Digital Transformation: When It Makes Sense and When It Doesn’t

TxMQ DIgital Transformation

This isn’t the first time I’ve written about digital transformation, nor is it likely to be the last.

Digital transformation has become a “must use” catchphrase for investor and analyst briefings and annual reports. Heaven help the foolish Fortune 500 company that fails to use the buzzword in their quarterly briefing. It’s the “keto diet” of the technology world.

It’s a popular term, but what does digital transformation really mean? 

Legacy debt. 

In a world of enterprises that have been around for longer than a few years, there is significant investment in legacy processes and technical systems (together what we like to call legacy debt) that can inhibit rapid decision making.  This is a combination of not just core systems, but also decades-old processes and decision-making cycles…bureaucracy in other words.

So why do we care about rapid decision making? Simply put, in years past, decisions were less consumer-driven and more company-driven, or dare I say it, focus-group driven.

Companies could afford to take their time making decisions because no one expected overnight change. Good things used to take a long time. 

We now live in a world where consumers demand rapid change and improvement to not just technology, but also processes. On a basic level, this makes sense. After all, who hasn’t had enough of poorly designed AI-driven, voice-activated phone trees when we just want to ask the pharmacist a question about our prescription refill? 

Too often, however, legacy debt leads to rapid implementations to meet customer demands – often with unintended (and catastrophic) consequences.  Often this is the result of rapid, poorly built (or bought) point solutions. This is where disruptors (aka startup companies) often pop up with quick, neat, point solutions of their own to solve a specific problem: a better AI-driven phone solution, a cuter user interface for web banking, sometimes even a new business model entirely. Your CIO sees this in an article or at a conference and wonders, “why can’t we build this stuff in-house?”

Chasing the latest greatest feature set is not digital transformation. Rather, digital transformation begins with recognizing that legacy debt must be considered when evaluating what needs changing, then figuring out how to bring about said change, and how to enable future rapid decision making. If legacy systems and processes are so rigid or outdated that a company cannot implement change quickly enough to stay competitive, then, by all means, rapid external help must be sought. Things must change.

However, in many cases what passes for transformation is really just evolution. Legacy systems, while sometimes truly needing a redo, do not always need to be tossed away overnight in favor of the hottest new app. Rather, they need to be continually evaluated for better integration or modernization options. Usually by better exposing back end systems. Transformation is just another word for solving a problem that needs solving, not introducing a shiny object no one has asked for. Do our systems and processes, both new and old, allow us to operate as nimbly as we must, to continue to grow, thrive and meet our customer demands today and tomorrow?

The Steve Jobs effect

Steve Jobs once famously stated (it’s captured on video, so apparently it really happened), when asked why he wasn’t running focus groups to evaluate the iPod, “How would people know if they need it, love it or want it if I haven’t invented it yet?”

Many corporate decision-makers think they are capable of emulating Steve Jobs. Dare I say it, they are not, nor are most people. Innovating in a vacuum is a very tricky business. It’s best to let the market and our customers drive innovation decisions. Certainly, I advocate for healthy investment in research and development, yet too often innovation-minus-customers equals wasted dollars. Unless one is funding R&D for its own sake, certainly a worthy cause, one needs some relative measure of the value and outcomes around these efforts. Which usually translates to marketability and ultimately profits.

Measurement

Perhaps the most often forgotten reality of our technology investments is understanding what the end goal, or end-state, is, and measuring whether or not we accomplished what we set out to do. Identifying a problem and setting a budget to solve that problem makes sense. But failing to measure the effectiveness after the fact is a lost opportunity. Just getting to the end goal isn’t enough, if in the end the problem we sought to solve remains. Or worse yet we created other more onerous unintended consequences.

Digital transformation isn’t about buzzwords or “moving faster” or outpacing the competition. It’s all of that, and none of that at the same time. It’s having IT processes and systems that allow a firm to react to customer-driven needs and wants, in a measured, appropriate, and timely way. And yes, occasionally to try to innovate toward anticipated future needs.
Technology is just the set of tools we use to solve problems.

Does it answer the business case?

“IT” is never — or at least shouldn’t be — an end-in-itself: it must always answer to the business case. What I’ve been describing here is an approach to IT that treats technology as a means to an end. Call it “digital transformation,” call it whatever you want — I have no use for buzz words. If market research informs you that customers need faster web applications, or employees tell you they need more data integration, then it’s IT’s job to make it happen. The point is that none of that necessitates ripping and replacing your incumbent solution. 

IT leaders who chase trends or always want the latest platform just for the sake of being cool are wasting money, plain and simple. Instead, IT leaders must recognize legacy debt as the investment it is. In my experience, if you plug this into the decision-making calculus, you’ll find that the infrastructure you already have can do a lot more than you might think. Leverage your legacy debt, and you’ll not only save time delivering new products or services, but you’ll also minimize business interruption — and reduce risk in the process. 

That’s the kind of digital transformation I can get behind.

Emergency Changes… Are you Prepared?

