China far ahead, Japan far behind in mature cloud adoption

by Abhinav Mohapatra

According to a Cisco-sponsored study, China, with 55 percent of organizations with repeatable, managed or optimized cloud strategies leads in mature cloud adoption strategy.

Mature refers to companies that are in the repeatable, managed, and optimized’ stage of cloud adoption. The study titled, “Don’t Get Left Behind: The Business Benefits of Achieving Greater Cloud Adoption” and developed by International Data Corporation (IDC) for Cisco, revealed that even though United States (34% of organizations) and Latin America (29% organizations) have emerged as the No 2 and No 3 adopters of repeatable, managed or optimized cloud strategies, they along with other countries have a lot catching to do.

The study is based on primary market research conducted with executives responsible for IT decisions in 3,400 organizations across 17 countries that are successfully implementing private, public and hybrid clouds in their IT environments. However, the organizations interviewed in China were, on average, larger than companies surveyed in other countries.

While UK (27%) is not too far behind Latin America, what surprises more is cloud adoption in Japan, which is a measly nine percent. Its neighbour, Korea, fares much better at 18 percent. Meanwhile, in France 22 percent of the organizations have a mature cloud adoption; followed by Germany at 21 percent, Australia and Canada (both have 19 percent respectively), and The Netherlands at 17 percent.

The study indicates cloud is moving into a second wave of adoption, with companies no longer focusing just on efficiency and reduced costs, but rather looking to cloud as a platform to fuel innovation, growth and disruption.

The study finds that 53 percent of companies expect cloud to drive increased revenue over the next two years. Unfortunately, this will be challenging for many companies as only one percent of organizations have optimized cloud strategies in place while 32 percent have no cloud strategy at all.

Manufacturing leads

By industry, manufacturing has the largest percentage of companies in one of the top three adoption categories at 33 percent, followed by IT (30 percent), finance (29 percent), and healthcare (28 percent). The lowest adoption levels by industry were found to be government/education and professional services (at 22 percent each) and retail/wholesale (at 20 percent). By industry, professional services, technology, and transportation, communications, and utilities expected the greatest impact on key performance indicators (KPIs) across the board.

IDC identifies five levels of cloud maturity in the study: ad hoc, opportunistic, repeatable, managed and optimized. The study found that organizations elevating cloud maturity from the ad hoc, the lowest level to optimized, the highest, results dramatic business benefits, including:

  • revenue growth of 10.4 percent
  • reduction of IT costs by 77 percent
  • shrinking time to provision IT services and applications by 99 percent
  • boosting IT department’s ability to meet SLAs by 72 percent
  • doubling IT department’s ability to invest in new projects to drive innovation

The study shows that 44 percent of organizations are either currently using or have plans to implement private cloud and 64 percent of cloud adopters are considering hybrid cloud. Commenting on the trend, Nick Earle, Senior Vice President, Global Cloud and Managed Services Sales, Cisco, said, “As we talk with customers interested in moving to the second wave of cloud, they are far more focused on private and hybrid cloud — primarily because they realize that private and hybrid offer security, performance, price, control and data protection.”

Economic benefits for advanced cloud organizations

The study also quantified the economic benefits the most mature cloud organizations are realizing. Organizations studied are gaining an average of $1.6 million in additional revenue per application deployed on private or public cloud. They are also achieving $1.2 million in cost reduction per cloud-based application.

The revenue increases were largely the result of sales of new products and services, gaining new customers, or selling into new markets. Organizations were able to attribute revenue gains to increased innovation resulting from the shifting of IT resources from traditional maintenance activities to new, more strategic, more innovative initiatives.

Operational cost reductions associated with cloud stem from the advantages to the business of running on a more scalable, reliable, and higher-performing environment. These include improved agility, increased employee productivity, risk mitigation, infrastructure cost savings and open source benefits.

Private cloud’s correlation with better expected business outcome

Private cloud, according to the study, allows better resource use, greater scale, and faster time to respond to requests, but with the added control and security of dedicated resources for a single company.

Adopting hybrid cloud can be more complex than adopting other forms of cloud. It requires workload portability, security, and policy enablement. These requirements were evident in the study, which showed that up to 70 percent of respondents expect to migrate data between public and private clouds (or among multiple cloud providers) and have high security and policy requirements.