Aamer Baig, McKinsey & Company | Google Cloud Next 2025

Good morning cloud community and welcome back to sunny Las Vegas, Nevada.

We're here on day one of our three days of coverage at Google Cloud Next, my name's Savannah Peterson, bringing you all the breaking stories with Dave Vellante this week.

Dave, lots of data, lots of announcements, and lots of fascinating guests. We're going to have a busy week.

guests. We're going to have a busy week.

We're in consultancy land.

I feel smarter just hanging out here.

I know. Did you feel like our opinions have more value all of a sudden?

Speaking of consultants and great ones like that, Aamer Baig, thank you so much for being here.

It's a pleasure being here as well.

I can imagine it's a busy week for you, but more importantly, an incredibly busy time.

Yes. - You are someone who empowers your team and helps oversee massive technological transitions and transformations.

Has your job ever been more complex than it is today?

It has always been complex.

I would think the complexity is at a different level now, but it's also probably the most exciting time to be in tech.

And you can feel the energy here, and you mentioned the announcements and the talk about data and agents, I think it's an enormously important moment to be in technology and in enterprise technology.

Absolutely. And a time of frankly, enormous investment.

I can imagine a lot of the conversations that you and the team have are, and the teams that you advise are around the healthy tension between investment in, not just AI, but the systems that are going to support our AI future and the ROI on that.

Talk to me a little bit about how you're helping companies navigate that as well as some of the maybe common myths that you're saying that you're often having to dispel or lessons you're teaching.

Great question. Look, I'll preface it by saying that we're in a moment of huge change in technology, but also huge change in business and organizations as well as a result of that.

So if you look back at different platform shifts or generational technologies, each one of them has led to changes in consumer behavior, changes in how big businesses and small businesses work, and also the role technology has in our life and our business.

So you have to look at all of that, but then you have to say, how do I apply all of that to really change people's lives or really drive impact in a business?

So to your point on ROI, the only thing for certain right now that we can see is more innovation, more product and with that perhaps more complexity and perhaps slightly a bit of confusion that companies are facing in terms of what to do here.

As a result that's leading them to experiment more perhaps with technologies that aren't ready, but even more importantly, experiment with without getting the rest of their organization and their partners ready.

That's a great point.

That has led to, I would say, a lukewarm response from CFOs and CEOs in terms of actual impact.

So there is a saying that has become quite common that says, "Hey, I see AI everywhere except in the bottom line.

" So it's not mine.

I'm quoting somebody who said that, but I think there's a lot of truth to this because we're buying into a lot of euphoria.

I would say rightfully so, but thoughtfully, no.

You're full of one-liners this morning.

I think that goes back to, it might've been a Fed chair who said that, "I see technology everywhere except in the productivity numbers," or something like that.

And that was right before the PC boom, and we saw it and so says somebody...

I was excited for this interview, Aamer, because I've been following the economics of tech spending for a long time.

And you know how it goes, when it's boom time, Y2K, people spend and they look back and then the market crashes and Nick Carr writes, Does IT Matter?

" And then everything gets downturn and people stopped spending.

And you saw this in 2020, in 2021 with the pandemic.

So how do you cut through that hype to really drive economic value for customers?

What's your methodology and approach?

It's a great question and it's a complicated question as well, but just to put a little bit of numbers behind what you said.

We've seen tech spend in aggregate over the last decade go 2, 3% a year and a little bit of a spike after the pandemic.

But if you look at labor productivity, which it's supposed to drive, has probably grown around one to one and a half percent in that main decade.

In fact, if you look at it from an industry perspective, the story's pretty much the same, there's no industry that has actually really captured full benefits of tech spend in terms of the labor productivity line.

So much so that some companies, you go from economy to industry to companies, companies are saying, "Look, my tech spend is growing faster than my revenues are growing.

" So that actually leads to a very interesting conversation, which is, how can you avoid spending money on tech?

You can't, because there's a race for productivity, for innovation, and there's no new business, no new productivity idea that doesn't have tech in the middle of it, period.

That's a competitive factor, you have to do it.

You have to do it. But how do you actually drive ROI, to Savannah's question, and the impact to yours, Dave, is to make some practical choices from a management perspective.

