[McKinsey] Leaders and laggards in enterprise cloud infrastructure adoption

Investments in organizational capabilities rather than specific technology choices separate the leaders from the laggards.

There is a lot of hype and hoopla about the cloud but few reliable facts and benchmarks about the adoption of this technology. CIOs, CTOs, and heads of infrastructure at large enterprises have shared with us their frustrations about adopting cloud-based platforms and migrating processing workloads to virtual environments. To address those frustrations, between 2014 and 2016 we surveyed senior business and technology leaders in more than 50 large organizations in Europe and North America to find out about their adoption of cloud and next-generation infrastructure.1 1. Most companies in our sample are Fortune 100 companies with large infrastructure budgets. They have been among the earliest adopters of cloud technologies. They come from a range of industries, regulatory environments, and geographies. The survey process started in 2014 and ended in the first half of 2016. We focused on the structure and management of their cloud programs, the technical capabilities they’ve implemented to this point, the benefits realized, and their future plans.

The results indicate that while almost all respondents are continuing to build sophisticated cloud programs, there is a clear gap between the leaders (those who have migrated more than 50 percent of their processing workloads) and the laggards (those who have moved less than 5 percent). We identified four best practices that differentiate the two groups—in short, the leaders pay more attention to the organizational capabilities that facilitate cloud adoption than to specific cloud technologies.

Findings on cloud adoption

Most of the companies in our survey are from regulated industries, such as banking, insurance, and healthcare. All are under significant pressure to introduce digital capabilities, such as online and mobile banking applications that allow customers to make payments, check transactions, receive quotes, or update personal information. A cloud-based infrastructure is critical for enabling such digitization. Here is what we learned from respondents about the status of their cloud programs.

1. They have spent significant time and resources building complex private-cloud platforms.

Almost all participants in our survey told us they have been developing cloud programs for five years or more, and this area of development remains one of the top priorities for IT. The majority of participants say they plan to significantly ramp up the technical capabilities of their cloud programs and have sizable cloud-engineering teams working on this effort. Additionally, most say they are building cloud-based platforms with an eye toward flexibility; these are being set up initially as private-cloud platforms so that companies can avoid the security and compliance risks associated with the public cloud. But companies are also building capabilities to facilitate the eventual migration of workloads to public-cloud servers.2 2. For this research effort, we defined the private cloud as both on-premises private-cloud and dedicated public-cloud environments in contrast to other off-premises offerings. Their ultimate goal is to develop cloud platforms that can meet all the diverse requirements of critical enterprise systems. Only a few survey participants are taking a more conservative approach: they are not building in-house cloud platforms. Instead, they are relying on vendors to supply “good enough” cloud environments.

2. Some companies are emerging as cloud-savvy leaders while others continue ‘science projects.’

Despite their high-priority, highly visible, multiyear efforts to implement cloud programs, half of the participants in our survey say they have moved no more than 5 percent of their x86 processing workloads to cloud environments (private or public). The difference between the laggards and the leaders is stark: the laggards have migrated fewer than 5 percent of their processing workloads, while cloud-savvy leaders have moved more than 50 percent (Exhibit 1).

The average adoption rate for x86 workloads in the cloud is less than 20 percent.

When analyzing the gap between leaders and laggards, we found no correlations involving particular industries. And the sophistication of the cloud platform being developed also did not seem to matter: some of the cloud-savvy leaders in our survey have undertaken large reengineering efforts and advanced the adoption of cloud technologies that way. Other leaders’ cloud programs have succeeded because IT and business leaders were focused on simpler sets of cloud capabilities and pilot projects. Similarly, the age of cloud programs was not a critical factor to explain the gap: cloud-savvy leaders seemed to outpace the laggards fairly early in their journeys, according to our data, and the gap seemed to grow quickly rather than shrinking the longer that cloud programs were under way.

So what accounts for this dispersion? There are still some significant barriers to adoption of cloud platforms—for instance, the cost and complexity of moving workloads from in-house data centers to cloud-based servers, and a shortage of tools and standards that would facilitate that migration. Meanwhile, survey participants also voiced particular concerns relating to the public cloud, including issues with security, regulatory compliance, and vendor lock-in.

3. The leaders in cloud adoption are already seeing significant benefits.

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