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Emergency change: when something on a system, application, or physical device is changed immediately in order to prevent an incident. It can be the result of an incident or of failed change.
Take my word for it; I’ve seen it first hand. Emergency changes are risky.
They are quick, “on the fly” production changes that usually don’t contain back out plans. For this reason, and for many more I won’t dive into just now, it’s critical to have outlined processes for emergency changes.
Risky or not, many organizations often don’t take pen to paper to write out these necessary processes to approve emergency changes. In such instances, I’ve found that people push through emergency changes as new code and skip the approval process all together. Why? Because the approval process by which to submit and review those emergency changes virtually does not exist.
No red tape and no CAB review bureaucracy… sounds like CAB-utopia, right? Wrong. The consequences are far reaching, and they might just catch up to you.
So what’s the bottom line?
Use your CAB to review each and every emergency change that occurs using an after change review. The CAB should assess whether or not it can work to prevent similar emergency changes in the future. It should strive to discover the root cause through deep analysis and should likewise explore ways to eliminate those moving forward.
And, if a large number of emergency changes occur each week, raise those red flags and dig a little deeper.
Maybe you have no clear policy for Emergency Change.
Perhaps you have not identified the true root cause of an incident.
Or maybe you have yourself a trending Emergency Change that needs addressing.
Whatever the case, whatever the cause, emergency changes come up quite a bit in Change Advisory Board (CAB) meetings. Don’t let them slide by.  Are you prepared?
Let’s start a conversation.
 
(Original image by Perspecsys Photos.)
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Discussion: Q&A: Cindy Gregoire

Insights Magazine Q&A with TxMQ Practice Manager Cindy Gregoire

 

For many organizations, managing a vast middleware environment is a daunting task, especially in terms of building and maintaining a dynamic, cost-effective, and secure infrastructure. TxMQ, Inc. an IBM Premier Business Partner located in Buffalo, NY, assists its clients with technical support and setting up their middleware environments to achieve a better return on investment and prepare for success.

Insights Magazine recently sat down with Cindy Gregoire, Practice Manager, Middleware & Application Integration at TxMQ, who has been in the middleware space for more than 15 years, supplying technical support to clients and assisting them with setting up their middleware environments. In this Q&A, Gregoire explains the top four infrastructure vulnerabilities organizations should look out for, the challenges clients face in middleware management and operational IT planning, the importance of embracing a 21st century information management and how to do it on a tight budget, and the benefits of developing a technology roadmap.

 

YOU’VE WORKED WITH HUNDREDS OF CLIENTS. WHAT’S A COMMON CHALLENGE THAT THEY FACE?

Cindy Gregoire: Many of our short-term engagements involve customers who have hit a brick wall and can’t move a project forward, or they’re running into a performance problem and the system is not behaving correctly, and the current staff is evaluating the problem, but are unsure of how to proceed. The problem or resource need is beginning to escalate, and the company now needs to go outside of their house talent for some external help. We start by talking through what the particular pain point is, what the resource need is, and we take the next step and put together a proposal and get that in front of the customer. Then we even put the consultant on the phone and coordinate activities.

 

WHAT’S UNIQUE ABOUT THE APPROACH?

Gregoire: [This is] fairly common in consulting practices at large, but our niche is mainframe integration middleware, where you have this infrastructure software that is somewhat nebulous and it’s having problems — but the folks that are supporting it or part of that IT shop are looking at this going, “I don’t know what the problem is; it’s Greek to me. Let’s bring in a middleware specialist; they should be able to tell us what’s going on with this system.”

So we do a lot of system Healthchecks, where we take a look at the various system and application logs, we take a look at the operating system, and we look at the statistics that the operating system is producing. Knowing what we know about middleware, we compile our findings and analysis and develop some recommendations on what could be done. We’re able to dive deep into the technology and look for other sources of configuration correction — other than just potentially throwing more memory at a server for upgrading processors, which then allows the application to just consume more memory. So rather than fixing the root cause, you’ve actually exacerbated the problem, and that’s very typical. We see that quite a bit. In the systems health check, we’ll take a look at what’s going on middleware and system-wide, we’ll create a list of recommendations and work with their technical staff to get those recommendations implemented. We free up the resources to really help customers achieve a better return on investment in their middleware infrastructure.

 

WHAT CONSIDERATIONS SHOULD ORGANIZATIONS MAKE IN TERMS OF THEIR OPERATIONAL IT PLANNING AND CONDITIONS OF EMPLOYMENT AND SECURITY STANDARDS?

Gregoire: Especially in 2013, we saw more than 1,000 breaches of company data over the Internet. Not all breaches are reported in a timely manner or even get publicity. Clearly the Target [Corporation] breach was the one that received the most attention, probably because it hit at the peak holiday season, and Target did a good job of notifying its customers and, of course, they are nationwide. So a lot of people heard about it and many people were affected. Customers are wary. The way you lay out your security standards and how you manage your e-commerce across the Internet is obviously a different animal than it was 10 years ago.

 

WHAT INDUSTRIES ARE MODELING THE RIGHT WAY TO SECURE TRANSACTIONS?

Gregoire: Ten years ago, the portion of e-commerce that was done over the Internet was so much smaller than it is today. But most businesses — for example, retailers and smaller financial management companies — can really learn a lot from the financial services industry, because banking standards in general have always been subject to very rigid security standards. Many of our retail and SMB customers suffer gaps in their understanding of the width and breadth of security topics, why things are done a certain way or the importance of security policies and governance on a project management level to ensure each new project is incorporating the appropriate security practices subject to the type of data being handled. Each industry has its own specific regulatory practices that have guidelines around the “right way” to secure transactions, like PCI compliance or HIPAA, and a lot depends on where that data exchange is occurring. A lot of the consulting we do with customers, before they even engage with us, is just talking about some of these security standards.
For example, when you look at network topology, it’s important to evaluate how you are breaking out your network IPs, subnets, etc. and isolating which incoming connections can actually be established with your application servers within your trusted network. You have your internal network and then you should have these tiers of protection and a firewall between those systems and the Internet.

