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An IDC InfoBrief, sponsored by SAP | June 2015

The Cloud-Centric OrganizationHow organizations realize business benefits

with a mature approach to Cloud

Realizing Business Benefits with a Cloud-Centric Organization

pg 2

An IDC InfoBrief, sponsored by SAP

This report uses data from IDC’s CloudView Survey, and IDC’s Business Value Practice.

» CloudView 2014 surveyed for cloud adoption and maturity among 19,080 worldwide IT and LOB respondents and attitudes towards cloud among 3,463 qualified respondents, in December 2014.

» IDC’s Business Value Practice data is derived from interviews with 370 user organizations in 2013 and 2014.

Key questions addressed in this InfoBrief » What key IT decisions and challenges are companies facing today? » Why is maturity important? What are the benefits of a mature cloud strategy? » What is the roadmap to achieve benefits of a mature cloud strategy? » What are organizations doing today to advance from one stage to the next? » Where are these companies struggling, where do they need help? » Where do orgs get help for their cloud strategies? » What does success look like for companies which have an “optimized” cloud strategy?

Study Overview


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Businesses need a game changer. Organizations are challenged to keep up with the pace of development and innovation required for businesses to earn money and be successful. A significant gap has opened where the IT budget is flat, and mobile, social, big data, and the need for new sources of sustainable revenue, are forcing a change.

Maturity in cloud produces significant benefits – in allowing organizations to focus on strategy versus day-to-day operations, in faster time to provision new services, in reduced IT costs, and perhaps most importantly – in the ability to make more revenue.

Organizations that are mature in their approach to a balanced use of cloud – the best mix of external sourcing and internal transformation – also have business units (e.g., marketing, sales) with more direct control over sourcing the IT solutions that best fit their business needs.

Setting the Stage


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The Cloud is RisingNearly 80% of organizations interested in cloud computing, with almost 40% already having implemented.

Interested in cloud computing

79% Currently using the cloud

Using the Cloud for more than 1 or 2 small applications/workloads

Private Cloud, but no interest in Public Cloud

Using the Cloud, but only for 1 or 2 small applications/workloads

Firm plans to implement within 12 months

Evaluating for a specific service, but no firm plans to implement

Generally learning about the cloud model

Don’t know, or have no interest in cloud computing at this time

38% 18%

19%

2%

14%

17%

8%21%No interest in

cloud computing

21% Not currently using the cloud

62%


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Businesses Need a Game Changer

Business demand for IT services

Opportunity for transformation

IT budget

IT service supply

Cost structure

Search for new revenue

Big data

Social Mobility Sustainable innovation

Business demand drivers »

Unsustainable gap

Business looks outside of IT structure for answers

Private cloud

Public cloud

Demand for shorter cycle times

New normal

Complexity slows productivity

RECESSION

Business demand

for IT services

2005 – 2010 2008 – 2011 2012 – 2016

IT budget

IT service supply

IT has always struggled to keep pace with the new initiatives business leaders want and need, and data analytics, social solutions, and the search for sustainable innovation have all pushed hard on IT organizations to build even faster.

Cloud – both public cloud applications and IT developer and operations services, as well as private cloud methodologies – are growing to fill the IT service supply gap.

Capabilities of the IT organization are once again expanding, driving greater business value.


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Maturing Cloud-Centric Organizations See Real Business Benefits

LearnFocused primarily on pilot projects driven by needs of individual decision makers and teams. LOB requirements met month to month.

BUSINESS OUTCOME

Develop a high-level knowledge of the business value of cloud computing for immediate, tactical needs

ChangeScale up access to standardized IT resources via cloud, at lower costs or increasing speed. Focusing on app virtualization.

BUSINESS OUTCOME

Promoting buy-in to cloud resources and need for a company-wide approach, experimenting with short-term improvements, in access to IT resources via cloud. Gathering input to eliminate redundancies.

RefineInstrument employee-facing IT processes. Enable agile access to IT resources through aggressive standardization & measurement. Create pervasive automation.

BUSINESS OUTCOME

Understand cost and business value of technology options (across spectrum of cloud and non-cloud); instantiate notion of internal self-service mechanisms. Formalize IT/business coordination structure for external sourcing.

MainstreamIncorporate structure and quantitative performance management and measurement. Publish rate cards, self-service sourcing/chargeback. IT as a service center.

BUSINESS OUTCOME

Create business unit opportunities by using internal and external cloud assets, associating risks/costs with rewards. Expanding a consistent, enterprise-wide best practices approach to cloud, speeding iterative cycles to increase value to the business unit.

AttackAchieve level of excellence including feedback loops for continuous improvement. Internal or provider-based sourcing structure driven by clear value to the business.

