ESSENTIALS FOR LEADERS AND THOSE THEY LEAD

The tale of cloud computing follows a familiar plotline. As with many other new technologies, there’s lots of excitement about the potential value to gain and then lots of growing pains and entrenched mindsets that make adoption feel more than arduous. But 15 years into the journey, cloud seems to be at an inflection point. McKinsey research projects that cloud could generate up to $3 trillion in value by 2030. Generative AI (gen AI) also has the potential to accelerate cloud use, and the returns a company sees from it, in unprecedented ways. This week, we look at cloud’s growing upsides and how companies can make good on its promise.

AN IDEA

Put business value first

Cloud’s potential to transform a business isn’t unique to one industry or region. Still, companies in different geographies face varying conditions and obstacles. McKinsey’s Bernhard Mühlreiter and coauthors look closely at the state of cloud in Europe. There, adoption rates and ambitions are high, while efforts to scale cloud leave room for improvement. So far, European companies have tended to pursue IT-led or IT-focused migrations to the cloud and measure the impact in IT-specific terms. Yet the real value from cloud, in Europe and beyond, comes from opportunities to increase revenue and save costs in a company’s business operations. How companies measure cloud’s impact matters, too. Rather than migrating as many workloads to the cloud as possible, Mühlreiter and other experts stress the importance of focusing on ROI and being intentional about why and where in the business cloud is adopted.

A BIG NUMBER

75–110

That’s how many percentage points of incremental ROI could be added to a company’s cloud program if it’s also using gen AI. According to senior partner William Forrest and colleagues, the adoption of both gen AI and cloud technologies is mutually beneficial and potentially transformative. To name a few benefits: cloud can support the complex scaling up of gen AI initiatives across an enterprise, just as gen AI capabilities can speed up the cloud migration process. Other gen AI–related advantages include reduced migration costs and higher productivity for development and infrastructure teams that are working on cloud.

A QUOTE

“We’ve learned that being empathetic means your job’s not done just because you’ve delivered cloud services. Your job is to make sure it’s been optimized and is efficient for the user.”

That’s Mark Oh, director of infrastructure and user services group at the US Centers for Medicare & Medicaid Services (CMS), on the importance of a people-centered move to the cloud. Oh, along with Rajiv Uppal, chief information officer (CIO) at CMS and the incoming CIO of the Internal Revenue Service, spoke with senior partner Naufal Khan and colleagues about the agency’s cloud migration and why it was important to understand the business, and the people running it, every step of the way. One tactic for achieving broad buy-in was enabling change rather than mandating it. “A lot of the success can be attributed to the ‘community of practice’ we established, where we involved the entire stakeholder community to help shape solutions,” Uppal says. “This community was instrumental in sharing best practices so we could all benefit.”

A SPOTLIGHT INTERVIEW

Even with all of the value cloud promises, the challenges to developing a successful program persist. In an interview with The McKinsey Podcast, McKinsey’s Mark Gu and James Kaplan describe the key components of cloud success that many firms have yet to address: identifying the biggest sources of business value, establishing foundational capabilities, and reimagining the technology operating model and skill needs. As with other types of tech, the business case for cloud can be complicated. “In many cases, the benefits and the investments are happening in two different parts of the income statement or the organization,” Kaplan says. But companies (and leaders) must be patient in their quest for cloud-based value, which goes far beyond cost savings. “You can’t make the case on IT cost by itself,” according to Kaplan. “The reason you go to cloud is because of the business value it enables, through agility, scalability, innovation, and flexibility.”

— Edited by Daniella Seiler, executive editor, Washington, DC

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