Digital Business and the Boundary-free Enterprise™

Bruce Guptill Research Alerts

What Is Happening?

As we get ready for the 2017 Digital Business Summit events in London and Dallas, it is easy to be reminded that Digital transformation, for enterprises and for IT providers, is increasingly about the re-invention of at least some of every aspect of the business. This includes the company’s technologies, its organization, its functional areas, and its culture, as the boundaries and barriers that have grown from each of these begin to shift and even disappear.

That’s not to say that everything needs to get blown up and rebuilt. But when long-standing business barriers and boundaries shift or disappear, everything that works now should be reconsidered or re-invented to work better in a boundary-less, or even boundary-free, business environment.

Why Is It Happening?

Our Boundary-free Enterprise™ (BfE) concept provides a useful model for identifying and understanding how and why each aspect of the business is changing and will change. The BfE model identifies and explains four areas where boundaries and barriers have traditionally developed and been maintained within and between enterprises – and which today limit and inhibit the ability of enterprises to compete in the new digital business environment. We briefly examine below how each is changing, and why.

Technology. Most technology barriers that inhibit an enterprise’s digital growth have arisen from its business software. Widespread use of open, agile, and Cloud-based development approaches, along with more reliance on and innovation in APIs, have helped reduce or eliminate the OS/platform-enforced technological boundaries between many enterprise IT stacks and systems. Meanwhile, increasingly flexible business models have been enabled by, and driven by, the resulting flexible approaches to development and integration/interoperability. This in turn brings increasing expectations of faster times-to-market, which in turn engender even shorter development and release cycles, which in turn both require and promote faster and more efficient development approaches.

Results: Traditional enterprise technological barriers are much more readily overcome today. Disparate business systems are more likely to be linked more effectively. Traditional OS-based or architecture-based technological barriers are fading. This enables reduction of boundaries elsewhere that inhibit digital growth within and between enterprises. Meanwhile, business expectations of what IT can do are rising – with expected shorter timeframes for results.

Culture. Cultural barriers within the enterprise tend to arise based on organization, function, and technologies used. The technological changes noted above reduce many of the most restrictive and inhibitive boundaries built up by and around cultural structures. Interconnectivity and integration from technology layers up through business processes, and across functional siloes, reduce cultural barriers. In such environments, positive and useful aspects of different cultures are more likely to be shared between organizations, helping to improve communication, collaboration, and the creation of new types of business.

Results: Cultural boundaries within enterprises (e.g., between IT and Marketing) are fading – especially as digital shifts push firms to add, or change to, a service focus versus a product focus. Widespread use of cloud has helped catalyze a rethinking of most organizational roles and responsibilities, while enabling and requiring IT and business leaders to work more and more closely. Note that cultural change strongly affects how, and why, the enterprise engages with other businesses.

Functional. Well-defined sets of data, systems, responsibilities, and functions are increasingly blended, typically by implementing Cloud-based systems that enable vastly improved sharing of information and functionality in more standardized ways. We also see more blending of data and functionality across formerly defined lines of responsibility and function. Leaders and users have access to more and better business data from all areas of the enterprise than ever before. Barriers based on worker and technology function fade as a result.

Results: The extent of inter-enterprise functionality and data sharing is unprecedented, and increasingly widely adopted and adapted. We will see more and better communication between those groups, enabling more and better cooperation, and, if adequately managed, improved sales effectiveness.

Organizational. There are still (and always will be) important departmental boundaries regarding responsibility, reporting, compliance, and function, but communications boundaries are fading fairly quickly. This enables greatly improved operating efficiencies, with much more business and technological innovation at a faster pace with wider reach.

Easier, more secure, and less expensive sharing of data and access makes it more natural to share tasks and functions. Tasks, functions, and workflows increasingly become intertwined, leading to rethinking and redefining business operations into more flexible and efficient constructs.

Results: Important and significant distinctions between businesses and groups within businesses will always exist. But the reduction of technological, cultural, and functional barriers enables the dissolution of many formerly strict boundaries that separated work groups, workflows, and workers.

