Futurecast: Cloud Transformation
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1 Futurecast: Cloud Transformation Exclusive research finds the cloud is a catalyst for innovation in four foundational areas: optimizing operations, engaging customers, empowering employees, and transforming products/services. Cloud computing is entering a new stage of maturity. Whether the goal is to drive cost savings and operational efficiency through better understanding of the business, or to find new business or market opportunities enabled by customer insights, line-of-business and IT executives agree that there is more to cloud than just faster, cheaper software and servers. This evolution of cloud from low-cost utility to strategic asset is clear from the results of an IDG Research Futurecast survey of 200 IT decision makers (ITDMs) and business decision makers (BDMs) on cloud transformation, sponsored by Microsoft. Respondents are split evenly on whether the cloud will have the biggest impact on their organization s ability to make money versus save money over the next 12 months. 61% of C-Level execs see cloud as a money maker vs. 43% of GMs / VPs & 33 % of Director-level respondents Business capability that will be most improved by cloud computing in the next 12 months 48% 2% 3% Ability to save money 48% Ability to make money Although operationally focused directors and managers tend to favor the cost-saving benefits of cloud, C-level executives are more excited about the opportunities to grow revenue using cloud-enabled platforms and
2 services. This represents a big shift from the early emphasis on using the cloud for cost-cutting and signifies a more strategic role for cloud computing, as priorities set at the top of the organization inevitably trickle down through the ranks. For the short term, at least, operational efficiency which encompasses factors like speed and simplicity of provisioning new computing resources and applications is still the low-hanging fruit, particularly among midlevel managers. However, as organizations increase investments in cloud-based data analytics and applications, they are likely to open up new doors to help transform their workforce, their products, and their customer relationships. Our survey turned up a handful of interesting insights regarding four core areas in which cloud technologies are enabling the next wave of digital transformation: optimizing operations, engaging customers, empowering employees, and transforming products and services. Optimizing Operations: Significant Near-Term Value Cloud computing is expected to have the greatest impact in the near term on operational optimization, easily outdistancing the three other categories. This is not surprising given the early emphasis on cloud deployments as a way to lower costs and reduce time to market. Companies focused on optimization are significantly more likely to see the cloud as a cost saver rather than as a moneymaker. Biggest expected impact from cloud in the next 12 months Optimizing your operations Engaging your customers Empowering your employees 43% Transforming your products and services 10% Other (specify) None 1% 0% 2
3 Among the applications that organizations are adopting to help them optimize operations, big data tops the list, followed by web-based applications and business applications. This is consistent with other research showing that organizations are currently using big data primarily for efficiency benefits such as improving resource utilization, streamlining sales and marketing activities, and optimizing supply chains. Similarly, business and web-based applications align naturally with the goal of organizational optimization. Software as a service (SaaS) is faster to deploy and easier to maintain than on-premises applications, and webbased applications are more resilient and scalable when delivered from the cloud. Web delivery is a particularly efficient way to enable customer self-service and e-commerce, both of which reduce operational costs, while having the collateral benefit of improving customer relationships. Going forward, organizations that are optimizing operations in the cloud see the greatest potential in automating previously manual processes and improving employee productivity. Automation is an obvious tactic for improving efficiency, but it s clear that respondents also recognize the potential of cloud to help employees complete tasks more efficiently and collaborate more effectively. Opportunities to optimize operations using the cloud Automation of formerly manual processes is a key factor for GMs / VPs (38% vs. 28% C-Level vs. 23% Directors) Automation of formerly manual processes Ability to increase employee productivity Improved monitoring of technology usage and/or performance Ability to shorten time to market Ability to create economies of scale More efficient allocation of human resources Re-allocation of capital Creating IT infrastructure for short-term projects Greater availability of suppliers / partners 31% 30% 28% 23% 22% 20% 19% 18% 3
4 Cloud Security Concerns Diminish Security, long seen as a weakness of public cloud infrastructure, is diminishing as a concern and is even perceived as a strength in some areas. C-level executives, in particular, are optimistic about the cloud s potential to make their businesses more resilient. Nearly 70% believe cloud will have a positive impact on data protection, compared with 53% of general managers and vice presidents. Respondents who see the cloud as a means to make money are significantly more likely to have a positive attitude toward cloud s security benefits than those who simply regard it as a cost saver. Impact of cloud computing on information security Moderate or significant positive impact over the next 12 months Engaging Customers: Ease and Immediacy With customers exhibiting less loyalty than ever to brands, providing a positive customer experience has become critical to business growth. It s not surprising, therefore, that nearly three-quarters of respondents who see cloud as a revenue driver view customer engagement as the area where the cloud will have the biggest impact over the next 12 months. C-level executives are especially bullish on this point, citing customer engagement as the No. 1 benefit by nearly a 2-1 margin compared with midlevel executives and directors. The greatest opportunities to drive customer engagement are self-service optimization (cited by 35% of all respondents), putting data at the customer s fingertips (32%), and building an omnichannel strategy to serve the customer in any context (32%). C-level executives, in particular, value the omnichannel dividend (39% versus 25% for GMs/VPs). Customer engagement enthusiasts also see value in using cloud-based tools to improve workforce productivity ostensibly to better serve customers and to apply predictive analytics to better anticipate customer needs. Enable business continuity 69% Be proactive with respect to disaster recovery Protect our data from cyber threats Meet regulatory and compliance requirements Protect our employees with identity management 56% 69% of C-level execs believe the cloud will have a positive impact on protecting data vs. 53% GMs / VPs and 54% Directors. 62% 60% 60% Opportunities to transform customer experience th rough the clou d Self-service optimization Providing customer data at their fingertips Omnichannel strategy Workforce effectiveness tools and training Predictive customer analytics 360-degree view of the customer Customer sentiment analysis in social media Personalization Churn analysis 35% 32% 32% 29% 29% 26% 20% 17% 4
