Dive Brief:
- Some CFOs and their C-suite colleagues botch the move to cloud computing because they hold on to an outdated financing and management mindset that took root during years of managing on-premises technology, McKinsey said.
- “That thinking has proven hard to change for many companies, with economic and financial models grounded in decades of traditional IT practices that are based on ‘owning’ IT instead of ‘consuming’ it,” McKinsey said.
- “Companies are developing business cases, negotiating contracts and making economic calculations that don’t take into account the different financial approaches and models that are specific to the cloud,” McKinsey said.
Dive Insight:
The costs to companies from missteps in cloud transitions may grow with the rapid pace of cloud adoption.
Worldwide spending on public cloud services will surge 20% this year to $495 billion and 21% next year to $600 billion, according to Gartner. Cloud application services is the biggest segment, with total outlays likely to hit a record $110 billion this year and $136 billion in 2023.
McKinsey identified six “persistent and pernicious” mistakes in cloud adoption:
1/ Rushing to “Day One” benefits
Taking a “lift and shift” approach to moving applications to the cloud, companies yield quick gains from reduced hosting, storage and maintenance costs, McKinsey said.
Yet companies that rush the transition and fail to plan for subsequent months retain many of the technical and operational inefficiencies of the migrated applications and forgo the advantages from the cloud’s flexible infrastructure.