According to IDC, by 2019 enterprises worldwide will have spent over US$2.1 billion on tech-based services to implement and manage digital transformation initiatives. By 2020 over two-thirds of enterprise IT spend will go on cloud-based offerings. But let’s back up and start at the beginning.
Digital transformation is defined as the “profound and accelerating transformation of business activities, processes, competencies and models to fully leverage the changes and opportunities of digital technologies and their impact.” What does this mean for your business and technology in general? Is your infrastructure ready for this transformation and how are you planning to handle this dynamic environment in the future? We look at some of the trends that are coming, how to plan for them, and some of the high level items you should consider before digital transformation becomes a disruptive force in your business.
Did you know that in 2017, 34 percent of all technology will be allocated to digital transformation projects? IDC states that this is mainly because IT, helped by digital transformation, is becoming more of a cost center than ever before, and is now on average responsible for 6.5 percent of revenue growth. That means IT infrastructure is no longer just an expense but a money maker. Moreover, organizations with digital-ready networks are seeing double or triple the revenue growth of those without. According to IDC, companies that have linked their distributed enterprises have increased profits by between 30 and 50 percent.
The reasons to move towards digital transformation are simple. With a more distributed and dynamic infrastructure, building a flexible and scalable IT environment, as a money maker rather than an expense, is mandatory. Making your IT serve as your best sales person or hardest working employee may be an odd concept, but think of the alternative: If your IT department and environment isn’t performing up to expectations, your whole business suffers.
A well-thought-out strategy and execution plan for digital transformation can actually deliver a competitive advantage. If your systems are faster, more flexible, and more affordable than your competitors’, you’ll increase your market share and drive more business. A great example of this is online advertising, where ads are served to hundreds of millions of people a day. Ads are a huge income driver for online marketing companies, but competition is fierce. The most successful companies have completely digitized so that the process to bid, approve, and serve an ad to an end user takes less than a second. The kicker is that if it takes longer than that in today’s online market, the user will dismiss the ad and the company that served it loses an opportunity.
Now the question is how do you prepare for digital transformation? How do you set a plan in motion to get from where you are today to where you want to be? Well, it begins with cloud tech and cloud infrastructure. Cloud computing is a type of online-based computing that provides shared IT resources and data to computers and other devices on demand.
First, let’s assume that your IT stack is a traditional setup with multiple vendors’ servers, storage, and networking solutions. In this infrastructure, an application like SAP/Oracle would have its own dedicated resources. The database and applications would all sit on a physical server with dedicated physical storage and, usually, semi-dedicated (zoned) networking. The database administrator would be limited to those resources. Adding resources would involve scheduled downtime. The standard setup also creates operation silos and bottlenecks in administration and information flow.
The first step is virtualization. You must virtualize the foundations of your environment before you can start providing services. There are three basic building blocks of any given infrastructure: servers, storage, and networking.
If you’re an average business, you have at least three storage vendors and, usually, a combination of two different technologies such as SAN and NAS. This provides you with very little flexibility. But, virtualizing storage is a key feature for monitoring, managing, and distributing storage according to its properties rather than vendor or type.
Let’s say you need a very fast disk for a new production database. In legacy infrastructures, that disk would exist inside a single vendor’s disk array. However, if virtualized, the disk could exist across multiple vendors’ storage products — even in different cities.
Products like VMware and ZEN are now used to virtualize servers. This blurs the lines between physical resources and the actual places where applications live, unfortunately creating a point at which more complexity could choke an organization. This physical versus virtual relationship must be proactively managed to avoid further complicating the IT infrastructure.
You’ll need a policy-driven control layer to control and coordinate all virtualization in the IT environment. This layer is also known as software-defined and is the basis of a hyper-converged infrastructure. It makes the server, network, and storage virtualization from different vendors speak the same language and work together as one large, well-oiled machine.
But, how does this work together and lay a better foundation on which to build your digital transformation project? Good question. Let’s look at an example of how the layers of virtualization make your IT work for you instead of you working for your IT.
