Looking past the mirage of cost savings

Survival in a rapidly changing, digital world depends on service providers’ software delivery capabilities. Delivery capabilities drive customer delight (or frustration), enable business agility, and ultimately hold the key to the service providers’ ability to compete. Cloud-native software and delivery models (agile, DevOps, cloud-intelligent approaches) have set the bar higher for customer experience and expectations. These are imperatives service providers cannot ignore, hiding behind the price tag as justification. It’s time for all service providers to look beyond the mirage of cost savings as the raison d’etre of cloud and embrace cloud-intelligence as a core strategy in a cloud-native world.

What Mckinsey found is that evaluating cloud adoption for the cost not only misses the point; it stifles the possibility of creating value.

What does cloud-intelligence look like?

According to a McKinsey study (2021), 75% of cloud’s predicted value is derived from cloud-afforded innovation. As McKinsey puts it, “The emergence of this immense value pool comes at a time of increasing competitive pressure on companies. Fast-moving digital players are creating a fluid business landscape and accelerating the pace of change. For CEOs, cloud adoption is not just an engine for revenue growth and efficiency. Its’ speed, scale, innovation, and productivity benefits are essential to the pursuit of broader digital business opportunities, now and well into the future. Yet an overly narrow view of cloud-value economics and where value exists, often keeps companies from achieving the desired outcomes.” (my emphasis).

What are Cloud Intelligent companies doing differently to capture value?

Cloud intelligent companies operate on a different wavelength from legacy organizations. Below are just some of their distinguishing patterns of behavior:

• Decentralizing decision making. Those that crave agility cannot retain constricting hierarchical structures. To keep up with the rapid rate of cloud computing change, organizations must learn to rescind centralized control (which is not always easy in legacy enterprises) and delegate decision-making to lower levels of the organization and team
• Adopting a culture that encourages experimentation and innovation. Adopting cloud and tools like canary testing reduces the cost, risk and time to innovate. 
• Establishing tailored cloud strategies that address specific business goals. For example, building a strategy to ensure future rapid delivery of innovative and differentiated products and services.
• Focusing on the People and Process aspects of cloud transformation – and not just the technology. In cloud adoption projects that failed to achieve their goals, a substantial portion of blame is invariably laid at the door of the people and organization that did not change.
• Freeing up developers’ time. Organization must allow developers to focus on what they should be doing i.e. building new experiences and features instead of spending time on non-functional activities. How is that achieved? In several ways, for example:
  • Automating duplicate, time-consuming, complex and monotonous tasks
  • Building opinionated pipelines
  • Reducing the time needed to prototype new business ideas.
  • Investing in a standardized, automated cloud platform that improves productivity and delivery. Amdocs Microservices platform is a great example of such an opinionated platform, that simplifies developer work, automates non-functional tasks, and frees the developers to focus on developing.

Beyond the mirage of cost savings

Cloud has so much to offer. Clearly costs must not be ignored but viewing a strategical transformation purely through the lens of cost ROI is a rookie mistake. Organizations that do not adopt cloud will not fare better in the long term; they will soon find themselves facing rising costs from bloated IT organizations forced to devote resources to repetitive manual tasks.

In this digital era, cloud must be a central pillar of every service providers’ strategy, as McKinsey said: “Its’ speed, scale, innovation, and productivity benefits are essential to the pursuit of broader digital business opportunities, now and well into the future”.

CSPs must look past the mirage of cost savings as the be-all-and-end-all or compelling event for cloud adoption. They must look at the broad definition of Return on Investment and not be blinkered by the dollars. And they must make this change soon- or risk demise at the hands of disruptive, agile competition.