So what does that look like? You have diagrams—have you done your architecture? Have you laid out your network topology? We don’t necessarily do a lot of network consulting, although most companies have done it already themselves because it’s a necessity. They want to enable Internet commerce with their internal applications, and that’s really where the rub is right now. Large companies have many internal backend systems for processing and generating invoicing. EDI [electronic data interchange] has been happening for many years now. Yet this idea of being able to take a credit card, and pass that credit card data to an online internal order processing system is scary. How protected is that transaction throughout the end-to-end lifecycle of business?

So, what other considerations should organizations be making? Number one, in light of the many breaches, you definitely want to be planning for network isolation and internal security as well as external security measures that ensure customer data is protected throughout the life of the transaction. TxMQ can help you with this process and this is where an architecture-review service comes in. We review the transaction lifespan and what topology it’s crossing, and through our security management practice, which is part of our ITIL group, we’ll take a look at what things you’ve done, what things you need to have in place, and where are you in this continuum from minimum security to high security.

So those are areas that we do consult with our customers and help them to develop a plan and start implementing some of the changes that are needed to bring them into that level of security, where they can feel comfortable and customers can feel comfortable that standards are being met and they can feel assured that their transactions are fully secure.

 

TXMQ’S WEBSITE MENTIONS 21ST CENTURY INFORMATION MANAGEMENT. CAN YOU EXPLAIN WHAT THE CONCEPT IS AND HOW ORGANIZATIONS CAN BENEFIT FROM THIS APPROACH?

Gregoire: We’re talking about is the way IT was done in the 20th century and how information management in the 21st century is different—and clearly there are challenges for organizations to adopt to the new paradigm. If you were starting up a brand new business today, you would implement an environment using new technology. New companies are far better off from the IT perspective working from that paradigm because everything you’re working with is new, it’s going to be integrated, and it’s going to have all the up-to-date standards, etc.

But TxMQ customers, many of whom have been in business for 20 years or more, are facing challenges including managing the old technology that doesn’t have all of the required capability and trying to introduce all the new bells, whistles, and capabilities, which are also key business drivers in the 21st century, on behalf of the business.

So the question is, what happens when you have all this old technology that works just fine and was designed for applications to run inside a technical environment that was not initially Internet-enabled? In order to compete and relate with customers, suppliers and service providers that are using social media and mobile devices, you have to maintain your old systems and also integrate with all the new security requirements.
The point of talking about 21st-century information management is the fact that, number one, there is a whole new way of doing business now because of the Internet and e-commerce. And two, you have all these mature companies that have been in business since before the year 2000 and their systems were never really designed to be able to deliver the types of services that 21st-century systems are delivering without some drastic investment. Not only do established businesses need to maintain existing systems that are working, but they also need to consider their integration and go-forward strategy for embracing the new. That’s the only effective way to compete with companies that are embracing the 21st-century information management strategies we are seeing in today’s marketplace.

 

IT’S ABOUT ANTICIPATING NEW OPPORTUNITIES

Gregoire: It’s taking a look at what’s coming up next. For example, big data is hitting everybody. Big data is all about having to house terabytes of data. Twenty years ago, the word terabyte didn’t exist in the common language at all because even the idea of a gigabyte was a phenomenal amount of data. So here we are talking about larger amounts of data and doing analytics in order to determine things like what people are buying right now and which demographics of people are living the longest. All of this really leads into a different mentality than what we had before the turn of the century in terms of our information technology systems and strategy. Are we managing our applications and our systems or are we managing our data as business intelligence or are we able to manage both? In terms of information technology and the management structure, you have all of these new roles—from CTO, CIO, CSO, data managers, etc.—roles that were previously combined into one single role, but are now each fulltime jobs with their own focus that are supported by a number of vendor products, suppliers, and service providers that all require management oversight. Or, how about rolling out a mobile strategy for your business? As a business, you want to relate to how to sell things to people. You can’t ignore social media anymore; you can’t ignore smartphones anymore. You have to have a complete plan in order to continue doing business in the 21st century.

 

A LOT OF COMPANIES HAVE SMALL IT BUDGETS; WHAT TOOLS CAN THEY LEVERAGE FOR MIDDLEWARE SUPPORT AND MANAGEMENT TO COMBAT THAT?

Gregoire: IT budgets have been flat since somewhere around 2009, maybe as early as 2007, and in much the same way that you might consider patching a roof because you can’t afford a complete replacement, the problems don’t go away just because you don’t have money or budget. It’s a quick fix, which will reoccur until the problem is solved.

When you look at what tools businesses can leverage, especially concerning middle management and support, take a look at what the business requirements are and then sell the need for additional funding to get the tools you require. The reality is that companies that are not putting enough money into their IT spending budgets are not going to survive the next five years. Competition is fierce.
I would have to go on the record and say that more companies are making the mistake of not paying attention to standardizing middleware management and support to help drive down those costs. As a result, they are spending a lot more money than needed because of the diversity of their middleware management tools. Companies are spending a lot of time troubleshooting and not getting a lot of results. These are companies who had a few copies of some very expensive tools or perhaps trial copies but no process in place to incorporate the use of these proper tools into the development lifecycle. Anything they do really goes back to their IT planning and being able to justify the need to the business management in terms of outage time and costs to not having the essential tools, resources and processes. We see that across the middleware environment when we’re doing health checks. They say, “We couldn’t get money for that, so we tried to do this instead.”

