Business and IT leaders across the globe are finding cloud adoption to be more complicated than many had originally anticipated, according to a report from KPMG International.
According to The Cloud Takes Shape, nearly 33 percent of all executives surveyed say that cloud implementation costs have been higher than they expected, and a similar percentage say that integrating cloud services with their existing IT infrastructure has been particularly difficult.
Business process design key to the implementation challenge
As the market for cloud matures, enterprises are now starting to come to terms with the hard practicalities of cloud enablement, according to the report's authors. There is evidence that organizations are placing greater focus on getting the business process redesign right, facilitating appropriate change processes and making business model improvements.
"One of the most important lessons uncovered by this research is that business process redesign needs to be done in tandem with cloud adoption if organizations hope to achieve the full potential of their cloud investments," said Rick Wright, Global Cloud Enablement Program Leader and a Principal with KPMG in the US. "Executives have found that simultaneous process redesign is central to addressing the complexities that often arise in the implementation and operational phases of cloud adoption."
Reaping the transformational value from cloud
Despite these emerging complexities, executives still believe that the benefits of cloud adoption far outweigh any growing pains they experience through implementation, the survey shows. In part, this is because organizations are shifting their focus away from pure cost reduction objectives to instead focus on achieving the transformational benefits of cloud.
"As cloud begins to become more mainstream within the business environment, we are seeing organizations move from the 'when and why' of the cloud adoption process to instead focus on the 'how'," said KPMG's Wright.
While cost reduction is still the primary reason for cloud adoption according to nearly half of respondents, 28 percent said that the speed at which they are able to migrate to cloud is important, as is cloud's ability to enable faster entry into new markets (27 percent) and business process transformation (22 percent).
"Gaining real cost savings from the cloud is about more than simply moving from fixed costs to operating costs; the greatest cost savings – and, more importantly, the transformational business benefits – will come from the longer-term outcomes such as more efficient processes, more flexible operating models," commented Steven Salmon, Principal Advisor with KPMG in the UK.
Mr. Salmon also added that as cloud moves further up the ranking as a strategic tool of the business, "we will begin to see the CIOs role becoming ever more critical as the business integration broker on commercial, process and technical levels."
Cloud's new and emerging challenges
Businesses are starting to more clearly understand some of the other aspects of cloud that can either significantly enhance or impair their organization's ability to reap the rewards of cloud adoption.
Security: Business executives are recognizing that cloud adoption should improve security, not lessen it, nevertheless 26 percent of respondents still see security as a key challenge. The report indicates that business executives recognize that the only way to address the concern is to work more closely with IT to develop a joint approach on cloud security to ensure that cloud providers' solutions and services are reliable and protected.
Many businesses are proving their growing confidence in the security of cloud with more than a third of respondents saying they will migrate core operations of sourcing and procurement, supply chain and logistics to cloud within the next 18 months.
"Security – data loss and privacy – are still significant concerns for business and IT leaders but many are quickly gaining more confidence in their service providers," said Greg Bell, Principal, KPMG in the US. "Functions that, until just recently, were considered too sensitive or complex are now being put on the table."
Regulation: Only 18 percent of respondents see regulation as a challenge but that may be due to complacency, the report's authors suggest, because organizations may be just beginning to prepare for the complexities that will arise with increased regulatory compliance. Respondents from the Americas are 10 percent more likely than their Asia Pacific peers to view regulation as a key challenge.
"It will not be long before regulators start to enforce new rules that will have an impact on the way global organizations use the cloud," said Shahed Latif, Principal, KPMG in the US.
Nearly 24 percent of respondents say they are looking at 'private' cloud environments as a way to address regulatory challenges.
Tax: According to the survey, when asked how significant the role of tax was to making decisions to migrate to cloud, nearly 75 percent of respondents globally view the role of tax as either very significant or significant, indicating a recognition that tax structures may change as a result of migrating to cloud.
About the report
In late 2012, KPMG in partnership with Forbes Insight, conducted a web-based survey of 674 senior executives at organizations using cloud across 16 countries to assess the status and impact of cloud adoption around the world. Countries included in this survey were: Australia, Brazil, Canada, France, Germany, India, Israel, Italy, Japan, China, the Netherlands, Saudi Arabia, Singapore, UAE, the UK, and the US. The report combines survey data with analysis from KPMG's cloud leaders to deliver a realistic perspective of the challenges and complexities facing today's organizations.
Other key findings of the report include:
- More than half of all organizations are already working in the cloud.
- Seventy percent of those with existing cloud experience say that cloud had already delivered significant efficiencies and cost savings
For further information, contact:
Jennifer Samuel, Global Communications, KPMG International
+ 1 416 451 8185
About KPMG International
KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 156 countries and have 152,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.