Like so many other staples of the internet age, cloud computing has come a long way since its inception more than a quarter century ago. What started as a means of centralizing server capacity has grown into thousands of services from providers large and small.
However, for many organizations, the understanding of the cloud and the costs associated with it is still primitive. PwC’s Cloud Business Survey found that more than half (53%) of companies are yet to see meaningful value from their cloud investments.
As economic uncertainty mounts month by month, procrastinating on cloud-related decisions could prove costly. We’re at a critical juncture for business leaders to change the way they approach the cloud, and the urgency is greater than you might think.
Organizations that prepare today can transform the cloud as a driver for new business models, not just an outsourcing tool. They can minimize service creep, find value in what they paid for, and form partnerships to maximize ROI. In contrast, companies that wait and see could be forced into a more transactional view. They might treat the cloud like an on or off mechanism, clipping it out of stacks they don’t fully understand and neglecting to leverage the remaining capabilities.
The hard part isn’t deciding which organization you want to work in. The hard part is making the right investments to bring that vision to life.
You buy agility, not capacity
Most companies are in some form of digital transformation to varying degrees. They expect technology to be a bigger part of how they do business, and they want digital leverage to happen faster.
From the beginning, cloud platforms have offered some basic tools to help. They replaced physical infrastructure with a virtual environment and solutions that didn’t require physical footprint or manual management. But companies that still see cloud computing as just that, or even most of time that, undersell themselves. Yes, storage and processing capacity are an important part of the cloud. But what you are really buying is agility: the speed at which you can operate, scale and transform your business. What used to take two or three years to set up in a physical environment can be done overnight.
That opens up enormous potential – and a budget crisis. Computer costs will remain and the overall cost of technology will continue to rise, with the main reason being rising energy prices and consumption. They can represent close to 10% of revenue for some companies, with cloud services accounting for a significant portion of that. The bill for cloud services can already exceed $100 million per year for some companies. Executives who see cloud as a transition to a cheaper operating model could be in for a rude awakening. Instead, they should leverage the agility of the cloud and keep costs under control with a new approach that combines discipline and smart investments.
Companies should try to cut costs and Capture returns.
Managing creep and extracting value
It’s easy to set up cloud services on short notice — and it’s difficult to manage infrastructure growth that you can’t see. Organizations need the operational discipline to ask themselves whether they really need specific computing power or storage capacity.
In the age of the data center, shutting down an application meant reallocating server space to another function. Today you would simply purchase more cloud capacity to get this new capability before closing the old one. Even with keen eyes at the top, inefficient use of infrastructure can easily occur.
It’s important to balance the growth of cloud infrastructure with the growth of the larger enterprise and manage both in a similar way. How does it look? Executives need to adopt new mental models, expand digital upskilling for relevant employees, and invest in headcount to take advantage of the services they purchase. Businesses need to innovate faster, deploy low-code/no-code solutions, and leverage the cloud to create better experiences for their employees and customers.
That creates value in cloud services, which becomes even more critical as market conditions tighten. Efficient cloud usage can make all the difference by keeping the very jobs responsible for managing that usage.
Of course, it’s important for companies to manage their cloud services the same way they set up other variable utilities and processes to ensure they shut down what’s not in use, even if it served a prior purpose. Just like you wouldn’t blow up the HVAC at home while on vacation, unused cloud capacity comes with a bill.
Build human networks
The cloud still needs people. Reimagining the cloud, staying disciplined on spending, and deriving value from the services you keep requires a major rethink.
Internally, leaders need to create transparency with partners who are less tech-savvy to explain how deriving value from the cloud means investing in the right talent to leverage their capabilities. In turn, the same partners can bring their business acumen back to cloud management. The cloud offers efficiencies for all parts of an organization, so everyone in the C-suite has a stake in it—and should align with strategy. A unified leadership team for these converging and complex business problems will remind you of enterprise-wide priorities and help increase the return on your cloud investment.
The best companies have a harmonious relationship with their cloud provider, allowing them to evolve new services in step with changing business environments. They should align themselves with the goals, paths and budgets of their company. Without these conversations, relationships become transactional: customers receive less and less value and tight budgets risk indiscriminate cloud cuts.
That goes back to the original point: maximizing cloud potential, especially in uncertain economic times, requires new ways of thinking, more discipline, and some level of strategic investment. Companies that wait until the balance sheet forces their hand will not have the time or space to develop the best strategy. It’s time for a whole new approach to managing the cloud.
Joe Atkinson is Chief Products & Technology Officer at PwC.
The opinions expressed in Fortune.com comments are solely the views of their authors and do not reflect the opinions and beliefs of wealth.
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