The ability to change and digitally adapt has been a defining feature of business success in the past 18 months. As early as September 2020, almost 60% of business leaders said they had already begun dramatically accelerating their companies’ digital transformations during the pandemic. With adversity serving as a catalyst for change, fully two-thirds of business leaders tell us the pandemic has allowed them to pursue specific transformation initiatives that, pre-pandemic, had encountered stiff resistance.
In an earlier analysis, we found that high technology adopters had on average a 6 percentage-point revenue growth premium over their peers across 12 industries during the pandemic. With that kind of return, it should be no surprise that transformation continues to accelerate.
Across industries, enterprises are more likely than ever to build organizations that can pivot seamlessly between virtual and analog worlds. They also look to take advantage of the new possibilities offered by their investments in technology, which means extending and operating beyond traditional organizational boundaries.
They can achieve these more open strategies through an increased engagement in disruptive business platforms and ecosystem partnerships. By adopting these strategies, organizations can create and tap into new sources of value within a new type of organization—what we refer to as a Virtual Enterprise.
Cloud technologies are central to this digital acceleration. And cloud is a fundamental enabler of successful transformation. But cloud adoption alone is insufficient to motivate significant gains in revenue and profitability. The ability to integrate functions and processes, and to enable intelligence and interoperability, is a key determinant in fully exploiting the potential value of cloud.
Hybrid cloud generates 2.5 times greater business value than a single cloud platform approach.
Recent analysis suggests that hybrid cloud—which provides the basis for interoperability and integrated capabilities—now generates 2.5 times more value than adoption of a single cloud platform. But even more significant, across industries, we have found that investment in cloud computing, when executed end-to-end in combination with other levers of business transformation, can generate up to 13 times greater benefits than cloud alone.
Cloud—or, more specifically, hybrid cloud—can support levels of openness and collaboration far beyond what was possible in the past. Hybrid cloud, coupled with digital and business transformation, can generate unprecedented strategic and financial benefits for an organization. In short, the democratization of data and the dramatically increased intelligence and insight brought about by open hybrid technology and architecture promise to redefine the economics of business.
Seeking the greatest value from cloud
Cloud’s contribution to business expands dramatically with business transformation. Reinvention involves adopting both state-of-the-art technology and an innovation-friendly, employee-centric organizational culture.
Our analysis suggests, with high levels of adoption of both public and private cloud among most organizations, that new cloud investments are likely to yield relatively low direct benefits. Indeed, we find that cloud adoption alone will yield, on average, only 8% of the total potential revenue from new cloud investments.
The potential of cloud plus transformation
The relative contribution to revenue growth from cloud alone and from cloud with other capabilities
The vast majority of the revenue potential from cloud—92%—are expected to be generated by the interaction of new cloud investment with the following enterprise capabilities:
– Mastery of data (11%).
– Level of adoption of other exponential technologies, including artificial intelligence (AI), Internet of Things (IoT), and robotic process automation (RPA) (17%).
– Maturity of operational enablers, such as workforce skills, processes and extended intelligent workflows, and cybersecurity (35%).
– Embrace of open organization principles, such as cultural transformation, innovation, platform strategy, and ecosystems engagement (29%).
Altogether, these elements account for 100% of the potential revenue impact of cloud investment. If an organization excels at implementing all these elements of transformation, the revenue impact of a dollar invested in cloud is 13 times greater than the revenue impact of cloud without transformation.
Unlocking the business value of hybrid cloud
Transformation needs to be holistic, comprehensive, and strategic. The recent IBV study on the Virtual Enterprise identifies this as a “Golden Thread” of value and purpose that animates and connects partners internal and external to the organization. Openness is its defining characteristic. With extended intelligent workflows, and underpinned by cloud, other exponential technologies, and data capabilities, the Virtual Enterprise affords new opportunities for co-creation, collaboration, and innovation orchestrated across platforms and ecosystems.
Download the full report to learn about 4 strategies that can help your organization extract more value from cloud.
Download report translations
Originally published 20 July 2021
The Virtual Enterprise
Discover the next-generation business model that will transform the way organizations innovate and do business.
The hybrid cloud platform advantage
Advanced companies are aligning their business transformation with the orchestration of cloud platforms for a next-generation business model.
Learn which technology mix is driving post-pandemic revenue growth in your industry.
COVID-19 and the future of business
Executives highlight five key opportunities that will help increase competitiveness in the aftermath of the pandemic.
Weaving data fabric into hybrid multicloud
It’s time to move beyond the database. Data fabric provides new ways to connect data and applications in a hybrid multicloud environment.