5 Carrying forward the themes of customer self-service and 360-degree engagement, respondents see the biggest returns from web-based applications, productivity tools, PC support, and voice/data integration. This is likely because web-based applications are the dominant self-service delivery mechanism, and productivity and employee support tools are well suited to the call center. ITDMs are significantly more enamored of the cloud s self-service potential than BDMs by a margin of 43% to 26%, a finding that may simply reflect their own preferences for doing business. Empowering Employees: Information + Analytics = Insight For the of respondents who see cloud most benefiting employee empowerment, it s all about access to information. This group shows the greatest interest in big data and analytics, automation, training, information access, and collaboration. The overarching theme: Employees who are more knowledgeable and better connected to each other work more efficiently and can better discern insights about their job functions and markets. Opportunities to transform the employee experience using the cloud Improved access to information and analytics Ability to reduce time spent on manual tasks Ability to improve your skillsets, acquire training Better access to resources and information Ability to leverage cutting-edge collaboration tools Ability to work how, where, and when you like Using intelligent services and agents to help you manage your time and attention Potential to expand your role by taking on new responsibilities 45% 34% 31% 31% 30% 29% 25% 19% Interestingly, this category is favored by C-suite executives by nearly a 2-1 margin over their subordinates, and by large companies over smaller ones by a factor of 3-to-1. 5
6 Respondents who favor employee empowerment see the cloud as increasing the availability of talent and fostering corporate social responsibility to a much greater degree than do those who favor other cloud transformation areas. Across the board, respondents see improved access to information and analytics as the principal employee empowerment benefit of the cloud. Transforming Products and Services: A Path Toward Reinvention Only 10% of respondents cite product transformation as the most significant short-term impact of cloud computing, but the low ranking is probably more a matter of priority than potential. Executives simply see greater near-term benefit in operational improvements. Harnessing the cloud to transform products and services is more difficult to achieve, but also potentially more rewarding. Transformation-focused executives want to harness data to better understand customer needs and use the flexibility of the cloud to develop new business models or reinvent parts of the business. C-level executives indicate particular enthusiasm for the cloud s ability to enable fail-fast experimentation, a key element of product and business transformation. Opportunities to transform pr oduct/se rvices via the cloud Failing fast is particularly important to C-Level leaders who see the cloud as a moneymaker (29% vs. 17% GM / VP vs. 15% Directors) Harnessing data and using intelligence to understand customer needs and demands Development of new business models Reinventing our business or parts of our business Modernization of R&D technology Ability to localize products and services Developing / Connecting a network of partners Ability to test product concepts in early stages with accuracy Shift to exploratory fail fast, risk-taking methods Ability to design products and services in a socially responsible way 35% 30% 28% 27% 26% 25% 25% 21% 20% 6
7 In short, using the cloud to transform products and services is a relatively low priority currently but offers some of the more impactful potential outcomes over the long term. Divergent Perspectives Our research finds some clear differences in the perceptions of cloud s current and potential impact among senior executives compared with those lower in the organization. For example, C-suite executives exhibit more interest in the potential of the cloud to enhance productivity and collaboration. They also favor technologies like big data and web applications to a greater degree than professionals in more operational roles. General managers and vice presidents see the greatest potential in web applications, followed by big data and security. This is probably a function of their greater focus on operational efficiency and resilience versus the more visionary perspective of senior executives. BDMs and ITDMs also differ on some issues, signaling a gap that needs to be closed in order to optimize digital success. For example, ITDMs recognize greater potential in big data/analytics and web-based applications than their colleagues on the business side. They re also much more excited about the potential of the cloud to improve application development and testing. It s tempting to conclude that ITDMs are simply more technically oriented than their business peers, but in some areas IT respondents actually show greater interest in the cloud s business impact. For example, they are significantly more intrigued by the potential of self-service optimization (43% versus 26%) and enabling an omnichannel strategy (38% versus 25%) than those on the business side. Even more striking is that ITDMs exhibit greater interest than BDMs in the potential of cloud to make money. This may be a sign of the growing importance of IT as a business transformation enabler a driver of revenue rather than just an expense center and the CIO as an agent of change. Organizations would be well served by tapping into this wellspring of interest from their technical staffs. Conclusion Cloud computing exhibits an adoption curve that is typical of significant new technologies. Early-stage adoption begins on the business side, with users seeking ways to do their work better and faster without the overhead of IT administration. Short-term priorities are driven by factors that hit the bottom line quickly namely, operational efficiency. It s significant, however, that a majority of the respondents to our survey see potential beyond mere cost reduction. The future they envision features cloud-enabled innovation that improves access to information, makes it easier to understand customer needs, and harnesses emerging technology such as artificial intelligence to reinvent the business. If past patterns hold true, we can expect interest in these areas to continue to grow as the cloud becomes a foundational element of business transformation. To learn more about cloud transformation, visit: 7
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