Implications of the Digital Transformation for IT

a guys' hand with gears, implications
Interview with Rüdiger Ernst, Director Advisory & Consulting, and Enrico Stark, Consulting Manager Technology Transformation, on the implications of the digital transformation for IT

In your opinion, where do we stand today regarding digitisation?

Ernst: The digitisation wave has reached companies across the board. Initiatives and pilot projects within companies are now headed into business operations. The trial phase is over. Things are getting serious now. No industry is exempt from this development. No company can shut itself off from the digital transformation.

What role does the IT organization play in the digital transformation − enabler or inhibitor?

Ernst: In a recent Gartner survey of nearly 1,000 companies, 91 percent of IT managers worldwide stated that they don’t have the slightest doubt that they will play a major role in the digital transformation process within their company. However, 59 percent admitted that their IT organization is not up to the challenge − neither today nor within the next two years.

What is your take on these results?

Stark: I find these figures alarming. They are a wakeup call to all IT managers. Unfortunately, these figures reflect the reality we encounter in companies. Having read the sign of the times, a number of IT organizations have successfully positioned themselves as enablers of the digital transformation. The Gartner survey clearly indicates that the majority feels overwhelmed by the digitisation wave; they lack the resources and the knowledge to drive the digital transformation in the company. This applies to technology as well as to personnel and corporate culture.  Last but not least, the IT organisation needs to reinvent itself in the course of digitization.

What are the potential consequences when IT organizations are slow to take on the digital transformation?

Stark: If the IT organisation fails to take the lead in this process, its role is in jeopardy. In the worst case, the company’s digital transformation may be at risk because IT is unable to support new digital business models.

You call upon IT to reinvent and transform itself. What makes it so difficult for them to pursue this route?

Ernst: In past years, IT organizations have embraced a number of mantras and have reiterated these. Today, these mantras are an impediment to transformation. This includes the rigorous standardisation of processes and technologies, the growing use of commercial off-the-shelf products and the necessity to perpetually reduce and control costs. As a result, IT has lost a great deal of its flexibility as well as innovativeness and creativity. However, IT urgently needs both.

IT consultants – including DXC Technology – have contributed to the proliferation of these mantras in recent years. Is this a 180 degree turnaround?

Ernst: No; these developments did and continue to make sense, but focusing too strongly leads to a deadlock. In the age of digital transformation, IT needs to see itself as the enabler and differentiator. In a nutshell; the IT organizations needs to grasp the opportunity to enable the digital transformation within the company and to give the business the key impetus that no-one else can provide.

What about the funding of digitization projects?

Stark: As a rule, there is a business case, and business units exert pressure on the IT organisation because they are keen on having such projects delivered quickly. If the IT organisation fails to deliver due to lack of flexible technology and structures, business units will quickly opt for other cloud-based solutions. This situation leads to a “shadow” IT, with all of the negative consequences. In the worst case, the company’s reputation may be damaged if, for instance, mobile apps used by sales reps no longer work after the smart phone manufacturer has switched to another operating system.

What should the IT organisation do to become more flexible, innovative and creative – without impairing day-to-day business or IT operations and without soaring costs?

Ernst: As I mentioned earlier, the three key factors – technology, processes and employees plus corporate culture – need to be addressed together. We do not recommend that IT be turned completely upside down. Not everything needs to be state-of-the-art, agile and flexible; this is needed only where it really matters. There are IT systems and workflows that are subject to limited change only.

Let’s start on the technology side: Which measures do you recommend here?

Stark: Before IT managers address this issue, they should focus their attention on their cloud strategy. In my view, it’s not ‘either/or’. Every company has mission critical systems that it prefers to run traditionally or via a private cloud, or that it needs to run internally due to regulatory requirements. As a rule, these are business management applications and production control systems. On the other hand, for marketing and sales applications, speed is the key to the digital transformation, and this can best be achieved through public cloud provisioning. Therefore, we believe that a hybrid delivery model, providing the right mix aligned with requirements and existing systems, is the best solution for increasing flexibility and speed in IT.

What other suggestions do you have for accelerating the pace in IT?

Ernst: Resources are in short supply in all IT organisations. That’s why it makes sense to hand over the operation of legacy applications, for instance, to an outsourcing partner. This reduces the workload of IT staff, enabling them to focus on strategic issues of the digital transformation.

How can this flexibility be anchored within the organisation? Will everyone use agile methods in the future?

Stark: No; I don’t think that the big U-turn in the IT organisation, proposed by Forrester and others, works. I believe it makes more sense to start with a small team that addresses flexible issues and short-lived IT environments and that drives agility. After all, employees need to be kept on board during such organisational changes.

Thank you for the interview.

Sabine Koll is a journalist emphasizing on IT and mechanical engineering – and the intersection Industry 4.0.