The race to cloud: Reaching the inflection point to long sought value

In brief

• Over the past two years, there’s been a surge in cloud commitment, with more than 86% of companies reporting an increase in cloud initiatives.
• Achieving full cloud value is at a tipping point for those committed, with heavy adopters fully achieving expected outcomes at a higher rate.
• The cloud journey continues beyond migration to utilizing the power of cloud, with the majority of companies considering their efforts ongoing.
• The low-hanging fruit has been picked and companies are moving more complex, critical workloads. A consistent set of stubborn barriers remains.
• Five key practices can help companies overcome these barriers and tip the scales towards full value achievement.

Unlocking the next level of business opportunity with cloud

The past two years have represented a period of dramatically compressed transformation, with COVID-19 as a key inflection point. Commitment to the cloud surged as companies came under immense pressure to prepare their businesses to thrive amid rapid change and become more competitive for the future. Buttressed by an era of economic abundance, they committed to the cloud providers, signed big deals, and developed more ambitious goals for how cloud would deliver immense growth, agility and efficiency for their businesses.

Today, companies find themselves at a new inflection point. The low-hanging fruit has been picked, and they’re reaching higher. Meanwhile, companies who transformed more and faster during the pandemic are building upon that experience to drive an all new imperative: Total Enterprise Reinvention.

Total Enterprise Reinvention requires a strong digital core, powered by cloud, to drive competitive advantage. Harvesting the full value of cloud requires ongoing commitment. Organizations must now shift the focus from simply “getting there” to “getting value” and then “operating on the Cloud Continuum” to not only realize their expected outcomes but also to unlock the next-level of reinvention.

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Our latest “state of the market” research surveyed 800 business and IT leaders across the globe to discover how far along their companies are on their cloud journeys, and how much value they report seeing from their cloud investments. We also asked respondents to identify the greatest barriers to achieving that full value. This research builds upon our 2020 and 2018 inquiries into the same topic.^[1],^[2] The results tell a story of significant progress, with full value still waiting at the summit.

An unprecedented commitment to cloud

A full 86% of companies we surveyed report an increase in the volume and/or scope of their cloud initiatives since 2020. Those who already had one foot in the cloud seem to be jumping in further. On average, 50% of workloads are committed to the public cloud, compared to 35% in early 2021^[3]. Private clouds are the destination for 32% of workloads on average (including both private and virtual private models).

The data also shows that hybrid and multi-cloud have become the new normal. Almost all cloud users report using both public + private (hybrid) clouds and a large percentage are using multiple public cloud providers (multi-cloud).

Full value on the horizon

While nine out of ten companies report achieving a significant measure of expected cloud value, only 42% report fully achieving their expected outcomes on average (just a five percentage-point increase over 2020).

Business enablement is the most realized outcome, with 45% reporting they’ve fully achieved the expected value. Business enablement offers the greatest value upside, unlocking the core digital capabilities and ongoing innovation needed to drive total enterprise reinvention.

Meanwhile, cost savings remains the most elusive of the outcomes. Only 39% reported fully achieving their expectations in that department—a mere two percentage-point increase over 2020. While this is perhaps the most frustrating finding for many, as cost effectiveness was one of the early selling points for cloud, it may not be unexpected. In order to achieve cost benefits, organizations must embrace modern architectures and operating models, utilizing FinOps and a Continuum Control Plane to provide transparency and the means of managing today’s complex IT environment.

Who’s achieving more?

Less than half of the companies we surveyed claimed they were getting everything they were expecting from cloud. Compare to see what global respondents in your industry are saying.

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Not surprisingly, those achieving greater outcomes are the ones further along in the cloud.

Heavy adopters continue to fully achieve their outcomes more frequently, 47% on average, than medium (36%) or low adopters (21%). Yet, even among the heavy adopters, the increase in fully achieved outcomes isn’t progressing as quickly as desired—only two percentage-points over 2020—indicative of greater challenges associated with greater ambitions.

Higher achievement levels also correlate with greater use of third party managed services: Almost half (45%) of companies fully achieving their outcomes are using managed services to a great degree.

Embracing the Cloud Continuum

Today, cloud is much more than a mandate for operating in a digital world—it’s where breakthrough innovation and reinvention take place. Cloud has evolved into a dynamic continuum of powerful capabilities, from public to edge and everything in between. Getting full value from the cloud requires a commitment to continuous reinvention, supported by advanced Cloud Continuum practices.

