mckinsey cloud report

Are you searching the right talent pools? But nearly two-thirds (65 percent) of surveyed decision makers say their organizations increased their cloud budgets as a result of the pandemic, and Given the economic and organizational complexity required to get the greatest benefits from the cloud, heads of infrastructure, CIOs, and CTOs need to engage with the rest of the leadership team. Please try again later. CIOs see the cloud as a predominant enabler of IT architecture and its modernization. This can require adjustments to continuity and compliance plans that preserve the confidentiality and integrity of sensitive data. However, some of our stakeholders take a different view. Rewriting an application to be cloud native requires the highest investment but yields the largest improvements in both agility and total cost of ownership. Some organizations, however, are leaking their share of that value instead of capturing it, with inefficiencies in orchestrating cloud migrations adding unexpected cost and delays. Should we think about cloud as a solution to our organizations technological pain points and/or as a source of product innovations and new features? Cameron Coles, 11 advantages of cloud computing and how your business can benefit from them, McAfee, June 9, 2015, skyhighnetworks. Consequently, this trade-off means accepting reduced functionality and fit for the work at hand. It also enables employees to be more productive and complete tasks from anywhere. Two years ago, legacy infrastructure accounted for the lions share of the average IT-hosting budget. First, the thousands of applications a large enterprise might have built over the past three decades need remediation or re-architecting to run efficiently, securely, and resiliently in the cloud. Please try again later. Overall, we see tremendous opportunities to accelerate progress on business agilityif organizations are ready to take the right steps across all these elements to transform the way they work. While some paint an idyllic picture of companies cloud bursting (using a mix of private and public cloud hosting to manage peaks of demand) their applications in real time to whichever CSP can provide the lowest-cost capacity, we have not observed this occurring except for very specialized workloads. However, 69 percent of organizations indicate that implementing stringent security guidelines and code review processes can slow developers significantly. Businesses that follow the lead of cloud-migration outperformers stand to unlock some $1 trillion in value. Conversely, focusing on one CSP may limit access to some types of innovation and will lock the company into a single provider, which has often been painful in the traditional on-premises world. A global pharmaceutical company sought to move nearly all its workloads to the cloud. Cloud-migration opportunity: Business value grows, but missteps abound. The legacy approach of focusing on projects tends to create barriers to realizing the full benefits of cloud investments, while compounding existing issues with customer and employee satisfaction and infrastructure reliability. Overwhelmed, the company cut the scope of its cloud-adoption plans by roughly 50 percent and chose to retire more applications rather than move them. Please try again later. How can CFOs rebrand themselves as innovation allies? In the testing phase, security tests are automated and integrated into the functional testing process. The CIO of a North American retailer notes that when it comes to picking public-cloud providers to migrate applications, This is a true debate. Do we understand how cloud can help us meet our business-optimization and -simplification goals? Looking forward, leaders remain bullish. Notably, 28 percent of respondents cited the complexity of their current environment. They are also baking in standardized configurations as part of deployment automation. How do we perform against our peers with regard to adopting the cloud? Does the current cloud transformation fit into the businesss overall digital transformation? Will cloud have an impact on our financials over time, and are we taking steps to adapt to that impact? The risk isnt just falling behind the competition. But no matter how powerful, technology on its own is insufficient to achieve acceleration. Success requires CIOs and tech leaders to do three things. How are we communicating our financial and strategic changes to our stakeholders? According to our research, CIOs believe that the organization cannot capture agility benefits by simply shifting applications to cloud platforms. We have to innovate on new policies and change our business model rapidly. And the CIO of a retailer indicates that the IT team is mutually accountable with the chief marketing officer (CMO) to achieve the growth objective: The CIO and CMO will have to work together. In recent McKinsey research, when chief information officers (CIOs) or equivalent tech leaders were asked about their CEOs top priorities (see sidebar, About the research), 71 percent pointed to agility in reacting to changing customer needs and faster time to market, while 88 percent of respondents cited revenue acceleration (Exhibit 1). This approach can also help focus programs on where the benefits matter most, rather than scrutinizing individual applications for potential cost savings (Exhibits 1 and 2): A financial-information provider determined that moving its customer-facing applications to the cloud could enable much faster and less costly responses to market opportunities. Migrating and then optimizing later can help break through the gridlock many companies have experienced with their cloud programs. If you would like