To achieve successful cloud strategies, companies should look for value. Many companies have made big investments, but the results have been disappointing. But giving up is not really an option: the cloud could generate as much as $1 trillion in value over the next decade, according to McKinsey research. Most organizations see the cloud as a “power magnet,” which amplifies value. But not all cloud services are created equal. Can cloud decision-makers make better value-based decisions when implementing cloud services by better understanding which ones drive the greatest value?
Actions to Get the Value Equation Right
In order for businesses to make the most of their cloud investment, they should consider refactoring their workloads to suit the cloud platform and take many actions toward this goal.
- Invest to build value: The cloud offers about 90 % of its value through faster time-to-market, innovation, improved resilience and cost savings, according to McKinsey research. For example, when a large brokerage uses the cloud to develop a new application, it increases feature development speeds by up to five times, while lowering operating expenses by 90 %. Thus, the key is to identify what work can benefit from the speed, agility and rapid scalability that the cloud provides and then invest enough in terms of teams and skills to get those benefits.
- Rebuild operating model around products: Most companies use the cloud in a traditional way of working, such as frequent transfers, time-consuming reviews and manual testing. Instead, they can make everything a product (e-commerce product displays, personalized email, etc.) that can then be used by small teams throughout the company to build things customers want. In this approach, a team is responsible for delivering a finished, working product rather than parts of it. Companies should look to automate every part of the development process, including server provisioning and infrastructure code generation, to support this product orientation. Successful implementations of product-oriented operating models can lead to productivity improvements in the development and release of 20 to 25%, based on McKinsey’s research.
- Optimize the economics: The work of managing the cloud for value is never done since cloud service providers (CSPs) are always rolling out new capabilities and because usage drives costs. Companies often overuse the cloud because it is easy to use, resulting in big bills. Therefore, organizations need to understand how much their apps are going to consume, when and for how long. Implementing such optimization techniques as real-time usage tracking, accurate demand forecasting and process automation can typically save clients 20 to 30% of cloud costs.
- Appreciate foundational capabilities: Cloud adoption rates are high because enterprises are so eager to build and migrate applications that they fail to invest in essential foundational capabilities such as automation and reference architectures. In addition to long delays resulting from stalled cloud initiatives, technical debt and poor security and resilience, this destroys value. In fact, IT resiliency accounts for nearly 15 % of the total value at stake in the cloud. A more resilient architecture can, for example, reduce downtime for migrated applications by almost 60%, resulting in almost double the availability while reducing transaction times. In addition, CSPs provide automation capabilities that allow companies to better implement “security as code.” By 2030, companies will lose roughly $650 billion as a result of system downtime and cybersecurity breaches, according to McKinsey research. Through more resilient architecture, cloud could reduce downtime by about 57 % for migrated applications, resulting in a 26 % cost reduction for breaches.
- Migrate complete services: Companies have tended to focus their cloud efforts on transitioning applications, often with great urgency. It's a strategy that will result in a disorganized set of applications on the cloud that fail to improve performance. For example, in a customer’s buying process, if the user authentication app is in the cloud but payment processing still uses legacy systems, the benefits of the cloud will vanish. So, the solution is to migrate a complete service or capability, such as mortgage origination, from beginning to end. By building up the critical mass of mutually supporting applications, the business can generate the full value of the application.
In summary, cloud technologies have become the foundation that enables businesses to transform, differentiate and gain a competitive advantage. Cloud can be used well, or it can be used poorly, and both are happening nowadays. Understanding what it takes to create value rather than simply moving to the cloud is the best way to ensure that big investments will deliver big returns. Organizations must reimagine business resilience, uncover new opportunities and reframe their futures to thrive in this complex and fast-moving environment.