The digital transformation happens in the cloud

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10 min read

Cloud-based technology might not be the only way to digitalize a business but it's hard to imagine that any company can be as flexible, innovative and fast without it.

Content:

  1. Cloud stats from 2020 and 2021
  2. Cloud advantages
  3. Cloud challenges
  4. Cloud trends 2022

With the pandemic acting as an accelerator to digitalization efforts, most companies already have or are planing to adopt a cloud strategy. Even in industries where data sensitivity is key, the cloud has shown to help speed up processes and stay flexible.

Some cloud stats from 2020 and 2021

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Around 50% of all corporate data is stored in the cloud (statista).

According to IDC, annual spending of X-as-a-Service cloud resources will reach $394 billion in 2021.

41% of EU enterprises used cloud computing in 2021, mostly for email and file storage (source: europa.eu).

In almost all European countries, the use of cloud computing services increased from 2020 to 2021 (source: europa.eu).

According to Business Wire (via techjury.net), the three main sectors to spend most on cloud computing services are manufacturing, professional services and banking.

59% of organizations surveyed by IBM (2020, PDF) have accelerated their digital transformation due to the pandemic.

Cloud technology drives innovation

For example, Moderna used its mRNA research-and-development platform on the public cloud to speed up discovery and development (source: McKinsey). McKinsey lists three best practices that companies that have successfully implemented public cloud followed:

  1. Execution of a well-defined, value-oriented strategy across IT and business and install a cloud-read operating model
  2. Develop first-hand experience and adopt a technologically progressive mindset
  3. Develop a cloud-literate workforce

This can be summarized in three key points: strategize, explore & train.

Strategy

As with almost every trend, successful adoption needs a clear goal that's based on the company's strategy & general business (or organizational) goals.

Experience

Furthermore, pilot projects help with gaining experience and building convincing use cases that have an immediate value but also leave room for experimenting.

Training

Last but not least, employees need to be trained and educated to be able to work with and on cloud projects.

HubSpot Video

External experts can be a great resource at the beginning or throughout development phases to support with specific industry or IT know-how as well as with additional resources and skills.


Read how manufacturer Huber + Suhner managed to standardize its sales globally with the Salesforce Sales Cloud. 

Read the Use Case


Cloud Advantages

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According to McKinsey, cloud advantages lie mainly in optimizing and innovating business. An additional point is "pioneering", however, I would place this in the same category as innovating business, since the early adoption of cloud technologies is usually comes with innovative strategies and solutions.

Cost Management & Reduction

One of the big advantages of cloud-based platforms and systems is usually the cost optimization and the resources involved when it comes to maintenance and infrastructure. A cloud-based software updates automatically and more frequently, meaning that bugs, security gaps but also new functionalities can be fixed and set up swiftly without tying a company's IT resources to the task.

Most cloud applications and systems are based on pay-per-use models, allowing companies to implement the core system and then pick and chose additional applications and systems according to their needs. Instead of buying bloated on-premise applications that won't be used sufficiently but cost a fortune, companies can start "lean" and then slowly build-up if they require it.

Standardization

Cloud applications and platforms also enable a certain standardization of processes and systems, reducing silos and leaving more opportunities to connect other systems. Big CRM vendors, for example, usually develop their software so it connects to other systems and makes the development of additional interfaces easier (opposed to the complexities of a legacy system).

Aside from that, standardization supports big companies with different locations, offices, markets, etc. to both implement standardized processes while at the same time enable individual regulations (e.g. for different regions, industries, business units) and functionalities.

Data centralization

Data silos are one of the biggest challenges of most companies when it comes to both optimize and digitize their business processes. Cloud-based platforms usually connect centralized data which eliminates silos and also helps keep data standards (e.g. taxonomies). Data centralization can be something as small as sharing and working on one document but it also expands to Data Warehouses & Lakes, offering structured or unstructured data for any data projects such as artificial intelligence, machine learning, etc.

Centralization of data also allows for much more transparency when it comes to reportings and forecasts but also to oversee supply chains, control processes across different business units and systems as well as being able to identify potential risks.

Flexibility

Cloud-based systems, platforms and applications offer different types of flexibility. Aside from the already mentioned freedom to pick & chose the number of applications (and cloud resources, such as storage space), the cloud also allows for users to access applications independent of their location.

With home office optiones becoming a very likely standard in the future of business, companies need secure and flexible communication and work platforms to ensure that everyone has the right tools, data and channels to do their work. An on-premise system that only allows access via VPN will always be a little less fast and easy to use than a cloud-based application with individual user access for secure, remote working.

Innovation

With the foundations and optimizations that cloud-based products and services offer, companies are much more capable to truly innovate. Many cloud applications allow users more freedoms to try out things (such as low-code platforms for app development), overview business numbers and implement ideas across different channels.

More than that, the collaboration possibilities of the cloud can create an environment that invites participants, documents every single action and therefore enables teams or entire companies to develop ideas on their own or together with customers, partners and service providers.

The use of artificial intelligence, machine learning, etc. can also help to identify gaps and/or opportunities to work on, that might have went unnoticed. With more speed in product development, more freedom to scale projects and more (smart) data to see the big picture, companies can be much more innovative with fewer risks than ever before.

Cloud Challenges

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Adapting the cloud or migrating to a cloud environment has its challenges and many companies shy away from bigger cloud projects due to costs, lack of expertise and fear of data breaches.

