In 2020, the top-three CSPs(cloud service providers) reached <a href="https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/the-cloud-transformation-engine">$100 billion</a> in combined revenues—a minor share of the global $2.4 trillion market for enterprise IT services—leaving huge value to be captured. To go beyond merely realizing cost savings, companies must activate three symbiotic rings of <a href="https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/the-cloud-transformation-engine">cloud value creation</a>: strategy and management, business domain adoption, and foundational capabilities.

Ample Growth In Cloud Computing

An <a href="https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/how-cios-can-work-with-outsourcing-providers-to-navigate-the-coronavirus">outsourcing model</a> is more apt than other analogies: the computing business issues of cloud customers are addressed by third-party providers that deliver innovative computing services on demand to a wide variety of customers, adapt those services to fit specific needs, and work to constantly improve the offering.

The Outsourcing Model

The pandemic demonstrated that the digital transformation can no longer be delayed—and can happen much more quickly than previously imagined. Nothing is more critical to a corporate digital transformation than becoming a cloud-first business. The benefits are faster time to market, simplified innovation and scalability, and reduced risk when effectively managed. The cloud lets companies provide customers with novel digital experiences—in days, not months—and delivers analytics absent on legacy platforms.  Organizations must make a collective effort that starts at the top.

Reasons To Move To The Cloud

With cloud computing, organizations essentially buy a range of services offered by cloud service providers (CSPs). The CSP’s servers host all the client’s applications. Organizations can enhance their computing power more quickly and cheaply via the cloud than by purchasing, installing, and maintaining their own servers.The cloud-computing model is helping organizations to scale new digital solutions with greater speed and agility—and to create value more quickly.

Cloud Computing

Developers use cloud services to build and run custom applications and to maintain infrastructure and networks for companies of virtually all sizes—especially large global ones. CSPs offer services, such as analytics, to handle and manipulate vast amounts of data. Time to market accelerates, speeding innovation to deliver better products and services across the world.

Benefits For Developers

<ul><li>A fast-casual restaurant chain’s online orders multiplied exponentially during the 2020 pandemic lockdowns, climbing to 400,000 a day, from 50,000. One pleasant surprise? The company’s online-ordering system could handle the volume—because it had already migrated to the cloud. </li><li>A biotech company harnessed cloud computing to deliver the first clinical batch of a COVID-19 vaccine candidate for Phase I trials in just 42 days—thanks in part to breakthrough innovations using scalable cloud data storage and computing to facilitate processes ensuring the drug’s safety and efficacy.</li></ul>

Examples Of Cloud Computing Uses

The cloud revolution has actually been going on for more than 15 years. Today, the next generation of cloud, including capabilities such as serverless computing, makes it easier for software developers to tweak software functions independently, accelerating the pace of release, and doing so more efficiently. Businesses can therefore serve customers and launch products in a more agile fashion.  Cost savings are commonly seen as the primary reason for moving to the cloud but managing those costs requires a different and more dynamic approach focused on OpEx rather than CapEx

Evolution Of Cloud Computing

Three actions CEOs can take to increase the value their companies get from cloud computing:<ul><li>Establish a sustainable funding model.</li><li>Develop a new business technology operating model.</li><li>Set up policies to attract and retain the right engineering talent.</li></ul>

What A CEO Needs To Do

Fortune 500 companies adopting the cloud could <a href="https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/clouds-trillion-dollar-prize-is-up-for-grabs">realize more than $1 trillion in value</a> by 2030, and not from IT cost reductions alone, according to McKinsey’s analysis of 700 use cases.The cloud’s global infrastructure lets companies scale products almost instantly to reach new customers, geographies, and channels. Finally, digital-first companies use the cloud to adopt emerging technologies and innovate aggressively, using digital capabilities as a competitive differentiator to <a href="https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/how-to-launch-a-new-business-three-approaches-that-work">launch and build businesses</a>.

The Value Created By Cloud Computing

When companies migrate to the cloud, the simple lift-and-shift approach doesn’t reduce costs, so companies must remediate their existing applications to take advantage of cloud services.Legacy cybersecurity architectures and operating models can also pose problems when companies shift to the cloud. The resulting problems, however, involve misconfigurations rather than inherent cloud security vulnerabilities.  <a href="https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/security-as-code-the-best-and-maybe-only-path-to-securing-cloud-applications-and-systems">Securing cloud workloads for speed and agility</a>: automated security architectures and processes enable workloads to be processed at a much faster tempo.

Risks Of Cloud Computing

Some cloud services, such as server space, are leased. Leasing requires much less capital upfront than buying, offers greater flexibility to switch and expand the use of services, cuts the basic cost of buying hardware and software up front, and reduces the difficulties of upkeep and ownership. Organizations pay only for the infrastructure and computing services that meet their evolving needs.