Private companies adopting cloud technology: PwC

Private companies are gaining on — and in some cases outpacing — their public company counterparts in embracing cloud technology. In PwC’s 2023 Cloud Business Survey, 39% of private companies say all their operations are in the cloud, compared to 36% of all private and public survey respondents.

This can be an opportunity for mid-market private companies to leapfrog public and larger private companies that may have legacy operations, which can hinder transformation and get in the way of value realization.

Adopting cloud technology. What’s motivating executives? Three things can be:

Many private companies have recently learned to trust storing their data in the cloud, and many have even become cloud advocates.
Many software providers are trying to move clients to cloud-native solutions or solutions hosted in the cloud.
Executives can recognize that cloud-based technology can significantly drive both their company’s financial and competitive performance.

Forty-six percent of respondents from private companies say they have already achieved measurable value from the cloud — from improved profitability to improved productivity. And 88% of private companies say they expect their organization’s revenue to increase over the next 12 months.

While most respondents consider their companies to be cloud users, that doesn’t mean they’re all in on this technology. Some respondents noted challenges they face with cloud adoption, with budget and investment constraints topping the list. Among private companies of different ownership structures, adoption varied slightly. Among respondents from private equity-backed companies, 23% say they’re all in, perhaps because they are more likely to move one function at a time, starting with areas that can add value quickly. On the other hand, 48% of respondents from owner-managed private company respondents say they are all in on cloud.

Biggest barriers to cloud adoption for private companies

Budget and/or investment constraints

%

Inability to effectively measure/quantify return on investment

%

Cloud service provider challenges

%

Note: Showing three highest-ranked choices from a list of 11 options.
Q: Which of the following have been the biggest barriers to achieving measurable value from cloud technologies? (Rank top three.)
Source: PwC’s 2023 Cloud Business Survey: private companies base of 761

Cloud-powered: the benefits of going all in

Migrating a few discrete workloads isn’t the same as being cloud-powered and using the technology to reinvent your business model. But private companies may be more comfortable taking a temperate, rather than fast-track, journey to adoption. Unlike public companies that often face stakeholder and stockholder demands on quarterly results, leaders at private companies tend to have more flexibility when making these decisions.

Companies also focus on the potential risks cloud technology poses, including cybersecurity and data privacy concerns. Many public companies have spent years investing in security technologies and protocols, but private companies may not have the same resources, potentially leaving them more vulnerable to attacks. However, cloud has enabled 46% of private companies to help increase their cyber posture, and another 46% expect to do so in the next 12 months, our survey shows.

While saving money is a key driver for increasing the return on cloud technology, most family businesses balance that with the value of their employees. They do not treat their employees as disposable assets; instead, they often use cloud to help improve their employees’ experience and, in turn, build stronger, longer-term relationships.

What does cloud-powered mean?

Cloud-powered companies are those that have reinvented their business through the cloud. They report fewer barriers to realizing value (e.g., new revenue streams, increased productivity and agility, improved profitability, etc.), and they’re doing so at a rate twice that of other companies. And even in the current business environment, they expect to see continued revenue growth of 15% or greater. Here are four ways cloud-powered companies are helping drive value:

Holistic and unwavering approach to cloud
C-suite collaboration from the get-go
Formal data, analytics and AI strategy
A focus on trust and controls

That doesn’t mean family-run businesses don’t struggle with talent gaps related to cloud technology. They do, but respondents say they plan to acquire the necessary skills by developing or retraining existing staff or outsourcing to meet some of those needs.

To maintain the family culture while also dealing with the recent talent gap, private companies may choose to use a private cloud and contract with a managed services provider to help assist as needed. This approach may enable companies to be more nimble.

Planning for the future: Where are cloud-powered companies focusing next?

Half of the private companies surveyed have already implemented an enterprise-wide transformation, and 42% are considering — or already developing — such a plan.

As private company leaders continue to evolve their cloud strategy, 19% say they will consider adopting an industry cloud solution, and that’s where we expect to see cloud-powered companies focusing next. These pre-built offerings typically provide the latest capabilities like AI, and they’re tailored to a sector’s unique business processes and customer needs.

The growing adoption of cloud technology in private companies is a wake-up call for those that have not yet transitioned. From a competitive standpoint, cloud-less private businesses are likely to fall behind both their private company contenders and their public company peers. Now’s their chance to catch up — or even speed past their competitors.

Taking an enterprise-wide view

Privately owned, family run

Privately owned, private equity-backed

Privately owned, partnership

We have implemented this

%

We are considering this or/developing a plan

%

We don’t plan to do this

%

Q: Is your company taking the following action to address the current business environment? (Response to ‘Implementing an enterprise-wide transformation’.)
Source: PwC’s 2023 Cloud Business Survey, January 2023: bases: 114, 216, 206

About PwC’s Cloud Business Survey

Between October 25 and November 18, 2022, PwC surveyed 1,010 US business executives. Respondents were from public (25%), private (54%) and private-equity-backed (21%) companies in six major industries: financial services (24%); industrial products (20%); consumer markets (12%); health (12%); energy, utilities and resources (12%); and technology, media and telecommunications (20%).