McKinsey partners discuss the challenges and importance of transitioning to the cloud, including complexities, advantages, and maximizing ROI. They explore difficulties in achieving ROI, potential solutions, and the importance of collaboration. Adopting an agile operating model is emphasized for cloud success.
Cloud computing is essential for successful businesses, but many face challenges in fully adopting and realizing its value.
Value leakage in cloud programs can occur through underutilization, complexity from multiple providers, and slow adoption, hindering significant cost reduction.
Deep dives
The Importance of Cloud Computing for Successful Companies
Cloud computing is the way successful companies will run their technology environments in the future. Despite being 15 years into the cloud journey, traditional enterprises face challenges in fully adopting and realizing the business value of the cloud. These challenges include difficulty in identifying the right use cases, creating a foundational set of capabilities for automation and scale, and navigating the cultural and skill set shift required for cloud adoption. However, there are industries like software, media, life sciences, and asset management that have adopted cloud aggressively and seen significant benefits. On the other hand, industries with strong regulatory or business model constraints, such as utilities, face hurdles in cloud adoption. Overall, successful cloud programs require identifying the right business domains, creating efficient delivery paths, and ensuring a strong collaboration between the business and technology leaders.
Challenges and Leakage Areas in Cloud Programs
Many cloud programs struggle due to value leakage in three areas. First, not fully utilizing the cloud for a range of use cases leads to expensive foundations with limited return. Second, adopting multiple cloud providers and a scattered approach to development tools and platforms results in increased complexity and costs. Third, slow cloud adoption and failure to address fixed costs lead to less significant cost reduction and hinder the realization of return on investment. These challenges contribute to the finding that less than half of major enterprises have achieved value at scale in their cloud journeys.
Guidance for Maximizing ROI in Cloud Investments
To mitigate challenges and ensure maximum return on investment in cloud computing, companies should focus on defining specific business domains and their related minimal foundational capabilities. This allows for efficient delivery paths and optimized skill sets. It is crucial to emphasize the connection between business and technology, educating both leaders on how to think about the business value enabled by the cloud. Exemplary companies that have successfully leveraged the cloud tend to focus on a core business domain and build around it, rewiring their business technology operating model towards a product-centric, agile approach. Incremental change and optimizing just enough to benefit from cloud scalability and resilience without undertaking extensive application and data changes can be a wise strategy for faster adoption and subsequent modernization.
We’ve all heard lots about cloud technology, but, according to new McKinsey research, only 20 to 30 percent of industries are using it regularly and at scale. On today’s episode of The McKinsey Podcast, McKinsey senior partners Mark Gu and James Kaplan share findings from the report, “In search of cloud value: Can generative AI transform cloud ROI?” They talk about why cloud technology is essential in business, what’s holding companies back from getting the most value from their cloud programs, and the steps they can take to improve their cloud capabilities. But first—did you realize that six words are fundamental to your company’s success? Scott Keller, McKinsey senior partner and author of CEO Excellence, tells us more.
Theme music was composed, produced, and performed by Joy Ngiaw.
