How to Measure the ROI of Your Small Business’s Cloud Workflows

What would you do with an extra 20 percent in annual profits? For many small businesses, gains like that are the difference between surviving and thriving. Yet, what if we told you the cloud could deliver a significant return on investment and you just didn’t have the visibility to see it?

Chances are, as a small or medium business (SMB) owner, you’ve made investments in cloud technologies and services to be more efficient, flexible, and data-driven. But without clear metrics, it’s impossible to know just how much your money-saving and revenue-boosting cloud initiatives are truly worth. It’s therefore difficult to justify additional spending or defend current cloud budgets. This leaves valuable information on the table and business decisions open to debate.

In this blog post, we’re going to change that by showing you how to quantify the impact of your cloud activities with Amazon Web Services. We’ll discuss how you can tie cloud activities to meaningful financial outcomes and key performance indicators and revenue streams. You’ll also understand how to demonstrate tangible business value from projects already underway in the cloud. It’s time to move beyond anecdotal assumptions and start proving exactly how much cloud profits your small business and how to quantify the value it brings to your organization.

To help with this task, the AWS Cloud Economics Team developed the Cloud Value Framework, a comprehensive lens to capture ROI beyond just finances. The framework defines value across five key dimensions: cost savings, staff productivity, operational resilience, business agility, and sustainability. We’ll explore each of these dimensions and how SMBs can address them on a smaller scale. By gaining an understanding of each one, you’ll be equipped to develop a holistic business case for your own cloud investments and initiatives. Let’s get started.

Source: Global 1000 Benchmark, The Hackett Group 2021

Cost savings

One key way cloud adoption delivers value is by optimizing costs. When infrastructure is owned and managed internally, small businesses often face large upfront expenses to purchase, implement, and maintain equipment. They also allocate too much to avoid downtime, leading to unnecessary spend.

The cloud eliminates these issues through pay-as-you-go models where customers only pay for what they consume. This enables SMBs to right-size their environments and avoid overspending on idle infrastructure. AWS Cost Explorer helps identify cost-optimizing actions such as right-sizing instances, using reserved instances for steady-state workloads, and buying savings plans for predictable spend. Done effectively, these practices have been shown to reduce cloud infrastructure costs. For example, if you are a retailer who only expects seasonal surges in e-commerce website traffic, you only pay for the resources you need.

Cloud migration also improves software licensing and maintenance costs for SMBs. Through AWS Marketplace, many software companies offer procurement benefits in the cloud through consumption-based or volume-discounted programs. Migrating to cloud-optimized versions also removes traditional costs of installing, patching, and operating databases or other applications internally. If you have your own custom app, modernizing it could also lead to greater efficiencies. One IDC study found large organizations lowered total cost of operations by nearly 50 on average through these types of cloud-driven software licensing efficiencies. While it’s not an exact comparison to SMBs, there are strong savings to be found for businesses of all sizes.

Staff productivity

According to SCORE’s Employee Engagement report, 60.7 percent of small business owners cite recruiting and hiring qualified talent as one of their top challenges. The broad range of skills required to maintain a robust IT infrastructure presents an additional hurdle, as many SMBs struggle to find employees who possess all the necessary capabilities. This frequently results in existing staff taking on multiple roles and responsibilities, which can lead to diminished productivity across critical business functions.

Managed services improve efficiency and innovation

Cloud platforms allow companies to shift focus towards hiring employees that concentrate on adding business value by developing new products and features. Routine IT responsibilities like infrastructure administration, patching, and upgrading can be handled by the third-party cloud provider. Research by IDC shows that utilizing cloud services leads to 47 percent more efficient IT infrastructure and administration. Additionally, 86 percent more staff time can be allocated to innovation efforts that differentiate the business. The automation and scalability of cloud platforms enable internal teams to prioritize higher-value work that spurs growth, rather than maintenance tasks. By leveraging the cloud, businesses can maximize productivity and focus on what matters most: delivering new value to customers.

Generative AI and automation enhances staff productivity

Cloud-based services give users the ability to automate repetitive tasks, leading to faster time to market and fewer human errors. This allows your SMB’s team to devote more time to more important tasks. With generative AI built into cloud services, customers can handle daily tasks more easily and productively. For example:

• Customer service agents can automate responses to common inquiries.
• Document processing is streamlined through automated data extraction.
• If you’re fortunate to have in-house developers, they can use AI to generate code, increasing speed and reducing bugs.

By integrating automation and generative AI into workflows, SMBs boost output while allowing employees to focus their efforts on higher-value work.

