Cloud-migration opportunity: Business value grows, but missteps abound
Companies aim to embrace the cloud more fully, but many are already failing to reap the sizable rewards. Outperformers have shown what it takes to overcome the costly hurdles.
By 2024, most enterprises aspire to have $8 out of every $10 for IT hosting go toward the cloud, including private cloud, infrastructure as a service (IaaS), platform as a service (PaaS), and software as a service (SaaS). Achieving that aspiration will require significant effort from both enterprises and technology providers.
The COVID-19 pandemic is one factor driving the ambitious goal, as it triggered the need to speed the pace of enterprise digitization. But the more significant catalyst is the $1 trillion in business value that cloud adoption can unlock. Some organizations, however, are leaking their share of that value instead of capturing it, with inefficiencies in orchestrating cloud migrations adding unexpected cost and delays. Approximately $100 billion of wasted migration spend is expected over the next three years, and most enterprises cite the costs around migration as a major inhibitor to adopting the cloud.
But not everyone is suffering these growing pains. A McKinsey survey of nearly 450 chief information officers (CIOs) and IT decision makers globally finds that a subset of organizations has shifted a majority of IT hosting to the cloud on time and on budget. This article reveals the aspirations and hurdles that business leaders are facing in their journey to the cloud—and what outperforming organizations are doing right.
Businesses that follow the lead of cloud-migration outperformers stand to unlock some $1 trillion in value.
Businesses were embracing the cloud even before the COVID-19 crisis, but the pandemic lent new urgency to its use. At one fast-casual-restaurant chain, for example, the number of online orders jumped to 400,000 per day, from 50,000. That volume would have overwhelmed the company’s legacy infrastructure, but the business had transitioned its e-commerce and online-ordering system to the cloud before pandemic-related lockdowns occurred. Having seen the benefits, leaders in the company now plan to compress their five-year migration plan to less than one year.
That company is not alone. Two years ago, legacy infrastructure accounted for the lion’s share of the average IT-hosting budget. At that time, enterprises set an aspiration to move around 45 percent of their IT-hosting spend to the cloud by 2021. But nearly two-thirds (65 percent) of surveyed decision makers say their organizations increased their cloud budgets as a result of the pandemic, and 55 percent moved more workloads than initially planned. With the cloud having proven its value, 40 percent of companies expect to pick up the pace of their implementations going forward.
Looking forward, leaders remain bullish. Our data show that by 2024, the average company aspires to have cloud spend represent 80 percent of its total IT-hosting budget.
Authors:
Tara Balakrishnan, Chandra Gnanasambandam, Leandro Santos, and Bhargs Srivathsan
Laura Foster
Laura is techUK’s Head of Programme for Technology and Innovation.