Our previous article discussed an overview of digital business and the public cloud being an ideal platform to deliver. Now let’s discuss one of the major challenges in creating digital business applications in the cloud – business culture.
First, let’s describe the pressures on enterprises today. Most large companies are struggling with understanding the rapid pace of change occurring in the public cloud – be it AWS, Azure or Softlayer. IT organizations are comfortable with changes happening every three to five years since that is the normal capitalization timeframe for computer hardware. However, with the wide adoption of public cloud, enterprises are facing tremendous competition from startup companies and progressive enterprise competitors.
By using public cloud properly, many enterprise can cut their costs over 50% (depending on the workload), but a more significant impact is that it increases the company’s ability to innovate. Innovation in existing enterprise IT is usually impeded by the time and cost to deploy computer hardware for experimenting on new ideas. Basically this requires significant planning and justification just to an idea. With public cloud, IT or a business unit can easily try a new idea for a few months with little planning or cost, thus increasing the ability to innovate by being freed to try new ideas.
Now, why is innovation important when discussing changing business culture? Let’s explore why it takes eight weeks to deploy a new server. You might think it takes a while to order the system, but in most cases the time is spent working through IT processes to ensure security, billing, power management, network setup, etc. A well-running enterprise IT organization needs to comply with many regulations and rules to ensure compliance with standards such as SOC, PCI, HIPAA, etc.
So why can public cloud do this faster, cheaper and more nimble and still comply with these regulations and standards? It’s simple – public cloud focuses on building capacity at scale versus building capacity when the business requests it. By using economies of scale, public cloud providers can maintain systems that comply with regulations that can be deployed in minutes versus eight weeks.
How does this change business culture? Using public cloud requires some different skills. For example, installing a load balancer in AWS requires launching the service in the public cloud instead of creating a PO, sending to a preferred vendor, waiting for delivery, deciding power consumption, cooling needs, network setup, physically installing the device, configuring the device, etc.
While there are similar tasks in some aspects, many of the tasks of physically installing computer hardware are no longer required. No matter if the enterprise manages its own data center or has it outsourced, many IT organizations resist this change.
I think many CIOs understand the need to change and are pushing their organizations to embrace public cloud, private cloud and new methodologies, such as DevOps, to make these changes. We find many similarities with the personal computer disrupting the mainframe mindset in the late 1980’s.
Enterprise IT organizations need to change business culture to embrace the new era of digital business and the public cloud, but most challenges will not lie within technology. The major challenges will be people, process and education. People tend to resist change that they do not understand, and existing vendors will use FUD (fear, uncertainty and doubt) to slow change because their install base is at risk.
So how does enterprise IT undergo a culture change? Education and critical thinking. Learn as much as you can about public cloud. Learn how it is used. Learn why it is simpler. Learn how your team can be more nimble. Learn how you can cut costs. Many of these learnings are foreign to how enterprise IT works today, but once the concepts are understood, amazing things can happen.
-Joel Rosenberger, EVP Software, Executive
It used to be easy to spot innovation. In the last ten years if you had a website with functionality vs. text and graphics, likely you earned the Web 2.0 moniker, and customers, investors and analysts would recognize you as a technology innovator. Now it is much harder to understand if companies are innovating and taking advantage of current technology trends. Our friends at Gartner coined a term called the Digital Enterprise – meant to denote companies that were taking advantage of the la capabilities of cloud computing, big data, elastic computing, batch computing and more.
It is important for business leaders and IT executives to understand the characteristics of a Digital Enterprise to determine where they sit on the spectrum of becoming a Digital Enterprise. 2nd Watch is at the forefront of enterprise cloud adoption, and so we have a unique viewpoint into what it takes for our customers to become competent users of new technology and the overall pursuit of becoming digital in the enterprise. Read about other enterprises that are making the transition to becoming digital businesses in our recent blog post.
I like to break down Digital Enterprise traits by functional areas. What things differentiate companies in the way they process their core business transactions? How do enterprise businesses run their IT departments? And finally, how does the organization innovate with new technology? Let’s talk about each of these buckets briefly.
The Digital Enterprise is focused around enabling core business transactions in 100% digital format. Gone are the days of organizations that resemble the average doctor or dentist office 10 years ago with racks and racks of multi-colored folders of patient paperwork. I wear contacts in my eyes to fix an issue with my eyesight, so I see my eye doctor once a year, and I’m happy to say I have not dilated my eyes in the last 6 years as the entire office operations are digital – including diagnostic s for various procedures that used to be carried out manually. My doctor and I are constantly talking about how much better the diagnostic information is now and how much more detail you can see digitally vs. the last generation of s. I use this example because it is very clear from a customer perspective that the business I am receiving services from is a 100% digital business – from the way I am reminded about my appointment to the actual appointment itself. The process is improved, customer friendly and uses current technology to aid in the business process. Do your customers recognize you as a digital business?
