September 26, 2016

Guest blog: Cloud Services – from industry hype to an essential part of IT delivery

Freddie Rinderud

Analyst and strategic advisor, Radar

Cloud Services usage has grown by 20 - 25 % over the last few years and three out of four of all Nordic organizations currently use cloud services in some shape or form. The strong growth has been pushed by the industry hype surrounding cloud services. The hype is gradually being replaced by a more mature approach, where cloud services become a strategic and essential part of a hybrid IT portfolio.

Radar has during the last two years carried out a study commissioned by Tieto called the Cloud Maturity Index. The study aims to establish the operational and strategic maturity in cloud services in Nordic organizations, as well as identify visible effects of different levels of cloud maturity.

In the latest study, “Cloud Maturity Index 2016”, evidence indicates a changing pattern in IT purchasing. Previously, cloud services have been viewed as a simple, cheap and quick solution for aggregated IT demand. The strategic value of using cloud services as an integrated part in a mixed service portfolio has not been appreciated, and very few organizations developed a strategy to establish why and where cloud services should be integrated in the IT portfolio. The end result often showed quick and tangible benefits, but such an approach has not allowed the customers to realize all the potential and business value locked up in the cloud services delivery form.

As cloud services gradually become a common and integral part of IT portfolios and the market matures, the hype recedes and is being replaced by a more balanced approach. A growing number of organizations have realized that cloud is just another form of IT delivery shaped in a different business model i.e., a different way of consuming the typical services contained in the delivery architecture. It is not a fundamentally different solution with some kind of intrinsic advantage or disadvantage.

As the hype is receding, cloud services now enter into normality, and services are qualified, sourced, and assessed by the same principles as the rest of the IT portfolio. As maturity grows, new strategic advantages emerge, such as shorter time-to-deployment, increased innovation capability, and lower business risk.

Business enjoying high cloud maturity use cloud services to a larger extent than their less mature peers, and they also use cloud services in a more effective way in terms of strategic results and integration in the IT portfolio. The study shows that cloud mature organizations realize significantly higher positive effects by using cloud services.

Full benefits waiting to be realized

Cloud services will continue to see high growth (> 20 % annually) and capture a larger share of the IT portfolio over the next couple of years. However, more than half of Nordic organizations are still missing a comprehensive cloud strategy and have yet to realize the full benefits of cloud services when they are applied correctly. These organizations face an urgent challenge to approach cloud services from a strategic perspective and integrate them in a true hybrid IT portfolio. Otherwise, they run risk of falling far behind the cloud champions and may lose competitiveness or deliver poor returns on the tax payer capital.

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Download the report Cloud Maturity Index 2016.

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