There are huge advantages to cloud technology for the energy and materials industry—and energy, metals, and mining companies in Indonesia that have been early adopters are seeing the results. Over the past year, McKinsey research shows a recurring impact of a 5 to 7 percent cost savings, and a 10 to 15 percent productivity improvement in the mining and agricultural sectors.

For example, a mining player invested in building a remote operating center at its isolated mining site, enabled by fully digitized data capture with monitoring and reporting capabilities, which included a gamified mobile application for the frontline to perform standard operating procedures. It paid off. Performance increased, with a 10 to 15 percent productivity improvement and a 7 to 8 percent cost reduction.

Businesses can capture enormous value from the cloud through cost optimization and value-oriented business use cases. McKinsey research estimates that the potential value creation for Fortune 500 companies could reach US$1 trillion in run-rate Earning Before Interest, Taxes, Depreciation, and Amortization (EBITDA) by 2030. 

The energy, metals, and mining sectors could benefit from cloud adoption in three areas— cost optimization, value-oriented use cases, and new ways of working.

For example, oil and gas shows an EBITDA impact of around 30 to 60 percent as a percentage of EBITDA in 2030, and basic materials approximately 10 to 20 percent. Chemicals and electric power and natural gas displayed around 10 to 18 percent and 5 to 7 percent respectively.

Major technology trends are helping, too. AI and machine learning, process digitalization, and robotics enable massive amounts of data to be stored on the cloud, and also give more computing processing power and the ability to run machine-learning algorithms and models.

Energy, metals, and mining companies in Indonesia are on the cusp of a cloud revolution

Companies in the industry need to be resilient — price volatility, sustainability and ethical requirements, and shifting value pools require them be hyper-efficient, adapt quickly to disruptions, and find innovative solutions to boost operational efficiency.

One of these solutions is cloud technology. Fast-moving players in Asia have realized its advantages and leverage its capabilities to drive impact and customer satisfaction.

Energy, metals, and mining companies wanting to migrate to the cloud for its immense potential need to consider the challenges that face them: security and infrastructure issues, clarity on business enablement, talent and capabilities, and lastly, privacy and regulatory constraints.

Businesses could consider scrutinizing their cybersecurity architecture and operating models: Are they sufficient to prevent hacking? Sensitive data are particularly vulnerable to attack as well as remote network infrastructures, and monitoring and managing cloud resources across providers.

Leadership must be clear on business enablement and roadmap to realize it, as well as the rigorous change management required to increase adoption across their organization.

With cloud adoption exploding globally, talent is in high demand across the technology pool. Companies should identify the people they need and devise ways to attract and retain them.

As the cloud rapidly evolves, the regulatory environment has to adapt constantly, resulting in unclear governance. Companies will likely be faced with regulatory implications, such as data storage rules based on national security considerations, and consumer data privacy.

The good news is that the cloud journey is navigable with the correct approach. Our experience in traversing it has revealed various insights.

A clear overall cloud strategy beyond work migration is critical to success. Its primary value doesn’t come from technology-cost reduction or IT upgrades — it is in how the cloud enables business innovation through automation, machine learning, and emerging technologies.

Security concerns might be well intentioned; however, they need to be demystified by experts in the field. For example, faulty implementations such as a lack of integrated governance can lead to further challenges.

Business and IT alignment is critical to ensure return on investment — companies can achieve this by streamlining investments and accelerating time to impact from around five years to just over three years to increase run-rate benefits

Staff acquisition and retention is another factor to consider. With the rapidly increasing demand for cloud talent globally, the right staff is vital to success, as well as deep capability building.

Lastly, rigorous change management is critical to ensure adoption. Organizations need to adopt the mantra: use equals value.

The cloud is rapidly changing how businesses operate. Cloud transformation needs to be seen as a non-negotiable, strategic value-creation lever. To maximize the cloud to its full advantage, energy, minerals, and mining companies in Indonesia wishing to migrate have to start critical business-strategy conversations as soon as possible.

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Prabaharan Gopalan is an expert associate partner in McKinsey’s Jakarta office, where Thomas Hansmann is a partner. Vivek Jha, an engagement manager in McKinsey’s Jakarta office, and Azam Mohammad, a senior partner in the Singapore office, contributed to the article.