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business-centric cloud transformation- why bother?

Capgemini
Dec 11, 2023

The adoption of cloud computing in any substantial manner can and does transform the way an organization works and performs.

The adoption of cloud computing in any substantial manner can and does transform the way an organization works and performs. It accelerates access to IT resources and emerging technologies, making them both fast and affordable. For legacy applications migrated to the cloud, there is an opportunity to reduce technical debt and enhance application functionalities through modernization. In the context of new application development, the cloud not only shortens time-to-market durations but also expedites innovation experiments. Thus, cloud computing and the associated transformation can significantly impact the evolution of an organization.

Types of cloud projects: Incremental, tactical, and transformational

To better comprehend the impact of cloud adoption, let’s categorize projects into three types: incremental, tactical, and transformational. Incremental projects focus on cost efficiency, often involving the migration of applications in a “lift-and-shift” manner. Tactical projects opportunistically address specific IT or business problems by leveraging cloud capabilities, shifting the focus towards business value beyond IT cost reduction. The pinnacle is “transformational” cloud adoption, aligning IT, business, and data transformation agendas to create a “digital core” and a “composable enterprise.”

In today’s fiercely competitive industries, innovation is key to staying ahead. Cloud adoption facilitates fast and affordable access to new capabilities, allowing organizations to conduct innovation experiments quickly. Successful solutions from these experiments can then be deployed and scaled rapidly with the help of cloud platforms, DevSecOps, and CI/CD methodologies. While IT initiatives often target cost efficiencies, market-leading enterprises recognize the need for a transformational focus on cloud adoption to achieve direct business benefits.

Business-level productivity gain: Baker Hughes case study

Now, let’s explore a real-world case study to understand how cloud transformation can lead to substantial business-level productivity gains. Baker Hughes, a major player in the oil-field services industry, implemented a smart factory solution on AWS. With 300 machines in seven plants, equipment issues were affecting manufacturing processes. The smart factory solution, combining IT and OT capabilities, resulted in a 12% increase in overall productivity and a remarkable 26 thousand hours of downtime reduction. The cloud-based approach allowed for a fast, large-scale deployment, emphasizing the importance of well-defined business targets, proper execution, and the right cloud services.

Such cloud-enabled business transformations in the Intelligent Industry not only lead to increased productivity and quality parameters but also contribute to significant reductions in defects and downtime. The optimized operation further contributes to resource savings, aligning with sustainability goals.

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Creating organizational agility: HMRC case study

In the face of fast-changing social, political, and economic landscapes, organizational agility has become crucial. The case study from His Majesty’s Revenue and Customs (HMRC) in the UK illustrates how cloud transformation can enhance agility, especially in traditionally bureaucratic and highly regulated industries. When the COVID-19 pandemic hit, HMRC swiftly responded with the “Corona Virus Job Retention Scheme” (CJRS) initiative. The agile “born-in-the-cloud”approach allowed for the rapid development and launch of the CJRS app in just four weeks. The cloud-enabled organizational agility ensured the processing and disbursement of over 40 billion pounds to support 10 million jobs.

This success story showcases the power of cloud transformation in enabling organizations to respond rapidly to crises, demonstrating the effectiveness of DevSecOps, Agile methodologies, and the right cloud services. 

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Accelerating innovation: 5G network deployment case study

The next example highlights how cloud technology can become a catalyst for cutting-edge transformation enablers. In a project focused on 5G network deployment in the telecom industry, Capgemini Engineering teams collaborated to create a cloud-based radio access network (RAN) automation solution. This innovation simplifies and automates complex 5G network deployments, making it accessible to a broader audience and eliminating the need for extensive 5G expertise. The cloud becomes a crucial enabler for scalable and accessible innovation, aligning with the “fail fast, succeed faster” mantra.

Pursuing business-oriented cloud transformation

The above examples emphasize the importance of a business-oriented approach to cloud transformation. Instead of solely focusing on cost efficiencies, the real power of cloud technologies emerges when they are aligned with substantial business goals. Business-oriented cloud transformation begins by identifying ultimate business goals, then working backward to identify the skills and resources needed to achieve those goals in a “cloud-first” manner. Collaboration between business and technical units becomes essential, with a higher cloud adoption maturity being mandatory for successful collaborations.

So, why bother so much with business-centric cloud transformation?

While the overall IT expenditure in an enterprise undoubtedly varies based on the industry it operates in, it typically constitutes a small percentage of the company’s revenue. Assuming thatan enterprise allocates 5% of its annual revenue to IT spending and considering that half of this expenditure can be categorized as cost of goods sold (COGS), achieving a 20% IT cost saving through cloud projects would result in a mere 0.25% enhancement of their gross margin. However, for an enterprise boasting a 50% gross margin, a 5% increase in revenue would yield a substantial 2.5% improvement in gross margin. Hence, business-centric cloud transformation promises a significantly enhanced level of profitability.

Meet the authors

Manas K. Deb

VP, Cloud Center of Excellence
A long-time veteran of software industry covering products and consulting, Manas has been a co-creator of several Cloud CoEs within Capgemini and has been actively involved in a variety of cloud transformation projects delivering business value. In collaboration with the customer, he explores their challenges and opportunities in the areas of innovation, digital transformation and cloud computing which helps him leverage Capgemini’s assets and his own experience to advise the customer on a best-fit roadmap to reach their goals. Manas has bachelors and masters degrees in engineering, an MBA, and a PhD in applied mathematics and computer science from Univ. of Texas (Austin).

Sergio Werner

Head of Southern & Central Europe Cloud Center of Excellence (CoE)
Aerospace engineer and an alumnus of INSEAD, Sergio is an expert in public, private, and hybrid cloud solutions, automation, and security. Throughout his career, he has gained extensive experience in consulting and management, with a focus on innovation and industrialization. His journey and involvement in significant international consulting missions and transformation programs have provided him with a deep understanding of the global challenges related to cloud transformation. Sergio is currently leading the Cloud Center of Excellence for Central and Southern Europe.