Dive Brief:
- A CFO assessing the payoff from a shift to cloud computing should consider gauging savings in security and compliance and the gains from accelerated launch of new capabilities, as well as multi-year measurement of return on investment (ROI) from reducing reliance on on-premises computing, IBM Cloud CTO Hillery Hunter said.
- “There’s a growing understanding in the industry that cloud is a set of technologies that are related to speed of development, agility of deployments, elasticity, integration of environments,” Hunter said Friday in an interview. Seven out of 10 executives managing cloud operations “think it’s difficult to realize the full potential of digital transformation without having hybrid cloud” blending on- and off-premises computing, she said, citing an IBM survey.
- Three out of four executives (77%) say their companies use a hybrid cloud approach, IBM found in its survey of 3,014 executives across 12 countries and 15 industries. Respondents identified security risks, regulatory compliance and technological complexity as the biggest barriers to success.
Dive Insight:
Nearly nine out of 10 businesses (88%) consider themselves advanced in cloud adoption, with just 9% exploring cloud computing at a limited, measured pace and 3% keeping computing in house while evaluating the cloud option, KPMG found in a survey of 1,000 enterprise technology leaders.
Four out of five survey respondents consider their companies’ cloud adoption successful, with two out of three noting improvements in business strategy, KPMG said. At the same time, two out of three respondents say they have yet to see substantial ROI from cloud spending.
In order to increase ROI, “you need to look more holistically, not down at an individual department,” Hunter said.
A CFO should examine the steps between “generating an idea to getting revenue from that idea,” she said, or what she called the “value stream.”
For example, a major airline upgraded its app after identifying ways to improve the experience of a passenger during the day of a flight, she said. It achieved savings, greater efficiency and higher customer satisfaction by streamlining check-in, baggage handling, re-booking and other contact with customers.
Also, a large bank used cloud computing to speed up new product development and approval, cutting costs and gaining an edge on its competitors, Hunter said. A company that focuses hybrid cloud on value streams can be “more elastic, enter new business spaces more quickly, shorten processes, introduce automation.”
At the same time, CFOs can measure ROI in more isolated projects, such as a “lift and shift” of entire applications to the cloud or by packaging software in “containers” that bundle application code with essentials such as configuration files and libraries.
“Containerization” speeds development, improves security and eases the portability of an application to another operating system. It can achieve ROI as high as 300%, Hunter said.
A CFO seeking to measure ROI of cloud migration can track the reduction in time from the conception of a new product to its launch, Hunter said. “That’s a really key metric that we often see as a core consideration because it points to how quickly the business can respond to changing market demands and to competitors.”
“We’ve seen organizations go from only being able to release new functionality every quarter to releasing functionality in days or weeks,” she said.
A CFO can also find ROI by assessing savings on security and compliance, Hunter said.
For example, a shift to the cloud often leads to elimination of “technical debt,” or software imperfections that were tolerated because of an emphasis on rapid deployment, Hunter said. “There’s a lot of technical debt that can be removed when you move to the cloud.”
