Cloud today is for growth and transformation
Banks move slowly. That’s their heritage, going back to the Italian bancas, or benches, that the Medici family and others used to safely lock up coins and forward to the vaults and fortresses of 20th century banking. In the 21st century, safe and slow banks now contend with agile, digital-native competitors and higher customer expectations.
Citizens Bank, a 195-year-old institution based in Providence, Rhode Island, began its cloud-powered modernization four years ago. They migrated existing systems to cloud and developed new cloud-native architecture and applications.
Citizens’ cloud-based technology upgrades have empowered the bank to rapidly respond to crises. When the US Small Business Administration passed the Paycheck Protection Program in response to the COVID-19 pandemic, Citizens quickly built cloud-based tools to help clients apply for forgivable loans. It processed 48,000 loan applications and disbursed about $5 billion US in timely support to client companies.1
Like Citizens, companies that once moved to cloud to modernize, cut costs, and boost resilience now find new reasons to continue shifting to cloud. Cloud has entered a new era as a tool for growth and transformation.
In the early days of cloud, transformations like replacing systems went hand-in-hand with cost savings. As companies just began to adjust to the capital expenditure cycle associated with running data centers, a new option emerged: Move to cloud.
Cloud is central to business strategy today, and intertwined in every aspect of successful digital enterprises.
When insurance business NN Life Japan studied the best way to modernize its technology in 2016, cloud-based platforms rapidly emerged as the best choice, chief technology officer Drew Flynn recalled.2
“The infrastructure we had at that time was not cutting it. It took too long to provision the servers; we had complicated processes and limited features and functions,” he says. “The cloud promised to solve these issues and provide improved speed and reliability.”
Early corporate cloud satisfied IT’s need for modern systems and the business’s desire for stable spending, without the constant replacement and expansion of server racks — sparking a peak period of enterprise cloud migrations, from 2011 to 2015. According to our survey, 67% of over 2,500 companies signed their first cloud contract during this period.
Companies continue to migrate to cloud, and our research shows that replacing and updating systems is still a top motivation, but it is decoupled from reducing costs.
Companies move to cloud for growth and transformation, encompassing four specific motivations:
Replace or update systems
Enable new revenue streams
Access new tech or capabilities
Integrate acquisitions
Each of these four motives is three times more important than reducing costs.
Companies think about cloud differently today, says John Wei, chief technology officer at Comerica Bank. Where early cloud focused on replacing physical computer infrastructure with virtual boxes, the new era of cloud is centered on applications and capabilities.
“We’re still talking about cloud. But we’re no longer talking about boxes. We’re no longer talking about servers, but we’re actually talking about capabilities,” he adds.
New on-demand capabilities will require composable architectures that span many clouds, which prompts two big shifts, Wei says. First, the network and orchestration of cloud applications and ecosystems becomes more important, and second, companies need to re-think how they procure cloud services.
This shift in priorities reflects the evolving nature of cloud. Once an infrastructure destination, cloud has grown to include a broader range of services, applications, and platforms.
This will only accelerate with the emergence of cloud-driven artificial intelligence (AI) and industry solutions.
Figure 1. Two-thirds of companies began in cloud between 2011-2015
N = 2,523. We asked respondents what cloud providers they use, and when they started using the ones they selected. Roughly two out of three respondents use all three major cloud service providers.
Source: Infosys Knowledge Institute
Figure 2. Companies migrate to cloud for growth and transformation
N = 2,523. We asked respondents to allocate 100 points among reasons to move to cloud. Updating systems and growth-oriented motives topped the list. We excluded the categories ‘not sure’ and ‘other’ from this chart because they do not reflect specific cloud migration motivations.
Three-quarters of respondents say cloud migration is very effective or extremely effective in meeting their objectives.
Our survey found strong enthusiasm for cloud across industries and regions. While we uncovered regional variation in which cloud service providers were most popular, respondents universally reported that cloud migration has gone well.
Companies have a more nuanced view of the performance and capabilities different cloud providers can deliver. For example, certain cloud providers have a reputation for handling large quantities of data more efficiently, and others excel at interoperating with standard business applications.
Provider reputations influence cloud decisions, says Ann-Kathrin Sauthoff-Bloch, managing director Germany, Infosys Consulting.
“Business leaders, in consultation with IT leaders, must make strategic choices on what data, workloads, and solutions run on what services,” says Sauthoff-Bloch.
Figure 3. Cloud delivers for executives
N = 2,523. 73% of respondents feel that their cloud migration initiatives are either very effective or extremely effective.
Business leaders, in consultation with IT leaders, must make strategic choices on what data, workloads, and solutions run on what services.
Cloud works well, but a closer investigation found a few areas for improvement, including using cloud for innovation, integration, and cost reduction.
Using cloud to access new technology or software development capabilities is a powerful corporate tool. In addition to innovation, cloud gives companies the speed and the ability to quickly experiment.
Cloud’s quick scalability and broad accessibility make it a natural choice to integrate acquisitions. However, this requires a more mature cloud capability, known as interoperability.
Interoperability is a highly valuable feature for companies with a mix of cloud and on-premises systems. It requires both of technology and business expertise, says Suresh Karra, an associate vice-president of cloud services at Infosys.
“Achieving interoperability in cloud requires cloud architecture and business processes to work together toward a common goal,” Karra says.
Respondents reported that using cloud to reduce costs falls short. This echoes what chief information officers (CIOs) have stated in recent years: As corporate data has proliferated and cloud has grown more complex, cloud has grown more useful but does not save them more money.3 This could be a symptom of how companies have shifted their expectations for cloud — that is, they are more focused on things it can do beyond saving costs.
“Cloud can be a black hole for money,” says Chris Leigh-Currill, managing partner, Infosys Consulting.
Figure 4. Companies have room for improvement in three areas
N = 2,523. While respondents reported high overall effectiveness, they rated their companies as relatively less effective in the first three categories listed here.
Enable a new revenue stream
Integrate subsidiaries or acquisitions
Access new technology capabilities
Connect to external data sources
Reduce costs
