This is one of the Most common words in IT industry you keep hearing ,ROI study and ROI for this project . in this Short post I will try to make it simple by using example from the IT industry not just by using the raw info .
it’s a performance measure to determine the efficiency
Example :
you want a new servers for building a new private cloud used as a sandbox (Testing) .
Step 1: getting the cost of Accruing those servers ( servers cost + software licenses cost + cost of implementing those ) you will end up with a number (Ex. $100,000 )
Step 2: (this is the Hard one )
you start calculating the benefits from this project in our example the benefits is
the time saved from provisioning the Vms (the virtualization Admin time saved –Salary per hour saved -+ the time the user had to wait before he can start working –Salary per hour saved -)
+
Power Saving (servers + Air conditioning –kilowatt’s saved –+ UPs lower kilowatt required ) per year
space saving (How much it cost per Squire Meter per year if it was rented DC )
network ports saving –switch cost /no. of ports – one time save
Private Cloud Higher utilization and additional unit Marginal cost/ benefit read about it Here
Now Sum it up
the Cost will be 100K and the Saving would be 75K
using the ROI formula =(Saving or profit-Cost ) /Cost = – 0.25 witch means this project is a loss for the duration of the First year
now lets increase and make the duration Two years
the Cost will be increased ( the support and maintenance cost ) lets assume it will be 125K
but the profit /saving would increase to the double 150K which will end up having an ROI Ratio of +0.2
the more Positive the ROI the more better the opportunity so if you thinking of public vs private cloud try to do it your self and see the difference .
Note : almost Any project will generate positive ROI on the long run so when comparing try to make sure you are using the same duration .
we will discuss how to create a study later on
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