You have to make sure that you are investing in the right places, not all over the place.

You have the management systems and the management practices to actually make sure our value actually gets captured in the bottom line.

And by the way, elevate the importance of technology in the organization as well.

So the CIO, CTO is helping you make the right platform choices and then the CFO helps drive impact to the bottom.

And what I've observed is what a lot of companies have done is they just focus narrowly on the ROI of a project without an understanding of the organic system.

And that's where it gets really complicated and difficult because when you insert that project into production, it has ripple effects and dependencies throughout the organization.

Capturing value is really tricky and especially complete value.

And measuring it and ensuring that we're actually getting the return and learning from your mistakes and continuously improving.

So I guess, I mean, who's doing it well? I mean-

Yeah, what are the best practices there, I think is essentially what you're saying when it comes to capturing and measuring, but also amplifying the value of these projects that are working.

So I completely agree, it's hard to capture value and the value is not just from tech.

We have a saying at McKinsey that it's never just tech.

The last mile around change management around adoption and changing behaviors, it's super important, very difficult.

Easy to say, hard to do, as we say.

Last year we came out with an article that said, "The Seven Hard Truths in Scaling Generative AI.

" And one of them is to really focus on things that matter.

Another one is, to your point, Dave, the ecosystem matters and point solutions.

And then also the third one, which is related to what actually makes a difference is really getting a good handle on costs.

You'd be surprised, many organizations actually don't have a really good handle on the total cost of deploying tech and running tech.

So it includes all the things you need to build your tech stack, but all the change management associated with it, all the technology debt that you actually carry as well as the innovation that you'll have to spend on top of that.

So we actually think there's an emerging practice around really understanding the economics of technology in large organizations and how to use the real levers of productivity, of growth, of margin improvement to actually use that to then prioritize where you spend your money.

Oh- - Yeah.

Go ahead, please. - Oh, I was just going to say, I mean you have to do it especially at the velocity and volume of data that we're dealing with right now and the impact and scope of these projects as they get a lot bigger.

So talk to me, I mean, we're sitting here at Google Cloud Next, talk to me about the value of a partner like Google and how that helps build the confidence in the work that you and your team are doing across the customers you have the opportunity to interact with.

Well, this is an opportunity for us to connect with a lot of people that are innovating, and a lot of our clients are here as well.

So it's a good catalyst for convening not just the best minds, but also the best practitioners as well.

So for us, it's not just the privilege of speaking with you, but actually learning about all the innovation that's happening here.

The announcements that they come up with really sets the stage for what's to come.

So there's a lot being spoken about agentic frameworks and agentic AI, last year it was generative AI.

I think it is a transformational improvement, not to overuse that term, but in terms of anything that involves knowledge, work with a lot of workflow in large companies, solving this in a way that is interoperable, that still gives agency to the worker, but really amplifies it could have a huge impact on a number of industries.

So when you look back at some of the major waves that you were talking to before these platform shifts or even initiatives like BPO, we were talking earlier to a guest about RPA, which gave a nice- Yeah, we're really doing all the RPA <inaudible> today, Dave.

Yeah, gave some nice back office hits, et cetera.

As you look back on those, we often say that new waves are over-hyped at the beginning, but under-hyped long-term area or under the curve, probably true for a lot of these initiatives, it certainly was for PC productivity and the internet and probably BPO.

A lot of talk now about a whole new way of thinking about organizations with massive gains potentially in productivity, which we haven't seen it drop to the productivity line yet because a lot of the action's in consumer, let's face it.

Yes it is, baby. You know I love that.

And that's fine. That's how these things always go.

How do you think about the future organization from two standpoints?

One is, the startups that are going to say, "I can do that with one-tenth the number of employees," and the incumbents, which are many of your clients, and say, "How can I make sure that what happened to the telcos with over-the- top vendors doesn't happen to me?"

Yeah, it's a great question.

Yes, it is.

I would say, just to give you a bit of a historical context, which you refer to, a general purpose, technology has taken multiple decades to really take hold.

So whether it's steam engine, railways- AI.

AI, the internet, PC- - People think it's new.

Right. - Yeah, AI was invented in the 1950s.

I was just going to say we're in our second century here.

Exactly. - The second century, exactly.

