Throughout 2021, the world experienced a sharp rise in cloud-computing use, fueled by the global, COVID-19 pandemic. Never had such a force driven organizations away from on-premises (on-prem) file and application servers to access-anywhere infrastructures.
Despite this trend, consultant McKinsey & Co. revealed in its survey of global manufacturing companies on cloud adoption that, "74% of cloud-related transformations failed to capture expected savings or business value.” Respondents said cloud technology was more complex than originally estimated, and the skills needed to manage cloud transformation weren’t keeping pace.
A second conclusion was particularly telling: “One key driver of the dire state of many cloud programs is their sole focus on the value of IT (cost) optimization, rather than on potential business value. This issue turns up time and again in our data. Asked directly, most companies (about 59%) expect the cloud to deliver more value in the area of IT than in business.”
Even today, cloud transformation initiatives are in the domain of IT departments, where the primary purpose is replacing physical servers in a data center. This is driven by the goal to optimize the costs of storing data and maintaining core systems.
However, as a cloud transformation leader at a software company that serves the manufacturing industry, I see a more impactful target for organizational benefit, along with three distinct waves of cloud adoption that manufacturers typically ride.
Three waves of growth
The first wave of cloud technology implementation is focused on core IT workloads: storage, backup and disaster recovery, and data center size reduction. Most companies today have already achieved, or are at least close to reaching, these outcomes.
The second wave prioritizes the migration of business data and applications to the cloud. Typically, the catalyst is storing customer or financial data in cloud-based data warehouses, along with the ease of integrating with a growing base of employee-related, cloud-business applications. The migration to the cloud of mission-critical systems, such as enterprise resource planning (ERP) or laboratory information management system (LIMS), is a telltale sign a company is well into the second phase (Figure 1).
The third wave can be referred to as “generating business value through advanced cloud technologies.” During this stage, companies pilot or implement new types of software applications in the cloud—they’re no longer simply replacing or moving previously used on-prem systems. The marquee category here is artificial intelligence (AI), but other technologies such as digital twins, mixed reality, and the Industrial Internet of Things (IIoT) are also players in this space. In this phase, organizations must prove business value because the goal of these technologies is not IT cost optimization, but improved business efficiency and better outcomes.
Leveraging the cloud to drive business value
To advance beyond the first wave, manufacturers face unique challenges, particularly at the operations level. Most industrial companies have invested in legacy operational technology (OT) systems over the decades, which are designed to run critical, factory, real-time process control systems. These systems have grown in complexity, and are deeply embedded in operations. Though they lack the scalability and advanced computing capabilities of the cloud, they’re not easily replicated or replaced, and it can be challenging to integrate them with cloud-based tools.
OT technology also demands a specialized skillset from plant personnel. OT system administrators must not only know the specific technology deeply, but also understand how the entire plant runs. Also, these experts are tasked with keeping OT data safe and compliant with standards like ISO, SOX, and GDPR, but most aren’t trained in cloud-based services. This exacerbates the separation of the cloud and operations; OT remains the domain of the process personnel, while the cloud is relegated solely to IT workloads.
However, this status quo isn’t sufficient to meet the demands of modern manufacturing. Today, manufacturers need to drive supply chain resilience, bring high-quality and innovative products to market, improve production efficiency, and reduce the carbon intensity of their operations. To achieve these objectives, rich data sets are required, along with software tools that generate insights on which to base operational and business decisions.
With the right solutions, workers are empowered to quickly discover trends, identify maintenance concerns, and collaborate across the organization to optimize operations and the business. With the volume and variability of data generated in modern factories, users can quickly become buried when left with only older, less-capable, on-prem OT systems.
For this and other reasons, the cloud must find a home at the crossroads of IT and OT to drive business value. How does the cloud help companies?
- Scalability: Businesses have the agility to scale systems up or down on-the-fly as their needs change. The cloud ensures teams have the computing resources to remain online during peak demand periods, while reducing operating costs during times of lower use because systems can be spun down at will.
- Advanced analytics: Using the cloud, organizations can analyze terabytes of sensor data at millisecond frequencies. With purpose-built software for manufacturing data, insight generation is automated, aiding decision-making and improving business performance.
- Workforce empowerment: Modern software equips employees with insights and context at their fingertips, along with the ability to easily collaborate and share insights with colleagues anytime, anywhere.
Marathon Oil generates smart maintenance flags
An independent U.S. energy producer, Marathon Oil (www.marathonoil.com) recently faced a monitoring challenge with thousands of assets spread across geographically diverse locations nationwide. In 2022, it embarked on a cloud-migration journey to automate intelligent maintenance alerts and notify operational teams when any asset was operating under its expected production capacity. This would trigger a root cause investigation or maintenance request.
Early in the company’s cloud migration efforts, it took months to synthesize relevant data, and generate useful alerts and insights without excessive false positives. But, as time went on and Marathon refined its software algorithms, intelligent alerts became second nature. Today, the company monitors more than 4,000 assets, requiring only a few hours to identify and verify operational anomalies, and notify plant personnel.
Migrating to the cloud
Following in Marathon’s footsteps, companies are generating business value using the cloud by embracing some key best practices. Marathon mentions the first imperative: nurturing a culture of innovation, propelled by the idea that if business practices and technologies don’t evolve, companies can’t keep up with new market trends and demands.
The second practice is strategizing. In addition to research up front, cloud strategies should follow a trajectory of pilot, proof-of-concept, and scaling to meet IT and broader business outcomes. Outcomes should drive cloud investments, not vice versa.
Third, companies must invest in employee training and skills development. In the age of Industry 4.0, organization-wide digital abilities are required to keep the workforce aligned with business delivery and operational objectives.
And finally, manufacturers must find ways to integrate OT functions with cloud infrastructure. This marriage ensures continuity of critical processes, while producing new operational and maintenance insights, increasing efficiency, boosting profits, and generating overall business value.
It doesn’t start with a cloud strategy, but a business strategy. And as an organization executes the plan, appropriate cloud technologies are deployed to support desired outcomes.
Megan Buntain is the VP of cloud transformation at Seeq. She leads its transition to cloud-native solutions to support global customers. She has more than 25 years of experience in the software industry. Prior to joining Seeq, Buntain served as a sales and marketing executive at Microsoft and was CEO of a consulting firm that advised SaaS companies on cloud go-to-market strategy.
