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Irwin Lazar Vice President and Service Director Nemertes Research

Blending On-Prem and Cloud for Digital Transformation Success comes from integrating cloud-based services and on-premises platforms to achieve measurable value

Q2 2018

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ExecutiveSummary........................................................................................................................3

FactorsDrivingDigitalTransformation...........................................................................................4

BellwetherDigitalTransformationTechnologies............................................................................6

LeveragingtheHybridCloud...........................................................................................................6

AchievingBlendedCloudSuccess...................................................................................................7

Conclusions....................................................................................................................................8

Table of Contents

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Executive Summary Digitaltransformationisdrivingorganizationstorapidlyconsider,andinmanycasesadoptnewtechnologiestoimproveinternalworkflows,enhancecustomerengagement,andrapidlydevelopanddeliverinnovativenewproductsandservices.Cloud-basedservicesofferdeploymentflexibility,fasteraccesstonewfeaturesandcapabilities,andminimalcapitalexpense.Therealityisthatmostorganizationsoperating24x7cannotsimplyflash-cutfromon-premisestocloud.Asaresult,hybrid,orblendedcloudandon-premisesdeploymentsarebecomingthenorm,andtheirusepositivelycorrelateswithoverallunifiedcommunicationsandcollaborationsuccess.Asaresult,ITleadersshouldevaluateplatformsthatenableseamlesson-premisesandcloudintegration,andprovideaneasypathtoforcloudmigrationonaschedulethatmakesoperationalandfinancialsense.Thisreportlooksathoworganizationscanblendcloudserviceswithon-premisesplatformstoachievedigitaltransformationsuccess.

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Factors Driving Digital Transformation Nemertesdefinesdigitaltransformationasthe“innovativeapplicationoftechnologythatimprovesorcreatesaprocess,productorexperiencethatultimatelydrivesbusinessvalue—quickly.”Businessgoalsdrivingorganizationstoembracedigitaltransformationincludethefollowing:

• Increaserevenuebydeliveringnewproductsorservices,orimprovingexistingofferingstoimproveupsellcapabilities

• Improvecustomerexperiencebycreatingorimprovingthewaysthatorganizationsengagewithcustomerstoshortenresponsetimes,improvebuyingexperiences,createcustomercommunities,andenableinteractionthroughthecustomer’spreferredchannel

• Reducecostsviaautomating,streamliningorimprovingexistingprocesses• Attractandretainemployeesbyimprovingworkplacesandbygivingemployees

accesstoemergingtechnologies,thusreducingturnoverandshorteninghiringcyclesforopenpositions

• Gaincompetitiveadvantagebyembracingemergingtechnologytospeeddeliveryofnewproductsandservices,improveexistingofferings,andincreasingmarketshares.

Nemertes’latestDigitalTransformation(DT)studygathereddatafrom~800ITandbusinessleadersontheirdigitaltransformationplansandstrategies.WeidentifiedapeergroupofthosewithsuccessfuldigitaltransformationstrategiesbasedonanumberoffactorsincludinghavingaformalDTstrategy,implementingadigitalworkplace,leveragingemergingtechnologieslikeInternetofThings(IoT),percentofDTprojectsthathadameasurablereturnoninvestmentwithinsixmonths,andself-ratedDTsuccess.WefoundthatofallthefactorsdrivingDT,thosewithsuccessfuldigitaltransformationstrategiesmostoftencitedincreasingrevenue,improvingcustomerexperience,andreducingcostsastheprimarybusinessgoalsfortheirdigitaltransformationinitiatives.

79%$

67%$61%$

50%$42%$

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Increase Revenue

Improve Customer

Experience

Reduce Costs Gain Competitive Advantage

Attract and Retain

Employees

Success Group: Digital Transformation Business Goals

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Figure1:SuccessGroup:DigitalTransformationBusinessGoals

Nemertesdefinesthreebasiccomponentsofdigitaltransformation:

1.) Innovativeapplicationoftechnology–Thiscouldbetheapplicationofexistingtechnologiesorentirelynewones.Thekeyisthattheorganizationisusingtechnologyinaninnovativeway;awaythatultimatelywillstartturningthegears.

