There is a myth that if an organisation begins takes steps to use digital technologies, the problem of IT complexity will resolve itself. In the digital age, organisations expect to connect with customers and partners in new ways; give greater access to information and services via new channels; and quickly launch new products and services.
Typically this requires faster application development and good access to information. Cloud computing is often used to improve access and the speed of delivery. But the question remains – can an organisation truly reap the rewards of the digital age without simplifying its technology footprint?
A recent article , Boston Consulting Group suggests that simplification along the digitisation is necessary for the success.
Opportunities for digitisation
- Grow the business – Businesses grow by improving products and services using the insights gained from internal and external (social media) data. These insights can help them improve customer experience.
- Get fit – Remove the inefficiencies by streamlining / automating business processes. Reduce the costs of doing business.
- Transform the core – Build digital capabilities throughout the organisation and optimise the IT landscape.
These opportunities sound great. But to realise their promise one has to think about ‘how’.
- How can we make the dispersed data easily accessible and unlock its value to the entire organisations?
- How can we align the products and the applications architecture to support digitization of processes?
- How can our IT infrastructure support the challenges of the digital age?
- How can our IT do with a ‘start-up’ mind-set?
Answer is in Simplification
Unless organisations cut unnecessary complexity in their IT systems, business processes and people, they will be unable to fully realise the potential of these opportunities.
Reduced complexity will lead to greater agility in applications development. It will also help scaling of the IT resources up and down as needed. Less complexity will mean greater efficiency and reduced maintenance costs. All of these would improve an organisation’s competitiveness.
When compared to start-ups, the cost of complexity is even clearer. Start-ups don’t have legacy systems. They can build systems from ground up using the technologies created for the digital age such as cloud services, big data analytics and 360-degree view of the customer. Existing businesses struggle with their customer data that is stored in multiple silos. They have multiple tools connecting applications and technologies in an architectural mishmash.
Organisations need to create a roadmap for simplification, which would help them meet their digital aspirations.
IT Simplification Roadmap
Removing the complexity is not easy. BCG has suggested five ways that can substantially reduce complexity.
1. Organise data in clusters
The past approach of consolidating dispersed data was to build a data warehouse on top and use the synchronisation processes. But this rarely provides access to data in real-time. BCG recommends implementing architecture around data clusters that are shared by all processes.
A European bank designed their IT applications architecture around data clusters and three main applications domains, namely client relationship functions, client servicing functions and transaction processing functions. This design provided all systems easy access to the data they need. It also enabled the developers to select the most proper development methodology (agile or water-fall) that made sense for each domain. This reduced the development costs and shortened the schedule. New digital applications could easily tap into this data.
2. Simpler product portfolio and applications architecture
In most businesses, 20 percent of products account for 80+ percent of revenue. Eliminating non-value adding offerings allows a business streamline processes and decrease the number of supporting applications, thus reducing IT complexity. This requires a joint IT and business effort. The first step is to group the products into three categories:
- “Differentiating products” that generate real profit and thus justify customisation;
- “Standard products” whose differentiation comes not from features but from the company brand and delivery; and
- “Third party” products where the complexity is not relevant as long as they can be integrated into the digital platform.
The second step is to assess the value each product set contributes to the bottom-line. Products generating the least value can then be targeted for elimination.
In addition, it is important to simplify applications architecture along with strong business-IT governance. Even when an integrated system replaces multiple systems, strong governance discipline is needed to stop migrating the complexity from the legacy systems and products into the new system. Business decisions that create unnecessary complexity should be challenged. IT and business also should work together to cut ongoing IT costs, so that they can allocate a higher proportion to the digitisation projects.
3. Standardise IT Infrastructure
Standard IT infrastructure enables flexibility by faster provisioning and reduced administration. It also allows companies to benefit from automated provisioning and on-demand scalability. Organisations should also consider sourcing relationships and use third parties to maintain or help transform legacy systems. Partnerships where goals of each party are complimentary, and the value created is shared, are more likely to be effective.
4. Use Right Tools and Methods
Newer software development approaches such as Agile or Scrum and lean development approaches can cut IT costs and development time. But there will be a place for the traditional approaches for some applications and projects. A two-speed IT where the digital development uses agile methods, while legacy systems changes use traditional development methods may make sense.
5. Collaborate with Business
Faster development requires greater collaboration between business and IT. It is increasingly important that business and IT speak a common language. IT staff understands the business processes and language. The business people need to understand the technical concepts and terms. Only with a common language can they can truly work together and make the right decisions.
A Digital Transformation
Digital transformation is a team effort. The business and technology leadership should jointly create digital strategy. Understanding the digital trends, changing customer needs and an assessment of the internal capabilities help identify key digitisation opportunities. There needs to be agreement on the opportunities and the sequencing of these. Prioritisation of the digitisation opportunities along with the IT simplification initiatives will create a transformation roadmap.
While many companies may choose to outsource digitisation tasks, they need to stay firmly in control of the transformation journey. They must have the ability to make key decisions on design and implementation as well as vendor selection. Good project delivery, architecture, vendor management and governance processes are essential.
Flexibility is the key. The transformation plan should not be set in concrete but re-evaluated and updated every six months.
Digitisation opportunities for growing the business, reducing costs and gaining more customer insights require agility and easy access to the data. Legacy IT systems and information silos create barriers to harvesting these opportunities. Simplifying the IT platform in parallel with digital initiatives will help overcome these barriers.