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Why Now? The Drivers for the Recent Spike in Cloud Adoption
When you get a group of IT executives into a room, it doesn't take long for the conversation to move on from the weather, recent political scandals, or to the pros and cons of cloud migration. With several major enterprises embarking on significant transformation journeys in recent months, we dig into the main drivers to discover what's spurring IT leaders on and, perhaps, what the more cautious executives can learn from their peers.
Ultimately, it seems that the usual benefits associated with the cloud are still holding true. Outcomes such as reduced cost, increased agility, and improved services are all still in the cards for most enterprises. We're also starting to see an increase in verticalized drivers—like access to new markets in health care and boosts in the service quality in the media and telecom industries.
IT leaders are looking to the cloud for agility
To dig a bit deeper into what's driving the uptake in cloud migrations, we took a look at the reasons enterprises gave for picking up the bill for some large IT service provider deals. While these motivations are each different, almost all emphasized a business requirement to either increase agility or build strong digital foundations—what we at HFS Research call the digital underbelly.
In Exhibit 1, we categorized enterprises’ reasons for migrating to the cloud, as cited in press releases announcing migration initiatives. By far, the most commonly mentioned reason is the desire for increased agility, which was followed by efficiency—either in closer system integration or boosted employee productivity. Boosting the quality of services was highlighted by 47% of enterprises we studied but, as we’ll discuss later, particular verticals focused on some of the drivers more than others.
Only thirty-eight percent of enterprises indicated cost reduction as a driver—perhaps a sign of maturity in the market as enterprises look to add value rather than reduce cost. Similarly, we see a rise in the number of enterprises that view cloud adoption as their ideal route to business growth, either by improving their access to new markets and remote locations or by building out delivery capacity.
While not often associated with cloud directly, several enterprises have migrated to the cloud for greater security, further bolstering the idea that there is a maturing approach to cloud adoption. It’s no longer the bogeyman; it’s an evolving capability that can help enterprises achieve an array of objectives. Finally, a few enterprises advised that they were using the cloud to support a shift in their business model or the way they calculate costs—moving away from capital investment and toward variable operating expenditure.
Agility, efficiency, and quality take over cost as main drivers
Exhibit 1: The key drivers that enterprises cite for cloud migration initiatives
Source: HFS Research, 2018
Motivations vary considerably dependent on specific industry challenges
These top-level drivers are interesting, but there’s more value when examining the differences in motivations between the industry verticals studied. While top-level motivations such as agility and efficiency had a presence in almost all of the communications, it was clear each industry was choosing its unique challenges to tackle. Take retail, leisure, and hospitality as an example, where motivations such as reducing cost in a highly competitive market are far more likely to make it on to a press release. While cost reduction was also high in the public sector, unsurprisingly, given the shift in many geographies to austerity, there was also a focus on security as regulations on citizen data became tougher. Public sector organizations were also more likely to cite a desire to improve services as a driving factor in cloud adoption. For example, the US Army recently announced a major migration project. Among its cited motivations were significantly reducing cost and building more secure, reliable, and scalable IT and analytics services. An organization like the US Army making better use of cloud and balancing out security concerns against agility and cost benefits bodes well for adoption by organizations with similar problems.
However, in the fast-moving consumer goods and retail sector, the emphasis is far more likely to be focused on sheer scale and the capacity to improve products and services. Coca-Cola, which recently announced an ambitious cloud migration initiative, listed its key drivers as being able to respond to seasonable demand and improve customer experience through cloud-based experience management systems. The firm also spoke of a healthy appetite for driving down costs to be more competitive.
Meanwhile, media and telecoms giants are looking to the cloud to solve their service quality woes and open up new business opportunities—these organizations that live and die on the digital battlefield need to constantly move and scale technology to meet their customers’ needs. Opera Software, for example, embarked on a cloud project after it recognized that it would need to scale services seamlessly to maintain consistent quality standards while also leveraging the cloud to support a shift to mobile services to meet the demands of new customer demographics.
Finally, major transport, logistics, and leisure firms are moving to the cloud for scalability and service quality improvements. Etihad Airways spoke of its needs to improve its guests’ experience, provide enhanced mobile capabilities, simplify IT systems, and drive ambitious company growth plans.
Bottom line: No matter what your business, everyone is welcome in the cloud
Ultimately, each industry has a particular set of challenges to overcome. While there will always be some similarities, such as a burning desire to be agile and reduce costs, there are also unique drivers—whether it’s a global healthcare provider leveraging cloud technology to reach remote locations or a retail firm seeking a solution that both drives down costs and improves customer experience. The cloud is no longer the technological bogeyman, and its evolution and continued development are dispelling many of the risks we have come to associate with the technology. For even the sheepish firms still viewing the cloud with caution, there are more benefits than there are risks.
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