Canadian businesses have gone nearly all-in on cloud technology. A recent survey by KPMG in Canada showed that 93% of business leaders reported advanced levels of cloud adoption in their organizations.

While many companies are reaping the benefits from their cloud-based investments, many others have yet to unlock the full potential of the cloud. The challenge, according to cloud leaders, isn’t with the technology itself, but with the organization’s broader digital transformation journey.

“You have to build a mindset of continuous improvement to constantly look at appropriate services and ensure sufficient flexibility in the architecture,” says Gavin Lubbe, who leads KPMG’s data and analytics management consulting practice in the Greater Toronto Area. Companies, he continues, don’t always realize just how much strategies and operations need to transform to really generate value from the cloud – and even those that do must understand that it's an ongoing process.

The cloud is working for many: In KPMG’s Global Tech Report 2023, 64% of Canadian organizations have increased profitability or performance thanks to the cloud, but at the same time 36% say they have not yet realized gains from digital transformation. Part of the problem is that many companies find themselves paying for services they don’t need, while others are using services too quickly. Some are also struggling to measure how the cloud is adding value, Lubbe says. Either situation can result in a misalignment between cloud strategy and execution and undermine efforts to implement digital business processes.

Cloud environments have also become increasingly intricate to manage – especially when it comes to major software systems, such as an enterprise resource management solution – with organizations often running multiple clouds from different providers. Many still have legacy on-premise systems, too.

These are all issues that can be overcome, but for organizations to succeed, they’ll need to be more intentional with their cloud investments, shift how they assess the value that technology brings to their business and find ways to better manage their cloud-related spending.

Embrace digital change

When organizations struggle to achieve value from the cloud, it’s often because they’re resistant to the broader changes these solutions can have on their operations.

“A lot of companies will say moving infrastructure to the cloud is about controlling costs,” says Amardeep Johar, a National Leader in Enterprise Solutions with KPMG in Canada, who works closely with companies of all sizes to implement cloud software platforms. “But going to the cloud is a major shift in thinking, it’s a business transformation. The organization has to adapt, not simply adopt new software. Sometimes organizations are not ready to embrace that change.”

To get the most out of cloud-based software-as-a-service (SaaS) platforms, businesses need to adapt their operations to fit the solution, explains Johar. But most organizations are used to buying tech and then customizing it to fit their operations. Johar notes that costs climb when organizations attempt to over-configure a SaaS platform to accommodate legacy processes, which may even conflict with updates from the SaaS provider. “Adapting to a platform is such a different way of operating for most companies,” he says. “And there’s a large ripple effect throughout the organization.”

Employee skills and behaviours are another area that must evolve but can be difficult to change. With much of the technical work now outsourced to cloud service providers, companies can reorganize their IT delivery and maintenance teams to take on more of a data management role. At the same time, many of the rote tasks people used to do can now be automated, allowing people to think more strategically about the business.

Embracing change management, prioritizing the needs of your end users and engaging employees is critical to a transformation’s success. “The change management aspect is huge,” says Lubbe. “You’re changing the way people think, and the way you work.”

Operational discipline

Another challenge: organizations have realized the cloud is not inherently less expensive – at least not if they continue to operate in the same way they did with on-premise servers. “Per hour or per gigabyte, the cost of cloud can actually be more expensive than on-premise,” says Lubbe.

Engaging large cloud service providers allows organizations to quickly access massive amounts of computing power for short periods of time, he says, but to contain costs, teams must be diligent and make sure they’re not paying for something they’re not actively using. “I have seen instances where the operational discipline wasn’t there to only spend what was needed and then pull it down.”

The cloud also represents a shift in control of technology assets into the hands of business users, which requires different internal governance models and oversight. For many organizations, it’s a significant rewiring, and Lubbe says it can leave both IT and business leaders frustrated.

“Consumption is being driven by the business, while cost is being borne by IT and then allocated back to the business,” he says. “So IT can be frustrated by expenses going up and they don’t know if they’re getting value for that expense. And then the business divisions are looking at rising bills.”

Value frameworks

For Lubbe, resolving this tension lies in defining and measuring value more broadly than standard benchmarks like cost, speed or efficiency. Instead, he encourages executives to put a price on factors like cost avoidance – for example, cloud providers bear the expense of updates instead of an IT organization managing those cycles – and opportunity costs of managing IT on premise instead of maximizing the cloud service. Lubbe notes there is also value in displacing some risk onto cloud providers who invest heavily in data protection and uptime. “You need to think about the benefits in a very holistic way,” he says.

From the outset, each cloud application requires something Lubbe calls a “value framework” to define the goals of moving to the cloud and the appropriate key performance indicators. It’s a deliberate process that establishes baseline cost-benefit analysis. “A lot of cloud implementations fail because there’s a lack of alignment about the objectives and what they are actually trying to achieve,” says Johar.

Lubbe agrees and adds that a disciplined approach to cloud strategy involves continuous measurement to regularly revisit the return on investment of individual cloud applications. This information helps to manage expectations and reaffirm to all stakeholders the benefits of using the cloud, as well as signal the need for adjustments or if it’s time to investigate a new service provider.

While many Canadian companies are waking up to the realization that operating cloud-based IT is a bigger transition than they first thought, they are eager to make the change and get more out of their technology. To do that, they’ll need to rethink their digital strategies. “Businesses often migrate what is easy, not necessarily what’s going to offer the most value,” says Lubbe. “Companies now need to be crystal clear about what value they want to get from every application.”

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