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March 11, 2022

Make these four mindset shifts when transforming applications for cloud

To get full business value from modernizing applications for the cloud, enterprises need to break away from entrenched thought patterns.

Although most enterprises have a digital transformation and cloud strategy, few have truly modernized the application landscape and capitalized on cloud-native architectures. In many cases, the IT function has started to leverage the technology infrastructure of leading cloud platforms such as AWS, Azure and Google Cloud by moving workloads and storage needs to the cloud.

However, this approach only results in IT benefits by exploiting the economies of scale — no business value is derived from running the same applications on a cloud infrastructure.

To realize the full potential of cloud transformation, businesses need to challenge old, on-premises behaviors and rethink their entire application landscape and technology stack. This starts by understanding the substantial differences between on-premises operations and today’s cloud world and breaking out of long-held core beliefs, entrenched thought patterns and established architectural principles. 

Modernizing your mindset

We see four mindset shifts enterprises need to make:

1.  The current scope covered by your applications should be reevaluated.

The first area of focus is to assess which business capabilities should be supported by which target applications. This must be done in an unbiased manner without carrying forward decisions of the past. Everything must be questioned, and the entire application landscape should be under consideration for a bold redesign.

A good example is SAP S/4HANA, the new platform to which all companies running SAP ERP ECC have to migrate. Beyond the new features S/4HANA offers, the transformation is also a great opportunity to clean up and drive forward cloud adoption itself. What’s happened over the years with ECC can’t continue unchanged with S/4HANA. For example, you can’t assume the business capabilities that will be supported by S/4HANA will be the same as with ECC.

To this end, businesses will need to make both scope reductions and enlargements, including:

  • Leveraging software as a service (SaaS) solutions (both SAP and non-SAP), following a best-of-breed approach (see the second mindset shift, below). An example is cloud-based advanced reporting and analytics solutions or moving some sales functionalities to a modern cloud-based CRM.

  • Eliminating custom developed code in ECC with new SaaS solutions or cloud-native extensions running on cloud platfoms.

  • Taking the opposite approach of reintegrating existing SAP satellite systems, such as SAP APO or SAP SRM, into the S/4HANA core

In extreme cases, companies may choose to limit S/4HANA to Finance only, while others will expand the SAP footprint in the application landscape. Depending on the business and digital strategy, either direction may be the right way to go.

2.  A best-of-breed approach works well in the cloud.

Historically, businesses opted for fully integrated, packaged software solutions that “did it all” over best-of-breed solutions. The latter were avoided because of fears about their high integration complexity and the desire (often unrealized) for an integrated database encompassing all enterprise data.

Since the “build vs. buy” decision came out in favor of “buy,” software development was not seen as a core competency. Nonetheless, lots of code was developed, and the monolithic systems were modified, causing today’s maintenance issues.

This can be well observed at the many enterprises currently facing the challenge of S/4HANA migration, where there can be thousands of custom developments. Because many companies wanted to avoid additional applications, they instead implemented all required functionalities directly into SAP ERP.

In today’s cloud world, however, it’s not only feasible but also preferable to select and orchestrate best-fitting cloud services. From an architecture perspective, there’s no longer a same-vendor advantage, since all integration is based on open, cloud-native interfaces, such as REST-APIs and WebSocket-APIs.
For example, there is no technical difference in how SAP Sales Cloud and Salesforce integrate with SAP S/4HANA. Deciding between the two applications should be a matter of which meets the company’s needs, not which vendor it’s from. Both are a good choice, and the integration between two different vendors is a non-issue.
Bottom line: Future application landscapes will be much more about orchestrating various cloud services, not necessarily sticking with a single vendor. This is also important because digitization means that a much wider range of capabilities has to be covered, including Internet of Things (IoT) and artificial intelligence (AI).

3.  You’ll need software development competencies and tech savviness.

Open, standardized, cloud-native APIs are changing the game. Future application landscapes will be more heterogenous, and the boundaries between internal and external applications and services will blur. This new approach to delivering business services will require a change to old underlying rationale and reasoning.

Moving forward with a best-of-breed approach requires both forethought and some technology savvy. For example, enterprises must select the best-fitting solutions in line with their (digital) business strategy.

We suggest they conduct this assessment by dividing business capabilities into three groups: innovation, differentiating and mainstream. For mainstream capabilities, the predefined norm strategy is to select and apply the best-fitting SaaS solution and to standardize business processes based on the proven industry best practices these SaaS solutions adhere to. This also means that not all requirements are fulfilled, and some gaps are tolerated.

For business capabilities considered to be in the innovation or differentiating categories, businesses should use cutting-edge solutions, using cloud services and APIs. Doing so — as well as orchestrating SaaS/PaaS services — will require software development competency. In this regard, digital business transformation requires a change in self-conception, too: All companies need to become IT companies with software development competencies.

4.  Directly involve business process experts in the digital and cloud journey.

The hurdles for software development are much lower today. For example, leading-edge DevOps environments are available as a pay-per-use service. The development task often only involves intelligently combining and orchestrating existing cloud services.

The capabilities of these platforms as a service (PaaS) range from databases to IoT and machine learning. Further, low-code/no-code platforms can enable business process experts and key users to define new end-to-end-processes, workflows, reports and dashboards, as well as wrappers of legacy applications.

The combination of SaaS and PaaS with low-/no-code environments enable businesses to strike a balance between buying and building software. Additionally, a growing number of technically savvy non-IT employees are capable of serving themselves or even developing software. In the interest of time-to-value and business agility, IT should facilitate such self-service approaches by providing low-/ no-code environments and self-service data analytics tools.

True digital transformation requires enterprises to reengineer their entire digital stack and application landscape. By relying on best-of-breed cloud solutions and leveraging the full potential of cloud-native architectures and serverless platform services, enterprises can break away from entrenched thought patterns holding them back and realize the game-changing characteristics of the cloud.

Felix Theisinger
Chief Enterprise Architect, Strategic Engagements
Headshot of Digitally Cognizant author Felix Theisinger

Felix Theisinger is Chief Enterprise Architect and Senior Director of Strategic Engagements at Cognizant. In this role, he orchestrates cross-practice, overarching target solution design and engineers the digital stack at scale.

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