The real benefit of the cloud? Innovation, says McKinsey
More than $1 trillion could be unlocked among the Fortune 500 if the role of cloud is expanded beyond just a cost-cutting tool, to a driver of innovation. This is according to experts at McKinsey & Company.
Cloud computing has been around for years, as an efficient, secure, and cost-effective infrastructure to support business activity and enable digital transformation. In a new report, McKinsey & Company suggests it’s time for a new avatar – a more central one that adds value to product and service offerings.
Exemplifying the potential of cloud is Moderna – the global pharmaceutical company that was among the first to launch an effective Covid-19 vaccine. According to the researchers, Moderna CEO Stéphane Bancel has been using cloud as a means to “accelerate therapeutic discovery and development” for years.
“When the Covid-19 pandemic hit, this strategy proved prescient,” said Will Forrest, senior partner at McKinsey’s Chicago office. “The company was well positioned to quickly design research experiments and to harness its automated laboratory and manufacturing processes and enhanced drug-discovery pipeline.”
Most large organizations globally could embody this level and speed of innovation – depending on how cloud is positioned in their business. For a clearer picture, the researchers tried to quantify cloud’s varying financial impact on operations using the Fortune 500 as a sample.
The conventional use of cloud – cost-optimization, security, etc. – delivers a healthy benefit of $430 billion to the 500 largest corporations in the US by revenue. This includes it’s value as a foundation for digital transformation within a business’ core functions – a threshold that has likely been long surpassed by most large corporations.
Then there is the advanced role. Cloud can be used to drive business growth by delving deeper into data analytics, internet of things, and automation. Easily configured infrastructure can speed up product development through a more agile operating model with better capacity.
And cloud enables “hyper-scalability,” with endless flexible storage capacity across customer segments and geographies – all available in an instant. According to McKinsey, these benefits combined are worth a staggering $770 billion in earnings for the Fortune 500 – taking the overall value of cloud beyond the $1 trillion mark.
“This $1 trillion is less a prediction than an estimate of what should be possible, provided companies aggressively pursue the cloud opportunity—and a call to action, because early adopters will capture a disproportionate share of the total value,” noted James Kaplan, partner at McKinsey’s New York office.
If ever there was a time and place to explore a wider range of growth and innovation drivers, it’s in the increasingly competitive post-pandemic market. Key sectors such as high tech, oil & gas, retail, healthcare, financial services, automotive, and telecoms – among several others – have all felt the impact of Covid-19 in their own right.
Per the report, each of these industries could draw significant value from cloud-powered innovation – provided they set ambitious goals, develop a business case, adopt agile ways of working, and build a standardized and automated cloud platform. “Companies can capture their share of the trillion-dollar prize only when they develop a clear view of the value at stake and the business cases they need to prioritize,” concluded Forrest.
