Modernizing a Company's Digital Core is Vital for Business Transformation
Businesses today are undergoing major disruptions. Mobility, social media and cloud are not trends anymore, they have become realities that traditional companies have to adapt to, or else risk irrelevance. As an example, one of the recent findings of Right Scale’s State of the Cloud survey states that adoption of the hybrid cloud is over 70 percent, with 95 percent of respondents using some kind of cloud service. According to Statista, Social Media is used by over 2 billion people, almost a third of the world’s population. We have seen the conventional paid TV channels struggling to compete for viewers with Netflix, traditional retailers fighting for customers with online outlets that offer lower prices and more convenience, and established recruiting firms losing potential candidates to LinkedIn. These traditional companies have the potential to compete effectively against the new disruptors, and meet the demands of today’’s market, but in order to do so, they need to increase agility in order to unlock the full value out of their data, people and processes. What has become really important today is speed–you need to bring products and services to market faster, be able to make decisions instantly, and proactively implement changes before your competition does. This means time is the new currency and speed is of paramount importance across all industries, and if you think your industry is not being disrupted–it probably is.
Despite this, many enterprises today continue to support their most critical business processes using older, costly technologies, that often slow deployment and prevent them to achieve the speed needed to effectively compete. Not only are these companies incurring higher operating expenses than necessary, but worse, they are unable to extract the value out of modern applications. IT budget ends up being spent in maintaining legacy systems instead of being channeled towards innovation, and IT becomes a cost center, instead of being a business enabler. To address the new disruptors, you must adapt to today’s economy, and get ahead of business demands.
Central to the functioning of any enterprise, there is a core set of processes, people and data that traditionally have been a stale, yet, static “processing engine.” For example, a manufacturer may have a solid view of their past and present parts inventory, however, the teams may not be able to foresee key trends missing the opportunity to optimize their ordering process. A bank may have an excellent history of customers’ debit and credit accounts, but it might be losing cross-sell opportunities for insurance products due to a lack of integrated customer intelligence. A third example may be a retailer that collects a great deal of customer information from all their channels, and integrates it to create a single view of the client, but misses the chance to make the right offer at the time of interaction. These are examples of companies missing revenue opportunities because they can’t extract value of information they already have. You may work for one of these companies, and although your business processes might be stable and predictable, they may not be proactive or agile enough, and this means your ability to compete effectively in today’s market is limited.
To address this, you must evolve this stable, static environment, to become a dynamic “digital core”, the convergence of your core transactions and analytics, working together with the ultimate goal of becoming a real-time business. The digital core components are:
• A set of critical business processes, for example Enterprise Resource Planning for a Manufacturer, or a Billing process for a Telecommunications company.
• A collection of key data, for example Customer purchasing history for a retailer, or credit card payments history for a bank.
• A group of applications as services, for example, a Customer Relationship Management as a service to all the relevant users in the value chain.
To achieve the vision of being able to make real-time decisions based on real-time insights, speed and agility are fundamental. Examples of real-time business may be a bank stopping fraudulent transactions before they are completed, a retailer making the right offer at the point of sale, or a manufacturer predicting equipment maintenance, rather than waiting for parts to break. These are all outcomes that are possible to achieve today, however, older technologies and processes may be preventing your company to get to that state.
Modernizing the digital core is essential for business transformation, and IT must be at the center of this process, delivering an environment that is proactive, agile and uninterrupted. Where before your transactional and analytic systems have worked in sequence, and customer intelligence might take days or weeks, in today’s climate, transactions and analytics should happen simultaneously so decisions can be made in seconds, using the same data. And where in the past IT dictated what could be changed and when, now it is the business that must drive these changes and their cadence. Finally, IT’s focus on availability should evolve from meeting Service Level Agreements, to operating an environment where mobility and cloud dissolve its perimeter, and business continuity is expected.
One of the first steps your company can take to start the journey to the dynamic, digital core is modernizing infrastructure. Older platforms not only carry high costs, but also high risk, as knowledgeable resources become scarce and key business functionality may get lost as Independent Software Vendors stop supporting older platforms. Often, legacy hardware doesn’t support modern applications, limiting your company’s ability to unlock their value. Modernizing infrastructure might also help alleviate your software licensing, one of the largest cost items in any datacenter, as standard platforms perform better and can carry the same workloads utilizing fewer compute resources, thus lowering licenses needed. This can free up resources to be invested in innovation, rather than maintenance. However, modernizing infrastructure is just the first step, and perhaps the easiest in this journey. You will also need to look at application and database modernization, services agility, deployment choices and change management.
A holistic modernization approach must be taken toward all the elements of the chain: data, applications, processes and people. Technology itself is seldom the barrier, and today’s vast array of IT capability and deployment choices can support the dynamic digital core. The challenge for today’s CIO is to enable business transformation and to successfully do so, modernizing your digital core is vital.