Cloud is a Catalyst for Digital Transformation: Deloitte

In today’s digital economy, enterprises depend on the effective use of technology not just to support their ongoing business processes, but also to drive new sources of competitive differentiation. Cloud computing is one such key technology that has always driven innovation and greater agility while allowing organizations to deliver promising  outcomes (whether its about a new product or a quality customer experience). The most decisive moment came in 2020 – the year of accelerated digital transformation – when circumstances forced companies to push their plans for digitizing operations and data to the top of their priority list. This has further made cloud-enabled business transformation a core theme of growth organizations.

In a recent conversation with CXOToday, Monojit Mazumdar, Partner, Deloitte India, discusses the trends and challenges of cloud adoption and why cloud is a driving catalyst of digital transformation in post-pandemic times. Excerpts.

CXOToday: What are the most important trends impacting cloud adoption currently and what’s the current state of the market?

Monojit Mazumdar: The Deloitte Access Economics report in July 2021 estimates, in  2015-20, annual spend on public cloud services in India grew at an impressive 45.5% CAGR with a current market size of USD 3.5 Billion. Corresponding growth for APAC for the period was 40.8% CAGR with a total market size of USD 43.1 Billion.

We expect the size of the market to grow even at a faster pace based on COVID induced business imperatives. Our estimate is that we will witness a brisk growth at 45.5% CAGR between now and 2024 in India market resulting in 8 Billion USD value. Three primary drivers would contribute to this growth:

1. Need for flex capacity: Our clients are showing more inclination towards a pay per use service. Recently, we moved the sales forecasting process for a client to cloud. Their operating cost of running the process is now a mere 25% of what it used to be. Sales forecasting process runs at a certain time of the month with a very high resource usage. Earlier, they had to keep a heavily designed system at rest for most of the times and wake it up to run for a short window. With cloud, this is now a pay per use and completely flexible capacity. As the resources get more constrained and drive to have a better earnings per share gets more intense, we see this lever being used even more.
2. Speed to market: Cloud offers a ready to deploy platform once you have set it up with right capacity. Across our banking, consumer business clients, we see a trend to bring in a set of rapid customer facing and backend digital applications quickly to address point solutions. Cloud platform will only hasten this process to enable a series of continuous changes that business will demand.
3. Cost: Almost all the hyper scalers are in the process of expanding their geographical reach. This will clearly bring the price points further down and over a period, we anticipate that classic CIO debate of “low capex but over a period of time high opex” will be put to rest.

Overall, we are upbeat not only on the growth but on cloud enabled business transformation being a core theme of growth organizations.

CXOToday: How can CIOs embrace the true capability of cloud as well as allied technologies like IoT, artificial intelligence, and machine learning?

Monojit Mazumdar: We see the entire cloud potential including all the technologies in question and even beyond being leveraged through a simple four stage framework:

1. Business question or opportunity: This is where it all should start rather than a fanciful attempt to implement one of these technologies. A specific business challenge (like reducing machine breakdown instances) or an opportunity (take competitors market share by a certain percentage points through smart algorithm leverage) that drives the business case should initiate the process of adoption.
2. Data: Provisioning and management of all data required to answer the question or opportunity. Often the data needs a blending of internal application data of organization as well as external information.
3. Algorithms: Which one to use and how to continuously improve upon the same.
4. Digital delivery: How, when and where to deliver the answer to the question or opportunity.

Cloud will be a great enabler across last three dimensions once first point is well elucidated by business. Using a set of tools and real fast data processing techniques, it may help in getting the data integrated faster for the purpose of analysis. Most of the cloud platforms are building/integrating a rich repertoire of algorithms which will cut down the time for development letting developers spend more time on improving the efficacy. Lastly, rapid application build, and deployment techniques will assist to get the answers to business quicker. Most importantly, failing fast and recovering quickly will be possible using the flexible cloud capacity.As the adoption grows and business cases become sharper, cloud platforms will evolve to have more automations embedded, allowing the CIOs to have faster adoption of some of the newer challenges.

CXOToday: What are the cloud compliance challenges companies are facing today and how can they overcome these challenges?

Monojit Mazumdar:  In our conversations with clients and results of our survey shows the biggest perceived challenge in implementing cloud solutions is security issues. This gets closely followed by regulations governing cloud implementation. Cost of adoption, difficulty in switching data to new systems and skills shortage are other typical challenges faced by organizations.