 

HOW DOES DEVELOPING A TECHNOLOGY ROADMAP FIT INTO THIS AND WHAT’S THE BENEFIT OF THIS APPROACH?

Gregoire: We hear that terminology used all the time. At the technology level, is your infrastructure current? And when you ask what does “current” mean, it means that if you installed software in 1999, have you applied all of the updates, new releases, patches, or even migrated to the latest version?
A technology roadmap places the infrastructure initiative at the same level as other application initiatives. So here are the underlying questions that should be asked when identifying a need for a technology roadmap and determining whether or not business applications are at risk.

  • Is the infrastructure current?
  • Most of my customers now have middleware roadmaps. What middleware are we running?
  • Are the applications running at vendor-supported levels?
  • Are the operating systems up-to-date?
  • Do the operating systems have certain security patches applied?
  • Are the applications connecting through to a database?
  • Is the database current? Is security-restricted access set up to that database?
  • Or, was everything installed using admin authority, where if hackers can crack that admin password, they gain access to everything in the network?

This is some of the content included in building out a technology roadmap. Developing a technology roadmap, if you don’t have one, is critical to the survival of your business. Otherwise, your technology is going to lag behind and what may be current now, will put you at risk tomorrow. Without following a roadmap you’re likely going to be more vulnerable, but even more than that, there may be more features and functions you’re not going to be able to offer to your customers. You may even be faced with instability issues.

WHAT ARE SOME TIPS FOR ORGANIZATIONS THAT WANT TO DEVELOP A TECHNOLOGY ROADMAP?

Gregoire: Start with what you have and what you do well, and develop a roadmap for the things that you know are most important to you. Carrying that forward, you can expand a technology roadmap to include some peripheral things. You’ll start off with a very specific technology roadmap and plan, and then start developing a plan for the network, mobile integration, and other components to the business. For every technology roadmap, you’re always going to be talking about how many resources it’s going to take to follow this roadmap, how much money it is going to take, and how much time.

 

WHEN YOU ARE WORKING WITH CLIENTS, HOW DO YOU PREPARE THEM FOR CONTINUED SUCCESS WHEN YOUR ENGAGEMENT IS COMPLETE?

Gregoire: We do what’s called a “project closeout.” Prior to that discussion with the customer, I have each consultant complete what’s called a “lessons learned.” Lessons learned is really just a document that helps me understand, from the consultant’s viewpoint, what went well and what didn’t go well. Then we complete the project closeout with the customer, with the idea of confirming whether we accomplished everything that was outlined in the statement of work and if there is something that should have been included that we didn’t do. What, if anything, could we have done better? The “project closeout” is something that I’ve found helps us identify other opportunities for the client where we might be able to assist or find resources.

White Paper: E-Commerce Trends

TxMQ Staff Contribution

Project Description: E-Commerce Trends

This paper will help you better understand how your consumers are interacting with E-Commerce and what they expect from your company’s website. It will also teach you what your company needs to do to keep up with emerging E-Commerce trends.

E-Commerce Is Exploding

In the past 10 years, e-commerce has taken on a life of it’s own. You may say, “Well, I bought things online 10 years ago, too.” That’s true, you did. But the online purchasing process is now fundamentally more evolved.
Gone are the days when a website purely offered a good or service which was simply directed to a shopping cart upon checkout, paid for and shipped.
In 2012 the best e-commerce sites will have teams of people to assess pertinent data about their consumers. This data will enhance digital marketing efforts, further supporting what has always been an integral component of a company’s overall strategy. The byproduct of the information collected as a result of online shopping creates a truer insight into important consumer behaviors, footprints, demographics and patterns.

How better to approach marketing than by understanding your audience’s needs?

The best E-Commerce platforms, (i.e., IBM® WebSphere Commerce) allow companies to collect information and record customers’ transactions, preferences and shopping habits.
The importance of this is two-fold. Not only can companies focus their online efforts toward better meeting customer expectations, they can also market across mobile and offline channels as well.
If you haven’t focused any energy on your e-commerce system, we suggest that now is the time to do it. Don’t get left behind as your competitors’ forge ahead using the newest technologies and leveraging the consumer awareness they will gain from upgraded systems and integrated analytics.
According to analyst Brian Walker of Forrester Research, Inc., experts believe that half of all retail transactions will either take place online or be inspired by something consumers see on the web.
Emerging trends show that the website is no longer the main e-commerce touch point. Customer interaction will now include mobile phones, tablets, Internet-enabled store checkout systems and more.
Your company needs to be prepared to manage multi-channel selling and fulfillment.

E-Commerce Trends

There’s constant change happening all around you. It’s your job to keep up with it all. Here are some emerging e-commerce trends to keep your eye on as we dive into the second-half of 2014.

Going Mobile

2014 can be one of the biggest breakout years yet in terms of companies going mobile. The demand for mobile developers is on the rise as more companies begin to develop mobile applications for their services.
RECCOMMENDATION: Don’t just build a mobile app. Instead utilize HTML 5 to ensure your customers can view your site no matter what device they’re working with. HTML 5 is dynamic and it creates the opportunity to operate from a single, catch-all platform without worrying about being device-specific.

