 From around the globe, it's theCUBE with digital coverage of IBM Think 2021, brought to you by IBM. Welcome back to theCUBE's continuous coverage of IBM Think 2021. My name is Dave Vellante and I'm one of your hosts for our virtual coverage. We're going to talk about cloud and hybrid cloud, what it is, what it means to clients and how the cloud journey will likely unfold in the coming several years. With me to address these issues is Varun Bijlani who's the managing partner hybrid cloud transformation at IBM. Welcome Varun, good to see you. Thank you Dave, wonderful to talk to you. So you hear people talk about, you know, they say cloud first, we got a cloud first strategy. What does that even mean? What is a cloud strategy? Is it a technology roadmap? Is it an experience? Is it a business strategy? What really is a cloud strategy all about? And importantly, how does it support business outcomes? That's really what matters. Brilliant, great question. I always believe it's less about the journey to the cloud and it's more important what you do when you get there. That is, what business outcomes does it actually support? Now, many different starting points for an enterprise to embark upon a cloud-enabled transformation. Things like reducing technical debt and costs, creating new products and services, accelerating time to market, and even changing working practices in an organization. Now, as we work with clients, we are seeing increasingly value coming from open innovation. What I mean by that is expanded revenue opportunities with broad ecosystems, you know, new ideas, new platforms and increased time to market. Now, accessing value from what we call those, you know, ecosystems and that open innovation we believe requires open hybrid multi-cloud architecture. With that, it enables you to plug into those ecosystems, allows you to fully consider modernization across your estate and creates consistent operating models. Also helps reduce, you know, talent and risk, a skill risks that organization have. And interestingly, this is exactly where Red Hat also shines as it's the best hybrid cloud platform out there today. But coming back to the main objective around business objectives, we are seeing that when leaders anchor their transformation on such a holistic strategy, they are driving towards two and a half times increased economic return as compared to, let's say, just a singular one single public cloud strategy. And they're able to drive impact on their business case across multiple dimensions, things like accelerating the business, so impacting top line, new product services. Number two is around accelerating application development and optimizing costs associated with that estate, improving infrastructure utilization, reducing the cost of security and compliance, and that gives that architectural flexibility. But that was the basis of approach that clients like Delta and Slumberger used. Therefore, cloud is absolutely about business outcomes, both top line and bottom line. Yeah, really trying to change that operating model of the organization versus just the IT model. I think we could talk about some of the headwinds that organizations face and maybe some of the typical challenges after they get to the cloud, whether it's organizational, technical, there's integration, there's security, maybe even culture, what are you seeing in that regard? A spot on, I think you've already started recognizing some of those. When clients started earlier in the journey, they started focusing on consumer-driven innovation. They had digital and AI experimentation and we saw user applications moving to the cloud. Now, they are recognizing the need to look at enterprise-driven innovation and how do you start embedding AI into the business at scale? And therefore, they are now realizing that they need to look at their core portfolio, their mission-critical applications. 90% of companies were on the cloud in 2019, but in all estimates, only about 20% of their workloads actually moved to the cloud. So there are a number of different challenges that our clients face, things like economic limits to how many workloads you can move to the public cloud. You called out security and regulatory challenges yourself. Speed to value or dealing with complex applications and the uncertain interactions, the data gravity and dependencies, sometimes they get into the loop of analysis paralysis. Another one that I get quite closely involved with is, does the cloud technology transformation actually drive and deliver process change? Does it take your old business process and make it into an intelligent workflow? The other dimension is execution and silos today and federated organizational constructs, the lack of the right skill and expertise. And then finally is things like technology lock-in and the struggle that people have with inflexible tools and methods which hinder scale and speed. So those are the few things. When I think about just the history of cloud, modern cloud, there was a lot of tire kicking early on and then the financial crisis actually accelerated, some moves to cloud. And then coming out of that, there was a lot of shadow IT but it was still, as you pointed out, very early days. And then the comment you made about mission critical is kind of interesting to me because I'm curious, and you set out a vision before of what I call this layer of abstraction that hides the complexity. I don't care