information about this content we will be happy to work with you. Exploiting cloud services and tooling, however, requires change across all of IT and many business functions as wellin effect, a different business-technology model. Unlocking the full potential of cloud takes strategic insight, technical expertise, and transformation engine thats made up of unique reinforcing and evolving elements. Data show that those inefficiencies are costing the average company 14 percent more in migration spend than planned each year, and 38 percent of companies have seen their migrations delayed by more than one quarter. This effort starts with hiring developers with knowledge of security architecture. Across interviews with almost 40 different boards, we synthesized the four best ways that boards can actively engage in cloud: connect cloud to the overall strategic agenda discussion, oversee and communicate clouds financial impact both inside and outside the business, assess and plan for cloud-related risk and compliance issues, and push and support management in the development of cloud capabilities throughout the organization. Subscribed to {PRACTICE_NAME} email alerts. Second, the economics, skills, processes, and organizational changes required are too complex and span too many different parts of the business for infrastructure heads to manage on their own. Therefore, applications not designed for efficient resource usage can run up large bills with cloud service providers. Design decisions are marked by a lack of transparency and coordination across different functions in IT, resulting in more expensive custom solutions that still underperform. Business acceleration is best achieved by extending IT modernization efforts to encompass far-reaching changes in the operating model along three dimensions: people, processes, and policies. We have seen CEOs seek this guidance from their IT leaders and teams. These IT functions have shifted skill profiles: from project managers to product managers, from operations engineers to automation engineers. For example, self-driving cars hold the potential to automate travel on even chaotic roads; however, no IT drivers are ready to take their hands off the wheel just yet. ej2[j-L(]$U}1l?Eh\ =XWv voGnuqn]=LxrEtx^Es=)~y nf9fik}I_sX@k?RV-x$Y$=2#n 2 Digital technologies continue to transform every facet of business. We'll email you when new articles are published on this topic. Capturing the value of migrating to the cloud requires changing both how IT works and how IT works with the business. Consuming traditional virtual machines has the lowest transition costs and implies the lowest level of vendor lock-in but, depending on the application, may not provide much benefit in terms of agility or time to market. Cost overruns at a global level add up to well more than $100 billion in wasted spend over the course of migration in three years. 80 percent of its total IT-hosting budget. Using CSP native compute (IaaS) with third-party-provided cloud-ready images provides the lowest level of vendor lock-in and limits changes to the infrastructure, providing low levels of benefit for imported availability and maintenance, if deployed with automation. According to the chief information security officer of a multinational cloud-based solutions provider, In the old world, when a developer checks in bad code, I can find it and control the blast radius. Giving up developer agility for the sake of control and governance. The authors wish to thank Arif Cam, Lisa Donchak, Jordan Rohrlich, and Chaitali Thakur for their contributions to this article. Why? Does management have the financial resources available to meet cloud-adoption goals? As the companys head of IT told us, Its not enough to have the CIO on board; you need CEO and board-level support to provide air cover. Its important to know that they have your back when you engage with others in the business.. Do we need to make changes to our overall governance model to accommodate the needs of our cloud and technical transformations? Therefore, applications not designed for efficient resource usage can run up large bills with cloud service providers. DevSecOps and API-based security are core enablers in such organizations. While a majority of CIOs indicate that they are living with these suboptimal choices, deeper analysis of companies that have successfully navigated these trade-offs highlights best practices to avoid these compromises and, in turn, increase business agility. Despite the best intentions to build capabilities, IT teams often compromise by outsourcing projects to contractors or partners to patch holes in their talent pipelines. Cloud by McKinsey brings all of this together, creating technology change that matters. A clear view of what is at stake and where board engagement can help will allow management teams and organizations to unlock clouds more than $1 trillion of benefits. So to say that the CMO is dependent on me to deliver the objectives is an understatement. The industrys average product release time has ranged from nine to 24 monthsa glacial pace compared with that of fintech companies, which can deploy code daily and run dozens of A/B tests a month. McKinsey Cloud Cube Survey; see also Arul Elumalai, James Kaplan, Mike Newborn, and Roger Roberts, . Instead, they must develop a clear picture of the business strategy as it relates to technology cost, investment, and risk. Refactoring applications to use containerization enables far greater agility, flexibility, scalability, and sustainability with increased productivity. That cushion has dropped significantly thanks to digital channels: the company indicates that it now has just 48 hours to launch a new design and gain buyers