Cloud Adoption and Digital Transformation: The Paradoxical Role of Enterprise Data Architecture

Large traditional conglomerates increasingly invest in cloud infrastructure through adopting Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) products, which facilitates digital transformation but creates complex interdependent systems spanning hybrid multi-cloud environments. Enterprise data architecture emerges as a crucial type of digital infrastructure that manages these complex systems. It is defined by the physical systems that collect and store data and the governance rules around the transformation, distribution, and consumption of data. We examine two technical frameworks for data architecture design: the microservices architecture that implements a modular design and the single fabric architecture that implements an integral design. We combine a survey measuring these data architecture designs at the enterprise level with data on cloud adoption and revenue across over 210,000 establishments from 2017 to 2019. Among retail establishments, the non-integral data architecture is associated with a higher likelihood of adopting the cloud and a significant increase in the effect of cloud adoption on establishment revenue. Among financial services establishments, the non-modular data architecture is associated with a higher likelihood of adopting the cloud and a significant increase in the effect of cloud adoption on establishment revenue. These results suggest that modular and integral data architecture designs complement cloud adoption under different contingencies. While retail conglomerates may use a decentralized approach to ensure flexible adaptability to the external market environment, financial services conglomerates may use a centralized approach to ensure consistent integration of internal data sources and robust control.