CEE in the spotlight

Cloud transformation is a strategic enabler for CEE businesses — not just an IT project

By Mariusz Chudy, Partner, Technology Alliances Leader, PwC CEE

Cloud transformation is inevitable and integral to the CEE growth story. Cloud adoption is a change management project to facilitate business transformation, and is certainly not a mere IT project. A mindset shift is already underway in understanding the criticality of cloud transformation among CEE business leaders, and must take hold in businesses throughout the region if they are to survive and thrive. 

These are some of the key messages from PwC’s CEE Cloud Business Survey and subsequent Cloud Survey Webcast on transforming business and creating value. A recurring theme of responses, and in the input of our clients and PwC’s Technology Alliance partners to the survey, is that cloud strategy should be focused on business needs first, and not oversimplified to solely technical or IT aspects. 

While less than 10% of CEE companies see themselves as having a high level of cloud maturity, the region can use its low cloud maturity as an advantage. Circumstances can facilitate CEE to bypass some of the growing pains of cloud adoption experienced elsewhere, adopting current technology and hastening the journey to being cloud-powered organisations. CEE is also ideally placed to fast-track cloud transformation because of the IT talent pool throughout the region.  

Moving to the cloud brings a range of business advantages, such as those in business innovation, agility, customer experience, cost savings, security, flexibility, mobility, insight, increased collaboration, quality control, disaster recovery, loss prevention, automatic software updates and sustainability. There is huge potential in the cloud for revenue generation, with research showing that companies based in parts of the CEE region will see a compound annual revenue growth rate of 16.7% until 2029 in the cloud for manufacturing and retail markets.

In the public sector, CEE national and regional governments have been working on the adoption of cloud technology to deliver public services in more efficient and user-centric ways that simultaneously protect citizens’ data. Poland’s Ministry of Digital Affairs, has implemented “Cloud computing cybersecurity standards'' which public sector entities who intend to use a government or public cloud must adhere to. These standards set a framework for further cloud adoption in the Polish public sector. 

In the Czech Republic, the government continues to implement digital government initiatives under its Digital Czech Republic government programme. In the Czech context there is also a well-established national agency for communication and information technologies, NAKIT. The agency is a strategic partner of the Czech state that designs innovative solutions in the areas of cybersecurity and specific aspects of network, application, and cloud infrastructure.

1. Cloud and acceleration of business transformation

The “cloud” is not a single entity and it isn’t new. As early as 2011 – in the US, the National Institute of Standards and Technology's (NIST) working definition of cloud computing lists five essential characteristics of cloud computing: on-demand self-service, broad network access, resource pooling, rapid elasticity, and measured service. While this definition is still valid, broadly speaking, many organisations see the cloud as a way, among many others, to streamline data storage and to decrease staffing and IT costs. These practical outcomes, while significant, undersell the cloud’s transformational potential.   

My friend and colleague Przemysław Galiński, PwC CEE Cloud & Digital Director updates the above definition succinctly, “The modern definition of cloud is not a technology definition, it's not IaaS, PaaS or SaaS. It's also not a different model for delivering IT resources. With the cloud we are beyond technology, because it supports business goals and brings innovation and speed.”

That 73% of executives in CEE said their companies have adopted cloud in some or all parts of their business further shows that the future, while the region has some way to go, is in getting more value from the cloud. The survey found a low level of cloud maturity across CEE compared to the US. Only 8% of companies in CEE consider their cloud maturity as high, compared to 32% in the US. CEE’s relatively slow start, however, represents a great opportunity to “do it later, do it better.”

The region can use its low cloud maturity as an advantage. Circumstances can facilitate CEE to bypass some of the growing pains of cloud adoption experienced elsewhere, adopting current technology and hastening the journey to cloud-powered. 

Overall, the main message from the survey in the CEE region is that there is huge transformational potential in cloud adoption. This moves beyond operations and IT — towards smarter ways of working, or as Małgorzata Jaworska, Chief Information Officer at Stock Spirits Group put it, “Cloud is seen by us as a strategic enabler and technical basis of our digital agenda which is supporting rapid business transformation and expansion.”

PwC’s CEE Cloud Business Survey, which sampled the views of 389 executives, is the most comprehensive snapshot to date examining how companies across the region are making the leap to the cloud. As noted above, the survey made clear the direction of travel, but there are some real challenges and barriers for organisations across the region before a majority of them are “cloud-powered.” 

In the survey, cloud-powered companies are defined as those that fall within the top 25% using a cloud success index based on the question, “Which of the following best describes how cloud technology is, or is not, delivering measurable value in your organisation?” As it stands, only 8% of companies in CEE consider their cloud maturity as high. This constitutes only a quarter of the 32% of companies in the US who are all-in on cloud and have scaled it throughout the business. High cloud maturity companies have already integrated the likes of advanced service design capabilities, deep product expertise and optimised workload differentiation.

Across CEE companies, both cloud-powered and other organisations, the top three barriers to achieving measurable value are the same: budget and/or investment constraints (40% for both), limitations of technology capabilities (39% for cloud-powered organisations vs. 32% for others) and talent gaps (36% vs. 32% respectively). The survey also shows that for CEE companies, cybersecurity, storage and data analytics are cloud capabilities which will be prioritised by more than half of CEE companies in the next 12 months.

