Digital Transformation: Start at the Core, End with Customer Delight
Only one of the top five companies on the 2011 Financial Times Global 500 list, namely Apple, makes it to the current top five, all of which are high technology companies with huge platform businesses. Less than ten years from now, a company on the S&P 500 will most likely live only for 14 years. Biggies like Kodak, Sears and Blockbuster have fallen by the wayside, swept away in a wave of digital disruption that is sparing no one, least of all traditional incumbents.
As longstanding organizations attempt digital transformation to avoid being disrupted, many of them are finding that their biggest adversary is at the core – a monolithic legacy infrastructure that lacks the agility to support their growth ambitions. Often trapped in islands, their systems, which are typically built on past technologies, and their processes, which are often outdated, have been messily linked up to run extensive business operations. Loath to disturb the status quo, incumbent companies shy away from making large investments into new technologies and changing organizational culture and skills, both of which are essential in a digital makeover.
Another important marker of digital transformation is experience that results in consumer delight. Creating such an experience is not simply a matter of bolting on a shiny new interface or application at the front end. It requires deep-rooted change at the very core of the organization, the place where problematic legacy systems happen to be.
What this means is that all digital transformation must start by fixing the enterprise core.
While this is a daunting prospect, we believe that by choosing business priorities wisely and modernizing the core in phases, organizations can successfully navigate digital transformation. Infosys has helped a number of clients make this journey by taking the following approach:
Massively simplify core systems: The first step towards transformation-readiness calls for modernizing monolithic, silo-based ERP systems into platform-led, lightly tied components built on open source software. This is exactly what we are doing for an Asian bank, where we are in the process of transforming their three and a half decades old mainframe system based on proprietary technology into a loosely coupled, extensible architecture. Early indications are very encouraging and point to a 30 percent reduction in loan processing time, as well as noticeable improvement in customer experience.
Carve out fire lanes of microservices and APIs: One way to make the core amenable to digital transformation is by firelaning Application Programming Interfaces (APIs) in the legacy systems to create microservices to allow the organization to share data both internally, and externally with its ecosystem.
A case in point, we helped a client, a direct seller of personal care products, achieve this by helping them develop a sound API management strategy and robust microservices architecture that now supports a new website and a social selling platform featuring more than 230 applications that serves markets in more than a hundred countries.
Start by migrating non-core elements to the cloud: The cloud is a major enabler of core modernization as it helps to overcome many limitations of legacy systems. But it is not enough to simply lift and shift those systems to the cloud; they must first be made cloud-capable. A number of decisions need to be taken, regarding the type of cloud to use, renewal of core assets, the processes to reengineer, and so on. A key question before enterprises is which legacy systems to migrate first. We recommend starting with the non-core aspects of the legacy landscape to develop both the right approach, and necessary confidence, before porting core applications to the cloud. Recently, we guided a mail-order retailer on this path by helping them to move their mainframe-based merchandising and supply chain system to AWS. The result is a 35 percent reduction in running costs and huge improvement in order processing and shipping volumes.
We have now implemented this non-disruptive, phased approach to core modernization enough to know that it is effective at reimagining the business of incumbent organizations as well as improving existing operations. The main aim is to renew and optimize the existing technology infrastructure to generate savings that may then be ploughed into next-generation digital capabilities. Here, our deep digital and domain skills are a huge source of differentiation. Implementation success is also greatly influenced by our modernization toolkits that help identify technical debt and weakness, as well as multiple viable options to build business and technical assets. Using DevOps and Agile play, integrated with open source advantage, we deliver a high degree of IT automation, yet another marker of transformation.
Our core modernization strategy is proven, and its implementation is customized to the needs of individual clients to maximize their opportunity to refresh both their core and their consumer experiences on the road to true digital transformation.