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Cloud computing is often described as a savior for businesses. Early success stories have shown that cloud can be used not only for improving business operations but also as an invaluable tool for driving business growth. Innovative, cloud-based platforms such as customer relationship management (CRM), e-commerce and analytics are making it easier than ever for businesses to experiment and pilot cutting-edge capabilities to increase revenue and gain market share.
These success stories have opened the eyes of CEOs and senior business executives to the value of cloud computing. Our research shows that 86% of CEOs believe that cloud is essential to deliver the results they need over the next 2-3 years.
Yet many organizations are struggling to make the business case for their cloud investments, and upwards of 30% of cloud initiatives fail. The cloud is a new way of doing things, and for most companies, it requires a different set of skills, processes and tools. Many companies apply traditional practices and existing capabilities to the cloud and fail.
In our experience, there are four primary issues that hold businesses back from realizing value:
1. Business and IT misalignment
An overwhelming majority of cloud programs tend to be driven by IT organizations. However, the bulk of cloud value is typically unlocked within business operations. To realize that value, businesses must change the ways they work. But CIOs are rarely positioned to drive these changes themselves. Business executives, on the other hand, are reluctant to take responsibility for these cloud programs because they are uncomfortable working with the cloud (and often with technology in general).
2. Underestimation of technology complexity
CIOs consistently underestimate the technology complexity associated with successful execution of cloud modernization. Cloud undoubtedly appeals to CIOs that wish to “get out of the data center business” and focus on more value-adding capabilities. There is also the undeniable beauty and promise of a highly distributed, event-driven microservices architecture on cloud that can power the next generation of intelligent applications. However, despite the many virtues of cloud, businesses are discovering that they are unable to shed the full responsibility of platform and infrastructure management. Quite the opposite, many companies find that managing hybrid environments adds a significant layer of complexity to platform and infrastructure operations.
3. Over-indexing on organization
Although CIOs appreciate the need to change their operating model to be able to work in this new cloud environment, they often treat these changes as a “boxes and arrows” exercise. In other words, they shuffle and regroup resources rather than breaking down barriers, addressing inefficiencies, and fundamentally changing the way their teams work. The only way technology teams have a hope of keeping up with expectations is if they drive very high levels of automation. Unfortunately, many companies fail to explicitly invest in the automation and AI necessary to transform IT delivery to take advantage of these new technologies.
4. Poor financial discipline
Many IT organizations lack the financial management capabilities to measure and manage cloud value. Our research shows that less than 40% of cloud programs have a well-articulated business and financial case. Some technology leaders are less well versed in IT economics and lack an understanding of how operating decisions can lead to financial outcomes. Further, in many companies, there can be a lack of adequate visibility into assets and metrics. The lack of an analytically-driven culture makes it difficult to derive a clear view of the value and efficiency of their cloud initiatives.
Being aware of these four failure patterns is the first step to being a proactive leader who can lead successful modernization programs and deliver business results.