Over $100 Billion Wasted On Cloud Migration Overruns

More businesses than ever are migrating their operations to the cloud, but with many lacking a consistent strategy and skilled in-house staff, there have been plenty of cloud migration overruns that could total over $100 billion in wasted spend. 

That’s according to a McKinsey & Company report on the missteps taken by businesses during the cloud migration phase. It projects that in three years, $100 billion could be lost in wasted spend and $500 billion in shareholder value could be wiped. 

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In a survey of approximately 450 CIOs and IT decision makers, it found that 75 percent of businesses were over budget on their cloud migration. 28 percent of respondents were 20 percent over budget, and only seven percent of businesses said they were under budget. 

In terms of planned timeline, 38 percent said they were behind schedule, with 13 percent behind schedule by more than three quarters. 63 percent were ahead of schedule however, so while the project may come over budget, a lot of the organizations are managing to reach a stage of completion on time. 

That may be partly because some organizations are reducing the overall scope of the migration, by retiring certain tools or keeping them on-premises. 

A majority of businesses increased their cloud budget and projects for moving applications to the cloud because of the pandemic, which forced businesses of all shapes and sizes to start looking seriously at cloud migration as a way to survive. 

McKinsey found that a select few organizations that were ahead of schedule approached the migration in a similar way. These ‘outperformers’ were 28 percent more likely than normal respondents to commit to upfront investments on early termination fees and 24 percent more likely to develop comprehensive security and compliance procedures. 

These organizations were 57 percent more likely to hire staff with advanced skill sets in DevOps and FinOps. They were also 32 percent more likely to have active CEO sponsors for the project, which gives the project leaders more assurance that the project will not be canceled or changed halfway through. 

“At one consumer-packaged-goods company, the CEO pressed the case for cloud adoption, setting the top-down strategy and communicating with the entire company in written updates and town halls,” said McKinsey & Company engagement manager, Tara Balakrishnan. “Employees knew that the cloud strategy had the CEO’s direct support. As the company’s head of IT told us, ‘It’s not enough to have the CIO on board; you need CEO and board-level support to provide air cover. It’s important to know that they have your back when you engage with others in the business.’”

It’s clear that if a business wants to migrate its business into the cloud, it needs to formulate a sound strategy that has the backing of all the key stakeholders. It also needs to invest resources into each aspect of the migration, including the hiring of staff to manage the migration and understand the risks and potential value.