Cloud Transformation Failing to Deliver Business Value, New Study Finds

A new study conducted by research firm HFS in collaboration with IBM Consulting reveals that while enterprises are making cloud transformation a top priority, most have yet to realize tangible business benefits from these initiatives.

The report, based on a survey of 510 senior executives at Global 2000 companies, underscores the need to view the cloud not just as a technology shift, but as an integral part of overall business transformation.

Key findings include:

According to Tom Reuner, executive research leader at HFS, the most surprising finding was the level of buyer's remorse, with nearly 95% of the respondents having some buyer's remorse from their primary hyperscaler contract.

Reuner-HFS

Most pertinently, 26% stated that they had canceled multiyear service contracts with their (previously) primary hyperscaler in the past 12 months. The reason? Respondents cited the high switching costs and higher than anticipated costs.

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"This is a far cry from the utility model that cloud is meant to be," Reuner told ITPro Today. "At the same time, this is a wake-up call for the hyperscalers to do more to support their customers on their transformational journeys."

How to Get More Out of Cloud Transformation

According to the report, most cloud transformations stall at intermediate stages.

Reuner noted that only 11% of organizations reported that they have achieved what they desired to achieve to execute new initiatives to extend the value of their transformation.

The reasons for that are manifold, but two issues stand out. First, Reuner identified the inability to align technology and business objectives. Second is the challenge of understanding and designing the cloud target operating model.

The report also found that only 17% of companies have a well-defined future state for their cloud transformation. Reuner said that the issue isn't about a lack of best practices, but rather a scarcity of discussion about the future state of the cloud for most organizations.

"Fundamentally, the future state is about business transformation — not technology," he said. "Therefore, cloud is and must become a business discussion."

What 'Cloud Masters' Get Right About Cloud Transformation

Related:5 Considerations for Migrating Data to the Cloud

Although the survey found that many organizations are not getting things right about the cloud, there is a group of organizations that are: cloud masters.

For starters, cloud masters achieve a stronger top-line growth, Reuner said. Cloud masters are seeing a much higher funding level from non-IT stakeholders. And business cloud masters are more forward-leaning by including the latest technologies in their cloud transformation initiatives. For example 55% of business cloud masters include generative AI (GenAI) within the scope of cloud transformation, compared with 35% for other enterprises.

"While the cloud masters are a small part of the sample, the lessons learned are compelling," Reuner said.