Simple Navigation

Make sure your customer can easily search your website and find the products they are looking for. People don’t navigate the way they used to, and since time is precious, one click transfers to a shopping cart will be imperative. You don’t want to lose a customer in the hassle and steps of a long transaction.

Cross Channel Experiences

E-Commerce must be accessible in any form your customer wants it. While e-commerce does play a huge role in customer experience, it is complemented by retail, mobile and social experiences as well.

Availability of Digital Goods

Brick-and-mortar companies are hurting. With options such as site-to-store shipping, goods are more readily available to consumers.
In addition, many traditionally brick-and-mortar shops will begin to offer goods online or even bring the e-commerce experience in-store via terminal transactions.

Video Vs. Images

According to Warren Knight of business2community.com, “2012 will be the year of video commerce.” This year we will begin to see video demos showing real users actually using or modeling a product in motion. One click on the featured product will send consumers right to the final purchase destination.

What Do Consumers Really Want?

If you’re running an E-Commerce business, what is it that your customers really want? Discovering what will make them truly happy is half the battle toward building brand awareness and loyalty.
The other half of the battle is fulfillment. Deliver on your promises, as promised and you will have customers returning again and again to purchase your products.

Pricing

Discounts. Discounts. Discounts. Have you noticed the recent trend toward discounting an item or product when a certain number have been purchased?
Customers want to feel like they’re getting a bargain for a quality item. And with the boom of social media outlets like Facebook, Twitter or Pintrest, where consumers can act as a driver of merchant sales by sharing deals with friends, group discounts are easily promoted and taken advantage of.
One Stop Shopping
Give your consumers a quick and easy exit to their shopping cart and purchase completion. Nobody wants to have to fill out forms and go through several steps to complete an order.
Many sites are allowing consumers to check out as guests and providing them the opportunity to register their accounts at a later time. Keep it quick and easy and your customers will continue to return.

Security

Now is a better time than ever to make sure your website is up to date on security issues. With the increase in apps, cloud platforms and social sharing sites, security threats are an every day reality.
Investing in online security is one of the best ways to invest in your company’s future.

Consistency

We touched on this a bit in the fulfillment section above. Consumers should be able to get efficient, consistent customer service. That means orders are shipped on time and the quality of the product is always top notch.
This is what customer loyalty and brand referral is built upon. Once a customer returns to your site to purchase your product more than once, you’ve created loyalty. Now it’s up to you to hold up your end and grow that trust.

What Can Your Company Do?

More and more, companies are utilizing the information they obtain from online transactions to create full-scale marketing campaigns.
Don’t work against yourself. Investing in a flexible, reliable system will allow you to serve customers across all channels, improve the way your company manages its’ products and information and create a deep understanding of your customers’ needs.
The change in your company needs to start at the top. If your company’s CEO isn’t behind the transition, you will struggle. Your entire company needs to see the benefits of the transformation.
Many times, your company will need to adjust the way it operates from the ground up. That may mean re-training your employees, or changing the way you incent them to meet customers’ expectations.
Photo Credit to Espos

Discussion: The Four Categories Of Technology Decisions and Strategy

Authored by Chuck Fried, President – TxMQ, Inc.

Project Description

There are countless challenges facing IT decision-makers today. Loosely, we can break them down into four categories: Cost control, revenue generation, security and compliance, and new initiatives.
There’s obvious overlap between these categories: Can’t cost control be closely related to security considerations when evaluating how much to invest in the latter? Aren’t new initiatives evaluated based on their ability to drive revenues, or alternatively to control costs? Yet these categories will at least allow us to focus and organize the discussion below.

Cost Control

Cost control has long been a leading driver in IT-spend decisions. From the early days of IT in the ’50s and ’60s, technology typically had a corporate champion who argued that failure a to invest in tomorrow would yield to customer attrition and market-share erosion. A loss of competitive advantage and other fear-mongering were common arguments used to steer leadership toward investments in something the leadership couldn’t fully grasp. Think about the recent arc on AMC TV’s Mad Men featuring an early investment in an IBM mainframe in the 1960s ad agency – championed by few, understood by even fewer.

From these early days, IT often became a black box in which leadership saw a growing line of cost, with little understanding attached to what was happening inside that box, and no map of how to control those growing expenditures.

Eventually, these costs became baked-in. Companies had to contend with the reality that IT investment was a necessary, if little-understood reality. Baseline budgets were set, and each new request from IT needed to bring with it a strong ROI model and cost justification.

In more recent years – and in a somewhat misdirected attempt to control these costs – we witnessed the new option to outsource and offshore technology. It was all an attempt to reduce baked-in IT costs by hiring cheaper labor (offshoring), or wrapping the IT costs into line-item work efforts managed by third parties (outsourcing). Both these efforts continue to meet with somewhat mixed reviews. The jury, in short, remains out.

IT costs come from five primary sources – hardware, software, support (maintenance and renewals), consulting and people. Note that a new line-item might be called “cloud,” but let’s keep that rolled into hardware costs for now. Whether cloud options change the investment equation or not isn’t the point of this paper. For now, we’ll treat them as just another way to acquire technology. There’s little, but growing evidence that cloud solutions work as a cost reducer. Instead, they more often alter the cash-flow equation.

Hardware costs are the most readily understood and encompass the servers, desktops, printers – the physical assets that run the technology.

Software, also relatively well understood, represents the systems and applications that the company has purchased (or invested in if homegrown) that run the business, and run on the hardware.
Support refers to the dollars charged by software and/or hardware companies to continue to run licensed software and systems.

