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Key takeaways
- Lift-and-shift VM migrations limit cloud value and sustain hidden cost burdens.
- Cloud-native architectures reduce compute, labor, and operational overhead significantly.
- Managed services improve scalability, resilience, and developer productivity.
- Organizations adopting cloud-native models outperform peers in growth, productivity, and efficiency.
Why cloud-native outperforms VM-based cloud strategies
Migrating to the cloud is a foundational step for digital transformation, but not all approaches deliver equal value. Many organizations rely on virtual machines to accelerate migration, but this model often replicates legacy inefficiencies in a new environment. A cloud-native approach, by contrast, enables enterprises to reduce cost, improve performance, and unlock innovation at scale.
The problem with VMs in the cloud
Migrating to the cloud can be a complex process. There are applications and files to transfer, settings to update, and APIs to connect. Software development practices undergo changes and workflows shift, forcing teams to adapt—even as the business continues to operate.
For many organizations, a lift-and-shift migration is tempting. It’s fast and relatively painless because an enterprise simply transplants the existing IT environment—applications, configurations, and workloads—into the cloud. There’s generally no need to rewrite code, and systems are typically up-and-running without delay.
But there’s a catch. Maintaining virtual machines (VMs) in the cloud is costly—and often inefficient. The qualities that make VMs so attractive in a data center—portability, resilience, and compatibility—become detriments in the cloud. Patching, backups, incident response, capacity management, auditing, and security issues don’t go away; they persist in the cloud.
Business leaders consistently underestimate the cost of VMs in the cloud. The reason? They rarely show up in a compute bill—even as they inflate IT costs and pull staff away from strategic tasks. As a result, many organizations find themselves in cloud purgatory: they accrue modest benefits, but they are unable to harness the power of a cloud-native architecture.
PwC’s 2024 Cloud and AI Business Survey found that the top-tier of cloud innovators—12% of firms—are twice as likely to report revenue growth of 15% or more compared to firms using traditional cloud-hosting VM models. These leaders are also delivering promising results, improving profitability by 74% and productivity by 72%, and time to market by 69%. More recent research, PwC’s AI Performance Study, found that those companies build on strong cloud, data, and technology foundations deliver 7.2x greater revenue and efficiency gains than their peers.
While VMs won’t disappear anytime soon—they have legitimate use cases and continue to fulfil niche needs—moving to a managed, cloud-native framework unlocks long-term cost savings while ushering in a more advanced digital business model. As developers and business units shed technical debt, innovation and transformation become possible.
Organizations often achieve cloud migration—but not cloud transformation.
Cloud VMs diminish performance and increase costs
Too often, organizations find themselves caught in a lift-and-shift trap. Familiar interfaces and known operational elements are comforting—and porting over existing workflows allows a transition to the cloud to take place quickly. But they’re not realizing the benefits a cloud-native environment can deliver. PwC found that while 78% of companies have parts of their business already in the cloud, only 10% rely exclusively on a cloud-powered business.
The reason? Swapping endpoints, tweaking configurations, updating certificates, and redirecting connection strings may make it easy to get into the cloud quickly, but then things get more complicated. Developers and IT staff spend time “keeping the lights on” and business units can’t take advantage of advanced digital tools like AI agents. Technical debt accumulates and security and regulatory risks rise.
The bottom line? VM by default isn’t a viable strategy for the cloud. Virtual machines are better used for applications tied to OS-level dependencies, workloads that should adhere to continually changing compliance standards, and systems and data that aren’t quite cloud ready. When organizations attempt to use VMs more widely they impose a barrier to innovation and a tax on growth.
Why cloud-native makes sense—and ultimately saves dollars
A cloud-native framework – while requiring more upfront change – can significantly lower compute costs, labor hours, and inefficiencies and technical debt that surface when an enterprise relies on infrastructure that was never designed for the cloud. These gains accrue around four key areas:
- Direct compute and licensing savings. Moving common workloads like SQL Server or web applications from a VM to managed cloud services delivers cost savings. For instance, Amazon Relational Database Service (Amazon RDS) and AWS Lambda can trim $50 to $100 per VM per month. Consider an organization that operates 10,000 VMs. It can save $6 million to $12 million annually in direct compute costs alone.
- Eliminating over-provisioning. It’s critical to have adequate compute capacity available at all times. But with VMs this often translates into chronic underutilization. Making matters worse, this waste rarely surfaces on a balance sheet; it’s just considered the cost of doing business. So, overprovisioning typically goes unnoticed. A consumption-based model addresses this problem: compute adjusts dynamically and enterprises pay only for the resources used.