if I'm on-prem in a public cloud, across clouds, the edge. I want you to take care of that in R&D. I want to worry about my business. And so we're early days. Do people want to move their mission critical workloads to the cloud and why? Or do they just want to create a modernization layer and hide that complexity? Maybe in the context of some of those challenges that you can talk about, how are you advising clients that they take the next step and of course how IBM can help? Oh, spot on. So yes, I think now they are recognizing that there is value of looking at those complex core applications and looking at where should that, what needs to happen to my complex core application? My mission critical application. Do I need to defragment that? Do I need to decompose into new capabilities? Do I need to just move it to the cloud? Do I need to keep it where it is? Because in some instances, that's where I get maximum security and data gravity. So if I reflect on this, I think there are four key things I would call out as what I would call the get rights. Number one is ensure that we are aligning with business outcomes. Number two, clarity of target architecture and portfolio. Number three is accelerating the journey with the right methods, tools and patterns. And the fourth one, which is closest to my heart is about delivering via an improved operating model. So let's just scratch the surface on this a little bit. Now, when you talk about aligning with business outcomes, first of course is clear business ownership and alignment with the overall strategy. What's important is what capabilities does the business need to deliver that strategy and how is cloud going to help enable those capabilities? For example, integration with ecosystem partners, faster launch of new products and services, monetizing data assets, things like that. And this was one of the key drivers for a healthcare company that I recently worked with in North America. When we talk about clarity of target portfolio, this is about what's my architecture going to be across the edge, on-prem, private, public? What should I do to my applications and where should they reside? Should I keep? Should I kill? Should I modernize? What should I do? So for example, we've seen a lot of companies around 15% of applications you may not touch at all. 20% of those applications you may replace with SaaS solutions. 45 to 50% is where you start looking at modernizing and that's where you look at what do you do with your monolithic applications and how do you modernize them? And around 15% you might say is building brand new native capabilities on the cloud. So that's kind of the second get right. The third was about accelerating with proven patterns and methods and tools. And this is about increasing speed to value, early wins, and being able to analyze and decompose complex applications quickly and reliably. Now, once you're executing on that journey, how do you grow from garage to scaled capabilities? Now, here we've made some strong focus and investments in this space. We have a set of standard patterns that allow you to modernize and migrate applications depending on looking at your operating system, the integration technology, the container standards, and so on. And it's important to have the right tools that bring in AI and machine learning to bear. For example, we have our own cloud advisory tool that looks at the operating system and the code to explain and give guidance on what disposition and what containerization is most applicable. And then finally, this consistent operating model, how should the ways of working actually change on the ground? How should platform engineering and the application teams work together? Should I instantiate that with a competency center that helps me get onto that journey? How do I have the right skills not being siloed, the consistent security approach, and especially for companies that are looking at real, complex, mission critical workloads, to them that becomes even more important and in regulated environments? So to recap, I'd say those four things. Alignment with the business, clarity of target portfolio, accelerating with the right methods and tools, and of course, embedding through a sustainable operating model. I'll pause there. Yeah, great, thank you for that. I would say my takeaway is this is not your grandfather's application rationalization exercise, which was a kind of a one-shot deal every 10 years. Oh, Y2K, we're going to write, whatever it was. And what you're describing is essentially a way to have continuous improvement. There's obviously a lot of automation there, but very importantly, there's a gain sharing aspect where you can reinvest in innovation. And I think one of the areas you mentioned is ecosystem. We haven't even talked about it. We don't have the time, but the whole data opportunity there for around innovation because that is how ecosystems, they're going to form around that data model. And it's a new world. And Varun, thank you so much for your very articulate vision that you set out and congratulations on all the progress that you've made. And I really appreciate your time. Thank you very much, Dave. Wonderful to talk to you, looking forward to more conversations. All right, I am as well. And thank you for watching everybody. This is Dave Vellante for theCUBE. You're watching our continuous coverage of IBM Think 2021, the virtual edition. We'll be right back.