RoD: Return on Disinvestment

Do you remember when
organizations needing Enterprise Software began by asking the question: 'buy or
build'? These days, except for a handful of very small, very niche areas, no
one would ever consider building their own Enterprise Software; 'buy' won the
day. But 'buy' was a bit of a misnomer. It was never 'buy' in the same way that
you buy a freezer. When buying your on-premise ERP application, for example, it
would take time to research a solution and all its components, and to find an
SI to help. Then it would take even longer to implement, test, and roll out.
Finally - and an eighteen month project wouldn't be considered an abnormal
delay - you would have a live system. But even then you'd still be paying for
it. Cost was never just a matter of the CapEx needed to buy the components and
get started, there were always the on-going expenses of the real estate for
data centers, the skilled DBAs and other technicians you would need to hire,
train, and employ, and all the other payments that role up to OpEx. And, of
course, you'd be paying in another way too: you'd be locked into what
effectively became an obsolescent system on the day you started the project. By
the time you went live, your software would probably be one version behind, and
it might be seriously out of date three years later. There would be little
opportunity to add features during that time (greatly limiting business
agility) and therefore your service level for the business as a whole would
simply degrade month by month until eventually you'd be forced to go through
the pain and cost of an upgrade (or simply repeat the research cycle and start
all over again with a new install).

And that's not all. Typically you would have to size your on-premise solution for your organization’s maximum workload, and much of the time - during periods of normal business - a major part of your resource would be idle. Conversely, your total costs: CapEx, OpEx, wasted resources, and the opportunity costs of being locked in to an aging system, would all be busily working against you. You know where this is going. The on-premise versus Cloud argument is often presented as simply CapEx versus OpEx, but clearly it's not that simple.

In
reality, the on-premise world had costs in CapEx, OpEx, lost opportunities,
degrading service levels, under used resources, and repeated cycles of upgrades
or replacements. If Cloud simply replaced CapEx with OpEx it would only be of
incremental value. But in fact, it's the avoidance of all the other problems
associated with on-premise and the opportunity to channel resources towards
what’s really important to the bottom line of your business that are the bigger
pay-backs by far. Investments in your company’s competitive differentiators and
customer and employee engagement – are examples of key focus areas that could benefit
from reallocation of resources that were dedicated to on-premise – call it the Return
on Disinvestment.

What are your thoughts on
this? Feel free to comment below and
let’s discuss!