BUSINESS OUTCOME

Enable managed risk-taking to deliver innovative IT-enabled products and services sourced from best of breed internal or external providers. Participate in standards development.

Drive business innovation through seamless access to enabling IT capability, based on value to business, and transparent cost measures. LoB and IT are harmonized, and use cloud to drive innovation.

Ad Hoc Opportunistic Repeatable Managed Optimized





We’re building…

38%

We’ve transformed…

16%We’re

moving…

46%

Source: IDC Cloud MaturityScape - Cloud Usage by Organizational Size: Benchmarking IT Buyers, #249227, June, 2014

IDC identifies 5 categories of cloud maturity, each with a set of IT tasks and milestones supporting LOB, and each with significant business outcomes.


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Source: 370 responses from 15 IDC Business Value Research Studies, December 2014

Cloud Maturity Improves Key Business Outcomes

Starting at stage #1 (Ad Hoc), operations, and time to provision improved on average nearly 80% for every “stage change”.

Those organizations which move from stage 1 to stage 5 are > 10x (1,084%) better than those at stage 1 in allocating IT staff resources to strategic tasks vs. “keeping the lights on” tasks.

Making a step change higher requires progressively more planning, expertise and investment.

800%

400%

200%

100%

Strategic vs. operations

Cumulative improvement %

Time to provision

Reduction in IT costs

% of SLA’s met

Increased revenue

Ad Hoc Opportunistic Repeatable Managed OptimizedAd Hoc Opportunistic Repeatable Managed OptimizedAd Hoc Opportunistic Repeatable Managed OptimizedAd Hoc Opportunistic Repeatable Managed OptimizedAd Hoc Opportunistic Repeatable Managed Optimized


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Cloud Maturity Improves Key Business OutcomesThe greater the maturity, the more significant the benefits

Source: 370 responses from 15 IDC Business Value Research Studies, December 2014

Cumulative KPI Benefit of Moving Up Levels of Cloud Adoption

Revenue growth

IT cost reduction

Strategic allocation of IT budget

Time to provision

Meeting SLAs

4 to 510.4% 77%

200% 99% 72% 1 to 2

0.1% 13% 16% 27% 43%

2 to 31.4% 29% 56% 47% 63%

3 to 44.0% 48%

100% 76% 69%


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How Are Mature Organizations Benefiting from Cloud?Cloud users are realizing benefits in ways that impact the line of business directly via agility, simplicity, collaboration and innovation

The three most important expected benefits of cloud among optimized organizations

Simplify and standardize IT infrastructure and

applications platforms

89% of IT users (and 83% of LOB users, average of 85% among all respondents) stated that cloud should enable them to give their business units more direct control over sourcing (and managing, configuring) their own IT solutions.

86% of IT users (and 80% of LOB users, average of 83% among all respondents) stated that cloud should enable IT orgs to improve their internal service delivery levels, and business agility.

Give business units (eg, sales, marketing, corporate communications, customer

support) more direct control over sourcing their

own IT solutions

Improve our internal service delivery levels and business agility

81% 84% 83%

Simplify ITGive BUs More Direct Control

Improve Internal

Processes

Cloud-Centric Businesses Think Differently

Benefits » 80% of deals that began by monitoring and directing social conversations closed.

» $8 million in revenue was driven from 14,000 leads found on social media.

» Set a new record – closed a sale that was initiated in response to a customer tweet in 2 minutes.

Enabling Business Benefits with a Cloud-Centric Organization

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Deployed SAP Cloud for Social Engagement, SAP Cloud for Service, SAP HANA, and analytics.

SAP Customer StoryA global flooring company, with operations in North America, Europe, Asia, and Australia, needed to simplify its business processes. SAP Cloud for Social has enabled the company to easily monitor and engage with their customers to drive sales.


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Source: IDC CloudView Survey, December, 2014, n=3463 worldwide respondents

Business Groups Expected to Benefit Most from Cloud MaturityWhich groups do you expect to benefit most significantly from your organization’s cloud strategy during the next three years?

n All respondents n LOB respondents n LOB respondents in specific field n IT respondents

60%

50%

40%

30%

20%

10%

0%Supply chain and logistics

Distribution channel

management

Financial/ accounting

HR Legal/ corporate

affairs

Engineering R&D

Sales Marketing IT operatiions Customer support

Application development

Senior executive

team

Program management

Operations

Most survey respondents evaluated the benefits of cloud apps according to their specific needs, but the IT organization has the only view of the entire company. It’s telling that in areas like supply chain, and engineering, among traditional lines of business, IT respondents felt that “maturity” in cloud would benefit IT further; these are areas which have far fewer SaaS applications than areas like Sales Automation and Human Capital Management, and thus have much more IT involvement.


