Over the past 18 months, the pace of digital acceleration has quickened. A recent KPMG survey of business leaders found that 67 per cent have sped up their digital transformation strategy and 63 per cent have put greater investment into their digital transformation plans since the start of the pandemic. With the technologies that underpin digital transformation being extremely cloud-dependent, it is no surprise that IDC’s latest figures forecast 2021 cloud infrastructure spending to increase 12 per cent to $74.3 billion.
However, we know that historic cloud investments haven’t always delivered value, and in some cases have actively generated wasteful spending. Some estimates show that almost a third of organisations’ cloud investment is inefficient, equating to approximately $25 billion of spending that is not creating real value for the enterprise. The reason this is happening is primarily a result of architecture inefficiency and value leakage. If these predictions for cloud infrastructure spending come true, this value gap is only going to get wider.
Why is Cloud Waste a Problem?
Many companies are so focused on migration throughput, that they fail to identify how their enterprise will drive value from the cloud. This mindset results in a poor quality of transformation and intensifies architecture inefficiency and missed value. Cloud value requires more than just moving IT systems; a focus on business outcomes, resilience and regulatory controls is a must, as it’s hard to retrospectively introduce the controls or transform the architecture to support these areas.
Architecture inefficiency relates to the use of architectures that cost more than they need to on the cloud. Perhaps they inhibit auto-scaling and utilisation, or they use older or more expensive instance types than needed, or they have failed to refactor workloads when implementing Function as a Service (FaaS) and Platform as a Service (PaaS) capabilities. In other cases, they use tooling around the cloud inefficiently.
Value leakage comes when spending is not targeted directly at where the enterprise needs to get value from the cloud. Understanding at the outset where the most value can be generated (whether that is analytics, scaling cyber security, AI, or a combination thereof) is crucial. Either under-investing in those areas, or over-investing in undifferentiated areas, generates waste.
Closing the Cloud Value Gap
CIOs are seeking to maintain or increase the pace of digital transformation which has been founded on cloud infrastructure, so they must extract value from every pound they spend. Fortunately, there are several measures that organisations can take to help achieve this:
Identify your organisation’s strategic reasons for cloud use
The enterprise can use the cloud for many things. The basic functionality is commodity infrastructure, which provides data storage and computes power. At an intermediate level, the cloud can also be used for increased agility, scalability and speed of provisioning to accelerate the speed to market of technology products. For the most innovative companies, the cloud can be used for analytics and advanced technologies including AI and machine learning. Some businesses might use all these capabilities, while others only employ a handful. Organisations must laser in on what they are actually trying to accomplish with their cloud deployment. Without this focus, engineers will simply build a slightly better cloud than the last one, rather than create an architecture focusing on the value that needs to be delivered.
Quantify impact using a ‘cloud value map’
After the strategic purpose of using the cloud is agreed upon, ongoing usage should be mapped against key metrics and the business capabilities they underpin. The simplest way to do this is by using a value map that connects these differentiating business services at the top of the pyramid, with the enabler capabilities in the middle layer, and at the base the foundational architecture and operations levers. Put simply, based on the business services outcomes that need to be delivered, the enablers and foundations will be organised differently. For example, a cloud engineered for insight will organise data in another way to one engineered for cost.
This then helps enterprises to identify if the cloud is supporting their ability to execute higher up the stack, whether business processes and systems are truly being enabled by the cloud, and if it is affecting customer journeys and processes. It’s also possible then to point at spending which is being wasted on functions that don’t support business value. Through a combination of these processes, cloud teams can be certain that the cloud infrastructure they are operating is cost-effective.
Don’t forget engineering teams and Risk functions
Having a cloud controls framework in place to show to the Board and regulators will give them the confidence that any cloud migrations and updates can be done with speed, accuracy and minimum risk. The framework incorporates the operational, security and resilience risks that emerge from cloud migrations and ongoing operations. It also helps to understand, mitigate and manage any risks, while complying with existing regulations.
Promote collaboration
Cloud implementation, whilst on paper is often done correctly, often misses the beneficial opportunities when business and technology functions are not properly aligned. When business and IT teams are brought together it encourages both parties to evaluate current cloud usage, logjams and ways of igniting faster progress. Cloud adoption is usually driven by CIOs, but they must work collaboratively with other departments to decide on a strategy and communicate how these decisions will impact cloud use, as well as what this means for the rest of the business.
Employ a sophisticated cloud-appropriate strategy
The benefit of hybrid cloud is that it enables organisations to choose the most suitable infrastructure for the job. One workload may benefit from a particular AI capability more prevalent in one cloud, whereas another workload may be purely commodity to be placed in the most cost-effective location, cloud or on-premise.
There is no doubt that cloud technologies will play an integral role in helping businesses recover from the effects the pandemic has had on the economy. It will be a significant differentiator for those businesses that implement it well. IT teams that are quick to adopt a measured approach to maximise value and minimise cloud waste will secure lasting competitive advantages for their enterprise.
As the Head of Cloud Transformation, Adrian leads our teams who transform and manage the technology platforms which enable our clients to deliver on the promise of digital. KPMG’s 100 cloud consultants in the UK, and 500+ architects and engineers in the UK and offshore, work with major enterprises across industries and Government in implementation and advisory role. Adrian’s roles have included migrating FTSE100 companies to infrastructure leading one of the world’s largest Office 365 implementations, and delivering digital transformations across front and back offices. Primarily, Adrian’s background is in the Energy and Consumer Goods sectors.