Net Impact

All of the above changes are occurring everywhere. Practically every business enterprise can and will be transformed to some extent into a boundary-free enterprise. We spend quite a bit of time and effort helping our clients – enterprise and IT provider alike – understand the scope and impact of these changes on their own business, and on their customers, partners, channels and competitors. While every situation is somewhat unique, seven aspects always surface, and must be understood and addressed. These are as follows:

  1. Business strategies need to be reviewed and rethought in the context of more highly-interactive, boundary-free environments.
  2. Success in many markets will require multiple-path, simultaneous approaches that vary based on relative availability and adoption of different enabling technologies.
  3. Speed to market, and speed of response, will become more variable and more critical in many industries. The value of „agility“ will be judged based on a relative ability to reach and match differing business velocities in different relationships and markets.
  4. Business structures, organization, and management need to adapt, and become more flexible, or they will disintegrate. Note: Hierarchical and centralized organizational models cannot be effectively applied where worker autonomy is expected and partner/provider/customer relationships are increasingly dynamic.
  5. Provider and partner relationships must be re-examined and rebuilt, because we are increasingly likely to rely on new and different types of technologies and providers. Enterprises will establish and rely more on new relationships with new providers.
  6. Procurement, security, compliance, and other aspects will need to be re-examined as a result. Software/SaaS providers that excel in this area will be more and more important and valued partners.

Security, especially data security, needs ongoing and continuous reexamination and re-engineering. There are more than adequate security technologies available, but these will need to be adapted in new ways. For example: worker /user security and compliance training and management will have to be rethought and rebuilt for “free-range” worker/user business models in a dynamic IT-as-a-service environment.

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ISG Research Study – Unprecedented Growth of Automation and AI in Enterprise Support Functions

Stanton Jones Research Alerts

What Is Happening?

Analysis of our recent global IT and business-buyer behavior study suggests that “ambitious” is the best word to describe enterprise plans for the adoption of software-based technologies and techniques that perform work like humans, or that mimic human decision-making.

Key findings from our new study, focused on the adoption of automation and artificial intelligence (AI) technologies in mid-sized to large enterprises, include the following:

  • The application of automation and AI to mission-critical business processes will more than triple by 2019. Sixteen percent of respondents indicate that they have applied automation and AI to one or more mission-critical business processes today. By 2019, this increases to more than 50 percent. Interestingly, it is the application of automation and AI to mission-critical processes that is set to grow the most over the next 24 months, suggesting that IT and business leaders are becoming more confident that current proof-of-concept and pilot projects will move into production over the next two years.

Automation & AI

Figure 1: Impact of Automation & AI on Business Processes. Source: ISG Insights 2017 Automation and AI Survey.

The rate of adoption of automation and AI technologies is set to double by 2019. Across nearly every technology category, planned adoption doubles. Survey results suggest businesses are looking to adopt technologies that have flexibility to solve more than one business problem and will target technology vendors and service providers that can solve a broad array of use cases. Similar to cloud, automation and AI adoption will be siloed until an enterprise-wide framework emerges to identify, evaluate, source, manage and govern various digital labor technologies.

Automation & AI
Figure 2: Automation & AI Technology Adoption Today and in 2019. Source: ISG Insights 2017 Automation and AI Survey

  • Outsourcing and offshoring is ripe for disruption. As ITO and BPO buyers increasingly look to automate processes before they outsource them, the need for traditional tower-based outsourcing services will wane – as will the need to have a significant number of delivery resources offshore. Buyers are also becoming savvier about the use of automation, and are realizing their managed services providers are not always passing savings back to them as services become automated.

Automation & AI
Figure 3: Automation & AI Impact on Outsourcing and Offshoring. Source: ISG Insights 2017 Automation and AI Survey

Why Is It Happening?

Digital business is rapidly moving from the front office to the back office. Customers are not the only ones who need access to products and services in real-time – employees and suppliers do, too. However, budgets for business support functions are generally flat to shrinking, leaving little to no new resources to support back-office transformation. This is why IT and business buyers are increasingly turning to technologies like robotic process automation (RPA), autonomics and virtual agents to execute business processes faster, improve quality and compliance and avoid future costs.

As the front and back offices increasingly become digitized, transaction volumes are exploding. Technologies to store, process and analyze data are improving at a dizzying rate, and costs are plummeting. The combination of these two factors is leading to an unprecedented level of interest and planned adoption of the technologies that underpin this transformation, namely RPA, autonomics, virtual agents and assistants, and an increasing number of machine learning algorithms that can process large amounts of transactional data to identify patterns, determine viable options and make decisions.

Net Impact

As we recently reported in the ISG Automation Index report, service providers and enterprise buyers that are adopting automation and AI – and specifically RPA and autonomics – are seeing significant improvements in productivity, cost and speed. These technologies are augmenting their human counterparts, by automating routine, deterministic tasks. This is, in turn, changing the way enterprise buyers think about their operating model and their associated sourcing strategy.