In recent times, the impact of regulatory challenges has become more paramount with policymakers focusing on regulations that protects regional data to stay within geographical boundaries. Cloud providers have responded to this challenge by increasing the coverage of local geographies. In recent times, all hyper scalers have scaled up in India significantly. We expect them to continue their investments on priority markets taking this local legislative buoyancy into account.

 While the regulatory compliance issues will get addressed in due course, bigger challenge awaits in information and cyber security areas. DDoS and other forms of attacks statistics shows an exponentially upward trend and is expected to in that course only. Cloud providers recognize it and are responding by strengthening their entire DevSecOps chain set. The evolution cycles to strengthen the platform will continue in foreseeable future.

CXOToday: What are the challenges in managing a multi-cloud environment? What is the way forward?

Monojit Mazumdar:  Today, more than ever, the Fortune 100 clients have invested in more than one cloud environments. Even more interesting is the fact that they have not committed to multi-cloud at the outset. For most of the cases, the need to have more than one cloud platforms is genuine and driven by a business imperative.

To start with, different hyper scale cloud platforms have taken different strategies with their product and platform roadmap. Some of them have focused on robustness and agility of infrastructure, resulting in enterprise applications preference of the platform. Some others have got their data and application integration right; allowing analytics, IOT and other new technology choices favoring them. This trend is expected to continue in foreseeable future.

Organization will continue to focus on addressing two major challenges that may become a bit of botheration if not addressed properly:

Exchange of information: While the foundational technologies are similar as far as data integration is concerned, implementation in different platforms could be diverse. Architecture patterns, standards need to address interoperability as a clear dimension here.

Allurement of automation: CIOs need to do a worst case scenario planning for application migration. This may involve some of the application being completely redeveloped with low refactoring index. Assuming another way round could result in significant delay and frustration on application migration.

Multi cloud choice is an obvious future, formulating an early strategy will be beneficial.

CXOToday: What are the most important factors CIOs consider in a cloud provider?

Monojit Mazumdar:  If we look a little beyond the obvious choices of cost, agility and service levels, four key considerations are emerging as defining factors of choice. We believe true value of cloud will emerge as business disruptors. Globally, we think CIOs are using and will continue to use these four factors as a determinant of decision making.

1. Impact of pandemic on the organization: In the financial sector, biggest disruption, now comes regulatory oversight measures. Choosing a cloud platform that takes care of or robust security feature is a prime consideration in a remote working world for the sector. Focus on consumer sector will be on a quickly deployable and robustly integrated to back-end platforms as they need to respond to a changing market scenario. Sector specific selection criteria could be different but overall decision making will be significantly impacted by newly disrupted reality.
2. Accelerate product development and innovation: Speed to build and speed to change at the request of business will be a key determinant of the platform.
3. Better business resilience: Business resilience in the area of remote access is a key solution choice factor. A platform that has a better track record on downtime, breaches and highest regulatory compliance ratings will clearly score better.
4. Better automation: Buzzword in business today is automation and technology is striving to meet that expectations. A platform with a better choice of API driven integration, automated DevSecOps toolset chain and easily integrated testing and deployment model will be a firm choice.

While these criteria look very relevant in today’s ecosystem, change is the only possible constant here.

CXOToday: How can companies strategically embrace cloud to drive accelerated innovation and greater agility?

Monojit Mazumdar:  The Deloitte Access Economics survey has measured cloud technology benefits across the dimension of accelerated innovation and agility along a set of value drivers, in which operational efficiency is at the top of the list, followed by winning new customer segments and profitability. We also observe use cases around innovative use of data and technology building automation resulting in operating efficiency. In fact the focus is expected to shift gradually on strategic innovations. Building a new product line for consumer facing industry segments, increased computing power towards research and development segments to build new pharmaceutical products are some of the use cases we see emerging. As ‘try early and fail first –approach’ gains prominence over first time right methodologies and gets more acceptable, use of cloud as a platform of choice to perform agile experiments is expected to gain prominence as well.

Historically, a period of prolonged stagnation forced by a natural and created calamities like war, a pandemic is always followed by a spurt of growth period. This is often aided by a technology innovation like air traffic technology advancement post the Second World War. There is a considerable chance cloud platform aided by new technology will be the propelling factor for post pandemic growth surge.