The race to cloud: Reaching the inflection point to long sought value

The past two years have represented a period of dramatically compressed transformation, with COVID-19 as a key inflection point. Commitment to the cloud surged as companies came under immense pressure to prepare their businesses to thrive amid rapid change and become more competitive for the future. Buttressed by an era of economic abundance, they committed to the cloud providers, signed big deals, and developed more ambitious goals for how cloud would deliver immense growth, agility and efficiency for their businesses.

Today, companies find themselves at a new inflection point. The low-hanging fruit has been picked, and they’re reaching higher. Meanwhile, companies who transformed more and faster during the pandemic are building upon that experience to drive an all new imperative: Total Enterprise Reinvention.

Total Enterprise Reinvention requires a strong digital core, powered by cloud, to drive competitive advantage. Harvesting the full value of cloud requires ongoing commitment. Organizations must now shift the focus from simply “getting there” to “getting value” and then “operating on the Cloud Continuum” to not only realize their expected outcomes but also to unlock the next-level of reinvention.

A full 86% of companies we surveyed report an increase in the volume and/or scope of their cloud initiatives since 2020. Those who already had one foot in the cloud seem to be jumping in further. On average, 50% of workloads are committed to the public cloud, compared to 35% in early 2021^[3]. Private clouds are the destination for 32% of workloads on average (including both private and virtual private models).

The data also shows that hybrid and multi-cloud have become the new normal. Almost all cloud users report using both public + private (hybrid) clouds and a large percentage are using multiple public cloud providers (multi-cloud).

While nine out of ten companies report achieving a significant measure of expected cloud value, only 42% report fully achieving their expected outcomes on average (just a five percentage-point increase over 2020).

Figure 1: Percentage of respondents who report that they have “fully achieved” their expected cloud outcomes, compared to previous reports

Not surprisingly, those achieving greater outcomes are the ones further along in the cloud.

Figure 2: Percentage of respondents who say they have fully achieved their expected outcomes, based on adoption level

Heavy adopters continue to fully achieve their outcomes more frequently, 47% on average, than medium (36%) or low adopters (21%). Yet, even among the heavy adopters, the increase in fully achieved outcomes isn’t progressing as quickly as desired—only two percentage-points over 2020—indicative of greater challenges associated with greater ambitions.

Higher achievement levels also correlate with greater use of third party managed services: Almost half (45%) of companies fully achieving their outcomes are using managed services to a great degree.

Today, cloud is much more than a mandate for operating in a digital world—it’s where breakthrough innovation and reinvention take place. Cloud has evolved into a dynamic continuum of powerful capabilities, from public to edge and everything in between. Getting full value from the cloud requires a commitment to continuous reinvention, supported by advanced Cloud Continuum practices.

To gauge how companies today are approaching cloud, we asked them to describe the current state of their cloud journeys. Nearly 7 in 10 (68%) of them still consider their cloud journeys incomplete. About a third of respondents (32%) see their cloud journeys as complete and are satisfied with their abilities to meet current business goals. Still more (41%) acknowledge their cloud journeys are ongoing and continue to evolve to meet changing business needs.

Figure 3: How respondents best describe the current state of their cloud journeys

At a glance, it looks like those who consider their cloud journeys complete are outperforming those who continue to evolve. However, we believe that companies are missing out on larger value opportunities by declaring their cloud journeys at a close. The rapid pace of technological innovation is redefining the landscape of what’s possible. And in fact, the “completed” group reports spending a lesser percentage of IT resources on innovation and business reinvention than the “continually evolving” set: 40% vs. 44%.

Companies with enterprise reinvention in their sights are growing, adapting, learning, changing as opportunities and risks arise. In a dynamic market environment, those that stand still get left behind. By considering their journeys complete, many companies are leaving value on the table… and putting themselves at risk.

Companies that have committed to the cloud are closer than ever to full value—but much still lies just outside of their grasp. With so many companies dialing up their cloud efforts, why is value not rising at pace? Perhaps the answer is simple: with greater complexity comes greater challenges. For many companies, the low-hanging fruit has been picked, and they are moving more complex and business-critical applications and systems.

One thing is clear, there’s no single barrier holding them back—all of the challenges companies have been struggling with for the past several years persist.

Figure 4: Top barriers to achieving anticipated cloud outcomes

“Security and compliance risks” and “complexity of business and operational change” are cited as the top barriers this year, with 41% placing them in their top three overall. “Legacy application modernization” follows closely with 39% listing it in their top three barriers. While “lack of cloud skills” is not the highest barrier to value, over one-third of companies (36%) rate it a top three concern—no change since 2020.

Relative to prior reports, security and complexity continue to be among the most frequently cited barriers. And, like our 2020 report, all barriers are reported in a relatively narrow band of 10% from top to bottom.

This is typical of any major transformation: When dealing with multiple obstacles at once, solving for anything less than all of them can result in diminished returns. The fact that companies continue to make steady progress against such a formidable collection of barriers shines a more favorable light on the data.