Case in point: in the Automation Index, we identified a 43 percent reduction in full-time equivalent (FTE) requirements when RPA robots were applied to certain tasks in order-to-cash processes such as billing, cash application and credit. Along with a traditional labor arbitrage model with a large number of low cost offshore resources, A sourcing buyer also must evaluate a new model that has lower-cost RPA bots performing the bulk of the deterministic work and a small team of more highly skilled resources to manage bot exceptions and drive process improvement enabled by bot-produced data. These operating model choices will drive a fundamental re-think of the very nature of enterprise support functions – and will render irrelevant many of the traditional operating benchmarks we have relied on for decades.

Looking toward the horizon, as enterprises become more willing to embrace automation and AI, their number one issue will be talent – whether sourced internally or via a provider or partner ecosystem. Our research identifies data science as the most important skill set of the future and the one companies are having the least success finding and retaining. As we have discussed in the past, data science is at the heart of digital business. As software moves from supporting the business to being the business, finding and retaining data science talent will be critical to business success.

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SapphireNow 2017: Intelligent Apps – Beginning of an Inflection Point?

Bill McNee Research Alerts

What is Happening?

Earlier this week, ISG Insights attended SAP’s annual SapphireNow conference in Orlando, Florida, along with 30,000 other senior executives, partners and ecosystem players.  Front and center during the opening-day keynote by CEO Bill McDermott was SAP Leonardo, SAP’s new / updated brand that is becoming its de facto next-generation platform and toolkit for building intelligent applications. SAP Leonardo integrates not only SAPs emerging Internet-of-Things (IoT) positioning, but likewise incorporates a design-thinking methodology that leverages machine learning and blockchain technologies, and a range of business analytics functionality.

Why is it Happening?

A key theme that McDermott emphasized was that data is the new “gold” in the digital revolution – a theme further emphasized by Hasso Plattner, Chairman of the Advisory Board, in the Day 2 keynote. In fact, Plattner’s emphasized two key new directions for the firm – the need to be faster and better at rapid application prototyping (emphasizing the role of the UI in this endeavor), and his vision to make all applications intelligent.

In this regard, Leonardo is SAP’s next big thing – and central to the way it will help customers build and deploy next-gen style applications and the services that will surround them. Long an advocate for in-memory approaches and architectures that deliver a single version of the truth, Plattner led SAP to its current “no-aggregates” framework as S/4 HANA evolved over the past few years. In this regard, Leonardo is the next crank of the wheel, and the foundation for the building of a new class of intelligent application layered on top of the SAP Cloud Platform, inclusive of its emerging IoT, AI and machine learning capabilities.

While an event as large and broad as SapphireNow can’t be covered in a single research piece, other key moves by SAP included:

  • SAP Digital Twin, providing digital inspection for the Leonardo IoT platform (leveraging sensors to create real-time digital representations of physical assets). Interesting case studies shared in these regards.
  • SAP Cloud Platform to now run on AWS and Cloud Foundry, as it ups its game to further support a multi-cloud environment.
  • SAP Machine Learning (ML) now available now only as part of Leonardo platform but SAP is launching its own ML technology on a digital platform, called SAP Machine Learning Foundation. A host of SAP offerings are also getting machine learning updates, including SAP 2/4 HANA Cloud for Finance.
  • Significant upgrades to a range of analytic offerings, including SAP Analytics Cloud (formerly Business Objects), SAP Digital Boardroom, SAP Predictive Analytics, among others.
  • SAP Ariba and IBM are partnering together to transform procurement with SAP Leonardo and IBM Watson

Market Impact

As shared in my Lens 360 blog post recap published May 18 on Workday’s recent Tech Summit, it is clear that the major ERP players are dramatically upping their games and advancing strategies that go well beyond their historical strength in developing and delivering core systems of record. In the case of both SAP and Workday, layering in advanced analytics, AI and IoT technologies that access real-time financial and non-financial data, combined with other internal and external information, is significantly extending the value-proposition of both providers – whether rank and file managers, all the way up to the boardroom.

While SAP’s various cloud-based offerings were emphasized throughout the event – front and center was a vision of SAP delivering a next-generation of intelligent apps that have the potential to enable enterprise to better navigate their digital transformations and journey. No doubt that we are early in this journey, but the knee may be in the curve where the emphasis will be less on core systems of record and more on data and executive intelligence as the cornerstones of tomorrows ERP.

While no doubt SAP has a compelling next-generation vision, a big question is how many S/4 HANA customers are far enough along in their journey to take advantage of the new capabilities – and how rapidly will SAP lay out some very actionable, compelling, and high-value ML-based solutions around specific process or executive leadership issues, to accelerate adoption?

But what is clear is SAP is thinking out of the box, as it moves to go beyond its initial S/4 HANA application vision – and sets its sights on helping clients advance their digital journeys. We like that SAP is setting new frontiers and challenges in front of itself.

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