June 22, 2015

Digitalization drives growth in every industry

Ari Hirvonen

Head of Enterprise Architecture Consulting, Tieto

Recent global Business IT trend research*, covering 66 countries and close to 3400 IT decision makers, supports this observation and shows interesting changes in the IT management priorities.

Cost saving agenda is replaced with new focus areas. Primary issue is to drive business change by digitalization and aligning business and IT. It is not about getting business requirements and then modernize IT, but it is about modernization business and modernizing IT.

We are in the middle of fundamental and disruptive business changes. Organizations like banks are increasingly detached from their customers by different kinds of new entrants like PayPal and retailers. On the other hand many traditional bank functionalities like payments are increasingly embedded to apps and search. In addition to this, margins go down and regulation challenges remain.

Customers are increasingly interested in solving their life events, not to use basic bank transactions. They like to utilize integrated modular services provided from the ecosystems through multiple channels. In this situation many banks have two options, either to slowly withdraw from the customer facing business to an efficient and industrialized transaction broker role or provide services expected by the customer.

The future success is in new digital business models

A Telecom sector customer requested us some maintenance to their current systems to support new technical solutions. Results of our pre-study indicated that the primary issue was not technical improvement of the system, but change the needs in the business model. The changes enable totally new revenue sources in addition to saving of tens of millions of Euros thanks to new and simplified business processes. We are now executing change program with the customer. Digitalization opens totally new business opportunities for our clients.

Organization are in a hurry with these changes. There is no more luxury to standardize and consolidate IT assets first, and then start digitalization journey, but digitalization needs to start today.

Agile and incremental development is becoming a new normal

Few weeks ago I met a customer who aims to do over a half of their development with agile methodologies by the end of this year. Business agility and time to market were also in the top of the priority list in the survey mentioned before. Results are expected quickly and development must adapt to the faster speed of change.

Business growth driven digitalization and cost cutting focused IT asset rationalization go parallel hand in hand, but the major focus and the driver is digitalization. In practice this means extending legacy for example with mobile and portal interfaces and building Business Process Management, Business Intelligence and cloud extensions to current applications.

This trend is becoming primary way of thinking among our customers and also the research support this. Gartner has predicted that "by the next year over a half of application modernization efforts will address business demand for enhanced functionality to legacy applications, not cost savings."

Tieto's Modernization consulting 2.0 approach is planned for digitalization driven future. Starting point is to understand what digitalization means for the customer and for the business and next steps are driven by that. Architecture rationalization is done in parallel, but primary focus is to enable new business growth in agile way, adapting to evolving business landscape.

*Derksen, Barry et.al. (2015): 2015 Global Trends in Business and IT Research

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