A Conversation on the Best Practices to Maximize Business Value from the Cloud
by Calvin Wu, Business Development Manager, AWS Cloud Economics
In his blog post, “Unlocking the Trillion Dollar Value of Cloud,” Mark Schwartz dives deeply into McKinsey Digital’s prediction that there’s $1 trillion of cloud value up for grabs by enterprises prepared to take it. While the McKinsey article clearly laid out the sources of the cloud’s value, what’s less clear is how some organizations are more successful at capturing these sources of value. What do successful organizations do that others don’t?
AWS Cloud Economics sought to answer this question in its recent survey of 705 customers globally. The results: 45 practices that were most impactful in creating business value. The study also revealed correlations between an organization’s best practice maturity and business value KPI improvements.
While many AWS customers realized benefits and saw KPI improvements after migrating to AWS, customers with high maturity in adopting these good practices realized markedly better results. For example, they saw an 11.7% decrease in infrastructure spend as a percent of total IT spend (versus a 0.2% decrease for low maturity customers) and increases in the amount of infrastructure that could be managed by each administrator (416% increase in the number of servers versus 110%), the time spent on strategic work (+54% versus +27%), and the number of code deploys per unit of time (+9.6x versus +5.8x). The value is there—it’s a matter of setting your organization up to realize as much of it as possible.
Four Best Practices for Business Value Creation
Our research showed the following four best practices correlate to the largest improvement across all areas of the AWS Cloud Value Framework: cost savings, staff productivity, operational resilience, and business agility. We’ve asked Mark to join the conversation to provide some context and insight on how different organizations may define or implement these best practices.
Best Practice #1: Design and Socialize a Cloud Migration Roadmap
Calvin Wu: Thanks so much for lending us your time and expertise, Mark. Let’s start with the first best practice—creating a cloud migration roadmap. Our study showed that the most successful organizations designed and socialized their cloud migration roadmap for all impacted workload owners from both IT and business.
So, while it’s not necessary to have migration plans for ALL of your workloads in advance, we’ve seen some organizations adopt a more “agile” approach to migration and make decisions as they go.
Mark Schwartz: Cloud migrations—and digital transformations in general—affect a wide swath of an organization. To be successful, change agents—usually the IT department—have to influence the rest of the enterprise, “selling” what they’re doing, and promoting a sense of urgency across the organization. So, it’s not surprising that creating a roadmap and socializing it is an important step. It’s a way of engaging the rest of the company in the success of the migration. Two potential pitfalls here are spending too long trying to create a perfect roadmap out of the gate and making it inflexible. Companies learn a lot during their cloud journeys, and it’s important to use those learnings to continually improve their plans. Some successful companies think about it this way: We should have just as detailed a roadmap as we need to accomplish the purpose of the roadmap—coordinating the stakeholders and fully engaging them.
Best Practice #2: Build a Comprehensive Business Case
Calvin Wu: Great. The cloud migration roadmap often goes hand in hand with the second best practice, which is to build a business case that includes BOTH cost and non-cost benefits. Develop a cloud business case beyond just IT cost savings and get buy-in and ownership across your organization to achieve these benefits. This is reinforced by IDC’s finding that 92% of the value AWS customers receive is from benefits beyond cost. And you talked about this in your recent McKinsey blog post, Mark. Would you mind briefly sharing the gist of what you were saying about how the business case, depending on how you build it, can positively or negatively affect realized value from the cloud?
Mark Schwartz: Sure, I really think this is a critical point. The business case for the cloud (I know this sounds obvious) should be based on what the business hopes to gain from it! The cloud can help increase agility, resilience, and security; it can enable innovation and better customer service; it can help streamline operations. Which of these benefits is most closely tied to the business’s strategic objectives? Once you decide, your business case flows from that—as does clarity, prioritization of what you’ll do in the cloud, a sense of urgency, and your way to measure results. I often hear companies say that their goal in the cloud is to increase their agility, but then watch them build their business case based on infrastructure cost reductions. The benefits of the cloud are not just technical benefits, but business benefits, and that’s where the business case is.
Calvin Wu: Yes, I agree. Many customers move to the cloud because of the agility to innovate but find it difficult to quantify these benefits. I’d also like to point out that AWS Cloud Economics provides plenty of resources to help AWS customers identify and quantify the business value of migration. We have benchmarks that measure the value that over 1,000 customers have realized, which we can use to help other companies in creating their own business cases.
Best Practice #3: Assign an Executive Sponsor for the Cloud Program
Calvin Wu: Moving onto the third best practice, our data shows that obtaining an executive sponsor who fully supports and oversees the cloud program can help accelerate the progress to value creation. Mark, I know you have some thoughts on this. Could you help break down how this has proven to be a pitfall of some organizations. What would be your advice to organizations to avoid commons mistakes and be able to benefit from executive sponsorship?
Mark Schwartz: This goes back to what I said before about the entire enterprise’s role in the cloud transformation. The transformation will go much better if everyone is engaged, and often the change agents or technology experts don’t have the organizational power to get everyone else on board. A senior executive sponsor can help with that engagement, and also provide the vision, linkage to the company’s strategic goals, and urgency. It’s very important. There is, however, a potential pitfall here as well. If there are strong change agents at lower rungs in the organization, I don’t recommend that they wait until they have that executive sponsor. There’s a lot they can do, as middle managers or line employees, to get things going, after which it may be easier to get the senior executive’s support.
Best Practice #4: Create a Centralized Cloud Team
Calvin Wu: We found that organizations stood to achieve more value if they established a centralized cloud center of excellence (CCoE) that included experts in all aspects of IT finance, business, and security. An effective CCoE team provides consultation, standardization, and best practices that help development teams innovate faster. Mark, I know you just talked about analysis paralysis, and that the word “centralized,” among others, can be left to many interpretations. What’s your take on CCoEs and finding the right balance to avoid stifling innovation?
Mark Schwartz: Ha! I have to admit that when I was a CIO, I didn’t create a CCoE, and I consider our transformation to have been very successful. But I think this is nuanced—it depends on how you set them up. A CCoE can play an important role in speeding up the teams that actually deliver—it can provide deep expertise, coordination across the enterprise, access to tools, creative ideas, and political support. In essence, it can act as a servant leader, removing impediments for everyone executing on the vision. It’s especially powerful in early stages, when others in the company don’t yet have the cloud skills they need, and the CCoE can lend its expertise. On the flip side, if this is done wrong, a centralized body like a CCoE can get in the way, add bureaucracy, and slow things down. I’ve published a blog post that goes more deeply into the tradeoffs of centralizing and decentralizing functions.
Calvin Wu: Thank you so much for your insights, Mark. As we just discussed, there are common best practices that many successful organizations implement. However, there are many nuances that may require organizations to modify some of these practices in order to drive change or create business values and fast.
To explore best practices for both overall and targeted improvements, download our e-book, “Best Practices to Maximize the Business Value of the Cloud.”
About our Guest
Calvin Wu is a Cloud Economics Business Development Manager at Amazon Web Services, where he focuses on leading primary benchmarking research to quantify metrics and trends from customers who migrated to AWS. Prior to AWS, he held multiple technology and finance roles at SAP America, Goldman Sachs, and Deloitte. He has an MBA from the University of Chicago Booth School of Business and a BS in Accounting from SUNY Geneseo.