Adopting Cloud Is No Longer An Advantage, HBR Finds

The analytics unit of Harvard Business Review concludes that since everybody is doing it, less advantage is found in moving to cloud.

Charles Babcock, Editor at Large, Cloud

August 3, 2015

4 Min Read
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If there was once competitive advantage in moving to the cloud, that's no longer the case. That's one of the conclusions found in a survey of 452 business and IT managers conducted by the Harvard Business Review Analytics Services.

The emergence of reliable cloud services has meant that "using cloud has enabled companies to act more quickly and to collaborate more easily. This has conferred competitive advantage on early adopters. Cloud's wider adoption, however, has set a new benchmark for business performance," the open pages of the survey's report, "Cloud: Driving A Faster, More Connected Business," concluded.

The Harvard Business Review analytics author, Angelia Herrin, continued: "The ability to adapt quickly is less of an advantage when everyone can do it; rather, not adopting cloud is becoming a competitive disadvantage." The prime benefits of cloud are impressive: 40% of respondents claim that using cloud has increased revenue, and 36% say it has increased profit margins.

"Achieving a competitive advan­tage is no longer a given as more organizations join the club. Advantage in the future will come from how well cloud is managed and to what extent companies can use it to decrease friction in all of their business activities," Herrin concluded.

The study was sponsored by Verizon Enterprise Solutions, the telecommunications company's cloud unit.

[Want to learn more about Verizon's acquisition of AOL? See Verizon Buys AOL For $44b To Bolster Video.]

It's not enough to start taking advantage of the efficiencies of cloud computing versus building out more data center space. On the contrary, to maintain a competitive advantage, organizations need to "develop a more strategic approach to cloud adoption, management, and use," she wrote.

That's true in part because organizations have moved beyond sales force automation and other straightforward cloud tasks and deeper into their software infrastructure operations, including supply chain management. Eight-four percent of the survey respondents reported increasing their use of cloud.

As they move toward mission-critical tasks, two-thirds of the respondents said they want to stick with a well-established cloud supplier with a broad service set, as opposed to a younger company or a niche player.

To a surprising degree now, shadow IT is not a problem.

While early cloud projects were often initiated by line-of-business managers going around IT, 43% of cloud purchases are now made through central IT and another 39% made with IT. The central IT staff advises the business units and departments, checks the vendor's claims, ensures compliance and security, and then provides interconnectivity expertise.

"Survey respondents were for the most part quite positive about the benefits of partnering with IT, claiming it … increased their ability to integrate cloud services with other company systems and business processes," Herrin wrote. Fifty-seven percent of the respondents felt strongly about the need to do that, and 52% felt strongly that involving IT lowered cost and complexity, she added.

At the same, the survey showed that 65% of respondents involved their company security professionals in vetting cloud service providers, but that 35% did not. Forty-five percent have policies defining what applications may run in the cloud and 54% have guidelines for how cloud applications are contracted and approved. "This needs to change," warned Herrin.

In addition to the 40% who saw increased revenues and the 36% who saw increased profit margins, 38% said use of cloud computing improved their ability to enter new markets, 41% said it increased their product range, and 36%  said it improved compliance with regulations.

Fewer respondents claimed significant competitive advantage from cloud adoption, compared to the previous year, 16% versus 30%, respectively. But not adopting cloud would have dire consequences, one respondent warned: "Cloud is no longer a differentiator. However, not being on it would be a significant disadvantage."

Advantage in the future will stem from effectiveness of adoption and management, the amount of collaboration realized as a result of it, and achieving speed to market.

"Success will depend on how well organizations manage not only their use of cloud but also the changes required in skills, processes, business models and relationships -- both inside and outside the traditional enterprise walls," Herrin wrote.

The 452 organizations surveyed included 32% of 10,000 employees or more and 31% with 1,000 to 10,000 employees. Thirty-seven percent of company locations were in North America, 25% in the Asia/Pacific region, 19% in Europe, and 12% in Latin America.

About the Author(s)

Charles Babcock

Editor at Large, Cloud

Charles Babcock is an editor-at-large for InformationWeek and author of Management Strategies for the Cloud Revolution, a McGraw-Hill book. He is the former editor-in-chief of Digital News, former software editor of Computerworld and former technology editor of Interactive Week. He is a graduate of Syracuse University where he obtained a bachelor's degree in journalism. He joined the publication in 2003.

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