Digital First – using modern IT architectures for high profitability

Traditional IT architectures (legacy systems) in transition

The pandemic has also shown it: state institutions and many companies are facing some challenges with digitalisation. It is no longer just about a comprehensive systematic introduction of new applications. For a quick reaction to drastic changes, modern architectures are needed first and foremost. However, their introduction requires expertise and professional project management.

In 2019, Germany’s digital readiness index score was 17.85 out of 25 points. Compared to 2018, the FRG thus moved from 6th to 14th place in an international comparison and was in a good position among 141 countries. However, the great need to catch up in the development of technological infrastructures and the low acceptance of digital products and services were critical. Companies in particular should use the latest technologies and IT services in order to save costs and be able to react to changing market demands in the shortest possible time. So far, very few of them have created the most important prerequisites for this in IT.

Modern IT architectures are needed

According to studies, as many as 85 percent of companies worldwide have outdated core IT. The historically grown architectures (legacy systems) often cause compatibility problems with newer operating systems and applications. The time and cost required to set up the necessary interfaces is very high – especially when connecting to cloud solutions for low-cost storage or software services. Modern architectures also offer high scalability: depending on the need for performance or storage, loads are systematically distributed so that all requirements can be met. Outdated systems are also more vulnerable to external attacks.

Traditional ERP architectures are indeed adapted to growing requirements through regular upgrades or comprehensive releases. But it should be carefully calculated whether a fundamental modernisation would not be the more lucrative investment in the medium or long term.

The backbone of contemporary digital processes and business models is an architecture that allows fast, i.e. problem-free, connections of solutions and services to adapt to new requirements. This change is worthwhile. Companies that reposition themselves according to the motto “digital first” are significantly more profitable compared to their non-digitised competitors and often achieve significantly higher revenues. Without this change, there can only be limited talk of true digital readiness. However, the transition to a digital company brings with it a number of challenges.

Where should we start?

More extensive digitisation initiatives are always also change management projects, which means: they must be carried out methodically and appropriately and require comprehensive know-how in technology and project management. However, one in two companies still lacked technology expertise at the top management level at the end of 2020. The modernisation of the IT architecture should therefore first be led by an experienced CIO or a professional CDO (possibly in interim management). He or she will coordinate the entire digitisation tasks and all stakeholders as well as budget planning and project management.

This change must also be managed top down because the introduction of new architectures and applications usually has profound effects on all processes and the internal workflow organisation. The consistent conversion to a digital company also requires the integration of suppliers, customers and other partners into the digital business models – for smooth processes, secure communication and the possible introduction of Big Data solutions for the permanent optimisation of development and production processes.

But that’s not all: once the architecture has been renewed, further demand-oriented digitisation projects will steadily follow, be it for the introduction of upcoming technologies or due to changes in the market. For such a continuous transformation, an agile roadmap should be continuously updated.

These numerous tasks must be systematically coordinated and controlled by an expert with know-how and an experienced project management team.

Digital First – for a solid market position

Even extensive digitalisations along value chains and for optimising internal processes bring an improvement in results – through cost reductions and an increase in performance. But companies that want to sustainably expand their market position with the help of digitalisation should introduce modern architectures and realign their processes accordingly as part of professional project management.

The technical implementation must be planned very precisely, because various technical specifications and individual developments as well as tests and introduction (rollout) of the solutions take months, sometimes even periods of up to more than a year. In order to reliably achieve the desired effects in the P&L, balance sheet or cash flow, a binding programme for systematic restructuring should be initiated in connection with the comprehensive transformation. Because the upheaval caused by the introduction of a new architecture is at the same time an opportunity for an ideal orientation on the market as a digital company – with optimised processes and a correspondingly adapted process organisation.

In this context, it is crucial that the organisation as a whole sets itself up for regularly recurring digitisation projects in order to always be able to react quickly and appropriately to changes in the market with permanent agility. For this great flexibility in dynamic adjustments, smooth cooperation between IT and the respective business units is a necessary prerequisite, which must be ensured throughout the entire transition.

Only with this true transformation according to the motto “digital first” will a solid level of digital maturity be achieved – for successful business in the digital economy.

    Dr. Jörg Schumacher berät seit vielen Jahren das Topmanagement. Er begleitete auch als Interim-Manager zahlreiche Projekte zum Thema Organisation. Jörg Schumacher leitete ferner Restrukturierungen in DAX-Konzernen, darunter Reorganisationen in Frankreich, Portugal und Italien. Er baute bei Haselhorst Associates den Bereich Digitalisierung auf und verantwortet Projekte bei global agierenden Unternehmen.

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