How Businesses Can find the Cloud’s Elusive ROI (2023)
There’s a difference between being a business that’s simply moved its data and applications to the cloud to take infrastructure savings and agility benefits (what we consider cloud 1.0) and one that’s creating enterprise-wide value; (cloud-powered or cloud 2.0). The latter is key to finding the cloud’s elusive ROI.
PwC’s Cloud Business Survey shows that 78% of executives are adopting cloud in some or most areas of their whole businesses. However, only 10% reported holistic benefits as a result of cloud technology investments. As they look to fill this gap, many organizations are rethinking their cloud transformation journeys.
Going from tactical to strategic
To start, think beyond migration. A piecemeal approach to cloud might have been the right way to start at the time, but now companies are finding this method limits potential. This initial stage is where we saw a massive wave of re-hosting applications from an organization’s own data centers to the cloud.
They got the most they could out of infrastructure savings and gained some flexibility and agility via a cloud architecture. The move was primarily tactical while transitioning capital expenditure to operating expense.
Cloud 2.0 — or cloud-powered — is more strategic, aligning a broader vision with business outcomes. Beyond migration means being clear and intentional about when, where and why the organization is leveraging cloud technology. Developing a roadmap to outline the capabilities helps unlock the cloud and shows how operations can be reimagined.
This new phase can contain multiple steps. Some organizations will go back to creating or refreshing a true cloud strategy. Others will focus on the modernization of what is already on the cloud: Predominantly super-charging the data and enabling hundreds of services provided by hyperscalers and third-party providers.
The next phase of this journey will be a business model reinvention of the front office — by designing next-gen business models and rewriting aging applications with cloud-native technologies.
Defining the real value of cloud
Our survey reveals that cloud-powered organizations have done this (reinvented their businesses) through modernizing applications and adopting next-generation, cloud-native office applications.
Simply put, they have modernized their architecture by taking previously or currently migrated applications and connecting them to services provided by Cloud Service Providers (CSPs), services with massive innovation capabilities.
Modernizing paves the way for the use of advanced technology like IoT, AI and predictive analytics, which goes a long way in maximizing ROI on cloud investments.
There’s much to gain from effectively implementing cloud technology based on the strongest business case for specific business goals.
Organizations that have already done so are benefiting from much greater scalability and agility, allowing them to focus on higher-level, results-driven tasks rather than low-value tasks like data management and reporting. Our survey shows that this approach has resulted in continued revenue growth through economic instability.
Cloud costs to be considered
Before they can save costs, however, organizations may have to spend. We see that the majority of companies consider technical savings like shutting down data centers and moving data and apps to the cloud providers.
What’s often overlooked are cost factors like accurate and detailed calculation of compute and storage requirements, network bandwidth expenses, risk and controls implementation, plus the need for ongoing support.
Employee training, architecture assessments and modernization costs, as well as funding for a cloud center of excellence should also be considered.
Ultimately, costs will depend on what an organization is trying to accomplish with the cloud, so it’s best to implement a comprehensive cost calculation framework customized for particular business objectives.
The good news is that our survey found that cloud-powered companies report an average 92% cost savings as compared to only 43% cost savings for companies not powered by cloud.
This reduction makes an excellent case for tech leaders to prioritize top business goals or functional areas and focus on specific cloud transformations accordingly.
Collaboration and trust needed to reach cloud 2.0
Since cloud 2.0 means making sure cloud aligns with your business strategy, CIOs have a huge role to play in reaching what’s next — but they can’t do it alone. They’ll need to lead by collaborating with other C-suite leaders from the start to maximize ROI on cloud investments.
PwC data shows that CIOs at more than 80% of cloud-powered companies report working closely with their organization’s CISO, CDO, CEO and COO when scoping out cloud transformation projects.
New architectures will drive learning and adoption of new technologies while stretching these roles as they deal with the complexity of legacy systems running in parallel with cloud during the transition.
This ongoing collaboration is likely to have cascading effects. For example, CIOs and CFOs working together can more accurately determine how the cloud is changing (or can change) their organization’s financial model.
Trust built into transformation
Another critical hallmark of cloud 2.0 is trust, and it should be built into all transformation initiatives. This includes more forward-looking areas such as AI, the metaverse and web3, which are foundations for the next wave of innovation and differentiation — and only made possible by the cloud.
For all companies taking a hard look at which technology is bringing them the most value, they’ll need to focus on strategy to fully take advantage of the endless opportunities the cloud can bring.
They also need to balance enterprise-wide transformations with knowing when and in what areas it doesn’t make sense to go there. It’s all part of finding the cloud’s elusive ROI, and it’s worth the effort, especially when you consider that all “cloud-powered” companies reported improved decision-making after their transformation.