For decades, IT has followed the theory of “Why fix what’s not broken?” This approach led to the massive accumulation of outdated legacy infrastructure, which is not only expensive to upgrade but also slow to meet the demands of becoming a digital business. In an era when the competitive advantages of technology have never been greater, the relentless focus on lowering costs of maintaining legacy systems is actually slowing down IT in its mission to revamp customer experience. In fact, 47% of IT executives we interviewed feel that their teams are spending too much time on maintaining legacy infrastructure. Moreover, the wasteful IT spending, which has long been endemic to corporations, has now reached plague-like proportions. The average server utilization rate in companies is at around 45%. Of course, much of the superfluous hardware will never be used – it is already out-of-date.
Without jettisoning systems and processes that are no longer (or soon won’t be) fit for purpose, companies are undermining their ability to invest the budget, time, resources and energy in the future. Two questions can help guide businesses as they make the necessary move away from older IT assets:
- Do you own the infrastructure, or does infrastructure own you? IT departments need to be brutally honest in accepting which parts of the IT infrastructure are the major bottlenecks in becoming a digital business. In fact, 58% of IT executives surveyed agreed that their core systems are difficult to update and are now seen as an obstacle. Over the next few years, companies will focus on reducing their legacy costs and expanding capacity through an asset-light business model. This means dropping the buy-and-hold mentality and replacing it with a pay-as-you-go model via cloud, mobile and as-a-service offerings, and leveraging partners to offload the legacy systems. In our study, The Future of IT Infrastructure, 51% of organizations said they are considering divesting self-owned assets as part of their digital strategy, with the goal of reshaping the core business. Moreover, as automation takes hold, asset optimization will increase significantly, resulting in the need to rethink the asset management strategy.
- Which part of your business can be transformed from a “we own” to a “we control” mindset to achieve a nearly unbeatable level of agility and scalability? In 2016, Apple had 200 suppliers with more than 800 locations to manufacture and assemble the iPhone, and none of them were owned by Apple. The essence of Apple is its product-led customer experience and not its physical assets. In another example, Capital One, one of the top 10 largest banks in the U.S., has adopted a cloud-first strategy to transform itself from a bank into a technology company to deliver capabilities at a faster pace. Rather than investing in building its own infrastructure, it is focused on developing new apps for the cloud, while also steadily migrating its legacy applications.
While the legacy IT industry of servers, databases and cables is still important, it has essentially become a utility, taking a backseat to the need for an agile, flexible and quickly scalable technology foundation to drive business. As traditional businesses adapt to the realities of the new machine age – breathless time to market, intelligently enhanced everything, meaningful and personalized experiences – the implications for IT have been profound. The core differentiator for a successful business today rests on the readiness of its IT infrastructure – and that an inflexible, sluggish, inefficient infrastructure poses a bigger competitive threat than any ingenious start-up or disruptive market force.
If your ancient system is holding you back from creating a better offering, it’s time to reboot your core IT. Elevating customer experience isn’t just a good idea; it’s a necessity for IT to thrive. For instance, Macquarie Bank in Australia built a customer experience layer on top of existing systems by leveraging big data, machine learning technologies and mobile applications to provide a real-time experience for its customers. The bank is using open source software and is moving data from many legacy systems to the new layer for real-time intelligence. The project will ultimately lead to legacy systems becoming obsolete.
Still wondering how to strike a balance between the present and future state of IT infrastructure? The first ballast for you is to discard IT’s traditional obsession with cost-cutting. The simple fact is – a lower cost but completely irrelevant backbone will condemn you to lose in whatever market you operate in. Business and technology leaders that seize this moment of change will have a front-row seat to the shift in IT value far into the future.