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Many of the most important cloud-related skills that “optimized” organizations do better than less-mature organizations, relate to having a consistent approach to IT sourcing and management across the organization, and focusing on enabling the line of business.

How Are Organizations Achieving a Mature Strategy?

Which of the following tasks related to cloud has your organization already implemented?

40% 39% 41%36%

51% 49% 52%48%

Ability to use cloud to drive business

innovation, agility and competitive advantage

Processes to share and reuse templates and best practices across internal cloud projects

n Optimized respondents n All respondents

Consistent processes to identify which

applications can best benefit from cloud

Collaborative business and IT governance to

define cloud management policies and SLAs


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Involving line of business leaders in developing KPIs and making decisions is step #1 in a consistent enterprise-wide approach to IT. Using cloud as the foundation for business innovation is a cornerstone for IT strategies of mature IT organizations, and it’s critical that the LOB is deeply involved in both implementation and operations.

» When the IT organization does less cloud purchasing and budgeting, and LOB does more, the percentage of optimization goes up.

What Makes a Cloud Strategy “Mature”?

Percent optimized Percent optimized

Today In 2 Years

0.40%

0.14%

0.37%

Cloud purchasing decisions and

budgeting come from IT

Cloud purchasing decisions and

budgeting come from IT

0.33%

Enabling Business Benefits with a Cloud-Centric Organization

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A large vertically integrated sugar refiner had a very complex sales process involving several leading brands. SAP has helped the company be more efficient by eliminating work and providing real-time information sharing that enables the company to engage with its customers and solve issues much more rapidly. Deployed SAP Cloud for Sales and SAP HANA Enterprise Cloud.

SAP Customer Story

Benefits Simplification allows the sugar refiner to get to market faster, with better processes that drive consistency across the organization and improve its overall customer experience.


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The difference of where organizations rated themselves on IDC’s maturity scale, versus where IDC’s calculations placed them on the maturity scale, is more than 17%. This represents over 1 full stage of maturity that companies over-estimated how far along they are.

Not as Mature as They Think

When asked to self-rate their progress in maturity, 46.3% of qualified respondents (cloud users) believed to be managed or optimizedIDC’s maturity modeling identified 31.2% as managed or optimized

Managed cloud strategy Optimized cloud strategy

Self reported

Self reported

173

Calculated

Calculated

46

31

Organizations need help to grow along the maturity spectrum and get the most business benefit.


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Nearly 90% of respondents have a “strong desire” for building a hybrid cloud organization in the next 2 years. But given where they are on a path to getting the most critical skills, IDC calculated a 50% skills gap for most organizations to achieve their goals. Specifically:

Customers Have Huge IT Skills and Business Process Gaps

cannot foresee when they will have consistent service-level

monitoring across hybrid clouds

have implemented a unified service catalog

have user self-service provisioning

have IT staff skills to use cloud automation

35%

38%

32%34%

18%have adequate

knowledge of cloud best practices

Getting there will require help and investment.


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Source: IDC CloudView Survey, December, 2014, n=1223 worldwide respondents. Top four answers.

But Customers are Ready to Work with Cloud Vendors

How will your organization get help in developing your cloud strategies?

It is important to carry forward our major incumbent

provider into the cloud

We expect to have a single major

cloud provider

We expect to have 2 or more major cloud providers

It is important that our SaaS provider provide a “complete” workflow

Strongly Agree

Strongly Agree Strongly Agree Strongly Agree

20%8% 6% 12%

Agree

AgreeAgree

Agree

78%

40% 38%

60%

Larger software incumbent vendors, especially those offering complete workflows in the cloud, are important partners for cloud maturity.


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Key TakeawaysOrganizations that are mature in their approach to a balanced use of cloud – the best mix of external sourcing and internal transformation – also have business units (e.g., marketing, sales) with more direct control over sourcing the IT solutions that best fit their business needs.

Many companies are naïve about how mature they really are. IDC research shows they typically believe they are at least 1-2 stages beyond where they actually are. A key reason is significant shortage in required IT skills and business-process change to get to the next level.

Businesses will trust their incumbent providers to take them to cloud solutions, rationalize their portfolios, provide orchestration between line-of-business and IT organizations, and move up the maturity scale. They will also trust companies that can provide a more complete set of end-to-end workflows of mission-critical applications.

Realizing Business Benefits with a Cloud-Centric OrganizationAn IDC InfoBrief, sponsored by SAP

For more information on SAP products and services, visit: www.sap.com/businessinnovation

For more information and for IDC research, visit www.idc.com

http://www.sap.com/businessinnovation

http://www.idc.com

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