We talked about how to calculate the ROI and TCO as you migrate to the cloud, in a post here.
This post is all about Key Performance Indicators. But why should you care about them?
When you move to the cloud, you not only change the regular day to day routines, systems and processes. Your entire business model might change, say, from offering paid downloads to a pay-as-you-go model.
But you need to be able to justify the decision to migrate using data, which you can collect by measuring against right KPIs.
The pitfalls of using technology led KPIs for measurement
A large number of companies go about this process all wrong. Once they have migrated to the cloud they start measuring against purely technical metrics.
Peep into the dashboard of such a company and you will usually see charts and graphs tracking metrics like:
- Number of VM instances.
- Server and memory utilization.
These are technology led metrics that tell you how much compute and bandwidth you are using.
They don’t tell you whether you will be meeting your revenue and profit numbers.
And they sure as heck don’t tell you whether moving to the cloud is all it is cracked out to be.
To answer these questions, and to justify your decisions to the bosses who cut the checks, you need to measure business led KPIs.
It’s critical that the KPIs that you choose to measure cloud success should be based on company strategy and business goals.
Measuring against purely technical benchmarks will reduce the impact of cloud to the equivalent of swapping out inefficient CRT monitors to better LCD monitors.
The cloud is not about incremental changes. It’s about a revolution.
The business KPIs that you need to measure
Based on the business model, size, flavor of cloud technology that you have adopted, and the industry that you are in there are multiple business led KPIs you can pick and choose from.
The data thus generated can give you a fair idea of whether you are on the right track.
- Compare upfront costs
Do a before and after comparison. Before you moved to the cloud you might have an on-premises setup and have costs around:
- Hardware and software which also includes expansion and upgradation costs.
- Maintenance (including electricity and cooling).
- People required to maintain the data center.
When you move to the cloud you eliminate all these expenses, while incurring costs around usage, and possible loss of because of downtime (no cloud provider will give you 100% uptime).
These numbers don’t tell the whole story because cloud can create new opportunities which will more than make up any shortfall in the after scenario, if any.
- Focus on the customer
When you have moved to the cloud measure KPIs related to end user and the impact your move has on them.
Depending on your business, these KPIs can be order fulfillment times, number of days you are maintaining inventory, customer churn rate, cart abandonment rate, average revenue per customer, and up sell and cross sell rate.
- Look at user satisfaction
If you moved from an on premises help desk solution to a SaaS provider it’s plausible that your customer service reps are becoming more efficient. After you implement a cloud based solution in any business area perform a user satisfaction survey after a reasonable amount of time.
If the end user is satisfied and the cloud based apps make their lives easier your decision to migrate will be completely vindicated. The exact metrics (time to response, first contact resolution rate etc for a help desk) will vary, but you will know them based on your niche.
- Calculate time to market
If Airbnb wasn’t a cloud based company they would have to ramp up capacity at the backend before it can add new features or acquire new users. This process would take weeks or months and by the time they would have finished it the goalposts would have changed.
But Airbnb, hosted on Amazon cloud can with a few clicks acquire as much compute, storage and network as they need and roll out new features as fast as the developers can code and test them.
The cloud makes a tiny startup look no different from a conglomerate as far as computing power is concerned, and this alone can justify the migration.
In the second part of this post we will look at few other KPIs which you can measure against to determine if cloud is working for you.