Consulting means dollars invested in outside companies to assist in both the running of the systems, as well as in strategic guidance around technology.

People, of course, is the staff tasked with running and maintaining the company’s technology. And it’s the people costs that are perhaps the most sensitive. While a company might want to downsize, no one wants the publicity of massive layoffs to besmirch a brand or name. Yet a reality of a well-built, well-designed and well-managed IT infrastructure should be a reduction in the headcount required to run those systems. If a company doesn’t see this trend in place, consider it a red flag worthy of study.

How should a company control IT costs? Unless a company is starting from scratch, there’s going to be some level of fixed infrastructure in place, as well as a defined skills map of in-place personnel. A company with a heavy reliance on Microsoft systems and technology, with a well-staffed IT department of Microsoft-centric skills, should think long and hard before bringing in systems that require a lot of Oracle or open-source capabilities.

Companies must understand their current realities in order to make decisions about technology investment, as well as cost control. If a company relies on homegrown applications, it can’t readily fire all of its developers. If a company relies mostly on purchased applications, it might be able to run a leaner in-house development group.

Similarly, companies can’t operate in a vacuum, nor can IT departments. Employees must be encouraged to, and be challenged to attain certifications, attend conferences and network with peers outside of the company. Someone, somewhere already solved the problem you’re facing today. Don’t reinvent the wheel. Education is NOT an area we’d encourage companies to cut back on.

At the same time, consulting with the right partner can produce dramatic, measurable results. In the 21st century, it’s rather easy to vet consulting companies – to pre-determine capability and suitability of fit both skills-wise, as well as culturally. The right consulting partner can solve problems quicker than in-house teams, and also present an objective outsider’s view of what you’re doing right, and what, perhaps, you could do better. “We’ve always done it this way” isn’t an appropriate reason to do anything. A consulting company can ask questions oftentimes deemed too sensitive even for leadership. I’ve been brought in to several consulting situations where leadership already knew what decision would be made, but needed an outside party to make it and present the option to leadership so things would appear less politically motivated.

Similarly, consulting companies can offer opinions on best practices and best-product options when required. A software company, on the other hand, won’t recommend a competitor’s product. A consulting company that represents many software lines, or even none at all, can make a far more objective recommendation.

In point of fact: One of the primary roles for an experienced consulting company is to be the outside partner that makes the painful, outspoken recommendations leadership knows are necessary, but can’t effectively broadcast or argue for within the boardroom.
Innovation As Cost Control

There are several areas of technology spend with legitimately demonstrated ROI. Among these are BPM, SOA, process improvement (through various methodologies and approaches from six sigma to Agile development among many others), as well as some cloud offerings previously touched on.
BPM, or business-process management, broadly describes a category of software whereby a company’s processes, or even lines of business can be automated to reduce complexity, introduce uniformity and consistency of delivery, and yes, reduce the needed headcount to support the process.

We’re not talking about pure automation. Loosely, BPM refers to a system that cannot be fully automated, but can be partially automated yet still require some human interaction or involvement. Think loan application or insurance claim. Many of the steps can be automated, yet a person still has to be involved. At least for now, a person must appraise a damaged car or give final loan approval.

SOA, discussed elsewhere in this paper, means taking advantage of a loosely coupled infrastructure to allow a more nimble response to business realities, and great cost controls around application development and spend. Process improvement, of course, means becoming leaner, and better aligning business process with business realities, as well as ensuring greater consistency of delivery and less stress on internal staff due to poor process control.

Big Data As Cost Control

Big data, discussed later in this paper, can also be used, or some might say misused, to drive down costs. An insurance company can use data analysis to determine who might be too costly to be covered any longer. A bank might also feel certain neighborhoods or even cities are too risky to offer loans. There’s a dark side to big data. At times even unintended consequences may result. It’s important for human oversight to remain closely aligned to system-generated decisions in these nascent days of big data. While Google may have figured out how to automate the driving process, companies today are still hopefully more than a few years away from 100% automated decisioning. One hopes society, as much as government oversight will help ensure this remains the case for the foreseeable future.

Integration And Service Oriented Architecture As Cost Control

Too often companies rely on disparate systems with limited, if any ability to interact. How often have you been logged on to your bank’s online system, only to have to log on a second time to access other accounts at the same institution?

Companies must be quick to recognize that consumers today expect seamless, complete integration at all points of their interaction. Similarly, suppliers and trading partners are ever more expectant of smooth onboarding and ease-of-business transacting. Faxing purchase orders is yesterday. Real-time tracking and reordering of dwindling products in the supply chain is the new normal.

At the same time, companies must recognize that to be nimble and adaptable against the ever-changing reality of their businesses, applications must be designed and implemented differently. It’s one thing if a company has five different systems and no more. A simple 1980s-era point-to-point architecture might suffice. Yet other than that limited example, enterprises show an ever-changing array of systems and needs. Hardcoding applications to each other yields an inflexible and challenging infrastructure that’s cost-prohibitive to change.

Yet other than that limited example, enterprises show an ever-changing array of systems and needs. Hardcoding applications to each other yields an inflexible, and challenging infrastructure that’s cost prohibitive to change.

An Enterprise Service Bus, or ESB, is what most enterprises and midmarket companies today recognize as a model architecture. Decoupling applications and integrating them loosely and asynchronously enables rapid application design and more nimble business decision-making. At the same time, an SOA-enabled environment also allows for the rapid adoption of new products and services, as well as the rapid rollout of new offerings to customers and trading partners. Yes, this does require a changing of attitudes at the development, QA and production-support levels, but it’s a small price to pay for long-term corporate success.

