Importance of Cloud in the New Normal
By: Arpit Kumar
Tags: Digital, Cloud, Data

According to Gartner, “28% of spending within key enterprise IT markets will shift to the cloud by 2022, up from 19% in 2018. Growth in enterprise IT spending on cloud-based offerings will be faster than growth in traditional, non-cloud IT offerings”.

According to IDC “Worldwide spending on public cloud services and infrastructure will more than double over the 2019–2023 forecast period”.

There is clearly an increasing trend towards the movement to Cloud. However, because of the COVID scenario in which people are forced to work remotely, away from the on-premise infrastructure in their offices, the need for Cloud migration has significantly accelerated. Multiple new scenarios are posing new challenges, which many Enterprises would not have prepared for.

1) Stress on customer-facing applications due to steep demands

Industries like online retail, trading etc. are experiencing this. For the enterprises where infrastructure setup is in private premises, they are not able to scale up / down the infrastructure to address peak demands. This is leading to a denial of services to consumers until the peaks are coming down. In a sector like Wealth Management where consumers are at the risk of losing wealth in very short time frames, an inability to access the applications at right moments can have a compounding effect on wealth erosion. Enterprises whose platforms are on Cloud are better prepared as they can immediately scale up their infrastructure to meet the peaks in demands.

2) Stress on employee-facing applications due to simultaneous remote accesses

Across industries, enterprise applications which are in private premises are being accessed by all the employees remotely and concurrently. This is putting a lot of stress on remote networking technologies and causing bandwidth issues. Enterprises whose workloads are on Cloud is better equipped to handle this situation since the access to those applications is made via public networks.

3) A physical restart may not be an option

Whenever the on-premise data centres experience any issues, physical rebooting/restarting, troubleshooting and replacements are always possible. In the current situation, that may not be an easy option and puts the availability of applications at risk if something goes wrong in data centres. With applications on Cloud, availability due to infrastructure issues is not a challenge. First, Cloud providers take care of any underlying infrastructure. Second, even if one of their data centres goes down, switch to other availability zones is a matter of a few button clicks.

4) New normal demands product innovations

Think of the banking sector, where banks will have to drive product innovations (e.g. for addressing payment holidays). Insurance companies will have to launch new products for dealing with the impact on different aspects of businesses (e.g. Workers Compensation, Cybersecurity, supply chain disruptions). All these can be done in an on-premise setup also, however, the cycle times will be longer compared to Cloud setup (e.g., if the innovation requires additional infrastructure then provisioning will take time, or if multiple people need to collaborate then VPN bottleneck will pose challenges).

Legacy applications (because of their architecture) also have large time and effort requirements to make even minor changes, compared to the Cloud-native applications. So, many organizations with legacy setup may not be ready to quickly address the product innovation requirements.

5) Need for data and analytics is high

Due to high volatility in the ecosystem (e.g. supply chain disruption, unpredictable customer demands), there is an increased need to make data-led decisions (and using as much data as possible). Financial stress testing across scenarios has become more important than in the last few years. Being on Cloud enables this in two ways: 1) Leverage available solutions across many of the areas (e.g. data warehouses, data science platforms, real-time business-friendly analytics) to deploy faster compared to doing a greenfield implementation on-premises. 2) Leverage the elasticity of Cloud infrastructure to process Big data (and not be limited by the capacity of on-premise infrastructure).

6) Cost reduction becomes critical

Given the risk of slowdown happening in the economy, companies across sectors will experience pressure on revenues. To maintain a healthy margin (and address survival issues in some cases), cost reduction initiatives will need to pick up the pace. Though cost reduction can be achieved through multiple levers, Cloud migration is an important lever to reduce IT TCO. Implementation of IaaS can save up to 55% of IT infrastructure costs (Source: Gartner blog).

The new normal demands multiple changes in the way Enterprises currently operate; Cloud adoption is definitely one of those changes which they can no longer ignore.