I recently came across an article from 2014 about migrating to the cloud. Back then, the concerns were all about the providers and the infrastructure. The article cited turbulent web connections, scattered data, and the high cost of premium service as common problems.
How things have changed in just eight years! Today, cloud providers are now a proven option and the economic case is strong. The infrastructure is ready to be used by companies that are digitally transforming themselves. The question is no longer if the technologies are ready, but rather if the enterprises themselves are ready.
In many cases, the answer turns out to be “no”. In a survey by McKinsey Research, industrial firms reported that 30% of their cloud spending was “wasted” while another 23% was over budget. And Gartner predicts that “through 2024, 60% of infrastructure and operations (I&O) leaders will encounter public cloud cost overruns that negatively impact their on-premises budgets.
Cloud migration is a big decision – and there are several important factors to manage as part of the process.
What’s the challenge?
There are many challenges. Consulting firms often say the biggest problem is a lack of strategy and leadership. McKinsey cites several issues, including the complexity of enterprise systems, hidden costs such as unexpected add-on services, and a tech talent shortage that is only getting worse.
According to many analysts, migration problems are exacerbated by a rushed approach that puts technology change before business change. For example, Gartner says, “Under pressure to move quickly, I&O leaders often prioritize the ‘lift and shift’ approach of moving workloads into the cloud without modifying them.”
There are other important issues too, such as security and compliance. Yet, despite all the hurdles, it’s still possible to achieve the benefits of the cloud without overspending or making false starts.
Fund as you go
Many consultants emphasize the importance of developing a detailed change management plan that focuses on business improvement, and corporate leadership that drives the cultural changes required. These measures can help avoid costly mistakes.
But according to McKinsey, manufacturers can do even better than avoiding mistakes. With the right planning, firms can “bend the curve” by migrating in stages that produce benefits along the way. This allows you to fund as you go, and manage and learn with each step. McKinsey lays out a four-point approach that an enterprise manufacturer must take to achieve this, but I want to focus on just two of them here.
- “Be strategic and sequenced about which applications migrate to the public cloud and then manage cloud consumption. The end-state vision should determine which applications and data should migrate and which should stay.”
There’s a lot of good advice in those sentences. First, you need an end-state vision of what your IT landscape is going to look like before you begin. Then you need to be strategic with how you stage the migration, taking care to manage cloud consumption at each step so you don’t lose control or get in too deep (which is where many companies go wrong). Taking on large IT projects in stages is always good advice, but it’s especially applicable with the cloud because it’s so easy for an enterprise to bite off more than it can chew. McKinsey gives one example of a firm that tried to migrate 30 different legacy systems at the same time. It did not go well.
- “Balance infrastructure migration against an ongoing cloud-enabled business redesign since the latter can start to self-fund the transformation. The redesign may include Industry 4.0 tools, new analytics, or new business models. Emphasize business-process improvements, often enabled by analytics, where investment is lower and impact is faster.”
Notice that the emphasis is on business. Technology is intertwined with business processes, and transforming them in tandem will yield the fastest and greatest return on investment. Since nearly every business process can potentially be improved through digital transformation, there is a lot of low-hanging fruit that companies can use to fund the early stages of cloud migration.
Those interested in reading the full article from McKinsey, including many other recommendations, can do so here.
Proceed with caution
There’s no doubt the cloud can fundamentally improve processes for manufacturing enterprises, from internal operations like design and manufacturing to the external world including supply chains and aftermarket support and services.
Enterprises are moving to take advantage. The cloud computing market reached $250 billion in 2021 and most firms have migrated up to 40 percent of their systems to the cloud. Some of these efforts have been successful, but too many have failed or cost far too much.
The lesson is clear: migrating to the cloud is increasingly becoming a necessary step for manufacturers that want to participate and take advantage of today’s expanding digital world. But there’s no need to rush or take on too much at once. The best way to win is to take your time, plan carefully, and proceed with caution with a trusted partner.