Cloud Adoption Links to Higher Profit Growth

By Samuel Greengard

It’s no secret that information technology increasingly defines an organization’s success, but not all strategies, systems and tools are created equal. According to a just released study by IBM, a high level of cloud adoption directly maps with revenue growth. In fact, high adopters displayed 2.5 times higher gross profit growth than peer companies that are more cautious about moving into the cloud.

“There was a clear correlation between financial results of the pacesetters’ businesses versus the others,” reports Ric Telford, vice president of SmartCloud Service at IBM.

The report, “Under Cloud Cover: How leaders are accelerating competitive differentiation,” surveyed more than 800 business decision-makers and users worldwide. It revealed that key decision-makers—including CEOs, CMOs, finance, HR and procurement executives—view clouds as increasingly vital to organizational performance.

Although 34 percent say cloud computing is important today, 72 percent believe it will be vital in three years. By comparison, only 58 percent of IT executives say clouds will be a critical component in 2016.

However, only about one in five organizations have stepped beyond basic cost and operational efficiencies and rely on clouds to achieve a competitive advantage. Compared to more cautious enterprises, leading organizations are 117 percent more likely to use clouds to enable data-driven decisions; 79 percent more likely to rely on clouds for deeper collaboration, including locating and leveraging expertise anywhere in the ecosystem; and 66 percent more likely to use clouds to strengthen the relationship between IT and lines of business.

The majority of clouds revolve around integrating and applying mobile, social, analytics and big data technologies, the report notes. Top-tier organizations achieved a competitive advantage in a number of ways. For instance, so-called “pacesetters” exceeded “chasers” by a whopping 136 percent in reinventing customer relationships; 73 percent in innovating products and services rapidly; and 70 percent in building new and improved business models.

These organizations were also able to make decisions faster and better. Fifty-four percent of pacesetters indicated that they are able to use cloud-based analytics tools to derive insights from big data, compared to 44 percent of middle-tier organizations (“challengers”) and 20 percent of chasers.

Despite such impressive gains, pacesetters acknowledge that the journey hasn’t been easy. Forty-five percent of all respondents noted that the cloud introduces greater complexity into the organization. Among pacesetters, that figure jumps to 51 percent. However, leading organizations found ways to combat the complexity. Many simplify integration and connect broad IT and business ecosystems through open-source cloud platforms.

Leaders also deploy hybrid cloud infrastructures, and they are more likely to experiment with clouds and rely on pilot projects. Overall, pacesetters adopt a more comprehensive cloud strategy, the reports notes. In fact, pacesetters surpass chasers in instituting an enterprise strategy by 270 percent.

Telford states that best-practice organizations tend to deploy enterprisewide cloud strategies and focus heavily on business and IT goals. Leaders at these organizations understand “where the cloud can drive business differentiation and how different cloud technologies—including hybrid, open-source and public clouds—can help IT meet its goals,” he says.

“The good news is that there are already some pacesetters out there showing you the way—but to draft on their success, you can’t fall too far behind.”