2.) Improvesorcreatesaprocess,product,orexperience–Becauseofthattechnologyimplementation(alongwiththerightpeople,processes,andbudgets—butthat’sthenextorderdown),somethingchangesandindeed,improves.Forexample,ahealthcareorganizationmayapplywirelesssensors,anInternetofThings(IoT)platform,andanalyticstoolstoaheartmonitortodeliverkeydatatoanurse-staffedcontactcenter.

3.) Drivesmeasureablebusinessvalue–Measurablevaluemayincludenewrevenueopportunities,reducedcosts,fasterprocesses,improvedcustomerretention,orabilitytoimprovecompetitivepositioninginthemarket.Forexample,ahealthcareorganizationimplementingaDTstrategytoimprovecustomerinteractionmayfindhigherretentionratesbyprovidingimprovedcustomerexperience.Inthiscase,patientsmaygetcallsfromthenurses,whogiveadviceonsomeofthetestfiguresthatcouldimprovequalityoflife—orindeed,savelives.Anotherbusinessvaluethatmaybeaffected(eitherexpectedorunexpected)isincreasedrevenuethroughpatientsvisitingthedoctormoreoftenorbuyingnewsupplies.

TheinterrelationofthethreebasiccomponentsofdigitaltransformationisshowninFigure2below.Inthisdiagram,theinnovativeapplicationoftechnologybeginsthespinningofthegearsthatleadtodemonstrablebusinessvalue.

Figure2:DigitalTransformation:AtitsBasicLevelFordigitaltransformationprojectstosucceed,themusthappenquickly;specifically,withinsixmonths.Thisdoesn’tmeantheentiretransformationprojectmustbecompletewithinsixmonths;itmeanstheremustbemilestonesbywhichmeasureablechangeshave

Digital Transformation: At its Basic Level

Innovative Application

of Technology

Improves, creates process, product,

experience

To Drive Value

•  Cloud •  Mobility •  IoT •  Analytics •  Artificial Intelligence •  Virtual Reality •  Collaboration •  Security

•  Insurance claim filed via iPhone with photo, electronic form

•  Car tells you what’s wrong, schedules service call

•  Sensors vs. people monitor remote oil rigs

•  Employees use digital whiteboard & video to meet

•  Grow revenue •  Improve customer experience •  Reduce costs •  Boost loyalty and retention •  Differentiate competitively

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occurred.Withoutatime-basedapproachformeasuringsuccess,digitalprojectsmaylag,enablingcompetitorstogainanadvantage,stakeholderstoloseinterest,orbudgetsdryingup.Bellwether Digital Transformation Technologies Nemertesresearchparticipantscitethefollowingtechnologiesasmostvitaltothesuccessoftheirdigitaltransformationinitiatives:

• Securityensuringthatemergingtechnologiesareadoptedinwaysthatminimizerisk• Cloudplatformsenablingimprovedagility,scalability,andtheabilitytoeasilyand

quicklyadoptemergingtechnologies• Analyticstoalloworganizationstousesourcesofinformationtoguidetheirdigital

transformationinitiatives.Examplesincludeanalysisofcustomer,transaction,orbusinessoperationaldata

• Collaborationtoimprovetheabilityoforganizationstoexchangeinformationbothinternallyaswellasexternallywithcustomers,partners,andsuppliers.

• ArtificialIntelligenceandMachineLearningenablingprocessimprovementandnewcapabilitiesbyallowingsoftwaretolearnfrompastactivities

• Human-to-MachineInterfacesenablingfunctionalitylikevoicecontrolofapplicationsanddevices(e.g.throughvoiceassistantserviceslikeAmazonAlexaandMicrosoftCortana)

• InternetofThings(IoT)toconnectsensors,cameras,andotherdevicesintobusinessprocessandcollaborationapplications.

