Cloud investments are a critical prerequisite for many business transformation efforts today because cloud technology can enable new products and services, help save on costs, and improve collaboration between stakeholders. Spending on cloud infrastructure grew 45% from 2020 to 2021.1
However, in the rush to adopt cloud, many organizations aren’t seeing all the benefits they were expecting, according to Deloitte’s 2022 US Future of Cloud Survey Report, based on responses from 500 senior cloud decision-makers in the United States across a wide range of industries who were asked detailed questions about their companies’ cloud maturity, and how they view the future of cloud.
To understand why this is happening and how companies could bridge the gap between expectations and reality, I spoke with the coauthors of the Deloitte study: David Linthicum, chief cloud strategy officer for Deloitte US; Cathleen Domes, chief operating officer (COO) of cloud services for Deloitte US; and Chris Thomas, Deloitte US banking sector leader of cloud services.
Q: According to the survey, on average, there’s a 14.5 percentage point gap between organizations’ stated cloud priorities and how well they say they’re achieving them. Are organizations aware that the gap exists? Are they feeling the disconnect?
Cathleen Domes: We noticed that many respondents indicated that while cloud is a force multiplier for their business, they may not be leveraging the technology to its full potential.
Chris Thomas: Also, their technology organizations may not be using cloud platforms in the way that they’re designed for full-feature adoption. Respondents were more often focused on migrating and modernizing for select use cases. They may not recognize how big the gap is because they’re focused on compartmentalized areas.
David Linthicum: I agree. I think that many people are narrowly focused. They might not have visibility across the enterprise or the marketplace. For the last three years, certainly, the pandemic has driven this: It’s been a mad rush to cloud, and not a lot of people are looking up to see what else is happening—even within their own organizations, even within their own divisions.
Q: Why do you think the gap exists?
CT: Organizations have that gap partly because they are still managing legacy systems and infrastructure while they’re operating their new platforms. They have competing priorities. We often encourage a “decommission and remove as you go” approach.
DL: And this can hamper their ability to innovate or even investigate best-of-breed solutions. It’s one of several complicating factors. Look at the number of articles that are coming out from the tech press on these sorts of barriers—costs, complexity, things like that. It’s just becoming a hindrance to them achieving anything. Larger gains usually result from cloud maturity, but how can your operations mature if you’re struggling against these complexities?
CD: Speed can be a factor too. Many organizations were already deep into their cloud journeys when the pandemic hit, but then they moved even more quickly to adapt to the new environment. While the times necessitated moving fast, many companies didn’t maximize the value of their investments along the way.
Q: So, are organizations moving too fast into cloud?
CD: It depends on the organization, so it’s hard to say. I will say it’s usually easier to drive benefits and value once you’ve migrated to the cloud. It’s like the well-known proverb, “Necessity is the mother of invention.” Some organizations just had to get to the cloud, but now there’s a huge opportunity for them to get even more value from it.
DL: Moving quickly during the pandemic without advance planning was necessary, and it naturally led to some issues. Without that structured and well-thought-out use of cloud, though, companies are at a point where they now have modernized systems—access to big cloud platforms, multicloud artificial intelligence (AI), things like that. They’re just not always sure how to leverage them as a force multiplier to get to a more innovative and agile state.
CT: And head count isn’t exactly growing in this labor market. That means that as the work they’re doing is increasing in complexity, it’s hindering their ability to innovate because there aren’t people to free up time for it.
DL: Some of them have even stopped the migration because they realize this complex wall is going to be hit. So, they’re trying to figure out what they can do with their budgets, which is freezing them in their tracks. I think getting over that paralysis will be a big push for the next couple of years. Many organizations made mistakes during the pandemic, with overly complex infrastructure, and didn’t think about the operational impact. Now, they likely need to cycle back through it again.
CT: I’ve recently designed strategies for clients where they’re doing cloud 2.0 strategy and cloud 3.0 strategy just for that reason. Every 18 months or so, they hit the pause button. Costs are spiraling out of control. They can’t keep up with their hiring and reskilling.
Another problem is that many programs are being run out of IT [departments] versus being run in partnership with a business or a business-led initiative. So oftentimes, you have the business coming in after the applications are on the cloud platform, then thinking “What should we do now?” rather than being part of the solution from the beginning. The business is sometimes an afterthought, despite all of this being about business enablement and value.
DL: Yeah. That goes back to that mad rush to get to cloud. Defining IT around the business to serve the business often seems to have been thrown aside.
CD: I think it’s important to say, though, that many companies that rushed to cloud are definitely seeing clear, measurable benefits, even if they aren’t using cloud as a force multiplier. Meanwhile, the more mature and savvy organizations—the “leaders” in our study—are seeing the most radical benefits.
Q: What advice do you give cloud decision-makers who want to meet their cloud objectives?
CD: Really understand how cloud can drive value across your entire organization and fit into your overall business strategy. Many organizations might be looking for cloud to solve select problems, but they aren’t looking at the full picture.
CT: I think active tracking and monitoring are key, too. Sometimes I see good plans and a sound business case, but they get three-quarters into implementation, and the business case isn't where it needs to be because tracking and monitoring aren’t where they need to be or didn’t evolve during execution.
DL: You need more strategic planning that arrives at a holistic, strategic understanding and vision that everybody’s adhering to and understanding. Often, I see a bunch of tactical things that are pulled together, and then that ends up being the strategy. That’s not effective.
CD: Awareness is just so important. There’s a huge opportunity for all organizations to successfully leverage cloud by getting to that mature state. The more focused you can be with your strategy, the bigger the returns—in multiples, as the survey clearly shows.
Q: In an environment in which speed of adoption is still important, are we saying that companies need to slow down to get it right?
CD: You can still adopt cloud quickly in a relative sense. It’s about making smart decisions. You should challenge your organization to learn what’s possible with cloud. Yes, that takes longer than rushing, but it’s not like you have to move slowly.
DL: That trade-off is always the challenge of business. You want to go fast, but obviously, you can only move so fast in some sort of a purposeful way. The big mistake is debating tools and technologies as step one, when it’s more like step eight after we figure out what our logical architecture is, our business requirements, and do all the blocking and tackling to iterate toward something custom that digitally enables most of the business. Then, you should plan to have incremental successes versus one big, giant drop.
It’s hard to look your boss or the board and CEO in the eye and say, “It’s going to take me longer than the industry is saying it should take because we’re missing some planning steps in here that are critical to success.” But the reality is that you’re likely going to spend more money on the mistakes you make and going too fast without the necessary planning and rigor can lead to more mistakes.
For more insights, read the Deloitte 2022 Future of Cloud Report.
Deloitte Cloud Services enable enterprise transformation through innovative applications of cloud. We combine business acumen, integrated business and technology services, and a people-first approach to support businesses throughout their journey to the cloud—and beyond. Our spectrum of capabilities includes application modernization and migration, cloud analytics and AI, cloud business transformation, cloud infrastructure and engineering, cloud native development, cloud native development, and many such services. We provide end-to-end cloud solutions for businesses by advising, implementing, operating, and innovating their cloud transformation initiatives.