Digital Transformation: What’s Going Well?
Virtually every business feels the pressure to up its digital game. Research firm IDC, for example, anticipates global digital transformation spending will reach $1.7 trillion¹ by the end of 2019, a 42 percent increase from last year’s already large numbers.
But “being digital” is easier said than done: IDC also found that last year, three-fifths of companies found themselves at a “digital impasse,”² with transformation efforts commanding growing budgets but producing inconsistent results.
In this challenging environment, it may be beneficial to highlight some of the areas in which enterprises are making solid progress. In our experience at Apigee, two clear areas of progress in digital transformation have begun to stand out — vision and cloud.
Enterprises have been spending more and more on technology for years, which might imply a sort of vision. But in reality, much of the spending could be interpreted as haphazard. Some businesses have been throwing money at mobile, as though that’s all that matters. Others have launched innovation centers that work on research projects but often fail to impact the core business. Others still have just bolted new solutions on top of whatever they already had. Sometimes, all of the above has been true within the same company.
This hodgepodge of digital solutions emerged in part because the nuts and bolts of transformation were often being handled autonomously, in an ad hoc and decentralized way, by different people throughout the company. Now, there’s evidence that that’s changing.
Gartner, for example, found in its 2017 CEO Survey that “42 percent of CEOs are now taking a digital-first approach to business change or taking digital to the core of their enterprise model.”³ In “CIOs Need Help to Scale the Digital Business,” the firm notes, “With 47 percent of CEOs reporting pressure from boards to make progress toward digital business, it’s time to move past speculation to a real digital plan.”⁴
Engagement from the C-suite and pressure from the boards suggest that enterprise leaders understand real business evolution relies on a unified corporate vision. In this evolution, IT is no longer just maintaining equipment, networks, and data — it’s enabling new business opportunities at unprecedented scale and velocity. That’s not a “bolt on” adjustment, but rather a holistic change that goes to the core of the business. Real change is not likely to organically coalesce from dev evangelists and IT managers making decisions throughout the company — and as more leaders understand that vision must be driven from the top, more businesses will be positioned to make strides in using digital technologies for true impact and real change.
One possible manifestation of the more focused C-suite visions — and an area in which businesses are making notable progress, regardless — is that companies are not only leveraging the cloud more, but also leveraging it in more ways. “Cloud is no longer about cheap servers or storage — it’s now the best way to turn great ideas into amazing software, faster,” states Forrester Research principal analyst Dave Baroletti in “Predictions 2018: Cloud Computing Accelerates Enterprise Transformation Everywhere.”⁵
Indeed, it can be argued that cloud is becoming a vehicle for and democratizer of innovation — something that’s enabling vast ecosystems of participants to interact at unimaginable scale and enabling businesses of all kinds to work with machine learning and other technologies that would otherwise be too prohibitively expensive for most companies to invest in.
Morgan Stanley anticipates that around 20 percent of application workloads are already in the public cloud, and that this percentage could double, or more, in the next few years.⁶ Morgan Stanley Managing Director Brian Nowak noted last June that 20 percent is a significant milestone. “When you get to that 20 percent penetration point, that curve inflects and growth accelerates,” he said.⁷
As more companies begin to leverage the cloud in more diverse ways, the variety of business models and use cases is only likely to increase.
Turning Cloud and Vision into Business Evolution
Pitney Bowes, a company with which the Apigee team at Google has worked closely, is an excellent example of the progress that can be made when a company unites around a clear vision and begins to leverage the cloud not only for cost savings but also to enable new business opportunities.
For much of the company’s near-century history, its legacy has been built on physical mailing and shipping solutions. Its leadership recognized that to remain competitive, it had to evolve for the modern world of connected commerce, where the lines between physical and digital interactions are increasingly blurred.
By organizing around this vision, the company has expanded from legacy business lines into new digital ventures that now amount for over $1 billion in annual revenue.
These ventures include the Pitney Bowes Commerce Cloud, which — far from using the cloud merely as a low-cost file repository — leverages cloud technology as a delivery mechanism for more than 160 public application interfaces (APIs). These APIs give third parties access to Pitney Bowes capabilities such as location intelligence, shipping, e-commerce, and payments, empowering developers and partners to build new apps and services that extend the reach of Pitney Bowes services.
This use of the cloud has dramatically expanded the scope of potential Pitney Bowes innovation, increasing the number of developers leveraging the company’s assets from a mere handful to hundreds. What’s more, these APIs haven’t just provided new revenue opportunities for outside parties — they’ve also helped the company to accelerate internal development as well, improving time-to-market for new SaaS products by as much as 4x.
As the success of Pitney Bowes demonstrates, when companies align around a clear vision, get executives involved in driving results, and began to more fully leverage the cloud, dramatic transformations are possible. The process of adapting to today’s business environment remains a challenge — and that challenge will continue to evolve rapidly, meaning that businesses shouldn’t see executive alignment or aggressive cloud plans as some kind of end state.
Rather, vision and cloud are destinations along a journey that never ends. This perspective emphasizes the enduring difficulty of true business evolution efforts — but it also means that once businesses get on the right path — as many have by embracing the cloud and refining their corporate visions — they may see their pace of innovation take off.
[Looking for more insights about digital transformation? Check out Apigee’s resource hub here.]
1: IDC, “IDC FutureScape: Top 10 Worldwide Digital Transformation (DX) Predictions,” November 2017.
3: Gartner, “Gartner Identifies Ten Ways to Fund the Shift to Digital Business,” November 2017.
4: Gartner, “Smarter with Gartner: CIOs Need to Help Scale the Digital Business,” May 2017.
5: Forrester, “Predictions 2018: Cloud Computing Accelerates Enterprise Transformation Everywhere,” November 2017.
6: Computerworld, “Economy boosts CIO budgets, as A.I. helped IBM, says Morgan Stanley,” April 2017.
7: Geekwire, “Morgan Stanley: Cloud computing is at an ‘inflection point’ — but how big will it get?”, June 2017.