Our Thoughts
Ankur Bhardwaj
15 November, 2021
11 MIN READ

How COVID-19 pandemic accelerated cloud adoption

It was barely a few months into the pandemic last year when Microsoft CEO Satya Nadella noted that companies have seen two years’ worth of (cloud-driven) digital transformation in just two months. 

And this is what Steve Van Kuiken told a Washington Post reporter during an interview in September, “we saw most companies reporting that they are seven years ahead of where they thought they would be prior to the pandemic.” 

Steve is the global leader of McKinsey Technology and also a senior partner at McKinsey & Company. He further mentioned in the same interview that companies are moving “24 times faster to the cloud than they thought.”

To tie these two pieces of information together...

Two months into the pandemic, companies were accelerated to being two years ahead of their cloud adoption schedule. Sixteen months later (in September 2021) companies are 7 years ahead. 

We’ll give you a moment to digest that.

Companies such as Wayfair and Etsy leaned towards cloud and saw a massive surge in their respective businesses. Further, when Scotiabank witnessed a massive spike in their trading volume along with rising volatility because of the pandemic, they used Microsoft Azure to navigate the challenges which the pandemic had thrown in their way.  

After the pandemic, a lot of things changed for a lot of us. Some of those things changed permanently. The move to cloud computing is one of those things. Prior to the pandemic, there were some of us who were living a hybrid life with no clear boundaries between the physical and digital. Now it's most of us (out of those have access to such technologies) 

So, when consumer behaviour evolved, moving away from the physical (towards a more digitally connected lifestyle because of the lockdowns), businesses had to evolve technologically. A big part of this evolution was using the cloud. For instance, Microsoft Teams went from having 75 million daily active users to having 115 million daily active users in a matter of 6 months. (Source)

It wasn't like something entirely new happened. This transformation of adopting cloud computing and AI was indeed an agenda for companies of all sizes. Just, the pandemic came as a catalyst and accelerated this change, 24 times faster for some businesses. To completely appreciate the gravity of this transformation we first need to examine what necessitated this change.

 

Socio-economic realities which accelerated cloud adoption 

The short explanation is that the pandemic forced us to shut down all possible physical interactions. Below is the long answer broken into a list pointing out the various business implications of this societal change. 

cloud computing stats


The inconvenient yet necessary lockdowns 

According to BBC data, there were over a 100 countries that had imposed complete or partial lockdowns as a response to the COVID 19 outbreak by March 2020. European economic giants like France, Germany, and Italy had nationalised lockdowns in place. And that was before the second wave hit...a much deadlier second wave. 

Businesses were shut down overnight. Therefore, on-premise servers, which are the backbone of this old computing world, were fractured. Technicians were not able to maintain servers, which gave rise to serious security challenges. Without engineers to maintain those servers, businesses were left vulnerable to breaches. 

On top of that, the handful of engineers available were quite expensive. So, those who understood the game, quickly made the switch ditching the on-premise baggage of the old world. Stepping into the future, companies like Moderna, and Zoom proved what the power of AI and data can unlock for their respective business.


Resilience in business operations

These global lockdowns resulted in a hit to economic activities, directly impacting the bottom line of most businesses. To stay ahead of the competition, businesses were forced to cut costs, at (almost) any cost. Measures as drastic as laying off employees were also taken, but most just moved to the cloud to reduce costs.

Nadya Knysh, the Managing Director at a pure-play QA and software testing company, ‘a1qa’ wrote in a Forbes article that, “by determining vulnerabilities in the organizational infrastructure and simulating the worst-case outcome, AI helps to design more thoughtful disaster recovery plans.” We don't know how else to define resiliency more accurately than that. 


Rise of the ‘E’ (New business models)

Referring to just one example out of many, cloud container usage saw a huge uptick in 2020. Which was a direct result of the rise of the ‘E’, let me explain... 

  • E-commerce (was already there but saw a boom)
  • E-learning 
  • E-food orders*
  • E-health (telehealth)
  • E-entertainment (video-on-demand)
  • E-education 

All this increased the amount of data that needed to be collected and stored, hence, container usage saw a huge uptick in 2020. You may add in the comments if we have missed an ‘E’, we’ll expand our list.

