The landscape of enterprise technology continues to evolve rapidly, with cloud transformation as a primary investment. Yet, most organizations have not yet experienced tangible business value from these efforts, according to new research by HFS in collaboration with IBM Consulting.

The research report sheds light on the challenges and strategies for cloud transformation. In a survey of 510 senior executives across Global 2000 enterprises, findings show that despite cloud transformation ranking among the top three critical investments for 60 percent of enterprises, only 1 in 4 can demonstrate a hard return on investment from their initiatives.

“For too long, cloud transformation has been confined to the realms of technology, but it’s time to recognize it for what it truly is—a pivotal investment in the future of businesses,” said HFS CEO and Chief Analyst, Phil Fersht. “Cloud investments must transcend the traditional IT narrative and become a central discussion in the broader context of business transformation.”

Cloud Transformation Goes Beyond Tech Infrastructure

A significant obstacle in successful cloud transformation is the notion that it is purely technological. In enterprises that left cloud transformation to IT, it was left out of the business discourse entirely.

“Our findings underscore the need for a fundamental shift in perception, where cloud is not just a technological shift, but a pivotal business discussion,” Fersht said. “Cloud transformation that moves enterprises forward demands a seamless alignment between technology and business.”

Key findings from the recent study Tangible Business Value from Cloud Transformation Remains Elusive paint a vivid picture of the challenges and opportunities in cloud transformation:

• Cloud transformation is increasingly funded by non-IT stakeholders, emphasizing its place as a broader enterprise transformation rather than solely an IT endeavor. Only 32 percent of cloud initiatives are funded by IT stakeholders, challenging the perception of cloud transformation solely as an IT-centric journey.

• The majority of cloud transformations are stalled in intermediate stages, with concerns around cost, lock-in, and meeting budget and timeline constraints. Less than a third meet budget and timeline expectations, pointing to a significant disconnect between cloud discussions and clear business objectives. Nearly 95 percent expressed some regrets over their hyperscaler contract.

• Only 25 percent of enterprises can showcase a solid ROI on business benefits from cloud transformation, relying on soft or deferred ROI to justify their cases. A lack of collaboration between business and IT remains a substantial barrier, with only 17 percent having a well-articulated future state and less than a third defining customer journeys and value streams.

The Secrets of “Business Cloud Masters”

The report also highlights the emergence of “business cloud masters,” constituting around 5 percent of enterprises, who have successfully harnessed cloud for significant ROI in business growth and new models. The report analyses the differences between the masters and their counterparts, unveiling the secrets to mastering cloud for business.

“These findings reinforce what we continue to see within enterprises―they are recognizing the need for adopting a hybrid cloud approach, but if not architected well, maximizing the return on investment is a challenge,” stated Varun Bijlani, Global Managing Partner, Hybrid Cloud Services, IBM Consulting. “To achieve tangible business outcomes through cloud initiatives, businesses need to make intentional choices when it comes to architecture, process, and talent across the enterprise. Those that do will become business cloud masters and will derive tangible value from their cloud transformation.”

At the core, the masters understand that cloud transformation is part of the broader enterprise transformation. That philosophy opens the door for business and IT collaboration. Other attributes they tend to share is an identified future state, having mastered architectural principles and a willingness to adopt the newest technology such as AI.

About HFS Research

HFS is a leading global research and analysis firm trusted at the highest levels of executive leadership. Our mission is to help our clients tackle challenges, make bold moves, and bring big ideas to life by arming them with accurate, visionary, and thought-provoking insight into issues that impact their business.

HFS analysts and strategists have deep, real-world experience in the subjects they cover. They’re respected for their independent, no-nonsense perspectives based on thorough research, demand-side data, and personal engagements with industry leaders.

To learn more about HFS’ extensive suite of reports and services, please visit www.hfsresearch.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20231212422494/en/