Manas K. Deb, VP, Cloud CoE, Capgemini; Sergio-Henrique Werner, VP, Cloud CoE, Capgemini

Adoption of cloud computing in any substantial manner can and does transform the way an organization works and performs. Access to IT resources and emerging technologies becomes fast and affordable. For legacy applications that are migrated to cloud, there is an opportunity of lowering technical debt and enhancing application functionalities via modernization. In the context of new applications development, cloud reduces time-to-market durations as well as facilitates innovation experiments quickly. Thus, cloud computing and the transformation associated with its adoption can have a substantial impact on the evolution of an organization.

Types of Cloud Projects:

In the context of the types of cloud projects, one can conceptualize a continuum of varying focus:

• ‘incremental’ cloud projects driven by important but scope-limited goals, for example, migrating a set of applications to cloud in a ‘lift-and-shift’ manner to free up some data center capacity or to consolidate server resources or to better leverage software licenses. In this type of projects, the focus usually is cost efficiency.
• ‘tactical’ projects opportunistically combine certain specific IT or business problems and matching cloud capabilities, for example, ‘cloud-style’ application developments, utilizing more data and analytics, leveraging of special emerging technology services like IoT and AI/ML – these actions add modern capabilities to legacy applications or provide solutions for some immediate problems. In this category of projects, we start to see increasing attention to business value beyond IT cost reduction.
• ‘transformational’ cloud adoption is the one where businesses get the most cloud benefits. This project category combines the transformation agendas of IT, business, and data. In this transformational mode, you implement a ‘digital core’ and create a ‘composable enterprise’ that has instant access to hardware and software infrastructures for any business need; data and analytics driven decision making is well facilitated; business harnesses the full range of cloud capabilities to instill a culture of business innovation across the enterprise.

Today, all industries are facing severe competition. An essential strategy to beat competition is innovation. Typically, innovation pursuits require fast and affordable access to newer capabilities as well as the ability to conduct innovation experiments quickly.  Successful solutions from these experiments then need to be deployed in production fast, and if they continue to show positive results, need to be scaled out fast. With DevSecOps, CI/CD, and large spectrum of managed services provided by the cloud platforms, creation, iterations, and scale-out of advanced technical applications are significantly more feasible and affordable.

Often, IT initiatives mainly target cost efficiencies. Thus, benefits of cloud adoption in providing more direct business benefits, for example, those providing revenue or market share growth, are not automatically addressed via such IT-centric focus. Market leading enterprises recognize this and add special focus on cloud adoption that are also transformational from a business point-of-view.

Let’s briefly visit a few customer cases, where Capgemini either led or substantially contributed to their cloud adoption projects, to see some business benefits of cloud transformation.

Business-Level Productivity Gain:

The first case study is about gaining substantial business-level productivity leveraging cloud transformation via a Smart Factory implementation, deployed on AWS, at Baker Hughes, one of the world’s largest oil-field equipment and services company (https://www.capgemini.com/news/client-stories/major-oil-field-services-company-transforms-factory-processes-with-ai-driven-solution/).

With 300 machines in seven plants, equipment issues often went undetected and typically resulted in slow and expensive fixes, thus adversely affecting manufacturing processes. The Smart Factory solution implemented to improve the situation combined IT and OT with the capabilities from Capgemini’s Intelligent Asset Monitoring and Predictive Asset Maintenance with Edge Compute solutions.

In a relatively short time machines were connected for operations monitoring and improvement, and for predictive maintenance. The project produced impressive results that business cared about: a 12% increase in the overall productivity and 26 thousand hours of downtime reduction, which is equivalent to an extra 3 years of output from a typical existing machine!

A cloud-based solutioning approach allowed simplification of the solution such that it could be created and put into action fast, in a large-scale deployment, with continuity of operation, and consistent visibility of monitored parameters so that right improvement actions could be taken across the board. Of course, the project required setting well-defined business targets, and proper execution of the project with the right solution architecture connecting physical machines to applications in cloud, competent project team, and the use of the right cloud services.

In fact, in the context of Intelligent Industry, with successful cloud-enabled business transformations, we repeatedly observe substantial increases in productivity and quality parameters, and big reductions in defects and downtime. With optimized operation, there are consequential resource savings like less material use and lower energy consumption – helping with the sustainability goals as well! 

Creating Organizational Agility:

Current times are filled with many fast-changing social, political, and economic situations that demand organizations be agile, i.e., adapt to emerging trends at high velocity. Developing this agility for large companies is not trivial, and it is especially hard for traditionally bureaucratic organizations in highly regulated industries, for example, financial services and healthcare. However, cloud transformation can help with increasing organizational agility.

Our second case study comes from Her Majesty’s Revenue and Customs in the UK aka HMRC – the tax and payments division of the UK government, where Capgemini has been engaged in a big way, and for a while, with many kinds of projects including cloud transformation. When COVID pandemic hit, the UK government urged the businesses not to lay off employees but furlough them, i.e., give them leave of absence, and the government would then help with the cost of this furlough. This was the “Corona Virus Job Retention Scheme” (CJRS) initiative.

