Cloud investments slow to deliver ‘substantial’ benefit for many companies, study finds
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Business leaders across the C-suite see the cloud‘s role in helping to achieve their company’s growth ambitions — and they have high expectations. But few organizations are positioned for the cloud to fully deliver on its promise, according to research firm PricewaterhouseCoopers. PwC’s inaugural U.S. Cloud Business Survey of over 500 executives found that more than half (53%) of companies aren’t realizing substantial value from cloud investments. That’s despite the fact that 56% view the cloud as a platform for innovation and growth.
The PwC report suggests that a new digital talent divide is emerging, affecting both technology and business roles. Forty-seven percent of respondents see the lack of upskilling as a barrier to cloud value. This agrees with a recent survey conducted by 451 Research, which found that 90% of organizations are experiencing shortages of cloud-related skills.
“After a decade of cloud experience, organizations are facing a talent shortage for all cloud-related skills,” Forrester said in a March 2020 report. “Although legacy skill sets translate well to new cloud technologies, the cultural leap to evaluate, select, and operate for productivity, system-level efficiency, and workload-specific problem solving is proving to be a challenge. Enterprise attempts to hire and train talent are constantly plagued with poaching by the cloud vendors themselves.”
Other barriers stand in the way of successful cloud technology implementations. According to PwC, trust-related considerations like a cloud’s impact on customer commitments or regulatory compliance are considered either too late or not all. Only 17% of risk management leaders responding to the firm’s survey said they’re involved at the start of cloud projects. And 55% of chief human resource officers see changes to processes and ways of working as significant issues when it comes to the cloud.
Perhaps unsurprisingly given the roadblocks, just 52% of chief financial officers say that they’re confident they can measure cloud return on investment (ROI). Those with this confidence are at a significant advantage. According to a Unisys Corporation survey, organizations that conduct a thorough ROI analysis before embarking on cloud migrations are 44% more successful in realizing cost-savings expectations than those that don’t.
“Without question, we find ourselves in the midst of an accelerated cloud sea-change on the heels of a pandemic, which brought a new awareness that any position of strength can be fragile, and organizations that operate with a greater degree of resiliency and agility can thrive in the future. Our recently conducted [survey] confirmed this,” PwC U.S. deputy advisory leader Jenny Koehler told VentureBeat via email. “Some of the greatest areas of promise include improved resiliency and agility, improved decision making given enhanced data and analytical capabilities, and the ability to innovate products and services. Despite this widespread adoption, however, there is a substantial value gap that persists.”
Despite setbacks in embracing the cloud, executives responding to PwC’s survey say that they’re prioritizing cloud capabilities into the next year. Companies are specifically investing in cybersecurity (48%); AI and machine learning (39%); hybrid cloud (39%); analytics (37%); and enterprise apps (28%). Beyond this, 33% of executives say that their companies are using cloud to advance environmental, social, and governance strategy, such as automating reporting and progressing green goals.
The rise of the pandemic defined 2020 for nearly every industry, and cloud computing is no exception to the rule. Gartner estimates that $257.9 billion will be spent on public cloud services in 2020, up 6.3% from 2019. And according to Statista, the worldwide public cloud computing market will reach an estimated $397 billion in 2022.
“In reflecting upon these [survey] results, [the] value gap may be symptomatic of the fact that many companies have not fundamentally aligned their cloud investments to their underlying business strategy, or in certain cases, have defined business value in too abstract, or broad, of terms, such as ‘revenue growth’ or ‘cost cutting,’” Koehler continued. “In addition to that, the cloud itself fundamentally introduces new capabilities to an enterprise. And, as is the case with any new capability, it must be nurtured in the context of new operating models and a mindset of continuous improvement, customer centricity and innovation, all enabled by end users that have been up-skilled not only on the IT side, but also on the business.”
It comes as no surprise that members of the C-Suite are more involved than before in cloud adoption efforts, given the amount of capital at stake. Over 70% of respondents told PwC that they’re helping to make cloud strategy decisions as well as cloud-related talent and upskilling decisions.
“Steps can be taken to address [challenges], including the introduction of holistic digital upskilling programs, mentorship programs in areas where greater cloud depth is required, as well as partnering with external third parties for long-term success,” Koehler said. “Even in the midst of this value gap, at this moment, we [at PricewaterhouseCoopers] remain optimistic that it can be closed, with the right alignment to underlying business strategy, and shared responsibility among the entirety of the C-suite.”
Cloud providers are reaping the windfall benefits. In its most recent earnings report, Google said that its cloud division brought in $4.047 billion in sales for the first quarter of 2021, up 46% from the year prior. Amazon’s Amazon Web Services (AWS) posted a record $13.5 billion in profits for 2020. And Azure, Microsoft’s cloud business, notched third quarter 2021 revenue growth of 50% year-over-year, beating analyst expectations.
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