In such a competitive landscape, businesses are more focused on ROI than ever, and purchasing new technology is no exception.
It is what drives a business forward, but can also be one of the biggest expenditures, so the total cost of ownership has to make sense.
However, cloud computing can put all of these traditional calculations to the test as they struggle to show the full impact of the transition.
According to a recent report by MIT Technology Review Insights, when looking at the ROI of moving to the cloud, additional criteria need to be taken into account including competitiveness, productivity, and new revenue opportunities. Although these factors can be difficult to measure, they have a clear impact on revenue growth and profitability. As a matter of fact, there are already significant productivity growth gaps that can be seen between companies using legacy systems and those using cloud-based emerging technologies, including artificial intelligence (AI), machine learning (ML), Internet of Things (IoT), and blockchain.
Despite the proven track record of these new technologies, adoption still happens at different speeds in different industries. Low-productivity industries such as healthcare, retail, and education are typically slower to adopt new information technologies, while industries with high productivity growth, think oil and gas extraction, media and communications, and agriculture, are much quicker. They are continuously adopting new technologies for automation and product development, investing five times more than organisations in low-productivity industries.
The takeaway: future productivity gains depend on digital (read: cloud) capabilities.
Over the next decade, McKinsey Global estimates that 60 per cent of productivity-boosting opportunities during the next decade will be digital, but currently US and European companies are running at less than 20 per cent of that potential. One CIO calls this gap a “technological debt” that will have to be paid sooner or later, either by playing a fast game of catch-up or suffering long term competitive disadvantages. Here are a few reasons why organisations should look to take advantage of the revenue-enhancement potential of the cloud as well as the ROI or TCO.
Cloud adoption fosters innovation
Traditionally, organisations could make incremental technology advancements to boost performance or add new functionality to their legacy on-premises systems. Now, however, the pace of change has quickened to the point where these strategies no longer suffice. The reason?
Cloud computing is a unique paradigm shift that provides:
- Regular, non-disruptive upgrades: Rather than an annual cadence of updates that can cause disruption and soak up time and resources, cloud applications receive updates automatically and frequently. With no on-premises hardware or software to maintain, your company can reap benefits immediately.
- Instantaneous new functionality: In a cloud environment, companies can adopt new functionality as soon as it comes online—or whenever they need it to drive innovation and meet (or exceed) customer expectations.
- Minimal incremental cost: Deploying your own AI, ML, or IoT solutions would be prohibitively expensive for all but the largest organisations. With the cloud, your company can take advantage of these rapidly evolving technologies immediately, and with minimal capital investment, using predictive analytics that leverage big data to propel growth.
- Agility to adopt best practices: With legacy software, it’s easy to get locked in with multiple customisations or bolted-on functionalities that can result in hardened business processes. But best practices are not only built into best-in-class cloud applications – they’re kept up to date as industries and technologies evolve.
Because cloud computing offers these advantages, adopters can bring innovation to market quickly, opening new revenue streams and efficiencies to drive sales and profitability. Their non-cloud adopting competitors? Not so much. Digital technology laggards pay a huge price in missed opportunities. Buffeted by rapid-fire disruption, these companies risk obsolescence alongside their technology.
Cloud goes above and beyond traditional considerations
The decision to upgrade technology typically falls on the IT department, which must make the argument that it requires new hardware or functionality to support continued growth. Even among early cloud adopters, the decision to migrate typically relies less on these new opportunities than it does on more traditional “end of usefulness” criteria, including:
- Un-patchable security vulnerabilities
- On-premises hardware reaching end of life or full depreciation
- Software vendor phase-out or support expiration
- Costly and difficult upgrades
As we’ve seen, however, the calculus has changed with the growth of cloud technology. Financial decision-makers are not used to considering the business benefits of a cloud migration. In addition, cloud computing’s subscription model means that costs will shift from capital expenditure to operations, which can obscure overall savings. Other benefits such as improved productivity are hard to quantify.
Don’t get me wrong, applying traditional evaluation criteria such as ROI and TCO to cloud migration is still valuable, but it doesn’t provide a complete picture. In fact, companies that rely exclusively on these measurements to determine the timing of cloud migration may be playing a very dangerous game and will undoubtedly be left behind in the rapidly evolving tech landscape. It is vital that all companies, in all industries consider the significant business value that cloud migration can provide both in the short term and for long term financial stability.
About the Author
Debbie Green is VP of Applications at Oracle. Leading the cloud. From intelligent business applications to infrastructure, Oracle deliver tomorrow’s emerging technologies today, like the world’s first – and only – autonomous database. Find out more at http://www.oracle.com
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