COVID crisis was rising very quickly, thus, CJRS needed to be launched very fast, had to be accessible from multiple channels, assistance applications had to be analyzed quickly, and money had to be disbursed correctly and rapidly – all of these needed a good front-end application that is well integrated with the necessary back-end application. Instead of the typically longer application development lifecycle, HMRC adopted an agile ‘born-in-the-cloud’ approach, and successfully launched CJRS app in just four weeks! It processed and disbursed billion-and-a-half pounds on the first day alone. Since the initial launch, with this 24/7 CJRS system, 10 million jobs have received support amounting to over 40 billion pounds.

The secret to such a fast creation of a scalable application is that with a few years of cloud transformation, HMRC had built up the necessary organizational agility to embark on a major ‘born-in-the-cloud’ solution and could execute it successfully. HMRC’s project was a big success and garnered many praises including a tweet from Tim Berners-Lee, the inventor of the World Wide Web! Capgemini worked with HMRC in designing and implementing microservices, using DevSecOps and Agile way of working and, of course, using the right cloud services (https://www.capgemini.com/gb-en/news/client-stories/hmrc-rapidly-develops-digital-service-to-support-employers/).

When we generalize digital transformation benefits across industries, we observe that digitally transformed industry leaders can launch new or improved products and services much faster with much less business risks, fix problems post-launch almost immediately, become resilient to adverse forces, and engage their employees in more value-yielding work. Such rewards are undoubtedly attractive, but one must pursue a business-oriented transformational strategy to receive such rewards.

Accelerating Innovation:

In the last two examples, we looked at how cloud can enable business growth and agility. The next example is about cloud helping to create cutting-edge transformation enablers.

There is a lot of buzz these days around 5G as one of the great next-gen innovation enablers. However, 5G technology is complex and 5G talents are in short supply. Can 5G network deployments be simplified and automated using cloud?

This example is about a project in the telecom industry where the need for innovation-led growth could not be any more urgent. Capgemini Engineering teams in Portugal and the US worked jointly to help a North American customer develop a RAN (Radio Access Network) automation solution that can be used by mobile network operators (MNOs) as well as enterprises to roll out 5G networks. This is a cloud-based solution that uses an open architecture, high-level of automation, and does not require the implementer to be a 5G expert! This is an example of an innovator using cloud to help others embark on their innovation-led transformations.

By the way, one of the innovation mantras is ‘fail fast’ – conduct many experiments and be prepared to fail quickly. However, if those experiments are done wrongly, the only thing one will achieve is failure. To be ahead of the competition one must be able to ‘fail fast, succeed faster’ – this requires right experimentations. Cloud ecosystem has a rich collection of emerging technology services, rapid application building frameworks, and provides many deployment and scale-out options. Thus, cloud is perfect for design and evaluation of innovation experiments, and quickly scaling-out the winners of these experiments for faster business benefit realization.

Pursuing Business-Oriented Cloud Transformation:

As we showed in the examples cited here, the real power of cloud is unleashed when cloud technologies are used to achieve substantial business goals. Efficient and high-return business-oriented cloud adoption can only be achieved through corresponding changes in an organization’s way of working; hence, such technology adoptions are transformational. Instead of only focusing on cost efficiencies which are often bottom-up initiatives and usually offer short-term benefits in modest amounts, in business-oriented cloud transformation we can target key aspects of profitable business growth.

Business-oriented cloud transformation begins by identifying the ultimate business goals to be attained. For example, reducing time-to-market for new products or services, increasing the rate of marketable innovations, spinning of digital subsidiaries of large legacy companies. With the business goals set, one ‘works backwards’ to identify all the skills and resources needed to achieve those goals in a ‘cloud-first’ manner, i.e., rejecting the use of cloud only when the cloud-based solutions are truly unsuitable.

Business-oriented cloud transformation needs close collaboration between business and technical units of the organization. Technical teams provide the business-enabling features from their technical work and educate their business counterparts about the capabilities of such features while business domain experts get active in exploring technology for business benefits. An overall higher cloud adoption maturity is mandatory in such collaborations.

So, why bother so much with business-centric cloud transformation? While the total IT spend in an enterprise surely depends on the type of industry the enterprise is in, it is typically a small percentage of the revenue of the company. If for an enterprise, we assume the IT spend to be 5% of the annual revenue, and half of this spend can be included in the Cost of Goods Sold (COGS), then if they achieve a 20% IT cost saving with cloud projects, it will mean only a 0.25% improvement their gross margin. However, if this enterprise has a 50% gross margin, a 5% revenue increase will translate to a 2.5% gross margin improvement. Thus, an order of magnitude better profitability improvement with business-centric cloud transformation!