Transformation-readiness means replacing monolithic, silo-based ERP systems into an interdependent, intercommunicating landscape
For incumbent organizations in every industry, the emergence of digital, disruptive competition poses nothing less than an existential challenge. Yet they also recognize that digital disruption has opened the doors to unprecedented opportunity for digital transformation.
To understand how enterprises are responding to the digital challenge, and how they plan to partake in its opportunities, Infosys recently commissioned an independent survey of 1,000 large companies from nine verticals around the world.
The study, “How Enterprises are Steering through Digital Disruption”, found that incumbent enterprises were fighting fire with fire, embracing digital technologies throughout the organization for everything from IT management (79 percent) to customer relationship management (62 percent).
While these numbers are interesting in themselves, they are more than their face value.
At Infosys we believe they tell the story of a steady digital transformation of large organizations, which, while retaining their essence, are embracing many aspects of the ‘digitally born’ businesses around them, the most important being a focus on creating experiences that delight consumers of the ‘on-demand’ economy, (and hence the 62 percent vote for customer relationship management).
That being said, it would be perilous to characterize a digital enterprise based on its shiny, new customer experience, although that is important.
A truly digital organization is composed of a modernized and simplified digital core, along with optimized business processes that surround it, so it can then amplify great consumer experiences. It is an organization driven by data, secured by technology, and improved by AI-led automation.
This organization is a long way off from the traditional company, where technology came in a monolithic, rigid package, with a goal to make operations cheaper, faster, and perhaps less dependent on manual effort. So how does an organization get from there to here?
The Infosys view of digital transformation integrates the following key activities
Make Intelligent Use of Data
Gathering sufficient data is no longer a problem for most organizations, which are awash in information; the challenge is actually using that information to steer the organization’s transformation in the right direction. At the broadest level, every transformation has only one goal – to maximize opportunities while minimizing risks. But amidst myriad competing opportunities and attendant risks, how does the organization identify what’s best for it?
A sensible approach is to use the insights from its vast data to arrive at an informed decision. The good news is that many organizations are already aware of this: for example, in the survey, 2 in 5 (41 percent) of banking respondents said that using data analytics to gain a deeper understanding of their customers, and thereby deliver much more personalized communications and services, was one of the most impactful trends in the industry. The desire to use data more optimally was seen in a range of industries covered in the survey, with the utilities, retail, insurance, life sciences and healthcare sectors all citing analytics as one of the key trends that would make the most impact on their business in the next three years.
After deciding, with the help of data, which opportunities to pursue, the organization must embark on the next stage of its transformation journey, namely, modernizing and digitizing its core.
Digitize the Core
Merely knowing which opportunities to pursue (and which risks to avoid) will not take the organization to its goal, unless it is ready for transformation from the inside.
Unfortunately, the ‘inside’ of most incumbent organizations is shackled by legacy systems and processes that not only prevent them from being agile, adaptable and flexible – as a digital organization should be – but also hamper the seamless exchange of information and insight across enterprise systems.
To arrive at a state of transformation-readiness, the organization must modernize its monolithic, silo-based ERP systems into an interdependent, intercommunicating landscape that can easily connect with new platform-based components and open source software solutions. This is often achieved by fire-laning Application Programming Interfaces (APIs) in the legacy systems to create microservices that enable enterprises to share data, not just inside their four walls but also with the larger ecosystem.
The cloud can play a vital, enabling role in this sequence by overcoming many of the limitations of core ERP systems. The idea is not to merely lift and shift those systems to the cloud, but rather, to change them from within to make them cloud-capable. Several decisions need to be taken here, such as which cloud (public or private) to go to, which legacy systems to divest, how to modernize the assets destined for migration, and which processes to re-engineer and how. Cyber security is an obvious concern in cloud migration, a subject we will return to later.
Improve Business Processes
Again, simply modernizing core systems does not render an organization ready for digital transformation; it is equally important to rewrite the surrounding business processes to optimize flexibility and agility. The survey emphasised the importance of process improvement: in a process-heavy industry such as the automotive sector, manufacturers expected to see a 16% increase in global annual revenues as a result of digital supply chain improvements.
On the road to digitization, the need is not for big-bang business process reengineering, but rather, for systematic, incremental changes to sub-optimal processes. The organization should turn to data to identify the processes needing improvement, and the ways to improve them.
Automate the Enterprise
Once business processes are optimized, they are ready to be automated. Most organizations already have some automation in play, ranging from deterministic automation of rule-based, repetitive tasks at one end to intelligent automation of complex processes using cognitive, self-learning systems at the other. It follows that different parts of the same enterprise are at different points of the automation maturity continuum. Since automation works better when coupled with artificial intelligence, advanced analytics and knowledge management, the enterprise should consider adopting a next-generation platform endowed with all these capabilities.
A little more than half the organizations (56 percent) in the survey said they were using AI, but universal adoption is still some time away, as indeed is consensus on how best to deploy the technology. One of the respondents summed up the dilemma well as follows: “You always lose a little of the human touch, and that’s always the question – how far will you let AI go?” Here, the advice and experience of a trusted partner can help the transforming enterprise find the answer to that.
Secure the Defences
Digitization, cloud migration, automation – their flip side is an increase in exposure to cyber risk. Cyber security is a huge concern of transforming enterprises, and as the survey showed, the most deployed technology among enterprises (being utilized by 69% of respondent organizations).
As digital organizations create more and more connections inside their enterprises, within their ecosystems and with the IoT at large, they need a new security vision that seeks to strengthen them on the inside, not merely secures their perimeters.
An integrated package of flexible and adaptive security solutions, consumed as a service, if required, can help them realize this vision. This would enable both quick remediation and anticipatory protection, and would be much more manageable than multiple point solutions. Here too, a trusted security partner with capabilities, such as AI-led security automation, an optimized tool suite, a proactive security perspective and predictive intelligence, can be a valuable ally to the enterprise, and a key factor of success in its overall digital transformation.