From two years of unsustainable spending, high levels of consumption and a struggle with high inflation, it’s no secret that Australia could be heading into a recession. While the govt is optimistic this is far from reality, some analysts are predicting Australia is facing a 50% chance of a recession in the next 12 months. Whether it’s if or when a recession is going to happen, business leaders know that economic downturn comes with inevitable cost cutting.
During cost-cutting times, when business continuity is a key focus, investment in cloud tech can seem like a line item to push to the backburner. But we know from experience that doing so slows business, makes it harder for employees to carry out their jobs, and ultimately hurts the bottom line. Not only is neglecting cloud during economic uncertainty a risky business, investing in it during these times may be a key strategy for avoiding calamity.
Cloud can reduce costs and drive innovation
If a recession is coming, companies need the right, and the best technology to weather that storm. In the long run, cloud computing when implemented optimally has proven to be a cost reducer and a driver of innovation that will help companies compete in coming years.
Global industry analyst Forrester recently recommended that companies cut spending in many business areas while increasing spending in one: strategic technology investments. Specifically, Forrester recommended companies today increase spending on technologies that improve the customer experience and help reduce costs. Cloud ticks all those boxes.
Cloud enables the development of new products and services as business leaders draw insights from real-time data. Decision-making becomes easier. Organisations can quickly pursue new opportunities ahead of the competition. Cloud also allows firms to easily scale: according to Forrester, the ability to quickly scale is the top driver of moving to the cloud.
We’ve already learned how helpful cloud can be in a crisis. As the pandemic upended operations, firms that had already adopted cloud technologies found they were able to scale, pivot and innovate much faster than those that hadn’t. Cloud facilitated remote work.
Companies that embraced the tech were able to operate seamlessly as they responded to evolving customer demands and business needs. What’s more, cloud reduced IT costs and operational expenses, supporting business growth. Public cloud spending in Australia is predicted to grow by 83% from $12.1bn in 2022 to $22.4bn in 2026, according to IDC.
IDC noted that the key drivers of cloud adoption in Australia were improving operational processes, driving business efficiency, and responding to new ways of working, all of which enable organisations to free up IT resources to achieve technology and business innovation to drive revenue growth. Firms that fail to tap into this opportunity risk being left behind.
What’s holding back Australia’s cloud innovation?
Cloud is helping millions of businesses find success, but the truth is we’ve only scratched the surface when it comes to the benefits. While 65% of firms have increased their cloud budget as a result of the pandemic, KPMG found that 67% have yet to see a significant return.
The most resounding issues across the industry today that are preventing a better return on cloud spending include legacy systems and applications, a need for more skilled talent, and higher than anticipated migration and operational expenses. This is in addition to security and compliance requirements, as well as misalignment on expected business outcomes. Managed services can help solve these problems and help unleash the true potential of cloud tech.
With cloud managed services, firms can engage specialist capabilities for management of the cloud and realise its full benefits by bridging what can be significant knowledge and staffing gaps, and unlocking productivity benefits through modern operations delivery capabilities – e.g DevSecOps, FinOps, AIOps. At the same time, managed services address other critical issues like security, data management, edge computing needs and reducing fraud risks.
The global cloud managed services market is robust and it’s growing, a sign that more and more organisations understand its unparalleled benefits and value. The market is estimated to reach $88 billion by 2027, according to IMARC Group. As the global economy inches closer to a recession, it’s time to double down on technology investments. Companies that want to get it right the first time won’t forget cloud. It’s the way of the future.
Michael Vincetic is the ANZ Cloud Practice Leader at Kyndryl.