Revenue Generation

The idea of IT helping companies generate new revenue streams isn’t new. It’s as old as the technology itself. Technology has always played a role in driving revenue – from airline-reservation systems, to point-of-sale systems, to automated teller machines (allowing banks to charge fees). Yet these systems didn’t create new revenues (with the possible exception of the ATM example) – they simply automated previously existing systems and processes.

Airlines were booking flights before the Internet made this possible for the mass public, and restaurants have, of course, been serving people dating back to the dawn of civilization. Technology improved these processes – it didn’t created them.

But until recently there were no app stores and certainly no online videogame communities. Not to mention the creation of entire companies whose revenue streams weren’t even theoretically possible years ago – think Netflix or Square or Uber. So new revenue streams are as likely to be the sole source of revenue for a company as they are to supplement an already in-place business model.
Perhaps one of the more exciting new-revenue developments has come to be called the API Economy. An API, or Application Programming Interface, is a bit of code or rules for how a software component should interact with other software or components. As an example, Salesforce.com has a published API to define how another application can integrate with it.

This new ecosystem is based on what grew out of web-browser cookies years ago. Cookies are bits of data on individuals’ personal systems used to identify returning visitors to websites. Today, the API economy describes how and why our browsers look the way they do, why we see which ads where, and much more. A visit today to most websites involves that site looking at your profile and comparing it to data that particular company has on you from other APIs it might own or subscribe to. Facebook, Google, Amazon and others allow companies to target-market to the visitor based on preferences, other purchases and the like. Similarly, one can opt in to some of these capabilities to allow far greater personalization of experiences. A user might opt in to a feed from Starbucks, as well as a mall he or she frequents, so upon entry to the mall, Starbucks sends a coupon if the guest doesn’t come in the store on that particular visit.

Big Data As Revenue Generator

Taking a bit of the API example from above a step further, companies can combine data from multiple sources to run even more targeted research or marketing campaigns. Simply put, Big Data today leverages incredible computing power, with the ever-increasing amount of publicly (and privately when allowed by individuals) data to drive certain outcomes, or uncover previously unknown trends and information.

There are a variety of dramatic examples recently cited in this space. Among them, a realization that by combining information on insurance claims, water usage, vacancy rates, ownership and more, some municipalities have been able to predict what properties are more likely than others to experience failure due to theft or fire. What makes this possible is technology’s nearly unimaginable ability to crunch inconceivably large data sets that no longer have to live, or even be moved, to a common system or platform.

In the past, to study data one had to build a repository or data warehouse to store the data to be studied. One had to use tools (typically ETL) and convoluted twists and orchestrations of steps to get data into one place to be studied. At the same time, one had to look at subsets of data. One couldn’t study ALL the data – it just wasn’t an option. Now it is.

In another dramatic and oft-cited example, it was discovered that by looking at the pattern of Google searches on “cold and flu remedies,” Google was better able than even the CDC to predict the pattern of influenza outbreaks. Google had access to ALL the data. The data set equaled ALL. The CDC only had reports, or a subset of the data to look at. The larger the data set, oftentimes the more unexpected the result. It’s counter-intuitive, but true.

How and where revenue models work within this space is evolving, but anyone who’s noticed more and more digital and mobile ads that are more and more appropriate to their likes (public or private) is experiencing Big Data at work, combined with the API Economy.

Mobile As A Revenue Generator

Mobile First. It’s a mantra we hear today that simply means companies must realize that their customers and employees are increasingly likely to access the company’s systems using a mobile platform first, ahead of a desktop or laptop device. It used to be an afterthought, but today a company must think first about deploying its applications to support the mobile-first reality. But how can mobile become a unique revenue driver?

Outside of apps in the Android and Apple App stores, companies struggle with use cases for mobile platforms. This author has seen the implementation of many creative use cases, and there are countless others yet to be imagined. Many retailers have followed Apple’s model of moving away from fixed checkout stations to enable more of their employees to check people out from a mobile device anywhere in the store. Similarly, many retailers have moved to tablets to enable their floor employees to remain engaged with consumers and to show the customers some catalog items perhaps not on display. The mobile platform can even be used to communicate with a backroom clerk to bring out a shoe to try on while remaining with the guest. It’s a great way to reduce the risk of an early departure. A strong search application might also allow the retailer to show the customer what other guests who looked at the item in question also looked at (think Amazon’s famous “others who bought this also bought these” feature). We’ll discuss mobile further later in this paper.

Security and Compliance

Not enough can be said about security. All vendors have introduced products and solutions with robust new enhancements in security – from perimeter hardening to intrusion detection. Yet security begins at home. Companies must begin with a complete assessment of their unique needs, capabilities, strengths and weaknesses. There’s no such thing as too much security. A bank might know it can require fingerprint verification, photo id and more at the point of sale prior to opening a new account. Yet that same bank might also acknowledge that too high a barrier might turn off the very customers it needs to attract. It’s a delicate tightrope.

All experts agree that the primary security threats are internal. More theft happens from within an organization than from without. Proper procedures and controls are critical steps all enterprises must take.

The following areas we can loosely discuss under the Security and Compliance umbrella. While they may or may not all tightly fit herein, it is the most useful group to place them in for our purposes.

