It is hard to open a business periodical or listen to a thought leader without hearing about Digital Transformation.
The IDC defines Digital Transformation as:
“the approach by which companies drive change in their business model and ecosystem by leveraging digital competencies”IDC IT Executive Programs – Digital Transformation
You would think a definition would add clarity, but for most people it sounds like a bunch of buzzwords! In this three-part Blog we will
- Explain and define terms of digital transformation in plain English
- Provide clarity and examples of how companies have changed their business models to take advantage of the new technology
- Provide some “best practices: on how you can go about transforming your business
When people refer to “digital competencies” they are really talking about the latest technology which allow for better collaboration. “Competencies” refers to a combination of new technology along with knowing how to use the new tools to make change. When you put the tools, together with training and know how, you can change the way you do business to:
- improve customer satisfaction
- be more effective and efficient.
20 or so years ago, the internet become more available to both business and consumer. People began referring to “the cloud” without meaning water vapor in the sky. I-BN and other companies installed a bunch of computers in data centers to allow companies to rent computing power. Similar to a utility, you pay for the electricity or water you use rather than building your own generators or drilling wells. Some well-paid marketing person called it the cloud and so began the digital age.
The initial advantage of the cloud was pooling of resources so the economies of scale could be used to make more powerful technology more affordable This enabled:
- Smaller companies the ability to afford more complex technology solutions.
- Larger companies could rent computing power “on demand” for developing and testing new applications without having to buy duplicate resources.
- Researchers and universities could rent computing power for experiments
- As e-commerce became more popular companies could add resources “on demand” for events like Black Friday, or if they went on QVC.
As the cloud matured companies learned new ways to use the model and data which was being captured on these centralized platforms. Although some of the new used of the information collected seem like “big brother is watching you,” they also opened up new ideas on how the cloud could benefit customers.
Software as a Service
Software companies saw how computers and hardware were being shared and rented and started offering their “software as a service” (SaaS). By itself renting or leasing software only shifts the cash flow from an up-front purchase to an operating least and often costed customers more than an outright purchase. In the early days SaaS companies added value by bundling additional services such as combining cloud computing and services such as periodic upgrades
New software was developed and some traditional or “legacy” software packages were re-written to be more efficient.
- Multi-Tenancy – More than one company could share the same code in a secure manner.
- Browser Based – Rather than having to install “client” software on every computer, the application runs on web browsers like Microsoft Edge, Apple Safari or Google Chrome.
These new “multi-tenant” packages combine the benefits of upgrading all server based software in the cloud at once instead of once per company. With the browser there is no local or PC based client to upgrade. This drastically reduce both labor and infrastructure costs. Because customers are paying subscription, upgrades become automatic so everyone uses the latest version of the software.
The advantages of cloud computing and SaaS are hyped by the companies that sell it. Moving technology from the office to a cloud does not change the way we do business. Renting versus buying software often increases costs over time. Subscribing rather than purchasing it also increases software spend. Changing how we pay or where servers are located is not “transformation.”
Often new SaaS software did come with some changes. Upgrading from QuickBooks to NetSuite or ACT! to Salesforce came with some new features and new costs. Unfortunately, after the initial subscription customers got a big surprise in the renewal or when more than the entry level version was required. Big increases in rental rates or advanced features came with a big monthly upcharge. However, if the new feature increased customer satisfaction or resulted in reduced headcount, SaaS is awesome!
Transformation requires change in the way we work. During COVID we learned to work remotely. Remote work drove many companies to the cloud. We now collaborate with Teams and Zoom. Simply moving to the cloud is not transformational because we just changed where servers are located. To transform a business, we must change HOW we work.
Part 2 –Digital Transformation in Action, provides examples of successful use of technology to improve the effectiveness and efficiency of operations. Part 3 – Creating Digital Transformation talks about methods for starting and/or executing a digital transformation program within your company. For more information, visit our Digital Transformation Services page, Schedule a Consultation, or e-mail us at email@example.com