To get digital transformation right – start with the core!
Most established businesses fear the “Kodak moment”, the rise of new competing services or products that over time will outcompete their current offerings. With threats of becoming disrupted by new, born-digital competitors, incumbents are fighting to digitally transform their businesses and delight their customers.
An important goal with digital transformation is to build experiences that result in consumer delight. For traditional brick-and-mortar businesses, this means that they are realizing the value of seamless and professional digital experiences for their customers. As a result, the mantra the past years has been to “digitally transform” the customer experience and reduce the distance between the traditional in-store experiences and digital alternatives.
However, longstanding organizations attempting to digitally transform often experience that their biggest challenges lie at the core of their IT architecture: a monolithic legacy infrastructure that prevents them from reaching their ambitions. Based on past ideas on enterprise architecture, the underlying systems are often based on outdated technologies and are untidily linked with business processes (which are also often outdated too). Combined with these systems’ lack of modern integration capabilities, the results of initial digital transformation initiatives are often shiny new front-ends with messy and unmaintainable back-ends.
In order to succeed with digital transformation, organizations must first focus on modernizing their legacy infrastructure and reimagine their business processes! However, removing the roadblocks of complex legacy technology is far from easy. Just the magnitude of change required is often enough to discourage even the most ambitious IT leader. In addition, many core systems are based on technologies where there is a significant skills shortage (such as COBOL). However, through experiences from work we have done with our clients, we can provide some advice on how to begin your “core transformation”:
1 – Analyze the situation and set clear priorities
It is well known that a failure to modernize your core in a timely manner can significantly slow down your digital transformation initiatives as well as further business growth. On the other hand, a hasty decision to retire all legacy software is not wise either. The ROI of digital transformation is often hard to measure, and premature core modernization may not bring you the desired outcomes.
In order to set the right priorities, the needs of the organization and customers must be assessed first. This includes information about:
- The main business value of current legacy systems
- Common issues, limitations and inefficiencies of current systems
- The key business logics and integrations they provide
- How the systems are used (which parts are utilized, and which are not)
- Desired functionality and automation potential of new system
- Modernization potential based on current technology and availability of skilled resources
Based on the information gathered, you can start evaluating whether it makes sense to abandon the entire core platform right away, start by modernizing certain elements of the core systems, or just add smaller enhancements to address specific issues.
2 – Simplify and evolve
What we have learnt from the past is that monolithic, silo-based ERP systems are like an elephant in a china shop: attempts to modify or upgrade such solutions often result in massive damages to the rest of the IT architecture. Rather than replacing such a monolith with a “newer monolith”, you should consider breaking the functionality of the core systems into a loosely coupled, extensible architecture. The key is to prepare for a future of rapid changes, so basing your new architecture on microservices and adaptable low-code applications is a good start.
Further, rather than forcing the entire legacy modernization into one large and unmanageable project, you should first start by filling the most urgent gaps from your previous analysis. By breaking the challenge down to rapid implementation of smaller, focused, functional services that your business needs, you will eventually make the legacy system replaceable with minimal risk. The goal should be an evolutionary migration from old monoliths to a modern Digital Operations platform.
3 – Focus on APIs
One goal of core modernization is to enable digital transformation initiatives by providing the services they need. The new applications, systems and services must provide APIs that enable other (often customer facing) solutions to utilize the information and functionality they provide. When you modernize your legacy core applications, make sure that the new technologies or platforms support easy and rapid creation and government of secure APIs for your organization.
4 – Utilize the opportunities in the cloud
The cloud is a major enabler of core modernization. Many limitations of the legacy core, such as lack of agility and availability, can be mitigated by establishing core systems and processes in the cloud. Further, cloud providers offer easy access to leading-edge technologies without heavy up-front investments. However, a “lift-and-shift” of legacy applications to a new infrastructure in the cloud will not remove their inadequacies. To truly harness the power provided by the cloud, the systems must be cloud-ready. Further, not all systems are a good match for cloud migration, so a thorough evaluation of compatibility, costs and benefits should be performed.
5 – Remember that it’s not all about technology
In order to be successful with your modernization initiatives, it is important to remember that the initiatives touch both people, processes and technology. Merely focusing on replacing an outdated technology may alienate data- or process stakeholders. Business subject matter experts in your organization must be involved to ensure optimization of the new (and hopefully improved) processes. Further, a new and “modern” off-the-shelf solution may not be the perfect match for your organization and end-users. Include evaluation of alternatives, such as low-code, where you can completely customize the solution to your organization and your business processes. Make sure that stakeholders are involved throughout the process, and that they are allowed to change their mind as you move ahead.
Core modernization can help your organization gain the flexibility and agility required to stay ahead in a fast-paced, continuously shifting business environment. It can provide the opportunity to redesign technology and business processes to better align with your business strategy. And, it can help you establish a digital foundation to adapt to foreseen and unforeseen changes. I’m not saying that it’s easy, but it’s a necessary investment in the future of your organization.