*Statista data shows that the Online Food Delivery segment is growing at a CAGR of 9.89%, having market size projections of USD 441.6 billion by 2025.


Remote work

Another article from Forbes in which they have listed cloud computing trends for the next year clearly states that remote working is, and will remain a key trend through 2022. They mention that “augmenting the abilities of remote and hybridized workforces will remain a key trend.”  

Steve, from the Washington Post article, also mentioned, “Zoom was adding thousands of users a night to their network and allowing videoconferencing (when the pandemic hit).”

The lockdown struck, and with cloud-enabled agility, businesses switched to a remote working culture. Cloud computing enabled businesses all the way towards maintaining or increasing productivity.  

Now that we have an idea of what happened, let us now look at why this happened. As in, what benefits cloud computing provided/provides that led companies marching into the cloud bandwagon. 

 

What cloud offered to businesses during tough times

Product delivery at rocket speed

The pandemic forced companies to deliver products and solutions at blazing fast speeds. Enabled by AI-fueled growth, companies displayed unthinkable agility in responding to the pandemic.

To directly refer to two examples: 

1) It took Moderna 42 days to prepare their COVID 19 drug/vaccine for Phase 1 trials with the help of AI and cloud computing. 

2) Frito-Lay launched a direct-to-consumer e-commerce platform ‘Snacks.com’ in a month. 


Not just for established businesses

Global managing director at Accenture, Arnab Chakraborty was quoted as saying in this Harvard Business Review article that there is a tremendous opportunity for businesses (both startups and enterprises).

The article further mentions that startups are banking on their latest data-driven approach powered by the cloud. Whereas established companies are competing on the front where they can have quick iteration to any product and can identify high potential business avenues out of their existing models. 


The bright side of remote work

Cloud computing became the missing piece in the remote work puzzle that was being struggled with, prior to the pandemic. It filled the technological gap enabling ‘work from anywhere’ culture.

Zoom was adding thousands of users each night because more and more of us were getting detached from our physical office spaces. This led to better satisfaction of the employees directly resulting in increased collaboration amongst team members and with the ecosystem. This also resulted in an improvement in employee engagement. 


New and better customer experiences

In September 2021, Wells Fargo partnered with Microsoft and Google to empower their digital transformation at scale. Wells Fargo is on a mission to accelerate its digital transformation using AI. It is aiming to deliver enhanced customer experience while increasing employee collaboration. The financial services behemoth will also use complex AI & data solutions to drive personalised experience for its clients and customers. 

Similarly in August, Verizon partnered with Microsoft to deliver cloud solutions building on their existing platform. Using Verizon’s 5G capabilities, they are moving towards providing enterprises with, “providing enterprises with increased efficiencies, higher levels of security, low lag and high bandwidth needed for applications involving computer vision, augmented and virtual reality, and machine learning.” 


Increased standardization and efficiency

Artificial intelligence at its (current) max, does a lot of things that were not possible earlier. Using machine learning combined with AI, industries have trained machines to do repetitive work over and over without any hitch. 

This enables an extreme level of standardization with minimum possible errors. AI also unlocks unthinkable levels of efficiency by performing repetitive actions, error-free each time. 


Acceleration of the innovation cycle

Speeding things up tremendously, cloud computing accelerated the pace of innovation while giving birth to new and modular revenue streams. Companies were able to test their products & services on a public cloud platform before moving them to the hybrid cloud for full scale deployment. This enabled companies to transform at speeds which were unimaginable. 


The obvious reduction of hardware cost

Without the need to purchase and maintain on-premise hardware, the cost of cloud computing is dramatically low. Cloud computing also reduced the fixed cost of businesses. Without the need to maintain computer clusters and data centres, companies thrived during the pandemic in the limited resources that they had. 

However, even now there are countless organisations who have not completely dipped their business in the cloud. There are a few barriers, some perceived and some real, which limit the true potential of AI and cloud computing.  

 

Few barriers which are slowing down this momentum 

Perceived security challenges

We say ‘perceived’ because public cloud providers such as Microsoft invest USD 1 billion each year to keep Azure safe.  Fending off a whopping 7 trillion cyber threats each day, this PwC article shows. Similar investments are made by Amazon and Google. Therefore, with such measures in place, the security threat in cloud infrastructure is a mere perception. 