But if you take the starting point of perhaps, generative AI as the moment where, think of the web browser giving us access to the internet and the chatbot giving us access to AI, you should think of anything between 5 to 10 years at least of it really taking hold.

So I would say we're still in the early innings, but I think you should start thinking of organizations, workflows, decision making in the context of a high degree of automation and what's called a digital workforce being part of the solution, so agents.

So yesterday in one of the sessions, one of the CEOs said they're actually asking for an org chart with an agent and a human, <inaudible> including in that.

So that is going to start a process, and I think it's going to take time to evolve.

But I will say just as very interesting concepts, and I'll take software development and tech as an example, because this is tech.

Usually big software development teams were big pyramids, particularly large projects.

And about a decade ago we went to diamond shapes, smaller teams. Now, if you add agents to it, I think you're going to have a very small set.

You're going from maybe a team of 20 to 7 to 2 to 3 to 4 people that'll make a highly effective team.

So you can just see the compression that's happening there and you scale that across rest of the organization.

And you think of organization as a set of rules, practices that accomplishes a certain goal.

It's business processes, yeah.

Business processes.

And you can have AI that enables that process.

And Dave, your great commentary, a few weeks ago you talked about processes being somewhat on the side of big technology stacks.

And now I think if you can embed process, data, workflow and the business logic associated with it does give you a very, very small unit that can accomplish what a bigger unit used to do.

And that's why I think you're right, it's going to take five or 10 years to make that happen.

That is not a trivial task to incorporate all the business logic and the processes.

I know we're out of time, but I have kind of an academic question for you.

If you go back and it's relevant to what's going on in the world with tariffs these days, if you go back to the Industrial Revolution, the UK, Britain was the world's low-cost provider.

So they were the exporter to everybody because they had better technology and they were able to build goods for lower cost than everyone else.

They were everywhere. - And they were everywhere. So

today, when you think about tariffs, it's maybe a more complicated question that I'm making it out to be, but my question is this, through automation can, for instance, the United States be the low-cost producer?

My fear is the tariffs give us a shield to not invest maybe in automation, but is it possible when we talk about bringing manufacturing back to the US, which may or may not happen.

China seems to have such an advantage in low-cost production.

Can automation actually change that?

And maybe it can in certain industries, I know aerospace, defense, automotive, and industrials are your sweet spots, so maybe there are certain industries where that can take shape.

Does that question make any sense?

And do you think that we can drive automation to the point where the United States could be the low-cost provider, at least in certain sectors?

I think in certain sectors where you can really drive innovation to the front line and innovate not just in technology, but the work process and the end product where you embed product development.

Because what happens in a lot of those industries is you design and then you manufacture, and then you sell.

Again, that linear flow that we talked about.

If you make that much more of a circular flow where things happen in an iterative manner.

Think of what happened in software development that went from waterfall stage-gated approach to iterative, apply that to engineering and manufacturing where the physical and virtual come together, you design and you produce at the same time.

It's highly automated with robots but has human ingenuity.

Really powering that, which is really the strength of America, I think it's possible in certain sectors.

Yeah. - That's interesting.

But cost is only one element of value, you have to remember that.

Value is what's perceived and what's delivered by the customer, and hopefully we can win on that.

Yes. And the impact that has across our friends and neighbors and everything else, making AI real for the rest of us, it's going to be really interesting.

All right, Aamer, this has been a really fascinating conversation.

One last question to wrap us up here today, since you do get to see a lot and in theory forecast the future a bit, what do you hope to be able to say next year at Next that you can't yet say today?

I would love to see some at scale deployments of agentic frameworks that have really not just improved productivity, but have really driven innovation and experience at the same time.

It is early innings.

We talked about single agents last year, we're talking about multi-agents, hopefully next year we'll talk about squads and a factory of agents that are really advancing the ball forward.

We have two of our colleagues speaking about agentic opportunity later today and another set tomorrow so I'd encourage your viewers to go check them out as well.

Awesome. Thank you so much for starting the day off so well with us today. This has been fantastic.

It was my pleasure. Thank you.

Thank you. - And Dave, always a treat.

And thank all of you for tuning into our three days of live coverage here in Las Vegas, Nevada at Google Cloud Next.

My name's Savannah Peterson.

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