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Are you making the most of the cloud? A leader’s guide

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Leading Off

Brought to you by Liz Hilton Segel, chief client officer and managing partner, global industry practices, & Homayoun Hatami, managing partner, global client capabilities

The tale of cloud computing follows a familiar plotline. As with many other new technologies, there’s lots of excitement about the potential value to gain and then lots of growing pains and entrenched mindsets that make adoption feel more than arduous. But 15 years into the journey, cloud seems to be at an inflection point. McKinsey research projects that cloud could generate up to $3 trillion in value by 2030. Generative AI (gen AI) also has the potential to accelerate cloud use, and the returns a company sees from it, in unprecedented ways. This week, we look at cloud’s growing upsides and how companies can make good on its promise.
An image linking to the web page “The state of cloud computing in Europe: Increasing adoption, low returns, huge potential” on McKinsey.com.

Cloud’s potential to transform a business isn’t unique to one industry or region. Still, companies in different geographies face varying conditions and obstacles. McKinsey’s Bernhard Mühlreiter and coauthors look closely at the state of cloud in Europe. There, adoption rates and ambitions are high, while efforts to scale cloud leave room for improvement. So far, European companies have tended to pursue IT-led or IT-focused migrations to the cloud and measure the impact in IT-specific terms. Yet the real value from cloud, in Europe and beyond, comes from opportunities to increase revenue and save costs in a company’s business operations. How companies measure cloud’s impact matters, too. Rather than migrating as many workloads to the cloud as possible, Mühlreiter and other experts stress the importance of focusing on ROI and being intentional about why and where in the business cloud is adopted.

That’s Mark Oh, director of infrastructure and user services group at the US Centers for Medicare & Medicaid Services (CMS), on the importance of a people-centered move to the cloud. Oh, along with Rajiv Uppal, chief information officer (CIO) at CMS and the incoming CIO of the Internal Revenue Service, spoke with senior partner Naufal Khan and colleagues about the agency’s cloud migration and why it was important to understand the business, and the people running it, every step of the way. One tactic for achieving broad buy-in was enabling change rather than mandating it. “A lot of the success can be attributed to the ‘community of practice’ we established, where we involved the entire stakeholder community to help shape solutions,” Uppal says. “This community was instrumental in sharing best practices so we could all benefit.”
An image linking to the web page “Getting ahead in the cloud” on McKinsey.com.

Even with all of the value cloud promises, the challenges to developing a successful program persist. In an interview with The McKinsey Podcast, McKinsey’s Mark Gu and James Kaplan describe the key components of cloud success that many firms have yet to address: identifying the biggest sources of business value, establishing foundational capabilities, and reimagining the technology operating model and skill needs. As with other types of tech, the business case for cloud can be complicated. “In many cases, the benefits and the investments are happening in two different parts of the income statement or the organization,” Kaplan says. But companies (and leaders) must be patient in their quest for cloud-based value, which goes far beyond cost savings. “You can’t make the case on IT cost by itself,” according to Kaplan. “The reason you go to cloud is because of the business value it enables, through agility, scalability, innovation, and flexibility.”
An image linking to the web page “Cloud-powered technologies for sustainability” on McKinsey.com.

Lead by laying a foundation for cloud success.

— Edited by Daniella Seiler, executive editor, Washington, DC

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by "McKinsey Leading Off" <publishing@email.mckinsey.com> - 04:25 - 6 May 2024