Over the past several years, moving to the cloud became equivalent to positioning one’s business as an innovative one: saving considerable costs, improving overall business performance, and much more. Most businesses eagerly embraced the cloud, due to a larger extent, because of these core benefits:
- Cost savings
- Competitive advantage
- Automatic software updates
Indeed, according to the Cloud Industry Forum, by mid-2015, 84 percent of UK organizations who participated in the poll have adopted at least one cloud-based solution. And, according to the latest RightScale report, 95 percent of respondents are currently using some form of the cloud—public, hybrid, or private—whereby the respondents have come from companies of different sizes and different industries from all over the world. This clearly shows that cloud adoption is not the "thing" for the adventurous anymore, but has gained a wide recognition across most companies. Even more, according to this same report by RightScale, on average, users are running 6 clouds.
It seems like with moving to the cloud, businesses have it all, don’t they?
Well, not so much.
The time has passed, and many companies can now finally evaluate how many benefits moving to the cloud brought them not just hypothetically, but in reality. And, the results are turning out to be not so rosy as the expectations may have led one to believe.
"She’ll Sting You One Day" *
Several research results have emerged in the past few months indicating that cloud adoption alone doesn’t necessarily reduce costs or make the life of IT departments easier, but can sometimes even make it harder.
For example, in their paper The Cloud Hangover, Sungard AS surveyed 400 organizations across Europe about their expectations of moving to the cloud and whether these expectations have been met. Top four expectations were: reduced IT costs, increased agility, improved IT team efficiency, and reduced IT complexity.
However, businesses turned out to be unprepared to face certain unforeseen cloud-related challenges that have presented themselves together with the cloud adoption. Or, as Sungard AS put it: "[…] in this rush to join the party without interrogating the hype in regards to their own organization’s reality, many have realised they have not truly thought about the cloud in the long-term."
According to the findings, a lot of organizations found themselves struggling with interoperability and unexpected costs at all phases of adoption, not least of all due to the incompatibility of cloud solutions with each other and with existing company software. For one, about a third were "surprised" by the unexpected expenditure on systems integration.
Another interesting report was presented this year at the Hamburger IT-Strategietage by Professor Peter Buxmann from the Technical University of Darmstadt. In his presentation Digitization: Reality Check, for which 40 interviews with C-level executives from Germany were analyzed, he showed that fast implementation and strategic flexibility are indeed among the benefits that businesses in question gained due to the cloud adoption.
Yet the promised benefit of automatic updates was quite debatable, while in the area of cost savings there turned out to be no benefit at all. Again, not least of all due to the unforeseen need for systems integration. Also, interestingly enough, security concerns turned out to be quite a pain point for many interviewees in Germany, either due to their own doubts or concerns of their customers.
Our Own Survey Backs It Up
Quite interested by these findings, I decided to run our own modest survey asking our customers and contacts about the success of their cloud adoption strategy.**
To start with, 56 percent of all respondents said that over 50 percent of all services, systems, applications, databases, etc. at their organization are cloud-based. At the same time, the quite remarkable 25 percent shared that their organization has adopted only one cloud-based solution so far. The rest was somewhere in between. This, in itself, is indicative of the fact that most companies either are already on very friendly terms with the cloud or at least started making first steps towards this.
In terms of how the general expectations have been met so far, 56 percent claimed they are satisfied. 25 percent even went this far and picked the answer "Absolutely, 100% or almost so met", while 6 percent admitted they had expected much better results. It is interesting to note that another 6 percent said they are quite satisfied but already know this is going to be more expensive in the long run. Yet at the same time, it was somewhat a relief to see that no one said that moving to the cloud was a complete waste of time and money!
Expected Benefits and the Reality Check
Based on the results of the survey, increased business agility was the top benefit expected from moving to the cloud—63 percent of our respondents picked this point. The second place is shared between enabling innovation and reducing IT complexity (each was chosen by 56 percent of respondents). The third place was equally shared by improving IT team efficiency and reducing IT costs (36 percent each).
The rest of the expected benefits was distributed as follows:
- Increased competitive advantage — 31 percent
- Less up-front costs — 6 percent
- All of the above — 6 percent
Picture: Benefits expected from moving to the cloud
When it comes to unmet or insignificantly met expectations, increase of competitive advantage, increase of business agility and reduction of IT complexity were among the first three — 33 percent, 27 percent and 20 percent respectively. Insignificant IT costs savings and insufficient decrease of day-to-day maintenance for the IT team as well as a certain scope creep (more and more applications are added then really needed) and issues with legal compliance were named among the rest.