Operational resilience

Even with careful planning, unexpected events can still occur that are difficult to foresee. An increasing number of businesses now have critical applications, such as email, e-commerce, supply chain, and CRM, that rely on IT infrastructure. When the unexpected happens, it not only results in lost revenue but, more importantly, can damage the reputation of the business. It’s crucial for small business owners to understand the magnitude of the potential damages caused by these events so they can prepare properly and make their operations less vulnerable. Operational resilience is achieved by enhanced availability, increased security, and less downtime.

Availability

Cloud provides more availability and disaster recovery options than on-premises datacenters and servers. Businesses reduce or avoid the cost of downtime with the strategies that provide best ROI. With AWS, Atlassian is able to achieve 99.99 percent uptime and 40 percent reduction in latency.

Security

According to this non-technical whitepaper, businesses that migrate to AWS see 45 percent reduction in security-related incidents per month and a 39 percent reduction in mean time to detect security events.

A well-architected cloud environment can enhance resilience and decrease costs related to unplanned downtime, cyber issues, and other business continuity disruptions.

Business agility

One of the most important benefits of adopting cloud is how it enables a small business to rapidly respond to change. Businesses environments often change, because of the following:

• Macro and micro economic conditions
• Consumer behavior (often driven by social media)
• Competitors’ strategies
• New entrants
• Newly commercialized technologies (such as generative AI)

Agile businesses are able to respond to these changes and not only mitigate the impacts but use it to gain competitive advantage. According to the Business Value of Cloud Modernization, businesses can increase the amount of data available for analytics by 35 percent and reduce time to insight by 34 percent using cloud services. Better analytics data and faster insights results in better and faster decision making. It allows companies to react to competitors faster, defend their market position (or increase market share), and capitalize on new opportunities, resulting in a 28 percent revenue increase.

Cloud enables business agility through three ways: scale, innovation, and security.

Scale

SMBs can use use the flexibility of pay-as-you-go cloud resources to adjust their costs in-line with demand. They can scale down and reduce costs during challenging economic times, or scale out during boom times while maintaining or reducing marginal costs.

As discussed previously, having robust, timely, and accurate data analytics is key for businesses to make fast decisions. The scale of the cloud allows businesses to store a tremendous amount of data and provides infrastructure and services to process and analyze the data. The data also can be used to train both traditional and generative artificial intelligence models to provide forecasts, detect patterns, make recommendations, and other machine learning applications.

Innovation

Cloud enables innovation by providing scalable on-demand resources, consumption based pricing, and democratized access to advanced technologies. Businesses can experiment more frequently and test hypotheses about consumer preferences, product viability, drug efficacy, and numerous other applications.

Joveo is an AWS customer which sells an AI-driven talent sourcing platform. By shifting their workloads to the cloud, they re-allocated resources and it led to a 25 percent reduction in costs per hire. Most importantly, it freed up more time for their developers to focus on innovation and producing new features.

Security

Security remains the top priority for cloud providers. Due to their operating model and scale, cloud providers invest more in security that most businesses. Businesses can increase their security posture by moving to cloud and avoid the opportunity cost of security by reallocating resources normally spent on security to revenue generating activities.

Sustainability

Reducing a business’s impact on the environment is a strategic priority for many businesses—especially SMBs that have strong ties to a community. It provides brand differentiation and attracts socially conscious customers, investors, and partners. Sustainability programs, with their focus on increasing efficiency and reducing waste, can lower costs and increase margins.

Cloud helps businesses accelerate their sustainability programs by providing infrastructure and services that have lower carbon footprint and are more energy efficient than typical on-premises data centers. Cloud providers invest in efficient power and cooling technologies, operate energy efficient infrastructure, and achieve high infrastructure utilization rates.

According to a study conducted by The Hackett Group, businesses that migrated at least 55 percent of their workload to the cloud experience the following advantages over businesses that do not:

• 3X savings realized from environmental, social, and governance (ESG) programs
• 2.3X decrease in greenhouse gas emissions
• 2.1X decrease in water consumption

These businesses also achieve savings equivalent to 76 percent of their annual sustainability spend, attributable to efficiency gains from sustainability programs. This amounts to US$750,000 saved for every US$1M spent on sustainability.

Enersis is an AWS SMB customer which used the cloud to achieve five-times more energy efficiency than on-premises data centers.

Next steps

Measuring ROI for cloud activities can be intimidating, but it’s crucial for small businesses to evaluate the actual impact of their investments. By establishing the right metrics, you can transform the cloud from a nice-to-have to a necessary driver of tangible business value. This blog post provided a framework for identifying key cloud activities, selecting relevant metrics, and examples of ROI over time.

By investing a few hours in setting up ROI tracking, you can track future cloud investments in terms of revenue or cost. Remember, the cloud should work for you, not the other way around. With data connecting cloud activities to financial outcomes, you can make informed decisions that drive your business forward. Ready to take the next step? Speak with an AWS SMB cloud expert or seek out a free consultation from our vetted AWS Partner Network consultants.