There is a cloud hovering over the Asia Pacific region. Spending on public cloud and related services is growing at a compounded annual rate of about 25% across the region, outpacing growth in the mature markets of Western Europe and the United States. Cloud computing budgets today account for approximately 5% of average IT budgets, a figure that is likely to double by 2023.
The cloud has long been championed as an avenue for efficiency savings for business. But in the era of Covid-19, virtual ways of working are as much about operational continuity as they are about operational expenditure.
In this period of radical transformation, organisations are now rushing to embrace the opportunity with enthusiasm. Transitions that have taken place over the past few weeks were previously expected to have taken up to a year based on pre-Covid timelines. That represents a remarkable catalyst for cloud adoption in the Asia Pacific region.
But while businesses across the region display enthusiasm for cloud services, they remain restricted by fundamental gaps in adoption. These are the findings of a report by the Boston Consulting Group (BCG) and Amazon Web Services (AWS), "Businesses in the Asia-Pacific Can Find Resilience and Growth in the Cloud", based on insights gathered across eight markets: Australia, India, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.
More than 70% of executives surveyed for the report indicated a belief that the cloud would help them innovate faster while reducing implementation and operational risks. Those beliefs are well founded. BCG experience suggests that large enterprises can deliver new services 30% to 60% faster through cloud migration. The value of enabling rapid growth will be unmistakable in a post-Covid-19 recovery.
While innovation and risk reduction represent the two biggest drivers, 52% of respondents mentioned revenue increases, and 57% cost savings, as primary adoption drivers. These levers will be critical during a period of stunted economic activity following Covid-19. Cloud adoption provides an avenue of growth which can help offset those economic challenges.
NEW ADOPTION REALITY
Covid-19 is set to radically transform how businesses view cloud opportunity, as remote ways of working become embedded in accepted operational procedures. Attitudes toward the cloud today are driven by innovation and risk reduction, both of which have come into focus during the current crisis. Seventy-one percent of respondents across the region cited these as primary drivers for adoption.
The sweeping global transition to remote work has resulted in virtual collaboration tools being thrust into the spotlight of economic activity. BCG estimated that up to 300 million office workers globally were working from home by mid-March. That number is likely to have increased significantly in recent months.
Yet while cloud adoption offers a powerful opportunity to unlock business value, there remains notable hesitation around the challenges of this transition. Cybersecurity concerns remain a significant barrier, with 45% of respondents noting that they do not host specific data on public cloud infrastructure.
The question of talent also poses challenges, particularly in Asia Pacific's emerging economies. Fifty percent of Thai respondents noted difficulty attracting external talent, and just 25% of Filipino respondents expressed confidence in developing internal cloud talent. That compares poorly to Singapore, with 75% of respondents confident of developing internal talent, and 100% in attracting external talent.
Remarkably, not a single respondent in Philippines or Vietnam expressed confidence in hiring external cloud talent, a problem compounded in Vietnam by a similar response to internal talent resources.
These challenges must be overcome if Asia Pacific is to unlock the true value of adoption. Yet our survey reveals that more than 75% of respondents still believe that weak alignment between business and IT remains a major barrier to scaling the cloud.
As a technology leader at a Singaporean financial services company put it: "While businesses leaders understand the benefits of the cloud, getting buy-in and funding for specific initiatives is difficult."
These barriers will have become evident in recent months, as the enforced transition to remote working highlighted previously unseen integration challenges of legacy IT systems.
STEPPING INTO THE CLOUD
While spending is set to accelerate significantly in coming years, many Asia Pacific companies remain at the early stages of cloud adoption. Capturing the greatest value from this transition will require priority across six key actions.
■ Align ownership and business outcomes between business and technology stakeholders within your organisation. Pilot projects to demonstrate early success are an important step on this journey. A joint business and IT planning team should be established to align strategy, prioritise budgets, identify cloud partners and establish metrics.
■ Determine optimal migration path to cloud adoption for your business. Companies should design their approach based on the value of the underlying workload. The three most common tactics are:
Rehost by "lifting and shifting" applications into the cloud environment. This is the easiest to employ, but also easiest for competitors to match.
Retire and repurchase by replacing legacy systems with superior software-as-a-service alternatives. While more time-consuming than rehosting, it still offers relatively rapid access to powerful enterprise solutions.
Refactor and re-engineer bespoke solutions for your organisation by designing fresh architecture with cloud-native features. While this is the most expensive strategy, it provides potential for differentiation that delivers enhanced competitive advantage.
■ Define a target cloud operating model for your transition. Nascent adopters typically manage cloud within existing infrastructure, while mature adopters shift towards a centre of excellence approach. Centralised offerings can help adapt services to meet specific operational needs. Covid-19 further underpins the argument for centralised cloud capabilities, as the pressure to enhance remote working facilities grows.
■ Create a strategy that combines internal and external talent. The most successful cloud transformations embrace a well-rounded talent strategy, covering a wide range of operational skillsets. Consider retraining internal resources for adjacent skills opportunities. Such an approach is critical to filling gaps in a competitive talent market.
■ Rethink cybersecurity for the cloud to ensure fit-for-purpose safeguards. Security threats have increased substantially during Covid-19, and organisations must recognise and respond. Advanced cybersecurity solutions are available which can further help boost security architecture.
■ Future-proof your technology architecture by adopting a cloud-first and cloud-native strategy. Cloud platforms allow organisations to rapidly flex and build new capabilities, a critical consideration to adapt to the new reality following Covid-19. Adopting cloud-based strategy alongside edge computing capabilities can further enhance proximity and provision to meet end-consumer needs.
Cost savings may have driven early cloud adoption, but organisations increasingly see the cloud as a way to propel growth while enhancing operational resilience. As companies in Asia Pacific adjust to the new reality following Covid-19, cloud adoption represents a transformational multi-billion-dollar opportunity for businesses.
Luc Grimond is managing director and partner, Boston Consulting Group (BCG). Alain Schneuwly is the managing director of BCG Platinion, a BCG affiliate focused on IT implementation and risk management