Mobile Device Diversity And Management

Mobile’s everywhere. Who among us doesn’t have at least one, if not many mobile devices always within arm’s reach at all times, often at all hours of the day? It’s often the first thing we check when we rise in the morning and the last thing we touch as we lay down at night. How can companies today hope to manage the desires of their employees to bring their own devices to work and plug into internal systems? Then there’s the concern about choosing what platforms can and should be supported to allow for required customer- and trading-partner interaction, not to mention securing and managing these devices.

A thorough study of this topic would require volumes and far greater study than is intended here. Yet a comprehensive device strategy is requisite today for any midmarket to enterprise company, and a failure to recognize that fact will lead only to disaster. A laptop left in a cab or a cell phone forgotten in a restaurant can lead to a very costly data breach if the device isn’t both locked down, as well as enabled with a remote-management capability to allow immediate data erasure.
As to enabling customer and partner access: As stated earlier, companies are made up of people, and people are more likely to access a system today from a mobile device than from a desktop. It’s crucial that companies engineer for this reality. A robust mobile application isn’t enough. Customers demand a seamless and completely integrated frontend to backend system for mobile to mirror a desktop-quality experience.

Cloud

So what is a cloud, and why is everyone talking about it? As most realize now, cloud is a loose term meant to refer to any application or system NOT hosted, run or managed in the more traditional on-premises way. In the past, a mainframe ran an application accessed by dedicated terminals. This evolved to smaller (yet still large) systems also with dedicated “slaved” terminals, and later to client-server architecture where the client could run its own single-user systems (think MS Office Suite) as well as access back-end applications.

Cloud applications are easiest thought of as entire systems that are simply run elsewhere. Apple’s App Store, Salesforce.com, online banking and many examples too numerous to mention are typical. Companies today can also choose to have their traditional systems hosted and run, and/or managed in the cloud, but can also architect on-premises clouds, or even hybrid on- and off-premises clouds.

The advantages are numerous, but the pitfalls are too. Leveraging someone else’s expertise to manage systems can produce great returns. Yet companies often fail to properly negotiate quality-of-services and SLAs appropriate to their unique needs, and complain of poor response time, occasional outages and the like. We can’t even begin to address the security implications about Cloud, including what customer data, or patient data can, and cannot be stored off premises.
There are countless consulting firms that can guide companies needing help to navigate the messy landscape of cloud options and providers.

New Initiatives:

Internet Of Everything (IOT)

A web-enabled refrigerator? A thermostat that can automatically set itself? A garage door that can send an email indicating it was left open? GPS in cars, watches and phones? These are just a few of the ideas we once thought silly, or simply couldn’t conceive of yet. But they’re a reality today. Right now we’re like the 1950s science-fiction filmmaker: We’re unable to foresee the depth and degree to which this will all end up, and what we can comprehend will probably seem silly and simple a decade from now.

CIOs and IT decision-makers today are faced with a never-ending list of things to worry about and think about. Today the IOT is a complex maze of what-ifs where reality seems to grow murkier, not than clearer at times. What is clear, though, is that just because something can be done doesn’t mean it should be done. Many of these interesting innovations will lead to evolutionary deadends as surely as the world moved away from VCRs and Walkman cassette players. Tomorrow’s technology will get here, and the path will likely be as interesting as the one we’ve all followed to make it this far.

CIOs must continue to educate and re-educate themselves on technology and consumer trends. This author found himself at a technology conference recently with executives from several global technology companies. Also in attendance was the author’s 17-year-old son, who quickly found himself surrounded with IT leaders asking his opinion on everything from mobile-device preferences to purchasing decisions in malls. When the dust settled, the teenager turned to the author and said rather decisively: “They all have it mostly wrong”.

Cloud, discussed earlier, as well as new mobile offerings can also be fit under this category of discussion.

Personnel And Staffing

More has likely been written on the topic of personnel and staffing in recent years than on all the above topics combined, and thus we left it as a unique item for final thought. Companies struggle with identifying talent to fill all of their vacant positions. At the same time, the populace complains that there aren’t enough jobs. Where’s the disconnect?
The United States and most democratized nations, are at a societal inflection point. As we move beyond the industrial revolution into this new Internet or Information Age, there will be pain.
Just as the United States struggled to adjust to the move from an agrarian society to an industrial one, we now struggle yet again.

We must be careful to not make pendulum-like moves without a careful study of the consequences – both intended and otherwise. It’s very difficult to change the momentum of a pendulum, and some policy decisions are difficult to undo.

There is an income gap. No economist would argue against that point. Wealth continues to accumulate at the top and leave a growing gap between the haves and have-nots. Some of this is expected and will settle out over time, yet most requires broad-based policy decisions on the part of lawmakers and corporate leaders alike.

Education reform and immigration reform are the tips of the iceberg we must begin to tackle. Yet we must also tackle corporate resistance to a more mobile workforce. Too often this author hears of a critical technology position that remains vacant because the employer refuses to hire a remote worker who could very readily do the job, and perhaps at a lesser cost attributed to their willingness to work for less from their home.

While technology leaders like IBM, Oracle, HP, Microsoft and others have quickly moved to adopt this paradigm, corporate America has moved rather more slowly.
Wherever we arrive at in the future, it will be the result of decisions made today by leaders facing a rather unique set of challenges. Yet never before have we had access to the amount of information we have today to make those decisions.

With careful thought, and proper insight, the future looks rather exciting.