Digital business transformation is one of those initiatives that tends to generate a lot of excitement within most organizations. Line of business executives tend to envision new streams of revenue suddenly being generated, while IT leaders see a chance like never before to directly add value to the business.
But now that a critical mass of digital business transformation projects have been launched, business and IT leaders are starting to discover that data management coupled with the rigidity of existing legacy systems is making it more difficult than anticipated to achieve digital business transformation goals.
In fact, a new global survey of 4,600 business leaders conducted by Dell Technologies in collaboration with Intel finds the top barrier to digital business transformation is concern about data privacy and security. That same issue only ranked fifth in the same survey conducted two years ago. Lack of budget and resources, a perennial IT issue, fell to second from first in the latest survey.
At the same time, information overload rose from 13th place two years ago to seventh place in the latest survey.
That shift suggests that organizations are starting to appreciate the true scope of the digital business transformation challenge they face, says Matt Baker, senior vice president of strategy and planning at Dell EMC. In fact, Baker says rather than being motivated to fund these projects because of some perceived existential threat to their business models, organizations are now pursuing a more circumspect approach that reflects greater overall maturity derived from experience.
“They are more worried about being outmaneuvered by traditional peers,” says Baker. “There’s much less of a boogey man involved.”
Nevertheless, the survey makes it clear that most business leaders are still paranoid about digital business transformation. A full 78 percent believe digital transformation should be more widespread throughout their organization, while 51 percent believe they’ll struggle to meet changing customer demands within five years. A third of respondent fear they’ll be left behind altogether.
In terms of actual progress when it comes to digital business transformation, a survey of 1,000 CXOs working at organizations with over $1 billion in revenue conducted by Infosys makes it clear the legacy systems where the data needed to drive these projects most often resides have emerged as both an asset and a liability. The Infosys survey ranks legacy systems (41 percent) as the single biggest barrier to digital business transformation in 2019, followed distantly by insufficient budget (30 percent) and an inability to experiment (22 percent).
Arguably, the one thing that organizations that are leaning into digital business transformation appreciate more than their peers is the compound impact these investments will have over time, says Jeff Kavanaugh, vice president and executive editor for the Infosys Knowledge Institute. Organizations that tend to lag on making IT investments will find it very challenging to close the gap as rivals begin to realize the benefits of investments in technologies such as artificial intelligence (AI), says Kavanaugh.
“Organizations that make these investments now are going to see non-linear benefits later,” says Kavanaugh.
The Infosys survey lumps respondents into three primary categories. Visionaries on average have deployed 12 digital business transformation projects as scale and have completed seven additional pilot projects. Explorers average six digital initiatives at scale and have completed seven or more pilot projects. Watchers typically operate at scale on only one or two digital initiatives, with another one or two initiatives in the pilot testing phase. Only 21 percent of the Infosys survey respondents are classified as Visionary, compared to 61 percent classified as Explorers and 18 percent classified as Watchers.
The Next Big Challenge in Digital Business Transformation
The next big challenge most organizations will face on their digital business transformation journeys is integrating these projects into their mainstream operations, says Dan Hushon, senior vice president and CTO for DXC Technology. Many digital business transformation projects were launched as “sidecars” that were deployed alongside existing business processes, says Hushon. As these initiatives increasingly prove their value, organizations need to more aggressively replace legacy processes, says Hushon.
“Right now, there’s only surface level integration,” says Hushon.
A global survey of 621 executives at organizations that generate more than $500 million in annual revenue conducted by The Economist Intelligence Unit (EIU) on behalf of DXC Technology suggests slow but steady progress is being made. While the survey notes about half of the companies surveyed have only digitally enabled three key organizational functions thus far, well over half (58 percent) expect every business unit to be digitally enabled in the next three years.
The survey also finds 83 percent of respondents expect their organizations to increase their digital investments in 2019, with more than 40 percent predicting their organizations will increase their investments by 11 percent or more. Much of the funding for these initiatives, however, will also come from savings derived from modernizing legacy systems. Over three quarters of survey respondents (76 percent) expect the cost savings from IT services modernization to help fund their digital strategy.
The challenge organizations will face, says Hushon, is that years of layering one set of applications on top of another has create a mass of “spaghetti code” that is very difficult to unravel.
On the plus side, the rise of cloud computing has significantly reduced the capital outlay required to drive a digital business transformation project, adds Hushon. That capability makes it much easier for organizations to experiment with new applications before replacing legacy systems. However, it’s more than apparent that organizations will need to replace those legacy systems to drive down the total cost of IT, which in turn will free up budget dollars needed to fund digital business transformation initiatives.
The simple fact of the matter is a critical element of any cost justification for a digital business transformation project is replacing existing legacy systems. The problem is that not only is replacing those systems a complex undertaking, most organizations can’t realistically turn off the applications running on those systems until new applications are thoroughly vetted. For all the excitement about digital business transformation, no organization can afford to disrupt their existing processes in a way that might impact their quarterly financial results. As a result, the digital business transformation journey for most organizations will be an extended one. Regardless of how hard that journey becomes, however, just about every organization now recognizes there is no going back.