Strategic Benefit of Scaling Cloud-based Digital Transformation

Business technology can be the great enabler that differentiates an enterprise from its mainstream peer group. Make no mistake, delivering digital business value at scale can be achieved. The essential change management process begins with fearlessly embarking on a bold initiative.

Granted, implementation has many steps and takes time. In fact, successful business transformations can take several years to complete. According to Boston Consulting Group's ( BCG) latest research findings, they require drawing on three key enablers: ensuring C-Suite alignment, developing the necessary capabilities, and maintaining always-on execution.

Executive leaders that establish these key enablers will scale digital business solutions successfully, and also embed digital transformation approaches and ways of working into their operating models. They will become the established market leaders in their sector to benefit from superior value creation.

Leveraging Cloud Computing Services for Digital Growth

To power their scaling of digital solutions, leaders use public cloud computing services, which serve as a technological foundation for building and expanding other enablers, such as data. Most leaders (64 percent) design solutions to be ‘cloud native’ so that they can host every new digital solution right away.

BCG consultants noted that savvy leaders deploy these solutions in a layered architecture connected with APIs and, often, employ two or more cloud platforms. A multi-cloud approach delivers a number of key benefits, including increased agility, greater flexibility, higher innovation rates, and the ability to deploy modern technology and platform strengths from various providers.

This approach decouples digital delivery from legacy systems, which in turn enables easier testing, deployment, and maintenance. Digital innovation leaders also reduce the costs of digital scaling.

By 2025, BCG believes that up to 60 percent of consumer-facing applications, almost 40 percent of data warehouse and analytics workloads, and more than 30 percent of core business applications will be running on public cloud services that hyperscalers operate.

More than 90 percent of forward-thinking business leaders can connect digital solutions to their tech stacks, which are API ready and use microservices. In contrast, 80 percent of the sector laggards still rely on tightly coupled legacy IT systems with complex interfaces.

Three factors make the cloud transition a digital business growth driver:

  • The cloud permits instant scaling of tech capacity (infrastructure, storage, and processing).
  • Solutions provided by cloud service providers (CSPs) usually include the latest cybersecurity mechanisms and patches.
  • CSPs have the expertise and people — both of which are in short supply — to customize solutions for clients efficiently.

Although the public cloud can function as a supercharger for scaling digital solutions, controlling its escalating cost is a key consideration, as is complying with national government regulations and data governance requirements.

Companies have followed multiple paths to mainstream cloud services adoption. According to the BCG assessment, decisions about which IT infrastructure capabilities to move to the public cloud, when to move them, and which models to use don’t always follow a deliberate transition strategy.

As a result, clarity on what constitutes an efficient and effective multi-cloud approach can be hard to come by and ultimately execute successfully. It is therefore not surprising that only one in three companies effectively controls their public cloud service costs.

But 68 percent of digital business leaders reported that they optimize cloud spending with advanced cost analyses. In doing so, they realize two to three times more cost efficiency and technical cost savings than laggards do.

Compelling Business Case for Scaling Digital Transformation

Digital solutions that scale to support a digital transformation initiative can generate significant commercial value. Moreover, the ability to scale digital solutions to achieve desired business outcomes at speed differentiates the leaders that realize value from their new business model investments.

The urgency of successfully scaling a transformation rises in times of market volatility or economic turbulence. Companies that scale digital solutions drive near-term gains in revenue growth, operational cost reductions, and speed to market execution.

BCG’s latest research into digital business model scaling and strategic initiative enablement found that advanced leaders are much more likely to navigate successfully through a crisis and emerge stronger from the experience.

For example, during the global COVID-19 pandemic, digital leaders gained 5 percentage points or more of market share, and over 5 percent more market capitalization than their peer group. And, 70 percent of digital leaders expect to gain another 5 points or more of market share in the coming three years.

The latest research on digital proficiency and maturity found that scaling individual digital business solutions can generate revenue increases of 9 percent to 25 percent and cost savings of 8 percent to 28 percent when compared with the baseline.

Furthermore, the leading companies that scale several solutions can reach an enterprise-wide revenue increase of almost 17 percent, along with a 17 percent reduction in costs. According to BCG estimates, scaling also creates qualitative benefits — such as better re-imagined customer experiences, a greater ability to integrate digital and data ecosystems, and much stronger business resilience.

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David H. Deans

David H. Deans

Technology, Media, Telecom analyst, consultant, columnist