Valuation game: Cloud adoption means business profits too

June 07, 2021 3:45 AM

Enterprises make more profits when they move more processes and services to the cloud while knowing exactly how much to spend and where to spend it

Narsimha Rao Mannepalli, executive vice-president, head of cloud & infrastructure solutions and Infosys Validation SolutionsNarsimha Rao Mannepalli, executive vice-president, head of cloud & infrastructure solutions and Infosys Validation Solutions

By Srinath Srinivasan

That cloud native businesses are asset light is a well-known fact. For legacy businesses, cloud is about reducing capex along with increasing speed, presence and scale. While these are efforts to improve the bottom line, how much of a business can be migrated to cloud and whether deep adoption of cloud results in further increase in profits or whether the investments are redundant after a certain level of cloud adoption are questions that vex business owners.

An Infosys survey suggests that there is a direct correlation between deep cloud adoption (of over 60% of systems and processes on cloud) and higher, new profits in enterprises. “Cloud can bring in new profit growth. In the markets we surveyed, we found that cloud can add $414 billion to profits,” says Narsimha Rao Mannepalli, executive vice-president, head of cloud & infrastructure solutions and Infosys Validation Solutions. These markets include financial services, insurance, high tech, manufacturing, healthcare, life sciences, CPG, retail, logistics, telecom and utilities. As per Infosys, high performance businesses which use cloud, applied it to speed up the launch of new solutions, features, expand processing capabilities, foster collaboration, use AI, automate processes and discover new revenue channels.

“You need a certain critical mass of business processes to be on the cloud to exploit it,” says Mannepalli. “After closely observing thousands of businesses, we were able to see that high performance businesses had at least 60% of their businesses on cloud. This is where we found a clear correlation between cloud, top line and bottom line performance.”

In real world terms, the 60% includes a wide range of functions like client side, customer service and delivery side, customer, associate and employee engagement and supply chain management. “A digitally native company, say Uber, has grown on cloud from day one. However, for legacy businesses, migrating to cloud is a long process and takes some time depending on the business size and nature,” says Mannepalli. He also points out that the migration process becomes a challenge only when companies try to replicate legacy processes as it is on cloud. “Cloud has its own ways and processes need to have cloud-specific architectures to be effective,” he adds.

Out of 12 industries and over 2,500 business representatives that Infosys surveyed, over 50% said that by 2022, majority of their IT systems and business functions will be on cloud. But it is not just the processes that are getting migrated but also the data from legacy systems. “Businesses are concerned about the value they can unlock from data. They have started to think about their investments in data warehouses as well,” says Mannepalli.

For instance, in healthcare, this could mean unifying patient data and improve services for patients, accelerating drug discovery and formulation via simulation and drive revenue growth through AI driven personalised care. In financial services and insurance, cloud and AI can power scaling up digitisation, connect to open banking and alternative payments systems, and expand and coordinate threat detection and fraud prevention. In telecom, cloud and AI are used for load balance and demand forecasting, to help scale up 5G offerings and products and develop predictive maintenance capabilities.

“As one can see, this migration can not happen overnight. There are now multiple vendors for various services for a single business, spread across multiple cloud platforms. Insights from cloud computing and complex data from all these services drive business growth actually,” he adds.

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