Digital Evolution: Adapting Business for a Digital World
This content is part of a program managed by the Economist Intelligence Unit, sponsored by Accenture and Pegasystems. “Digital Evolution: Adapting Business for a Digital World” aims to shed light on the world of digital business—the strategic imperatives, challenges, complexities and pitfalls. All “Digital Evolution” content can be found here.
To the untrained eye, many of today’s enterprises look like they have adapted to the times. Take, for example, banks. Their sleek, modern branch offices and mobile apps are the fig leaf that covers a different reality: Many still use legacy systems that date back to when the Beatles ruled the charts.
Other heavily regulated industries have the same issue. For instance, a high percentage of insurance companies are still running mainframe systems written in COBOL. Their consumer-facing apps are really just bolted-on appendages to ancient infrastructure.
But this if-it-isn’t-broke-why-fix-it approach isn’t necessarily a prelude to disaster, says Don Schuerman, CTO and VP Product Marketing, Pegasystems. Legacy systems are definitely an issue, but that doesn’t mean that you can’t have both a front-facing mobile business and a legacy IT system. It’s possible and often preferable to have both and continue to get mileage out of your existing technology.
“I don’t really hear companies saying ‘We’re going to do this all,’” he says. “It’s more ‘We’re going to attack some strategic initiatives that we need to move our business over to.’” Rather than moving an entire business into the cloud, Schuerman advocates first moving just the key strategic parts.
“For example, a company isn’t going to move its business over to the cloud for the sake of doing so. It is going to create a separate business in the cloud, test that business and, if it’s successful, gradually roll out a whole business that’s in the cloud over a three-to-five-year period.”
In other words, instead of rebooting the entire enterprise, Schuerman advocates that businesses spin off small portions with a focus on innovation.
Start-up mentality in a legacy system
This piecemeal solution—to essentially create an in-house start-up—could be employed by a lot of companies, says Schuerman. And this sort of approach is in great demand. For example, in a 2014 survey of 321 executives at insurance companies, 86% of respondents said that legacy IT issues and data silos are a big roadblock to transformation. This approach was also spotlighted in an Accenture Technology Vision 2015 report that surveyed 2,000 global IT executives across ten industries.
Since overhauling a legacy IT system can be hugely expensive and difficult (a common, if hackneyed, metaphor is trying to replace a plane’s engine while in flight), budgets for transformation initiatives get rejected. Smaller projects, though, stand a better chance of being approved. Still, you have to be strategic about where to begin. “When you look at transformation as it pertains to mobile, many organizations are not set up to be able to embark on an enterprise-wide transformation,” says Schuerman. “A lot of organizations don’t understand where to get started.”
Often, they take a Band Aid® approach. One common solution is middleware—software that acts as a sort of glue between old operating systems and modern apps. Such stopgap solution isn’t likely to allow for the kind of dynamic response that’s needed in today’s fast-paced environment. “I think the age of middleware is really done,” Schuerman says. “It’s more about building an agile business that can effectively have the business provide requirements to IT and then IT is there to service the business and they can rapidly launch a new application in an environment that’s like an innovation lab.”
That’s done via an agile methodology rather than a traditional Java or middleware spec.
For instance, suppose an established company has a new unit that tests customer offers and mobile capabilities. The company could treat this unit like it was a start-up, complete with its own test lab. And it could function effectively even if the company still uses legacy billing systems.
Businesses don’t have to be shackled to and by old mainframe-based systems, Schuerman says. In fact, all too often legacy systems are merely a manifestation of a mindset that’s as intractable as the old technologies.
“A primary issue is culture,” he says. “It’s not as much technology as it is getting individuals to shift their thinking and getting them to gradually become more comfortable with new ways of doing business in a digital setting.”
He adds, “It’s not the systems that are in the way. You’ve got to build an environment within this organization that is free and has enough authority to be able to launch new business processes and create almost a new business model. And that's when transformation occurs."
In Build for Change: Revolutionizing Customer Engagement through Continuous Digital Innovation, Pegasystems Founder & CEO Alan Trefler shares his insight on what organizations can do to serve the next generation of customers and survive the pending "Customerpocalypse".