November 13, 2017 | Written by: Mike Fitzgerald
Categorized: C-Suite | Cloud | Digital Transformation
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Where we were, where we’re going
In 2011, only a third of senior business leaders we queried1 said they had already adopted or planned to adopt the cloud. Fast-forward five years to 2016, and more than three-fourths of the executives described their cloud initiatives as already included in a coordinated program, or fully integrated with their overall strategic transformation.2
Cloud computing is now a substantial part of new IT spending and expected to grow from USD 96.5 billion in 2016 to more than USD 195 billion by 20203 — more than doubling in the next four years. Last year, 60 percent of the growth in IT spending was estimated to come from cloud alone.
Here’s the exciting part: next year, expectations are that a full 100 percent of IT spending growth will be attributable to the cloud! 4 For most organizations, the cloud they’re choosing is a hybrid model.
What outcomes are businesses looking for?
Today, organizations want to contain their costs while differentiating themselves in terms of operational efficiency, customer satisfaction and innovation. The most compelling reasons are to:
- Cut costs. More than half (54 percent) of executives surveyed cited the reduction of the total cost of technology ownership as the reason for implementing hybrid cloud.5
- Improve operational efficiency. Operational efficiency was cited by 42 percent of respondents. In the realm of IT, cloud enables operational efficiencies by optimizing the latest infrastructure, middleware and apps, rather than making do with sub-par legacy systems.6
- Enhance customer engagement. Cloud’s agile attributes enable faster time to market for new products and services that attract and delight customers. For example, retailers can use cloud to tempt consumers with tailored promotions that are customized to the customer’s unique buying behaviors.
- Boost innovation. Cloud adoption fosters innovation because it can transcend geographic, industrial, organizational and operational barriers. Astoundingly, at least 90 percent of executives surveyed said their most successful cloud initiatives had already significantly or moderately achieved expansion into new industries, creation of new revenue streams and invention of new business models.7
We’re overcoming past worries about cloud adoption.
When cloud was first developed, some issues arose that justifiably caused some concern for executives. These included security, cost structure and operational disruption. As technology has advanced, these problems have become less of an issue.
- Security. Security and compliance requirements have restricted certain categories of workload to be migrated to cloud. But this is often due to perception rather than reality. As Gartner puts it, “Many objections to cloud adoption are gradually becoming discredited. There is growing evidence that the security of business data in the cloud for most mainstream organizations equals or exceeds the levels achieved by mainstream IT on premises.”8
- Cost structure considerations. Organizations need to understand the tradeoffs between capital expense (CapEx) and operating expense (OpEx) models, including the corresponding effects on their financial and business strategies. This movement away from basic in-house IT infrastructure then allows the IT organization to shift resources away from maintenance activities to achieving business objectives, repositioning IT as a business partner.
- Risk of operational disruption. Potential operational disruption can dampen a company’s enthusiasm to replace less efficient IT functions with new cloud-based solutions. But, when business and IT priorities are combined, the advantages of vastly improved customer experiences, new sources of revenues, enhanced ecosystem collaboration, and an expanded product and services portfolio outweigh any temporary disorder that may be encountered to achieve cloud-enabled business model innovation.
By overcoming the challenges of cloud adoption, successful companies are delivering business value through hybrid cloud in three areas: operations, finance and innovation. Cloud isn’t just about improving operations or reducing costs. It’s overwhelmingly about innovation, too! Fully 76 percent of surveyed executives said their most successful cloud initiative has significantly achieved expansion into new industries, created new revenue sources (71 percent) and led to new business models (69 percent).9
For real examples of enterprises who have successfully migrated to the cloud, view my webinar Beyond Agility: The CIO’s guide to enterprise transformation with cloud.
If you have any questions, I would like to hear from you. Feel free to leave a comment below or schedule time with me or someone on my team.
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1 IBM Institute of Business Value, “The Power of Cloud.” 2012. https://www.ibm.com/services/us/gbs/thoughtleadership/ibv-power-of-cloud.html
2,5,6,7,9 IBM Institute for Business Value, “Tailoring Hybrid Cloud.” 2017. https://www.ibm.com/services/us/gbs/thoughtleadership/tailoredhybrid/
3 IDC, “Worldwide Semiannual Public Cloud Services Spending Guide.” 2017. https://www.idc.com/getdoc.jsp?containerId=IDC_P33214
4 TiernanRay, “2016 Will Be All About the Cloud.” Barron’s magazine. 2016. http://www.barrons.com/articles/tech-spending-growth-this-year-will-be-all-about-the-cloud-1451704687
8 Richard Dolan, “Gartner: Cloud Computing in 2017.” 2017. Datapipe blog. https://www.datapipe.com/blog/2017/01/09/gartner-cloud-computing-in-2017/