“The cloud has tremendous business value!” That’s the battle cry chanted by cloud providers and their allies at every cloud computing conference.
You will never hear me say that “the cloud” is always the right solution or, for that matter, the wrong solution. In my 20-plus years as a cloud expert, I’ve never blindly followed the lead of cloud computing pioneers or adopters. Like any other technology trend and category, cloud computing should be considered on a case-by-case basis.
This balanced approach may have cost me some friends and perhaps some jobs, but I believe this will remain the right way to think about cloud deployments in 2024.
Who benefits from the cloud (besides vendors)?
According to a recent McKinsey survey that engaged about 50 European cloud leaders, the benefits of cloud migration still need to be recovered. In other words, cloud migrations are not as universally beneficial as we’ve been led to believe. I’m not sure why this is news to anyone.
The central promise of cloud computing was to usher in a new era of agility, cost savings, and innovation for businesses. However, according to the McKinsey survey, only one-third of European companies actively monitor non-IT outcomes after migrating to the cloud, which suggests a less optimistic picture. Moreover, 71% of companies measured the impact of cloud adoption solely through the prism of IT operational improvements rather than core business benefits.
This imbalance raises a critical question: Are the primary beneficiaries of cloud migration just the tech departments rather than the more comprehensive business entities they’re supposed to empower?
Cloud computing technology is often associated with business agility and new revenue generation, but just 37% report cost savings outside of IT. Only 32% report new revenue generation despite having invested hundreds of millions of dollars in cloud computing.
It’s no surprise that the transformational potential of cloud computing is being called into question. Agile business units poised to explore new markets may be nothing more than a mirage. Although 95% of European companies claim to capture value from the cloud, it remains isolated and on a subscale, falling short of the widespread revolution anticipated.
ROI of cloud computing and AI
McKinsey underscores the necessity of incorporating generative AI into cloud adoption journeys. There is an anticipation that up to seven times the ROI for each migrated business domain still needs to be determined. This is in a landscape where only a fraction of companies report satisfactory returns from their cloud ventures.
The primary questions to consider are:
Can AI lead to a significant increase in the use of cloud providers?
Should organizations continue to approve public cloud investments without careful consideration?
Is it better to only deploy AI systems or use cases that have clear and justifiable business cases?
It shouldn’t be a surprise that I lean toward the cautionary route. Despite technological advancements introduced by cloud deployments, 13% of companies surveyed said that returns from cloud investments need to be increased. It seems to me that cloud ROIs should be much higher, but I’m also aware that businesses are myopic about the actual value of their cloud deployments.
Even more troubling is that 55% of companies report satisfaction with their cloud investments. This highlights a gap between satisfaction and actual business value. In other words, the rush toward AI expansion is causing lousy technology configuration decisions because the perceived value of the cloud is overvalued.
This survey and others like it are a crucial wake-up call for businesses to reassess their cloud strategies. The promise of cloud computing must be critically examined—as it should have been from the beginning. However, I don’t see any fire-in-the-belly movements to get this under control right now. Instead I see people walking like lemmings toward more cloud deployments without a sound understanding of the business value that should be returned.
The focus on cloud ROI must shift from mere IT operational improvements to tangible business outcomes. This means thinking differently and devising better metrics. Perhaps many already understand that the business value of cloud computing is not there, but no one wants to be the messenger with bad news.
I’m a firm believer in coming clean with mistakes, especially when facing the truth may save your business. Only by measuring cloud migration success beyond the IT department can businesses hope to unlock the full potential of cloud computing. The journey ahead is fraught with challenges, but also opportunities for those willing to question, adapt, and reimagine what cloud computing can truly offer. I think it’s time, don’t you?
Copyright © 2024 IDG Communications, Inc.
