Overcoming the #1 Barrier to Digital Transformation

David Rowe
Chief Product Officer & EVP, Global Transformation
3 min read
Overcoming the #1 Barrier to Digital Transformation

For years, IT has had clearly defined responsibilities: Keep critical business systems up and running, control costs and meet security and compliance requirements. Even today, most of your IT budget is likely spent keeping the lights on. But this traditional focus is holding organizations back in an era of accelerating focus on customer experience enabled via digital transformation.

The role of IT is evolving quickly and becoming more prominent. Your key priorities should be shifting from predominantly maintaining current operations toward helping your 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.

CEOs consistently cite business growth as their number-one priority. Digital innovation is now frequently identified by CEOs as a top priority for achieving that business growth. Digital transformation presents numerous new challenges, but also creates exciting opportunities. 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. But nothing can be achieved without first freeing up funds to invest in these new digital initiatives.

Is Budget Holding Back Your Business?

All too often, opportunities for business transformation are hindered by insufficient budgets. The number-one barrier to digital transformation is insufficient budget and resources, according to a new survey of 4,000 businesses by research firm Vanson and Bourne for Dell Technologies.

According to the survey, approximately 8 in 10 respondents stated that digital startups pose a threat to their organization, now or in the future. They understand that these nimble competitors are more agile, employ data more effectively and are early adopters of smart technologies.

To keep pace and fend off these startups, organizations have made customer engagement and satisfaction a top priority. They are also increasingly focusing on mobility and social media, as well as harnessing data for informed decision making.

Digital opportunities are in sight, but only 32 percent of survey respondents said they were doing well organization-wide.

Are You Locked into Traditional Models?

According to IDC, organizations spend as much as 90 percent of IT budgets on current systems. This leaves 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 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 your business from meeting its objectives, how can you 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 your total maintenance costs and related ROI for maintaining enterprise software from big ERP vendors such as Oracle or SAP. To truly understand your total costs, you need to consider more than just maintenance fees — which are typically 22 percent of upfront licensing costs, but paid every year. Traditional ERP platforms also require ongoing expensive upgrades and 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 about double your maintenance fees.

With the right approach to maintenance, you can cut your 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. You can quickly estimate your savings with this online calculator.   

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, you can innovate far more quickly by optimizing your core IT systems to liberate resources — your people, your money and your time — so you can reinvest them in initiatives that most directly and rapidly impact your business. The alternative, waiting for new ERP platforms from legacy vendors and then spending vast sums to re-implement onto these future, unproven systems, puts you behind in the race to competitive advantage in a digital world.

By aggressively investing in digital initiatives using optimized resources today, you 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 you engage 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 your core ERP applications with the innovative digital investments you need today to create competitive advantage.

If your IT budget is keeping your organization from meeting today’s challenges, you’re not alone. With the right approach to IT optimization, you’ll be able to move your business forward to unleash the potential of a digital economy. Don’t wait to innovate.