through digital, direct-to-consumer routes, and rapid (sometimes same-day) delivery. In our research, we observed leaders pursuing the following strategies to improve customer experience without compromising security: Delaying talent development and upskilling and augmenting talent with contractors. Outdated technology environments make change expensive. Cloud scale-out abstracts its infrastructure as code (IaC) to tools that offer multi-CSP and SaaS vendor support (such as Terraform or Ansible) so teams can unify on a common approach that embeds co-creation. At the end of 12 months, however, it had shifted only 40 percent of its first-year target. Having a clear understanding of clouds value potential and targeting the most relevant pools of value are important starting points. What are the new types of cyberrisks to which cloud could expose the organization, and what steps are we taking to manage them? Our data show that by 2024, the average company aspires to have cloud spend represent Leading IT organizations have integrated security into every aspect of planning, building, and operating. As a CIO for a professional services company explains, We dont see concerns of vendor lock-in with public-cloud providers by betting on a single vendor. Twenty years ago a single small application might run on a $25,000 server. Without multiple vendors, you run into technical and financial lock-in.. Containerization provides optimized efficiencies, scalability, and abstraction with cost efficiency. Analysis shows that those outperforming companies are 32 percent more likely than others to have active CEO sponsors. Larger companies, however, with hundreds of millions of dollars in technology-infrastructure spend, are more inclined to use multiple vendors, though they will often start with a single CSP. Further analysis indicates that companies are falling short of their IT agility expectations, regardless of their level of cloud migration (Exhibit 5). In some cases, companies have found existing applications cost more to run in the cloud before remediation. Something went wrong. As important, they are also more decisive in pulling the plug on data-center funding to galvanize the cloud migration, even if it means paying early termination fees. Toolchains optimized for different environments and those with which developers and operators are most familiarhelp boost productivity. Modern developers need to be free to choose combinations of languages, libraries, and frameworks that enable accelerated delivery. Our surveys have found, in fact, that the business case for cloud is the largest barrier to overcome. Does our CEO and CIO succession planning include considerations around both technical and cloud competency? We strive to provide individuals with disabilities equal access to our website. a senior partner in the Silicon Valley office, where Bhargs Srivathsan is an associate partner; and Leandro Santos is a senior partner in the Atlanta office. That demand is likely to exacerbate already tight talent supplies. The right technology and source decisions not only mesh with the companys risk appetite but can also bend the curve on cloud-adoption costs, generating support and excitement for the program across the management team. Technology execution capabilities are often not up to the task. Cloud will help organizations to both reduce IT costs and support innovation through powerful emerging technologies. Multiple surveys performed by McKinsey indicate that large companies host 10 to 15 percent of their applications in the cloud but continue to host the core of their technology environment in traditional data centers. Technical debt is the implied cost of rework caused by implementing a quick but brittle or otherwise architecturally suboptimal solution. Furthermore, these organizations are incorporating automation into service-request management and incidence response. What challenges have we faced around cybersecurity, and will cloud enable us to meet them and increase overall security? Last, during the deployment phase, APIs for environment creation include functions to enforce secure configurations. Unlocking business acceleration in a hybrid cloud world. Over the past 20 years, there have been multiple disruptions in the way large enterprises host applicationsfrom expensive proprietary processors to commodity x86 architectures, from proprietary operating systems to open-source Linux, and from servers dedicated to a single application to many virtual machines running on a single server. This often requires using proprietary services from a CSP, which may create an unacceptable vendor dependency for some companies. In the implementation phase, developers create modular security components that can be easily reused, thereby eliminating the need for separate design and implementation. But this approach requires accepting that some applications may cost more in the short term and aggressively preventing application teams from moving on after migration and neglecting to optimize their systems in the cloud. Just as CIOs and CTOs have long had to make buy-versus-build decisions, in the cloud they must determine whether to procure software-as-a-service (SaaS) offerings or build their own applications to run on infrastructure-as-a-service (IaaS) or platform-as-a-service (PaaS) services hosted in the cloud. CIOs and CISOs will need to identity how much dependency they will build into their existing legacy network design and traditional security systems. Never miss an insight. Something went wrong. Containerization is most suitable for applications but requires code refactoring during migration from traditional environments.

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