Cloud computing is often described as a savior for businesses. It provides the ability to innovate quickly and easily, which can be a huge advantage in today's competitive market. Our research shows that 86% of CEOs believe that cloud is essential to deliver the results they need over the next 2-3 years. Early success stories have opened the eyes of CEOs and senior business executives to the value of cloud.
These 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), ecommerce and analytics are making it easier than ever for businesses to experiment and pilot cutting-edge capabilities to increase revenue and gain market share.
The speed at which measurable value can be delivered for these early success stories is now measured in weeks--and even days, in some cases. This is a huge shift from the traditional IT delivery model, which can take months or years to yield results. These successes have created lofty expectations for cloud and placed increased pressure on CIOs to accelerate cloud modernization.
However, despite these early success stories, we have found that many organizations are struggling to make the business case for their cloud investments and upwards of 1/3 cloud initiatives fail. Why, then, are many organizations unable to realize the promise of cloud for their modernization efforts? Our work with clients struggling to either initiate or scale their cloud programs points to the failure patterns to avoid and the successful traits of leaders that are delivering results through cloud.
Top Four Cloud Modernization Failure Patterns
The cloud is a new way of doing things and, for most companies, it requires a different set of skills, processes, and tools. Yet 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:
- 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.?Value to the firm cannot be realized until business changes the way 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).
- 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, many 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.
- Over-index 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.
- 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, at best, to derive a clear view of the value and efficiency of their cloud initiatives.
Therein lies the curse of the cloud: CIOs are being crushed under the weight of expectations that cloud technology has inspired in the industry but are unable to get out from underneath these expectations due to these challenges.
What sets leaders apart
The good news is that there are patterns and best practices that leading companies have used to successfully address modernization imperatives while delivering business results. Successful modernization programs share several common traits.
- Instill joint business and technology ownership:?Rather than treat cloud modernization as a technology project, leaders put the business vision at the center and develop a plan to unlock value from cloud. This is done by forming a cloud leadership team that is cross-disciplinary and brings together business and technology executives. Leaders in cloud deliberately diversify their teams to better understand and interact with different personalities, cultures, regions, business segments, and challenges. This team is responsible for developing the cloud strategy and roadmap and then executing against it. For example, one client was struggling to prioritize their cloud modernization efforts and formed multiple "Cloud Pods" focused on specific functional and departmental business imperatives. These pods were made up of business and technology leaders and teams across the enterprise and tasked with identifying the most valuable use cases and opportunities for cloud. Rather than just addressing the technology transition of application workloads, they enabled cross-disciplinary focus to develop, prioritize, and plan cloud initiatives that drove business value.
- Build the backbone for cloud control:?They establish a cloud architecture foundation along with strong controls to help manage and govern the way that cloud services are used. They also invest in training development and operations teams on cloud best practices and build the scaffolding or library of cloud-ready patterns and components that can be reused across the enterprise. For example, one client found that complexity quickly grew as they adopted cloud across the enterprise. We recommended and implemented a "Cloud API Academy" to train their development teams on best practices in API development. In addition, they formed a "Cloud Adoption Council" to govern major development efforts and ensure that they conformed with standards and best practices.
- Digitally Transform IT:?Leaders apply digital thinking and technology to their own operations.?This includes leveraging data and AI to develop self-healing operations capabilities, automating end-to-end application delivery. Leaders also create a cloud operations center that is responsible for evangelizing operational best practices, driving automation and self-service. One client began a digital transformation of IT by exploring end-to-end automation opportunities across IT as they moved to cloud. This included an exhaustive inventory of key processes and tasks that were candidates for automation. The company then prioritized these areas for automation and applied consistent tooling and standards across these processes.
- Establish FinOps:?They put in place the tooling and operating model to get transparency into the financials and operations of IT and systematically train IT leadership on the foundations of financial management in technology.?This allows them to measure and evaluate cloud investments in much the same way as they do other business investments. Reporting and chargeback (or "show back") mechanisms are put into place to give management insight into how cloud is being used and the associated costs. One client implemented FinOps capabilities which included setting up a cloud cost center, mapping cloud services to consumers, and allocating costs to lines of business. All of this was integrated into their self-service cloud foundation so that reporting was automated from the point that cloud resources were provisioned. Across our clients where we implement FinOps, we routinely find savings of 10-30% in cloud service and technology costs.
Modernization is imperative for companies in nearly every industry. Cloud is a powerful enabler of modernization, but it is not a panacea. To avoid being crushed under the weight of increased expectations of cloud, CIOs must partner with business leaders to ensure joint accountability for success. In addition, they must build the capabilities to manage and monitor their cloud platform to address the added complexity that it brings to their landscape.
In the next part of our series, we will explore how companies can build their cloud leadership team and take a business value-led approach to modernizing their businesses through the cloud.
Great read, Brent...thanks for sharing!