To gauge how companies today are approaching cloud, we asked them to describe the current state of their cloud journeys. Nearly 7 in 10 (68%) of them still consider their cloud journeys incomplete. About a third of respondents (32%) see their cloud journeys as complete and are satisfied with their abilities to meet current business goals. Still more (41%) acknowledge their cloud journeys are ongoing and continue to evolve to meet changing business needs.

At a glance, it looks like those who consider their cloud journeys complete are outperforming those who continue to evolve. However, we believe that companies are missing out on larger value opportunities by declaring their cloud journeys at a close. The rapid pace of technological innovation is redefining the landscape of what’s possible. And in fact, the “completed” group reports spending a lesser percentage of IT resources on innovation and business reinvention than the “continually evolving” set: 40% vs. 44%.

Companies with enterprise reinvention in their sights are growing, adapting, learning, changing as opportunities and risks arise. In a dynamic market environment, those that stand still get left behind. By considering their journeys complete, many companies are leaving value on the table… and putting themselves at risk.

Navigating a collection of stubborn barriers

Companies that have committed to the cloud are closer than ever to full value—but much still lies just outside of their grasp. With so many companies dialing up their cloud efforts, why is value not rising at pace? Perhaps the answer is simple: with greater complexity comes greater challenges. For many companies, the low-hanging fruit has been picked, and they are moving more complex and business-critical applications and systems.

One thing is clear, there’s no single barrier holding them back—all of the challenges companies have been struggling with for the past several years persist.

“Security and compliance risks” and “complexity of business and operational change” are cited as the top barriers this year, with 41% placing them in their top three overall. “Legacy application modernization” follows closely with 39% listing it in their top three barriers. While “lack of cloud skills” is not the highest barrier to value, over one-third of companies (36%) rate it a top three concern—no change since 2020.

Relative to prior reports, security and complexity continue to be among the most frequently cited barriers. And, like our 2020 report, all barriers are reported in a relatively narrow band of 10% from top to bottom.

This is typical of any major transformation: When dealing with multiple obstacles at once, solving for anything less than all of them can result in diminished returns. The fact that companies continue to make steady progress against such a formidable collection of barriers shines a more favorable light on the data.

Cracking the value code

The timing was right for companies who did the work of committing significant resources and effort to the cloud over the past two years. Today, we’re exiting an era of economic abundance and entering one of greater uncertainty. Thus, every dollar spent—cloud or otherwise—must go through rigorous qualification.

It is increasingly important that companies “crack the code” to cloud value. and identify specific use cases on which to focus their efforts. Yesterday, technology was the disruptor. Today it is the enabler—a certainty in turbulent times. Driving real businesses agility, efficiency and growth in the cloud requires strong commitment and adopting reinvention as a strategy. There are five practices companies should embrace in order to achieve peak value and unlock future opportunities.

Five practices for maximizing cloud value:

1. Pursue business and industry advantage - Utilize cloud as a force for change. Prioritize use cases according to time-to-value and align investments with emerging business strategies.
   
   
2. Design and orchestrate in the Cloud Continuum - Embrace cloud as an operating model and strategic enabler. Focus on adopting the right mix of capabilities and services across the Cloud Continuum.
   
   
3. Unleash new value from data and AI - Data excellence is the new frontier of industry competitiveness. Generating the right insights will help companies compete and grow sustainably.
   
   
4. Reimagine your operating model and people - Technology alone will not sustain cloud value. Companies must transform their people and processes to thrive in the Cloud Continuum.
   
   
5. Master cloud economics - Companies must master and optimize their cloud spend with transparency and oversight, and shift the conversation from cloud cost to cloud value.

Conclusion

We have arrived at a new inflection point: Migrating to cloud is a necessary but insufficient step in cultivating value and driving ongoing reinvention. The challenge and opportunity now will be in defining the business reinvention agenda, centered on a much broader definition of value, and using and using cloud as an operating system to bring together data, AI, applications, infrastructure and security to optimize operations and accelerate growth. Cloud is a journey, along which companies will continue to cultivate new capabilities and skills—and hopefully enjoyment in all new value-discoveries.