By David Rowe, SVP & CMO, Rimini Street
For years, IT (information technology) has had clearly defined responsibilities: Keep critical business systems up and running, control costs, and meet security and compliance requirements. Even today, most of the IT budget is likely spent keeping the lights on. But this traditional focus can prevent organizations from accelerating customer experience initiatives enabled by digital transformation.
Global information and communications technology (ICT) industry spending is expected to grow by more than double the rate of the GDP growth through 2022 and this activity will be driven by investments in new technologies such as artificial intelligence (AI), robotics, and augment/virtual reality (AR/VR).
The role of IT is evolving quickly and becoming more prominent. Key priorities for CIOs (chief information officer) should be shifting from predominantly maintaining current operations toward helping the company achieve its business objectives, using technology as a transformative tool. More than ever, successful IT teams are focusing on growing the business, improving margins, and expanding globally, through strategies such as improving customer experience and enabling new business models.
In a KPMG survey, only about half (56%) of CEOs in Singapore acknowledged the danger in being too slow to adapt as industry disrupters and changing customer expectations push companies to change how they operate. Digital transformation presents numerous challenges, but the opportunities are also tremendous as these organizations grapple with the pace of technological changes, growing cyber threats, and a talent shortage. The survey notes that CEOs who are transforming their leadership teams to be more resilient and proactive in their digital transformation and business model redesign initiatives also have ambitious plans to upskill more than half of their entire workforce.
CIOs can’t help the business digitally transform and grow without expanding their mindset from maintaining the status quo to including a relentless focus on experimenting and innovating. However, nothing can be achieved without first freeing up funds to invest in these new digital initiatives. Gartner has found that although CIOs in the region are expected to perform like global leaders, IT budgets do not match up with this expectation. Additionally, despite the investments that Singapore’s government has made into business innovation and technology adoption, 65 percent of businesses polled in 2018 hoped to receive additional government support to fuel transformation efforts.
Are you locked into traditional models?
In order for CIOs to make the best use of budgets to support today’s business priorities, they need to reallocate budgets to move beyond the traditional focus on operational spending to more innovative, transformative business needs. As a Gartner CIO Agenda notes, digitalization and customer-centric growth are top organizational priorities that CIOs must support. Traditional technology budgets tend to leave little budget for driving business transformation and new digital initiatives. Ensuring a robust, secure platform for business operations is table stakes for the IT team, but current systems and the accompanying legacy vendor business models are now seemingly consuming the vast majority of IT resources, preventing needed investments in digital transformation.
If maintaining the status quo is limiting your innovation budget and keeping the business from meeting its objectives, how can CIOs take control of costs and regain your momentum? One area with huge IT savings opportunity is the traditional legacy software vendor model for maintaining ERP systems, including maintenance and support fees.
To fund digital transformation, take a close look at total maintenance costs and related return on investment (ROI) for maintaining enterprise software from big ERP vendors such as Oracle or SAP. To truly understand total costs, CIOs need to consider more than just maintenance fees, which are typically 22 percent of upfront licensing costs and paid every year. Traditional ERP platforms also require ongoing expensive upgrades to maintain full support, as well as other costs related to inefficient software vendor support models, including the cost to support customized code and a one-size-fits-all support model. Annual maintenance fees are only the tip of the iceberg, with total maintenance costs that can significantly exceed the cost of such maintenance fees.
With the right approach to maintenance, IT organizations can cut annual support fees in half, in addition to delaying or avoiding costly product upgrades for even more savings, freeing up precious IT resources for more important priorities
The ability to innovate quickly is key
Innovation agility is an effective strategy for driving transformation in the real world. With an innovation agility approach, IT teams can innovate far more quickly by optimizing core IT systems to liberate resources — people, money, and time — so that it is possible to reinvest in initiatives that most directly and rapidly impact the business. The alternative, waiting for new ERP platforms from legacy vendors and then spending vast sums to re-implement onto these future, unproven systems, can put organizations behind in the race to competitive advantage in a digital world.
By aggressively investing in digital initiatives using optimized resources today, CIOs put innovation foremost and avoid the Sisyphean task of first perfecting an elusive “digital core.” Focus digital investments at the point of impact with systems of engagement, where the organization engages with customers, employees, and partners, not on yet another reimplementation or upgrade of already robust systems of record.
Industry analysts frequently recommend managing mature ERP applications in collaboration with new digital investments like cloud, social, mobile, IoT, and analytics in a hybrid IT configuration. A hybrid IT approach is the best of both worlds, combining the robust foundation of core ERP applications with the innovative digital investments needed today to create a competitive advantage.
Budget is what prevents many IT organizations from meeting today’s challenges.
With the right approach to IT optimization, you’ll be able to move the business forward to unleash the potential of a digital economy. They should not wait to innovate.