Vendor lock-in and Cost considerations

Being stuck with an uncompetitive cloud provider is a nightmare for any CTO out there. Because as Jeff Bezos’s ‘Bezos Law’ predicts, the cost of cloud computing will reduce by 50% every 18 months. So far this has been found to be true by PwC. So, with a halving of cost every 18 months, nobody would want to stay with a cloud provider that charges over and above. However, the truth is that the upfront cost for adopting a cloud strategy might be high for some, but the real value lies in the returns on investments.     


The struggle of finding skilled talent  

Tony Saldanha, founder and CEO at Transformant, said in a Harvard Business Review report that constructing a definitive cloud strategy demands a lot of cross-functional capabilities. He further mentions that, “You have to combine strategic business experience with technical knowledge, and not enough businesses do this very well.”

 

Trends we can see in the future

The rate at which cloud computing will unfold in 2022

Steve from McKinsey & Company stated in the Washington Post article that roughly 15% of the enterprise workload is in the cloud. Which means that approximately 85% is not. 

cloud computing untapped resource

Therefore, it is quite obvious that we will see this continuing trend of accelerated cloud adoption throughout 2022. Grartner had predicted in April 2021 that end-user spending on public cloud services is projected to reach a market size of USD 332.3 billion in 2021, up from USD 270 billion in 2020.

cloud computing market size


The emergence of edge computing 

One of the biggest trends in the cloud computing world is edge computing. Edge computing refers to the system where the servers are placed close to the edge of the network. This eliminates the problem of latency which the traditional cloud suffers from. This is especially beneficial for IoT and connected devices. 

In traditional cloud computing setups, IoT devices collect data and send it to the central server for processing. Whereas, in an edge computing setup, the information from such devices is processed on the edge itself, much closer to the device which increases speeds and decreases latency by a huge margin.  

Therefore, in 2022 edge computing will gain significant ground and will remain a key innovation. 


The call to arms on sustainable cloud computing

Another trend that we will see in the next year is the approach of sustainable cloud computing which saw a rise in recent years. With companies and countries pledging to achieve a net-zero carbon emission (Google for example), we will definitely see rapid upward movement in the adoption of sustainable cloud engineering.


AI in cloud computing

Development of cloud computing and AI is intertwined with one another. The everyday AI that we witness all around us (in the form of Google search and Instagram filters) lives in cloud computers. 

With extensive computational and data processing strength needed to incorporate machine learning and artificial intelligence, cloud computing becomes the obvious choice for such needs. And this is what we are going to witness in 2022, an even more connected development of the two.  


Like all things, cloud computing has a hybrid

Having the best of both, private & public cloud, hybrid cloud computing is set to scale at an accelerated pace through the next year. With companies like Microsoft, Amazon, Google, and IBM already having some form of hybrid cloud setup. The market for hybrid cloud computing is expected to reach USD 97.64 billion by 2023. 

The future of the cloud is literally in the clouds! Witnessing such rapid transitioning from on-premise to cloud, we can now truly appreciate the gravity of this transformation. 

 

Bibliography

  1. https://www.gartner.com/en/newsroom/press-releases/2021-04-21-gartner-forecasts-worldwide-public-cloud-end-user-spending-to-grow-23-percent-in-2021
  2. https://hbr.org/resources/pdfs/comm/HCL/PandemicInspiredCloud.pdf
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  5. https://hbr.org/2021/09/ai-adoption-skyrocketed-over-the-last-18-months
  6. https://www.forbes.com/sites/bernardmarr/2021/10/25/the-5-biggest-cloud-computing-trends-in-2022/?sh=5165f7462267
  7. https://www.statista.com/outlook/dmo/eservices/online-food-delivery/worldwide
  8. https://www.forbes.com/sites/forbestechcouncil/2021/10/18/improving-business-resilience-in-challenging-times-top-five-technologies-to-invest-in/?sh=6c05e01969f6
  9. https://www.bbc.com/news/world-52103747
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  12. https://www.microsoft.com/en-us/microsoft-365/blog/2020/04/30/2-years-digital-transformation-2-months/
Ankur Bhardwaj