Redefine cloud strategy to maximize cloud-native transformation value

Cloud-native transformation (CNT) is a critical initiative for today’s enterprises, and it’s becoming necessary to remain competitive. Our discussions with organizations and providers during the HFS cloud-native transformation Horizons study revealed that enterprises had not achieved their desired outcomes wholly or at the pace they expected, even within fully transformed enterprises. Very few enterprises have an organization-level cloud transformational strategy. To capture CNT’s full value, organizational leaders must overcome a few common challenges that could limit its true potential.

CNT efforts are different from cloud migration

In Exhibit 1, we see organizations consider the cloud a significant investment target, but Conversations with enterprise clients confirmed interest mostly focuses on cloud migrations (only moving the assets into the cloud). However, the cloud-native context is quite different. The cloud-native model is a fundamentally different way of working and collaborating; we discussed it in greater detail in this POV. The concept of “cloud native” goes beyond technology-centric capabilities such as access to data from anywhere, working from anywhere, and other infrastructure-focused capabilities. CNT is about how we create and deliver, such as new operating model transformations, business model transformations, and innovative outcomes. To become cloud-native, organizations need to have well-defined business objectives and leverage technology to achieve them.

Exhibit 1: Enterprise leaders consider cloud a top three investment

Sample: HFS Pulse Dashboard, 2022; 602 executives across Global 2000 enterprises
Source: HFS Research, 2023

Clients struggle to capture the value of their cloud investments. To capture value, client organizations need a clear cloud strategy, but very few have it at an organizational level in alignment with the business. Organizations fail to understand CNT’s broader context, limiting their effort by transforming only their technology. It appears clients limit their current objectives to migrating legacy applications to cloud-based and infrastructure modernization with less focus on operating models and business outcomes.

Navigating common CNT challenges

Enterprises that have commenced cloud-native transformation initiatives are on the path to achieving their desired outcome. However, they need to address some common challenges at the enterprise level to capture CNT’s maximum value.

• Cloud strategies often don’t align with business objectives: Enterprises often face challenges in defining cloud strategies that align with business needs and objectives. With improperly aligned cloud strategies, transformation happens in silos, leading to other challenges, such as inadequate security configurations, missing shared standards, and cost escalations. The fragmented approach decreases the value of cloud transformation. Organizational leaders must align technology transformation with business objectives to achieve maximum value.
• Enterprise leaders may not understand CNT sufficiently: Not everyone is familiar with CNT; some only have basic ideas. Enterprise leaders and decision makers across the organization should clearly understand what their company’s cloud transformation initiative involves, including processes, expected impacts, and desired outcomes. Ideally, leaders will fully understand CNT and the right courses of action for people, culture, and change management before commencing a cloud transformation journey.
• Missing business and client focus: Our CNT study taught us that clients largely focus on technology transformation. Modernizing infrastructure and platforms and updating the language and libraries is critical, but it is equally critical to take a business-driven approach and consider the end clients. Focusing on enterprise business needs and end clients (to enhance client experience) in the transformation program is also essential. Enterprises should consider the best practice approach, management, and methodology and ensure they align with clients’ business needs, then deploy the right modernization and optimization strategy.
• Technology and business team alignment could improve: Alignment between technology and business teams has improved, but there’s still a gap and room for improvement. Disconnection between teams makes it difficult to successfully build the foundational building blocks critical for transformation programs. Technology and business teams should align their objectives to overcome this challenge and succeed.
• CNT program change management is complex: Change management requires a technological and cultural shift in a cloud transformation program. CNT is a complex and lengthy process with incremental value generation through iterations and faster release cycles. A lack of a change management approach complicates CNT program adoption; successful management requires a step-by-step approach or framework.
• Security and governance need earlier implementation: Security and governance continue to be among the commonly mentioned challenges. In a cloud transformation program, security and governance are usually the highest priorities, even though they are the least-managed aspects of the process. In most cases, security architecture, policy enforcement, and cost and account management are set up post-transformation. Involving the right teams early and deploying holistic security policies in the strategy phase reduces risk.
• The talent crunch is persistent: While cloud and service providers and the industry constantly invest in talent to meet demand, having enough talent to support transformation initiatives is always challenging. The cloud transformation workforce needs to be trained in technology and collaboration. Retraining and reskilling are becoming critical for organizations’ journeys toward achieving cloud native.

The Bottom Line: To maximize CNT’s value, enterprises need a clear cloud strategy and effective collaboration and alignment between technology and business teams.

Cloud-native transformation programs are critical for organizations, but inadequate steps in capturing value and misalignments between teams inhibit the desired outcomes and slow project timelines. Cloud-native transformation is simultaneously a challenge and an opportunity for enterprises. Redefining a cloud strategy to align with business objectives will help enterprises optimize and modernize their operations as desired and achieve value sooner.