- Achieving high availability without duplication. Idle capacity isn’t the only infrastructure problem VMs introduce. To avoid failures, organizations require duplicated instances and multi-availability zone (AZ) resilience. Unfortunately, these VMs do not contribute to normal compute capacity. On the other hand, cloud-native environments introduce enterprise-grade resilience within the architecture from the start. There are no expensive and time-consuming fixes later.
- Reducing operational overhead. Ongoing patches and OS updates, performance monitoring, configuration backups, and constant security monitoring aren’t just a nuisance. These costs directly impact IT labor and ticketing queues. PwC’s experience has shown that when a cloud provider oversees these tasks, managed cloud services deployments typically take place one-third faster and with fewer technical glitches than equivalent VM workloads.
A cloud-native architecture drives technical efficiency gains
A cloud-native architecture removes the engineering drag that slows progress and undermines innovation. An enterprise benefits in four ways:
- Built-in resiliency and scalability. In a traditional VM environment, engineering teams architect and maintain fault tolerance, often requiring considerable time and expertise. However, cloud-native services introduce multi-region failover, load distribution, and autoscaling. The result is higher availability, zero provisioning, and instant dynamic scaling.
- Automated patch management. OS and middleware patching isn’t just a cost problem; it’s resource-intensive and prone to problems. In a managed cloud environment, the service provider handles patches, updates, and upgrades, while teams can focus on building business value.
- Improved observability. Managed services offer cloud monitoring tools specifically designed to provide telemetry, proactive alerting, and a consistent view of performance data. Consequently, instrumentation challenges common to VM environments disappear.
- Capacity availability. Because VMs are inherently constrained by pre-allocated resources, elastic scaling can be a persistent challenge. However, managed services use shared capacity pools. The result is dynamic, always-on capacity that matches fluctuations seamlessly.
A cloud-native framework delivers business benefits
Cloud modernization transcends IT. It touches almost every corner of the business and reshapes the way teams operate, interact, and innovate. Results revolve around four critical factors:
- A cultural shift toward cloud-native thinking. A cloud-native environment impacts everyone—and changes the way people work. Servers, maintenance windows, and request-and-wait models disappear; APIs, managed services, and highly automated event-driven architectures take shape.
- Faster time to market. In a cloud-native environment, DevOps teams are freed from constantly recoding and updating core applications. They’re able to focus on developing new features, products, and services—as well as improving code reliability.
- Application modernization powers advanced analytics and AI to uncover new opportunities. Modernization isn’t just about moving faster, it’s about unlocking capabilities that may not have been previously known, creating meaningful value through cost reduction and new revenue streams.
- Redeploying talent for maximum strategic impact. Assigning highly-paid engineers to routine tasks such as managing maintenance cycles, software updates, and incident response isn’t a recipe for innovation. In cloud-native environments, these specialists can focus on optimization and innovation.
Getting started: A leading-practice approach
A post-VM world is built around four leading practices:
- Step 1: Address discovery. It’s critical to assemble a complete and accurate picture of existing VMs. This includes what resources are running, who owns them, what they cost, and what dependencies they create. With an understanding of how technology assets map to business services, it’s possible to select which VMs to migrate first.
- Step 2: Identify candidates. Databases running SQL Server or PostgreSQL on VMs are strong candidates for managed services such as Amazon RDS or Amazon Aurora. Web application front-ends are also relatively easy to move to managed cloud services. These workloads often require minor configuration changes rather than full-scale code swaps.
- Step 3: Build a sound business case. This includes quantifying savings across compute, operations, and labor pools and factoring in funding programs offered by AWS, which provide incentives that offset transition expenses. Confirm that finance and technology leadership buy into the cloud modernization plan.
- Step 4: Gain momentum through strategic execution. A common trip-wire on the cloud modernization journey is often cultural resistance. It’s better to address this challenge in a structured way: Identify early use cases, deploy them and train teams, prove the model works, share early wins, gain buy-in, and then move forward.
A world beyond VMs
A migration to cloud-native infrastructure is no simple undertaking. It requires careful planning and deliberate engineering across a vast landscape of applications, workloads, and resources. An organization should understand how changes unfold in the real world—and how to put a cloud-native environment to work for maximum gains.
That's where PwC and AWS enter the picture. Powerful technology along with a deeper understanding of the business elevates a cloud strategy. When an enterprise approaches the task strategically, it dramatically lowers long-term CAPEX and OPEX costs, while unlocking business value. As it retires virtual machines and embraces a cloud-native world, a fundamentally different—and digital ready—enterprise emerges.
PwC and AWS help organizations move from loud ambition to measurable outcomes. AWS provides the cloud, data, and AI foundation, while PwC brings industry insight and delivery excellence. Together, we help clients unlock faster ROI.
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