As companies large and small in Australia embark on their cloud journeys, what’s become increasingly clear is that no two journeys are the same. While the promise of Cloud to increase agility, innovation and speed is no longer in doubt, boards and executive teams are staring at balance sheets that don’t make sense. What they’re looking at—often in disbelief—are the bottom line results of their cloud strategy.
The cloud has been billed as the superpower that will give companies the agility, performance and cost efficiency of their digital disruptors. It’s the key to digital transformation, digital decoupling, smart manufacturing, Industry 4.0 and the future of work—an essential element of competitive advantage.
But, to date, for the vast majority of companies, cloud investment has either not delivered on those promises—or, has failed to scale beyond simple standalone apps or workloads. As companies grapple with this challenge of adopting cloud at scale, CxO’s need to find a way to continue investment in this transformation, while driving cost reductions and ensuring business continuity.
Don’t throw out your cloud strategy yet
The reason many cloud journeys are proving so stressful lies in the strange nature of the cloud itself, which means it doesn’t behave like normal IT projects:
Low-hanging fruit are poisonous – The usual IT approach to change is to go after the so-called low-hanging fruit. For cloud, this means the simple stuff—"lift and shift" workloads like web applications or your online portal. But moving these apps to the cloud doesn’t actually change how they work. They’re still plugged into the on-premise backend. So traditional support processes like your supply chain or your order processing is still just as slow and inflexible as before, tied heavily to your legacy on premise applications. The cloud investment has not moved the needle one iota, other than giving some initial flexibility for your customer facing applications.
The value equation is different – When you move workloads from on-premise to cloud, you’re also moving a largely CAPEX spend, to OPEX. Previously, your finance team has relished capitalising the cost of your data centres, and depreciating all your IT assets to get the tax benefits. But the cloud is an ongoing operating cost. So, as more applications migrate, your traditional balance sheet shows a much higher operating cost—the opposite of what people perceive the cloud will provide. To really see what’s going on, finance needs to account for this fundamental difference—and to figure out how to assess the dollar value of hard-to-quantify ideas like improved agility, innovation and customer experience.
Pilot benefits don’t translate at scale – When you use cloud at scale, new problems come to light that were never evident in the pilot—and the business case often falls apart. You need a fundamentally different approach to make cloud work at scale. A typical cloud strategy needs to assess benefits over at least five years, taking into account a traditional hardware refresh cycle and also quantifying the benefits of agility and speed. Organisations also need to be able to quantify the difference between essential differentiation and unnecessary differentiation—moving to cloud may not necessarily deliver benefits for all your applications.
Making your cloud strategy work
To start seeing the benefits you’re expecting:
Make cloud a family affair – The whole enterprise (business, finance, IT, security, architecture) needs to come together to agree on and execute a single strategy that meets everyone’s goals. To galvanise these activities and help break down challenges across these generally siloed parts of the organisation, I recommend establishing a central Cloud Adoption Office, with dedicated resources from all five functions to sit together for two to three years and solve common problems and establish key enablers to allow Cloud adoption at scale.
Analyse your full application stack, not just the low hanging fruit – Gartner recommends the "5R" mechanisms for migrating applications to the cloud: Rehost, Refactor, Revise, Rebuild, Replace. I think you can simplify this by sorting your entire application portfolio into one of three buckets: Kill, Maintain, Transform. Kill will disappear. Maintain aren’t key to growth. Transform will drive top line revenue growth or efficiencies. And these are the ones that go on the list to move to the cloud. Moreover, as technology progresses, new migration paths or approaches might become available for the applications in the "maintain" category, leaving you to focus on the applications in the "transform" category that will act as your systems of differentiation.
Fund the journey through migration waves – Don’t do cloud migration piecemeal—do it in waves. In Wave 1, take a group of "Transform" apps that work together to achieve a business outcome. Make sure you’re not leaving any of the stack on-premise, or you won’t get the financial or transformation benefit. Now, you can use the new savings or revenue it delivers to fund Wave 2. Rinse and repeat. The benefits from each prior wave, should fund the next wave. This also means you are quantifying and locking in the value of each migration and not simply letting any benefits get absorbed into business as usual.
Focus on the key enablers – Deliver the base capability to allow consumption of cloud services at scale, including but not limited to blueprints, financial controls and chargeback models, policy driven security and orchestration and automation. Without these key enablers, cloud adoption will continue to remain fragmented, with each team solving common problems, increasing the cost and complexity of workloads moving the cloud. These enablers need to be setup outside of any ongoing projects to ensure that first mover projects that are pushing boundaries are not bearing the cost of delivering these common capabilities.
By taking these practical steps, you can accelerate cloud migration in an affordable way, unlocking the value of existing investments and getting many more wins as cloud starts to deliver on its promises.
When your entire organisation is mobilised behind a multi—wave journey and finance understands how to account for cloud—including how to capture the value of agility and innovation—your balance sheet will tell a very different story.