Few companies are harnessing the full potential of the cloud to drive agility, innovation and digital transformation. For example, 53% of companies surveyed by PwC US in 2021 had yet to achieve the substantial value they anticipated from their cloud investments. Business leaders can change the game, however, by paying careful attention to three critical factors:
Though companies have quietly embraced cloud computing for years, 2020 demonstrated to boards and C-suites just how vital the cloud is to survival and the pursuit of new opportunities. When the COVID-19 pandemic shuttered economies, businesses quickly discovered that they needed the cloud's web-based computing services to enable employees to work remotely, to shore-up fractured supply chains, and to provide new digital services to consumers who couldn't leave their homes.
Contrary to its marketing buzz, the cloud is not a single technology or one-stop money-saving solution. Rather, it is a collection of computing software and data services that can be accessed via the internet instead of residing on a desktop or internal servers. These services include applications as simple as email or as complex as full-scale ERP (enterprise resource planning) systems. Because cloud computing platforms are 'always on', they are ideal test beds for experimenting with and deploying new technology solutions, incorporating advanced analytics, automation, blockchain, quantum computing, and augmented and virtual reality. This makes the cloud a powerful strategic tool—not just a tactic.
Yet, despite the acceleration of cloud adoption across the business landscape, most companies are barely scratching the surface of the cloud's vast potential. According to a 2021 PwC survey of C-suite leaders, more than half of respondents were yet to reap substantial value from their cloud investments.
This unrealised value is significant, but it only begins to speak to the cloud's untapped potential to propel digital business strategies. As 2021 showed, the cloud isn't a 'one-and-done' IT project. Just as operations and strategy need to be agile and adaptive, so does your cloud blueprint. Staking out this new ground requires a well-defined, value-oriented strategy that links technology and business teams in a common pursuit of bold outcomes.
Despite the progress that companies have made in their cloud journeys, many are now facing the 'cloud hump'— where a significant ramping up of cloud spending is followed by a forced pause to figure out a new path forward. As one executive we interviewed cautioned, if organisations believe that the cloud is mostly about moving data to slash IT costs, they have a problem. Rather, the executive says, the cloud should be about reconceiving the way the business operates.
But pivoting from tactical to strategic is not easy. Through our work with companies around the world, we have identified three critical factors to help you close the cloud potential gap.
The three key factors are:
For many organisations, a cloud transformation programme creates the urge to 'lift and shift' data and applications from legacy IT systems to cloud platforms merely for the cost-saving benefit. However, this approach leaves an enormous amount of value on the table in terms of agility and innovation for the organisation.
Take the HSE, for example, which is Ireland's national healthcare system. With the onset of the COVID-19 pandemic, the HSE needed to rapidly implement new information flows and systems to model and manage the impact of the pandemic. They turned to the cloud to provide the required agility and, in a matter of weeks, they delivered what would have taken months or years to deliver in a traditional IT delivery model—new systems to facilitate testing, vaccination and reporting. An added benefit of their use of the cloud was that when the HSE was later struck by a major cyber attack, the separation and security of their cloud-hosted systems allowed these critical systems to remain online.
The lesson? Avoid the temptation to see the cloud merely as a cost-saving, operational IT project. Instead, view it as a catalyst for business value creation and a way to increase the capacity of your organisation to thrive in a changing business environment.
Another pitfall is seeing business challenges through a 'pre-cloud' lens.
Take the case of one European bank. EU regulators mandated that banks open their data interfaces (applications programming interfaces, or APIs) for greater transparency with regard to system risks and to allow interoperability with central bank systems. The bank saw the cloud more as a means of ensuring regulatory compliance and less as a cost-saving IT project. The bank's IT team also realised that the new cloud interfaces provided a platform for fintech start-ups to sell their digital services: app-based banking, instant mortgage approval, mobile payments and portfolio management tools. Because of the cloud, the bank was able to leverage its large customer base and market knowledge in tandem with the fast-moving fintech ecosystem. Here is a classic case of defining the cloud opportunity too narrowly, where better regulatory compliance was the initial goal. Fortunately, the bank pivoted and, through a series of bold moves, demonstrated that by pushing ahead with cultural and structural adjustments, far greater success can be achieved.
Companies want to see a meaningful and measurable return on their technology investments. As a result, many tend to focus on notching quick wins, such as digitising a sales channel or making an internal process more efficient. But this only scratches the surface of the potential value at stake. In contrast, the most adept cloud operators constantly experiment and measure results in real time, move forward, and shift to other areas without regret, thereby creating the agility that feeds innovation. This reframes problems as opportunities for bold innovation. To get to this point, however, companies sometimes need a jolt.
Most executives understand the transformative power of cloud technologies but many focus their attention and capital spending in the first year of the launch, assuming their work is all but done. In reality, cloud success requires continuous updating, refining and revisiting agreed-upon paths to determine if better options are available.
We've seen multiple cases where a company's board approved a cloud investment in year one on the assumption that the IT leaders wouldn't come back with another funding request for two or three years. Meanwhile, the initial year one success generates further opportunity and investment demand. At one company, the realisation that victory wasn't assured after its initial investment led to an urgent call for fresh investment in hiring data and architecture specialists and business managers with digital expertise. Then came IT, which in year one got what it needed for data storage but soon realised that it needed platform-as-a-service capabilities to speed up business software delivery. The company's expansion of cloud businesses also required more funding for security and compliance. The key here is that the cloud is not a one-off technology project—it requires the ongoing evaluation of additional investment needs, attention, and the reassessment of strategies and tactics.
To achieve competitive advantage and gain real value from transformation in the cloud, organisations need a multi-faceted approach that includes strategy, technology transformation, organisation design, portfolio management, compliance, governance and cybersecurity.
We are ready to help you in any and all of these areas to maximise the value of your cloud transformation. Contact us today.
This is an abbreviated version of an article by PwC's strategy+business. View the extended article. It has been localised by Eoin Mulhall, Consulting Director at PwC Ireland.