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The business imperative to modernize your tech estate

This is the first part of a two-part series looking at application modernization. You can read the second part here.

Senior IT executives are anxious. A jaw-dropping 95% of them admit their business is falling behind. They’re being outpaced by an elite set of competitors—ones that have already transformed their IT dependent business operations—that have
 become digital businesses. These transformed companies are powerhouses: 96% of them exceeded revenue targets last year, and they’re more than twice as likely to meet revenue goals.

These companies enjoy other advantages too: they complete more IT projects on or ahead of schedule, and on or under budget, and their overall IT spending is lower. Digital organizations with highly evolved DevOps operations are also 24 times more likely to automate security, leading to more secure and security proactive organizations.
 
In this article, we’ll explore steps and techniques that allow companies to transform and modernize their applications, what it looks like when you get there, and the implications that has.

The Transformed Elite don’t have some kind of exclusive license or access to digital technology, market-responsive behavior or customer intel. Their secrets aren’t branding or marketing, but selected innovations and characteristics that were purposefully identified and built.

Everyone’s heard of Amazon’s “two pizza” teams, and that’s an important part of its collaboration strategy, but what’s more important is the capability those teams give to the business: Jeff Bezos has said that Amazon’s success is proportional to the number of experiments it can run in its business, every hour, every day.

Part of Amazon’s success comes from not being hindered by legacy systems. While this legacy has enabled other businesses to compete up until today, it won’t help them in the future: legacy estate reduces profits, eats up the operational budget and stifles your ability to innovate fast—your innovation cycle time is measured in months, if not years. What’s more, it impedes your ability to transform: in the competition for tech talent, nobody wants to work for a digital dinosaur.

Application modernization is fundamental to your ability to transform, your ability to deploy innovations in customer engagement or supply chain management, to deliver automated and flexible operations. And to use data to drive future growth.

Look at where the Transformed Elite standout. It’s their ability to harness innovative technology and make it a part of their business fabric. You can see this happening all around. Companies, such as Ocado, are using machine learning to improve the handling of inbound emails and drive up customer satisfaction. Or at tire maker Michelin, who has created a trucking service offering by deploying IoT sensors in its products.

During our work with the Transformed Elites, we’ve identified a common set of characteristics that they all exhibit. These digital business characteristics are essential to create new digital revenue, attract and retain talent, respond rapidly to marketplace changes, and expand one’s ability to commercially operate in new channels and markets.

The essential digital business characteristics of the Transformed Elite are:
  1. The customer at the center—ability to create meaningful and lasting customer experiences across multiple channels.  
  2. Business outcome orientation—aligned investment around clear business outcomes. The pursuit of net-new revenue streams, products, services, and business models.
  3. Responsive to business shifts—can change direction and respond at the pace of the market, responds to business shifts using continuous innovation and rapid responses. Works in smaller chunks, with faster feedback and decisions.
  4. Test-and-learn culture—experimentation mindset and frictionless execution mechanisms. Makes knowledge-based and data-driven decisions. Uses “test and learn” culture to acquire knowledge before making major investments along the transformation journey.
  5. Technology as a core capability— alignment that technology is a key strategic unfair competitive advantage. Understanding of the benefit that technology brings to the organization. “Technology in the boardroom.”
  6. Strategic use of data as part of business strategy—decision making, product and customer interactions are driven by data. “Data in the boardroom.”  “Data in the basement.” Data to infuse decisions at every level in real time.

The top company in any industry is typically the one who excels in all of these characteristics.  

Of course, all change is hard. It starts with having a vision of what you can achieve with a modern tech estate. But vision alone doesn’t guarantee success—as John Kotter’s eight-step plan for change makes clear. Any modernization activity must “start where you are.” Our experience informs us that one must have a process that takes into account the forces at play and uses organizational change and puts tech at the heart of the business. This process can be summarized as:

Figure 1: Four-step change process
  1. Assess
Assess your current businesses needs, outcomes and processes and relate it the current technology and architecture you have. Identify what new business needs you to have and what processes and journeys must be implemented to build the unfair competitive advantages you desire. Identify customer needs and standards against which all decisions will be evaluated. This defines where you are and where you want to go.
  1. Map
Map the technology required to transform from the current phase to the desired target phase, to create unfair competitive advantages. Use modern software risk management, assessment methods, and tools to deeply understand the risks introduced or affected by the decisions being made. Make conscious decisions to improve resiliency, availability, security, accessibility, and reliability and develop a live risk profile to ensure resources are focused on the right things. Ensure the business thrives within its target and future market for its expanding customer base.
  1. Build
Use specific technical patterns pertinent to your legacy architecture. Adopt platform thinking and API ecosystem architecture, microservices as appropriate, and evolutionary architecture strategy to evolve your enterprise architecture to be future ready. Feedback learnings and knowledge from delivery and verification testing to confirm performance against key outcomes and targets. Adjust the live risk profile to help prioritize build effort.
  1. Evaluate
Evaluate progress in developing and maturing your essential digital business characteristics. Measure whether you’re affecting or improving your operational risk profile, identify characteristic noise factors that contribute to risk, and continually prioritize the next highest risks for mitigation. Use your KPIs to ensure your digital revenue and other digital business goals are being met.

Real world application modernization

This type of process-led change is helping organizations ready themselves to compete in today’s fast-changing digital world. For instance, UK-based ticketing company Trainline is a prime example of how that process can be used to great success. It was struggling to meet customer and regulatory demand because of high costs and a legacy platform that it was unable to scale effectively.

With ThoughtWorks’ distributed agile approach, Trainline was able to modernize and scale its platform while using continuous delivery and automation throughout their technology organisation. As a result of our distributed partnership, Trainline has accelerated its development to an average of 10 releases a day. Its average time-to-market for applications has shrunk from five months to six to 12 weeks. It’s implemented automated testing approaches that have reduced testing times to half overall development time. Lastly, its application modernization program has delivered bottom line results too, with an 80% increase in booking conversion.

The largest logistics company in China was a victim of its own success. Its fleet covers 65,000 vans across 250 cities, making it a hugely complex operation. Could it continue to grow traffic and still increase shipping speed? Yes, and it began by integrating 18 separate systems for domestic and international customers. The project enabled 130,000 of its couriers to make real-time decisions and saw a 200% increase in web traffic growth—along with an increase in digital revenue.

Summary

The business argument for application modernization is clear—modernization allows transformed companies to exceed their revenue goals. But it’s important to realize that application modernization can be a difficult undertaking: we all know that moving to “the cloud” is important, but how should you choose between public, private and hybrid clouds? You know that data is important, but should you build a data pipeline, data lake, or just fix up your existing data warehouse? Security and consumer trust are critical, but is a private data centre actually more secure than cloud hosting backed by a global-3 cloud provider?

In the next article in this series, we’ll explore these technical considerations in greater detail, and highlight methods for modernizing your legacy estate that increase your chances of success.