One of the easiest questions to ask your IT teams to understand how they manage the business of IT is that of process lead times. How long does it take to provision IT resources? How many people are involved? How many vendors need to be touched? How long does it take to acquire and provision services? We have heard a variety of answers to this question. Enterprises can take weeks to secure and provision infrastructure or IT services. Or it can be months – there are many Fortune 500 companies that still answer this question in terms of months today. We certainly have our work cut out for us. The answer needs to be minutes. One of my favorite success stories at 2nd Watch comes from a large enterprise that was already one of the most efficient procurement shops we have dealt with, but its infrastructure was still out 2-3 weeks as a part of its normal process. With our tools and know-how, we took this down to 30 minutes. This delta in time is a huge competitive advantage in business today.
The last big category of Digital Enterprise traits are related to technology innovation. Interestingly it is not about the “what” but about the “how.” Does your IT team embrace continuous integration? Does it leverage public cloud infrastructure and enterprise management software on top to enable faster time to market? Is the team focused on technical capabilities or business process innovation? Is there a clear path between customer feedback and technology innovation? Does the team look at last minute customer requests as an annoyance or as a way to get innovation in front of their consumers more quickly?
Today’s Digital Enterprise is leveraging public cloud infrastructure and enterprise management tools to deploy business innovation at a dizzying pace. You’ll know you are there when your IT department is waiting on the business to react to change. A 2nd Watch customer once said, “This is a first in my 19 years here at the company that we beat Marketing time-wise in a project and are now waiting on them for project completion. It’s a great feeling!” Are your IT folks pushing to make your business better?
More about Cloud-Enabled innovation in my next update.
Learn more about the Digital Enterprise by downloading our whitepaper, The Digital Enterprise: Transforming Business in the Cloud.
Contact us to learn how we can help you make the transition to becoming a digital business.
-Kris Bliesner, CTO
Increasingly over the last couple of years, I have had more conversations with C-level executives who are asking, “How do I transition and change my business from where it is today, to a digital business?” What is driving this discussion is that businesses are evolving rapidly to a global Digital Economy. In a recent article by The Economist, Where the Digital Economy is Moving the Fas, it is easy to see why the United States is in the center of high levels of digital development. Over the last two decades we have seen massive enterprises formed like eBay, Amazon and Netflix, and it’s been less than a decade since up and comers like Airbnb and Uber have been launched. In short, consumers used to be confined to make purchasing decisions within a particular geography or source until digital businesses leveraged the internet to sell products and services worldwide.
In today’s Digital Economy, customers have more information and more purchasing choices. Therefore, traditional businesses recognize that in order to keep the customers’ interest and loyalty, they must be relevant where their customers are spending their time, searching for information and making buying decisions. Traditional companies are also facing competitive pressures online globally that they may not have had in the past. Enterprises that are transitioning to becoming a digital enterprise are evaluating current revenue streams and how future revenue streams may differ. A classic example is that of Blockbuster, who filed for bankruptcy almost five years ago for a few reasons. First, they did not recognize how their customers wanted to buy, which was a reason Netflix prevailed. Second, they were focused on how to increase (current revenue streams) in-store sales outside of movie rentals. For more than five years now, this customer, along with many others I presume, has been happy ordering movies from home when we want and without feeling like we had to stop at another convenience store on the way home on Friday night.
In our recent whitepaper available for download, The Digital Enterprise: Transforming Business in the Cloud, we discuss other companies that have been successful in the Digital Economy. Companies that are successful will learn more and earn more revenues rather than being displaced by upstarts. If you look at the most recent YOY revenue growth of IBM and Salesforce as examples, you may be shocked to know that Salesforce reported 38% growth while IBM reported -4%. Some traditional companies may be slow to change or resistant all together, while more agile and nimble companies are learning and seeing earnings growth and becoming the enterprise of tomorrow.
In this whitepaper, we have laid out our view of how companies can transition to being a digital business. Cloud transformation isn’t just for emerging companies. The rapidly maturing infrastructure of the public cloud has finally hit the big time for big business. Many large companies have been dabbling in Infrastructure-as-a-Service (IaaS) for years. Now, well-known, major brands are taking the plunge to commit critical parts – if not all – of their IT infrastructure to the public cloud. These pioneers have every reason to be optimistic about what the future holds.
We are happy to help you make this transformation. Contact us to see how we can help.
Jeff Aden, EVP Marketing & Strategic Business Development