2. Cloud adoption and business leaders’ mindset change in CEE

Magdalena Dziewguć, Country Director at Google Cloud Poland suggests that something of a mindset shift among leaders is required to put themselves ‘all-in’ on the cloud journey. As she puts it, “A key challenge in cloud adoption in Poland and CEE is related to the fact that the majority of business leaders still believe that the ‘cloud’ is an IT project and nobody likes to manage complex IT projects. The truth is that new business models in digital are all data-driven, and it is impossible to build efficient digital growth strategies without cloud tools to empower them.” 

Survey data, to some extent, suggest that a mindset shift is required among CEE business leaders. As many as 44% of survey respondents involved in their company's cloud strategy see the ability to think strategically as the most important skill set for tech leaders. This compares to 37% who see technical expertise as being the most important. Furthermore, a further 23% view strategic thinking as a key area of improvement for tech leaders over the next twelve months. 

Andrei Ghiorghiu, CEO at BlueTweak, also points to a mindset change as being required among leaders to take full advantage of cloud technologies, “Talking about issues, I have to say that from our experience, although finding the talent needed after migration to the cloud is an obstacle to reaching full cloud potential, educating CIOs and CTOs seems to be a problem of equal value.”

Overall, however, the survey gives the overwhelming impression of optimism, and that the challenges and barriers are not insurmountable. Magdalena Dziewguć sums this up, “Nothing is missing in CEE – companies can benefit from a locally-based robust hyperscale infrastructure, solid engineering talent base and entrepreneurial business mindset of the region.” CEE’s talent pool is a key strength and the region is well on the way to becoming a hub for tech talent. The European Bank for Reconstruction and Development (EBRD) rates CEE, which already employs over 2 million ICT specialists across the region, as having higher digital potential than other emerging markets. 

The survey findings support this optimism. While there are challenges, almost 90% of CEE companies are heading towards cloud adoption, with 35% of companies in Central and Eastern Europe having adopted cloud in all or most parts of their business.Of those who do not have all operations on the Cloud, 43% plan to be in the next two years. The survey also finds that cybersecurity, storage and data analytics are cloud capabilities to be prioritised by more than half of CEE companies in the next 12 months.

PwC clients and Alliance partners who commented on the results survey point to the cloud’s potential to harness data, and to do it quickly, as one of the foremost reasons for optimism. As Microsoft’s General Manager Enterprise, Central and Eastern Europe, Middle East and Africa, Paco Salcedo explains, “For companies lagging in their transformation journeys, moving to the cloud and becoming data-led is the fundamental first step. With a strong foundation in the cloud, organisations can drive transformation in a matter of weeks, not years.”

3. The value of being cloud-powered

Cloud-powered companies’ leaders are also more optimistic about their revenue growth prospects. As seen in Figure 1 below, 73% of cloud-powered company leaders are optimistic about an increase in revenue in the next 12 months, compared to 61% of other companies in the CEE region. Cloud-powered company leaders are less likely to predict a decrease in revenue, with only 18% predicting revenue will decrease over the same period, compared to 25% of their counterparts in non-cloud-powered companies.  

The Cloud Business Survey results also show that CEE cloud-powered businesses are achieving significantly more measurable business benefits than their counterparts in non-cloud-powered businesses. These benefits can be viewed in more detail across a dozen business areas in Figure 2, and they encompass, amongst others, positive customer and internal operations outcomes. 

For instance, while they are still some way behind the 92% of cloud-powered US CEOs, 68% of CEE leaders reported an enhanced customer experience through being cloud-powered, compared with just 21% of other CEE leaders. 69% also reported a faster time to market compared to just 22% of non-cloud-powered organisations. In terms of improved decision-making, while CEE cloud organisations lag behind the 100% of those in the US companies who noted an improvement at 61%, this still compares well with other CEE organisations who are not ‘all in’ on cloud transformation.

This survey feedback reinforces the message that cloud transformation is only going to gather pace. The cloud’s ability to harness data much more quickly and effectively than ever before is key to a data-driven present and future. 

As Jason Janicke, EMEA Senior Vice President at Alteryx notes, “The cloud is the most effective way to store, access, and analyse large volumes of data. Cloud computing also provides the scale and agility needed to take advantage of a world of unprecedented and automated data analytics potential to quickly convert data into meaningful decision intelligence.” 

The cloud’s value is in business reinvention. It isn’t just about making things run better, it is about the survival of businesses. PwC’s most recent Annual CEO Survey – Central and Eastern Europe, for instance, told us that half of CEOs believe their businesses, under their current business models, won’t survive without change. One example is that legacy technology will no longer be supported. All software services have moved or are moving to the cloud and new CRM or BI systems are able to be supported only on the cloud. The cloud is therefore not just something that’s nice to have, but imperative. 

What is also clear, however, is that cloud technology shouldn’t be seen as a kind of ‘magic bullet’, or be introduced just for the sake of being ‘all in’ on the cloud. Rather, the technology must serve business improvements. Cloud strategy should not be oversimplified to solely technical aspects as we move to a cloud-powered future; its development should always remain driven by business needs. Undeniably, through the survey, our clients and Alliance partners are telling us that cloud transformation is a fundamental part of the CEE growth story and will determine how the CEE region will grow and remain competitive.