Cloud Adoption: A trillion dollar opportunity

Prior to the COVID-19 pandemic, a confluence of various factors was already driving a transition to the cloud. Today, we already find that many companies have a digital first approach. The move to a cloud-centric digital infrastructure is already happening at an expedited pace, due to the pandemic.

The COVID-19 crisis has only served to further accelerate the pace of cloud adoption. There is no doubt that the cloud, as a form of technology, has immense potential that most organizations fail to capitalize. Insights derived from McKinsey highlight how companies can unlock the true potential of the cloud, which will give them an edge over their competitors.

Truth about cloud adoption

It is no secret that the big-three public cloud providers (AWS, Microsoft Azure, and Google Cloud Platform) have seen their revenues increase five-fold. To meet the unprecedented surge in demand, they have also scaled up their capital expenditure. Today, the cloud has become like something of necessity, as remote-working has become widespread due to the new normal. Cloud technology is being used in some way by 90 percent of the organizations, who were surveyed.

Cloud adopters today are lured in with the promise of a flexible infrastructure capacity, faster time to market for digital products, and rapid capacity deployment. The new normal has brought about a heightened awareness in organizations about infrastructure-economics, and the need for speed and agility, which are delivered via cloud based services for enterprises today.

However, many enterprises are finding it difficult to capture the value of their cloud in their operations. Around 30 percent of the cloud spend is wasted, as per enterprises. Further, managing cloud spend is a challenge for as much as 80 percent of the organizations surveyed.

Unlocking value in the cloud

There are three dimensions – rejuvenate, pioneer, and innovate – for unlocking value via cloud adoption. Management leaders can start by focussing on the following actions: Adopt cloud-native methods of functioning, invest in cloud platforms that are standardized and automated, set big targets, and pursue a hard-headed economic case.

Rejuvenate: Unlike conventional approaches to use the cloud to minimize costs and risk across core and IT approaches, rejuvenate delineates a change in approach from cloud adoption conventions: This is accomplished by identifying bottlenecks and managing resources better, sizing computer services to scale, and waste elimination. Overall, rejuvenation efforts have the potential to unlock $430 billion in the cloud for the industry.

Innovate: This dimension is about using cloud capabilities to accelerate innovation in sync with other technologies like automation, IoT, and AI. Such an approach would would enable innovation-driven growth and cost optimization in the business operations of companies. The potential use cases are vast and varied. However, the number of organizations with the cloud maturity that can implement the innovation dimension are few. Innovation efforts have the potential to unlock $770 billion in value for the industry.

Pioneer: In this dimension of cloud adoption, the value of the cloud can be extended by enterprises that have acquired a certain level of cloud maturity. New technologies like quantum computing, 3d printing, AR and VR, and blockchain can be experimented with to maximize value generation. Pioneering efforts have the potential to unlock even more additional value in the cloud.

Areas of focus

As organizations move to the cloud, there will be a paradigm shift in how companies will consume and source the cloud, which will impact value leakage and value accretion. The first thing that organizations moving to the cloud would need is a mindset shift. They would have to foster a dynamic model that accounts for the finer nuances and idiosyncrasies of cloud economics.

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members

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