How the business case for migrating to cloud reflects an increasingly mature market.
The rapid pace of cloud adoption continues across all sectors and in all geographies, with over 25% of the UK FTSE top 100 companies citing cloud adoption as a major opportunity and focus for their strategies. Cost reduction and business agility remain strong drivers, but new factors are emerging that strengthen cloud business cases. Based on my conversations with both CIOs and IT strategists in client organizations, it’s clear that new economic models and save-to-invest approaches, as well as rapid evolution and increasing maturity in the cloud solution marketplace, are reinforcing and compounding growth in cloud adoption.
New economic models
The set of economics that drives certain regulated industries, such as the utilities sector, has previously encouraged capital expenditure in IT. Often, this has led to disproportionately large and complex “on-premise” IT estates that lock in cost spirals and incremental mindsets. As utilities markets mature, regulators are forcing companies to demonstrate better returns on capital and significant operational efficiencies while improving levels of customer service. As such, we are seeing a move away from a CapEx-dominated model to one of total expenditure (TotEx). CIOs in these industries are looking at ways to reset the economics needed to achieve the best TotEx for their businesses. Application solutions, IT infrastructure, and services are being procured differently, moving from on-premise to cloud. This is a situation that is not confined to the UK or the utilities sector. The economics are compelling for many of our clients as on-premise estates age and come to the end of their useful lives.
Using savings to drive digital transformation
Staying on the theme of economics, as demand for new digital services outstrips the capability and capacity of existing IT organizations to deliver change quickly and run services cost-efficiently, new entrants are reaping the most immediate benefit from the cloud. Start-up costs and barriers to entry are low, giving these start-ups a massive agility advantage. But how can established businesses find the money and time to transform mid-flight? Our clients are responding to this challenge by re-investing the savings they make from cloud adoption into the wider transformation they need to stay competitive, consequently setting up a virtuous save-to-invest cycle and driving greater cloud adoption.
A maturing cloud market provides rapid access to increasingly sophisticated solutions
As cloud adoption increases, there is an underlying geometric rate of evolution in the market for cloud services. Salesforce, Amazon Web Services, and Microsoft Azure, to name but a few, are now strong considerations for most of the CIOs with whom we work. The availability of solutions in the marketplace continues to grow; more importantly, standards and industrialization are making it possible to use them at scale with peace of mind. Previous concerns and challenges relating to security, confidentiality, reliability, and integration are now giving way to questions of choice, negotiating strategy, and exploitation for maximum benefit.
Cost and agility performance improvements from cloud are already being realized across all industry sectors. New economic drivers are emerging that strengthen and evolve the case for the cloud. The IT market is responding with new and increasingly industrialized products and services that increase the scale and diversity of the opportunity. But cloud adoption is not without challenges. Picking your way through the choices, industrializing your retained capability, and realizing benefits intelligently necessitates a more rapid and sophisticated economic and sourcing strategy, a strong delivery plan, and a significant shift in IT operating capability. Capgemini’s Cloud Choice Advise framework could be exactly what CIOs need to ensure that their strategies are fit to take full advantage of all the potential cloud has to offer.
You can read more about Capgemini’s Cloud Advise services on our Cloud Strategy page.