If the SAP/Oracle Instance that your development and operations group needs to start testing its new application, the software control plane would use its policies to create a workflow that would find and allocate storage that matches the agreed service level agreement (SLA), regardless of vendor. It would then use the best practices of the database and storage vendors to allocate the correct number of disks, file systems, and servers. Next, it would find and allocate proper networking with the correct level of backup, recovery, and – if needed – active/active failover. After that it would automatically create virtual machines and install all the appropriate software using the vendor’s best practices. Finally, it would apply the policy for monitoring, business continuity, and disaster recovery and grant users access to the new environment.
In the past, this would have taken weeks of planning and meetings. Change requests and testing had to be done every step of the way. However, with the software control plane and the ability to create pre-tested workflows, that’s no longer necessary.
Once your foundation is built on solid virtualization principles and a robust policy control plane, you are ready to start digital transformation. IDC calls this the 3rd Platform and it’s where the cloud combines with a mobile platform and a social platform that interfaces into your cloud environment. Big data functionality must stretch across all aspects of your environment, even those parts you may not own.
There are many industries whose futures depend on digital transformation and its many benefits, including the promise to turn traditional IT infrastructure into a cost center that allows a company to make money easier and faster. Telcos and banks now depend on mobile technology and the dynamic applications that allow business to be done anywhere at any time. Fintech is talked about in every trade publication worldwide, and all the newest technology claims to have a huge impact on Fintech and other industries.
Agriculture is another great example of how digital transformation will revolutionize farming and food supply over the next 10 to 15 years. The UN predicts the global population will exceed 8.5 billion by 2030 and the scale of activity required to provide food for all is driving the environment to breaking point. Using precision farming, smart irrigation, and smart farm management will allow tech solutions deployed on robust digital infrastructure to streamline processes, minimize waste, maximize output, and let us once again walk the path to sustainability.
The energy industry requires smart grids and smart power distribution to prepare for upcoming demands. Smart government depends on digital technology to bring government closer to the people, and the health and education industries require digital solutions to reach more of the world’s population more efficiently at cheaper cost.
Any industry that wants to do more than just survive will need digital transformation. To thrive, the underlying technology that industries utilize must morph into an environment that promotes the rapid deployment of new services and the ability to serve customers cost effectively.
However, according to Forrester only 27 percent of today’s businesses have a coherent digital strategy that sets out how the firm will create customer value as a digital business. Gartner reports that 125,000 large organizations are launching digital business initiatives now and that CEOs expect digital revenues to increase by more than 80 percent by 2020. IDC expects that the percentage of enterprises creating advanced digital transformation initiatives will more than double by 2020, from today’s 22 percent to almost 50 percent.
IDC predicts the emergence of the “digital transformation economy”; Gartner talks about the rise of “algorithmic business” and the “programmable economy”; and Forrester has charted a roadmap for companies to respond to digitally savvy customers and consumers. Based on their predictions, digital transformation will become a key strategic driver for most CEOs.
Big data analytics will serve as the foundation of digital transformation due to all of the increased business and traffic to your online applications. Collating and predicting your customers’ needs is mandatory, because they can buy or get services from hundreds of online providers. Big data directly affects the customer experience, and the better the experience the more likely a customer is to become a repeat customer.
IoT will catalyze the expansion of digital transformation to all corners of the economy. Gartner states that by 2018, there will be 22 billion IoT devices installed, driving the development of over 200,000 new IoT apps and services. Also in 2018, 6 billion connected things will be requesting support and responding to service requests from things, creating new service businesses. By 2022, 1 million new devices will come online every hour. IoT devices and solutions have the potential to redefine competitive advantages in every type of economic activity and fundamentally alter how consumers interact with enterprises and how enterprises interact with their supply chain and distribution partners.
Huawei and industry experts predict that by 2020, 85 percent of enterprise applications will be cloud-based and that going to cloud. Every enterprise wants to deploy applications more efficiently and at lower cost. Every enterprise requires powerful and convenient platform services, smarter resource sharing, and the benefits of the “pay as you go” cloud model. In fact, Huawei and industry experts predict that by 2020, all enterprises will be connected to the cloud in some manner, which then begs the question: Is your digital transformation plan vetted and viable?
If so, this is where your digital transformation begins. You’ve built a foundation that’s solid and robust, able to scale, and ready to take on the role of business catalyst. Your digital transformation starts with cloud and big data, but must be ready to tackle the coming tsunami of IoT.Your digital transformation starts now.