Picture: Particular benefits that have not been met significantly
The Road So Far: Challenges Encountered
Next, we asked what challenges have been encountered so far, and this is where it’s getting really interesting. Here’s the complete overview:
Picture: Unexpected challenges encountered after moving to the cloud
The results are very close to these of Sungard AS, and it seems like the unexpected costs could be the real deal-breaker when it comes to cloud adoption. The reasons are different – staff needs to be educated, applications must be integrated into the existing infrastructure, the increased use of cloud applications as shadow IT (which results in more uncontrollable purchases by non-IT departments), and so on. But the outcome is the same. When I think of it, though, it is quite ironic that while companies move to the cloud in order to save costs, what they really get is even more costs on their hands then before. At the same time, I believe the real benefit in terms of costs savings will be very palpable in the long run.
Last but not least, we asked our respondents to share with us what they would have done differently if they had had a chance to start all over again. Equally important were the following points (each “scored” 29 percent of respondents):
- Would have developed a detailed plan for migration of existing software from their physical environment to the cloud
- Would have developed a solid strategy for managing multiple cloud vendors
- Would have ensured we have the right tools and technology for systems integration, e.g. an integration platform, in advance
Securing the right tools for systems administration in advance turned out to be another point that several respondents wish they had done before moving to the cloud. Only 6 percent reported they don’t regret a thing:), in other words, wouldn’t changed anything.
Picture: Things respondents wished they had done differently
Wisdom Shared, or Words of Advice
Finally, we asked some of our respondents to share a piece of advice off the top of their minds with those who are just starting their journey to the cloud. Here’s what they wrote:
"Don’t do it alone. Hire a company to assess your systems and build a plan to do it properly. It will cost more initially, but will save you boatloads in the future."
"Try several before choosing one. Not everything has to be in one platform, it is more important whether or not integration is possible."
"Change your requirements instead of upgrading."
"Plan how to make efficient user/group management in different clouds."
"Start small with one or two systems, work your way up."
Three Steps to Hit It Off With the Cloud
It was very interesting to see that the results of our small survey were indeed in many points consistent with the conclusions made in the Sungard’s paper and by Peter Buxmann. So, this is true that the cloud does bring some significant advantages to businesses, however, it is utterly important to have built a strong, solid, and well-thought-out strategy for cloud adoption way in advance. In particular, based on the answers of our respondents and the recommendations by Sungard AS, I would like to highlight the following points that organizations should pay special attention to:
- Don’t go for the "all or nothing" approach — Start small. Don’t rush to move as many applications to the cloud as possible within the shortest period of time, even if your organization decided to go full speed ahead on digital innovation and cloud adoption. Not all applications and systems can be migrated into the cloud seamlessly, and in some cases, you might even need help from an external specialist. First, get used to the thought that this process might take several months if not years—better slowly, but surely. And then work on a very detailed plan about what should be migrated to the cloud, when and why! Make sure you take the technical requirements and interdependencies of the systems and applications into account at this step already.
- Get yourself an integration middleware — It’s been repeated over and over again, and yet it seems that when it comes to cloud-based systems and applications, IT specialists tend to forget or dismiss the fact that these need to be somehow integrated with the existing on-premise software, systems, databases. Most even think that they can easily manage systems integration themselves, without any third-party middleware.
Yet cloud-based systems and applications tend to require a completely new set of skills. Besides, cloud adoption is today only an intermediary step towards embracing projects related to IoT, Mobile, and Big Data—the real drivers of digital innovation. Without a uniform integration platform that would be accessible across all departments, B2B partners, and other key business parties; that would work well not only with the existing core systems but also with other platforms; and that would provide an overview of all integration flows down to the last detail, IT departments are bound to get buried under the amount of integration work. This is hardly in accordance with the principles of digital innovation and digital transformation.
- Know where your money goes — Right from the start, make yourself familiar with ways to manage multiple vendors. Hire a specialist or talk to other CIOs and CTOs at a conference about how they tackle this issue. As much as you would love to get 90 percent of all solutions from one vendor (and are really intending to) this is simply not going to happen, so be prepared for that. In addition to that, Sungard AS warns about being very attentive to Cloud Service Level Agreements and recommends nailing them down from the start. Here’s what they write: "Considering what elements are included in an SLA is essential in ensuring that your cloud deployment can meet those business and IT expectations right from the start."
To Be Continued
While preparing this article, I luckily happened to talk to a person who has many years of experience in working in "cloud-free" organizations and is now running his own company, which is based entirely in the cloud. We talked about differences between the two models, benefits and disadvantages of the cloud for him, and even about security. Next week, I’m going to continue the topic of cloud adoption and share his story with you.
* (Brothers Grimm, The Queen Bee)
** 88 percent of all respondents are from the SMB (small and medium-sized business) sector, while the rest 12 percent come from enterprise. The respondents came from all over the world, with the majority of them being located in Europe.