Cloud Investment Promises Financial Benefits, but Talent Gap Poses Challenges

Organizations can boost their ROI through the cloud by driving revenue growth and cost savings, and reaping a host of other strategic and operational benefits.

A recent SoftwareOne study of 300 IT leaders shows that as organizations advance in their cloud journeys, their return on investment grows, as their cloud investment costs fall while their revenue and cost efficiencies rise.

Organizations just starting out migrating to the cloud — cloud beginners — invest 1.3% of their revenue in the cloud (an average of about $2 million), while those well-advanced — cloud leaders — invest 1.1% (an average of about $4.6 million).

Beginners report a 19% decrease in overall business costs attributable to cloud usage versus a hefty 25% for leaders. Similarly, 26% of beginners benefit from a rise in revenue, with that percentage leaping to 48% as these companies morph into cloud leaders.

The findings indicate cloud investments help companies:

Thomson-SVP-SoftwareOne

Filling the Cloud Talent Gap

The biggest surprise in the report, according to Craig Thomson, senior vice president of cloud and application services at SoftwareOne, was how many companies still don't appreciate the cloud talent gap.

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"They think they can gradually develop their skills," he said. "But to build a bridge between where you are now and where you will be in two years, they will need to inject new talent into their organization, whether it's with new hires, contractors, or third-party consultants."

Thomson said it's essential to understand the issues at the start — a cloud migration roadmap that covers technology steps, culture, process, and skills is critical.

"You must understand your company's gaps and what you might do to close those gaps," he said. "Acknowledging there is a talent gap very early on is very important. It only gets harder if you wait."

When it comes to executing a cloud investment strategy successfully, organizations must first and foremost understand that the cloud is growing more complex, Thomson said.

"As a result, it can drive up costs if not approached strategically," he cautioned. "To avoid wasted cloud spend, companies should start by looking at their entire portfolio of applications, consider which are the most important to prioritize for modernization, and start their journey toward cloud financial management."

Controlling Cloud Spending with FinOps

Many companies are starting to implement FinOps practices, Thomson said, which he considers table stakes if they want to keep control of their cloud spend and be able to track what value or revenue their transformation initiatives are delivering.

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"Cloud financial investment may come through tooling — often several tools — consultative services, and, for large organizations, people," he said.

From Thomson's perspective, the key to maximizing ROI is understanding the business case workload by workload, which will dictate how companies handle each workload when migrating to the cloud.

"Companies must ensure that every investment in capability drives a commensurate ROI for the business," he noted. "It's essential to have a plan for how investing in the cloud will move the business capability forward for customers or make your operations more effective and efficient."

For an effective cloud budget, an organization should consider all operating expenses associated with their cloud investment, including people, software, and provisioned resources.

Since cloud costs are changing in real time, ROI and unit economics will play a major role in decision-making.

"The more clarity and insight into optimization opportunities that a FinOps practice can provide, the better positioned an organization will be to address these changing costs," Thomson said.

This means organizations must create a culture of accountability, or a shared responsibility across departments, regarding cloud spend.

"Ultimately, this helps ensure that cloud and modernization efforts are maximized for long-term success," he said.