A Must-Read Report by McKinsey Lays The Foundation for Cloud Transformation and Related Economics and ROI.
Author: Kalibr8 Marketing
Date: December 2, 2022

Digital transformation has created a world where businesses are rapidly adopting and embracing the variety of innovative devices and applications to meet rising consumer demands and gain any competitive advantage over rival companies. Amidst the shift to a digital-heavy work environment, technologies such as the Internet of Things (IoT), artificial intelligence (AI), and automated capabilities have been at the forefront of enterprises priorities.

However, in a world where “new” has increasingly become synonymous with “best”, the most prominent technology available today has been around for decades. Cloud computing, as well as its associated cloud technology and cloud services, has been around since roughly 1996, yet is experiencing unprecedented growth and use during the beginning of the new digital era.

Currently, the cloud applications market is worth over USD $150 billion, with cloud infrastructure services generating USD $178 billion per year in revenue. Furthermore, 90 percent of large enterprises have adopted a multi-cloud infrastructure, while in total, 60 percent of the world’s corporate data is stored in the cloud.

“The rapid growth comes as no surprise, given how long the technology has been available, and the benefits it can offer organization, small to large,” said Ben McGahon, cloud optimization expert and founder and CEO of Kalibr8, a cloud optimization solution company based in Ireland but providing services globally. “Advantages such as cost savings, scalability and flexibility, and improved security are just some of the enticing benefits the cloud provides. Overall, moving to the cloud is giving organizations of all shapes and sizes the ability to move faster, be more agile, and transform their businesses.”

However, many enterprises today are moving to the cloud, but focusing too much on short-term gains, leading them to miss out on the cloud’s estimated $1 trillion of value potential in the long-term. This happens when IT departments attempt to make the migration to the cloud as quick as possible to appease the executives and capture initial gains. This leads many companies to give a lack of attention to the underlying “cloud foundation.”

The cloud foundation, according to a new report by Mckinsey, is a set of design decisions that is implemented in code files and defines how the cloud is used, secured, and operated. It’s been found that the ideal cloud foundation is split into three layers (application, isolation, and base) to reduce risk, accelerate change, and provide appropriate levels of isolation.

“Many enterprises initially overlook the necessity of a proper cloud foundation, citing the monetary and human resources it would take to set up correctly,” McGahon said. “McKinsey is absolutely right, that building a solid cloud foundation as part of a transformation engine does not mean delaying financial returns or investing significant resources. It is all about doing the research, creating a strategy, implementing the plan, and constantly monitoring and measuring the value organizations are getting out of their cloud evolution.”

A cloud foundation is a critical investment that will reap significant rewards in terms of speed and value, that simply requires knowing what critical steps to take and executing them well. In fact, the Mckinsey report found that companies that put in place a solid cloud foundation reap benefits in the form of a potential eightfold acceleration in the pace of cloud migration and adoption and a 50 percent reduction in migration costs over the long term, without delaying their cloud program.

Luckily, for the organizations who emphasized initial value over long-term sustainability, making the essential changes to one’s cloud foundation is not as daunting as it sounds. According to the Mckinsey report, there are a myriad of ways an enterprise can begin to improve their cloud foundation to reap the long-term benefits of cloud technology.

For example, optimizing technology to enable the fastest “idea-to-live” process is crucial. An enterprise’s cloud foundation should be constructed to enable an idea’s rapid progression from inception to up and running in a production environment, without sacrificing safety and security.

The report highlights a variety of ways this can be done in practice, like “automating as many steps of the production journey as possible, including sandbox requests, firewall changes, on-demand creation of large numbers of isolated networks, certificate generation, compliance, and so on.”

Another way an organization can improve their cloud foundation is through the design of the cloud architecture itself. If done correctly, enterprises can build a cloud architecture based on five people that can scale up to support 500 or more without significant changes.

“As the cloud infrastructure industry continues to surge with growth, and evolve with new models for private, public, hybrid and multi-cloud implementations, a well-designed architecture can accommodate more components, including more application patterns, isolation zones, and capabilities, as McKinsey wrote,” McGahon said. “The authors understand the beauty of simplicity, of well-designed interfaces between components, and the need for clear reporting on a straightforward set of metrics. One of the most overlooked ways to improve cloud foundation, is to not reinvent the wheel, as the saying goes. When organizations give free rein to application teams to migrate applications to the cloud provider, the result is a variety of disparate cloud capabilities and configurations that makes ongoing maintenance of the entire inventory difficult, as the McKinsey report points out.”

Instead, the report highlights that enterprises should treat the deployment capabilities of an application as a stand-alone product, solving common problems once using application patterns. Application patterns can be responsible for configuring shared resources, standardizing deployment pipelines, and ensuring quality and security compliance. The number of patterns needed to support the inventory of applications can be small, therefore maximizing ROI.

Overall, the cloud, while already essential to the modern-day business, is only going to continue to grow in importance as the world ventures ever deeper into a new digital era, populated heavily with technology. This means enterprises need to design and build their cloud foundation to provide a reusable, scalable platform that supports all the IT workloads destined for the cloud. This will not only help organizations remain competitive amidst the digital age, but also unlock all the benefits that the cloud offers and ultimately capture its full value.

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