According to a survey by O'Reilly, costs and concerns over data security are the most common reasons why companies don't adopt cloud technology.

Costs - Transformation costs but so does stagnation

Although adapting the cloud will lead to cost reduction, the initial projects will cost money. Especially if a company plans to migrate many if not all environments into the cloud, the planing, implementation and optimization will not be cheap.

However, the migration itself is a means to gain long-term advantages when it comes to reducing resources and costs overall. An oven might be an investment but it still is better than setting up a fire in your kitchen every single day just to get a cup of coffee. With the automation, data intelligence and optimization capabilities of cloud technology, a company can not just reduce costs but also gain new opportunities to gain revenue (e.g. by offering new services & products via cloud platforms).

Data Security & Regulations

When it comes to cloud technology, information is conflicting on whether data is more or less safe in the cloud. The answer is: it can be both because everything depends on the setup and the overall security strategy of your business (including user know-how when it comes to security risks).

However, actual data regulations, such as European laws concerning sensitive/personal data can impact your company's strategy in general, since some data might not be allowed to be stored on servers outside of Europe. All of this depends on what and whose data you collect and what the cloud vendor does to ensure their safety (including what access the respective government has to your data).

But most cloud vendors nowadays operate servers across the globe, ensuring regional data regulations and compliance standards based on location, industry and use.

Another question is whether cloud-based data is more vulnerable when it comes to cyber attacks. Most experts will tell you that data stored in the cloud is usually safer, because the vendors operative with different, flexible security measures. In the end, cloud security starts and ends with the users. With a strong password-protocoll, individual user rights, two-factor-authentification and educating users on safe behavior, your cloud-based data will be secure.

More than that, cloud storage reduces the risk of losing all data and functionalities during a power outage, floods or other causes that might impact an on-premise server. Since most vendors work with backups, the risk of losing all your data is a lot smaller in the cloud.

You can read more on cyber security and what modern security measures entail in our focus article

Vendor Lock-In

Many companies are concerned of Vendor Lock-In which means that they fear being dependent on the vendor so much that it would be impossible to change vendors or even adopt other technologies.

Avoiding vendor lock-in is easy when planing the cloud project and listing requirements. Thinking ahead and asking not just about the planned project but also future possibilities (scaling, further development, adding functionalities & services) can provide transparency over hidden costs and further clear questions such as API, scalability and contractual services.

However, most cloud vendors don't even want a vendor lock-in because their clients depend on platforms and systems that adapt easily to other systems. In fact, a bigger vendor lock-in might be caused by legacy systems, especially made in-house that have been growing in complexity over the years and demand big development cycles for the tiniest changes.

Cloud Trends

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Hybrid clouds are the future

According to a study by IBM (2020, PDF), companies are moving from single public clouds to hybrid cloud models, allowing for a better, more secure environment that offers the flexibility and collaboration of the public cloud combined with the security and ownership of the private cloud.

In 2020 alone, the study participants claimed that their use of hybrid cloud models rose from 44% to 59%. The numbers most likely grew a lot more during the pandemic, with many companies speeding up their cloud strategy.

Development platforms open up innovative potential

X-as-a-service opened up immense business opportunities for small and big vendors and created tools that can be used everywhere as long as you have a login and access to the internet (and sometimes, not even that is needed). Those services have the power to enable heavy users to do things that previously only specialized experts were able to do. From app development to video animation to website design - cloud-based applications open up completely new possibilities for creative solutions, a DIY-spirit on a corporate level and reduced costs and time invests.

With X-as-a-service being developed in complex environments such as AI, machine learning and more, the sky is the limit of what we will be able to do in a few years time.

Artificial intelligence & cloud

Since data analytics, machine learning, etc. require not only the storage of big data but also the necessary processing power, cloud services have risen in demand due to their scalability.

The many daily interactions that we have with AI - search engine algorithms, smart gadgets, and smart assistants - are based in the cloud. Without cloud computing, we wouldn't have been able to develop AI and machine learning as much as we have in the last decade.

Especially when it comes to enabling companies to do their own AI projects, e.g. with Data Warehouses and Data Lakes, cloud computing and AI will continue to be a strong combination to develop business data, applications and intelligence further without being forced to invest in on-premise server farms.

Digital workplaces

The pandemic has moved entire businesses into the cloud because home office options demanded for collaboration platforms, data sharing and mobile applications. Although many companies already used digital workplaces (for example to collaborate better across different locations but also with partners and customers), the obligatory "lockdowns" accelerated the need to establish them company-wide even more.

Even more so, the need for digital workplaces has innovated development for corporate platforms, meeting software and applications and created a lot more options and functionalities than were previously available.

Mobility creates transparency

Cloud technology will be a driving force when it comes to crucial topics that are currently disrupting entire industries. For example, with cloud-based applications, supply chains can be made much more transparent, giving insight into where an object is at any time with documentation on where it has been and where it is going.

Mobility is one of the most important assets of cloud software, helping users to access and input information on the go, tracking objects, and documenting processes across different responsibilities.


DIGITALL has the cloud experience and industry know-how to help your business become the digital champion of your industry. Find out about our cloud services and products and transform your organization.

Secure into the Cloud

by Juliane Waack

Juliane Waack is Editor in Chief at DIGITALL and writes about the digital transformation, megatrends and why a healthy culture is essential for a successful business.

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