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Research indicates that although cloud transformation is considered a top-three critical investment for 60% of enterprises, only 1 in 4 can show a positive return on investment from their initiatives.
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HFS and IBM Consulting report that enterprise technology is constantly changing, with cloud transformation being a major focus. However, many organizations have not seen concrete business benefits from these efforts.
“For too long, cloud transformation has been confined to the realms of technology, but it’s time to recognize it for what it truly is—a crucial investment in the future of businesses,” said HFS CEO and Chief Analyst, Phil Fersht. “Cloud investments must transcend the traditional IT narrative and become a central discussion in the broader context of business transformation.”
Cloud transformation is increasingly funded by non-IT stakeholders:
One obstacle to successful cloud transformation is the idea that it’s only about technology. In companies where IT handled the transformation, it wasn’t part of the overall business conversation.
“Our findings underscore the need for a fundamental shift in perception, where cloud is not just a technological shift, but a crucial business discussion,” Fersht said. “Cloud transformation that moves enterprises forward demands a seamless alignment between technology and business.”
More and more, cloud transformation receives funding from non-IT stakeholders, highlighting its role as a broader enterprise transformation rather than just an IT project. Only 32% of cloud initiatives are funded by IT stakeholders, which challenges the idea that cloud transformation is mainly driven by IT.
Many cloud transformations are currently stuck in the middle, mainly due to concerns about cost, lock-in, and meeting budget and timeline limitations. Only a small percentage of these transformations are completed within the expected budget and timeline, which suggests that there is a notable gap between discussions about cloud adoption and concrete business goals. Additionally, almost all of the respondents (about 95%) expressed some form of regret regarding their contract with a large cloud service provider.
Only 25% of companies can demonstrate a strong return on investment (ROI) from cloud transformation. These companies often rely on intangible or delayed ROI to support their claims. One major obstacle is the lack of cooperation between business and IT departments. Only 17% of companies have a clearly defined future plan, and less than a third define customer experiences and value chains.
The secrets to mastering cloud for business:
The report shows that there are “business cloud masters” who make up about 5% of enterprises. These masters have effectively used the cloud to achieve significant business growth and new models. The report analyzes the differences between the masters and other businesses, revealing the secrets to successfully using cloud for business.
“These findings reinforce what we continue to see within enterprises―they are recognizing the need for adopting a hybrid cloud approach, but if not architected well, maximizing the return on investment is a challenge,” stated Varun Bijlani, Global Managing Partner, Hybrid Cloud Services, IBM Consulting. “To achieve tangible business outcomes through cloud initiatives, businesses need to make intentional choices when it comes to architecture, process, and talent across the enterprise. Those that do will become business cloud masters and will derive tangible value from their cloud transformation.”
Masters understand that cloud transformation is part of enterprise transformation. This encourages collaboration between business and IT. They also have an identified future state, mastery of architectural principles, and willingness to adopt new technology like AI.