Together,thesetechnologiesprovidethebasistoenableorganizationstoachievetheirdigitaltransformationgoals.Leveraging the Hybrid Cloud Inaperfectworld,anorganizationwouldhavetheflexibilitytomovequicklytoembracebellwethertechnologiesasrapidlyastheydevelop,andasitmakessensebasedonbalancingopportunityversusrisk.However,modernorganizationshaveextensivedeploymentsoflegacysystemsthathavebeencustomizedandoptimizedovertheyearstosupportbusinessprocesses.Itmaybeimpossible,orimpracticalforanenterprisetoflashcutallofitson-premisesplatformstothecloud.Instead,successfulorganizationswillembracetheblendingofcloudandon-premises,sometimesreferredtoas“hybridcloud”tomaintainnecessaryon-premisesplatformswhileintegratingemergingfeaturesandcapabilitiesfromthecloud.Forexample,tosupportadigitaltransformationstrategythatleveragesanInternetofThingsdeployment,anorganizationcouldblendacloud-basedIoTservicethatprovisionsdevicesandreceivesinformationfromthem(e.g.alerts,monitoringdata,oraudio-videofeeds)withanon-premisescommunicationsandcollaborationplatform.Inthisexample,aneventcapturedbyanIoTdevicesuchasamanufacturingprocessanomalyoratrafficsignalfailure,couldtriggeracommunicationseventthatpops-upamessageonaworker’s(orworkgroup’s)desktopandmobilemessagingapplication.Thismessagecouldcontaininformationabouttheevent,liveorstoredvideoabouttheevent,andlinkstorelated

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informationsuchasprevioussimilareventsorothereventsinvolvingthesamesensors.Thoseviewingthemessagecould,fromwithintheirmessagingapplication,startameetingtoenableallthosewhoneedtorespondtoconnectinavideooraudioconferencetodiscussaplanofaction.Anenterprisethatneededtoreplaceitscurrentmessagingandconferencingplatformtoimplementsuchaworkflowwouldneedtospendfarmoretimeandmoneytoimplementasolution,whereasanorganizationthatcouldblendnewcloud-basedcapabilitiesintotheirexistingenterprisecommunicationsplatformswouldachievefasterdeployment,andabettershotatrealizingmeasurablebusinessvaluewithinthepreviouslydiscussedsixmonthROIwindow.Organizationscontinuetoseethevalueincloudblended/hybridapproaches.The2018NemertesstudyonUnifiedCommunicationsandCollaborationshowsthat38%nowusehybridapproachesfortheircollaborationapplications.

Figure3:UCCArchitecture

Forcomparison,in2017,47%ofparticipantsusedallon-premisesapproaches,andjust10%werehybrid.Our2018datashowsthatuseofhybridarchitecturescorrelateswithoverallunifiedcommunicationsandcollaborationsuccess.Achieving Blended Cloud Success Mostorganizationsareleveragingcloud-basedtechnologiestoaddnewfeaturesandfunctionalitytotheirexistingenvironments.Just24.7%saytheyusecloudtoreplacepreviouslyon-premisesapplications,while63.7%usecloudtobringnewfeaturesandfunctionalitytotheirworkplace.Usingcloud-basedservicestointegratenewcapabilitieswithexistingon-premisessolutionscansupportdigitaltransformationinitiativeswithout

Hybrid 38%

All on-premises 33%

All cloud 29%

UCC Architecture

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requiringextensivereengineeringofthecurrentcommunicationsenvironment,orimplementationofseparatecommunicationsplatformsforindividualDTprojects.AswithanyITprocurement,asuccessfulimplementationfirststartswithevaluatingavailablechoices,basedonfactorsincludingfeatures,costs,andsupportability.Specifictohybridapproaches,ITleadersshouldlookattheavailableofopenAPIstoenableintegratingcloud-basedserviceswithon-premisesplatformsaswellastheabilityofvendorsandtheirdeliverypartnerstobothimplementandmanageintegrations.Cloudpartnersshouldalsoofferaroadmaptoenableashiftfromon-premisestocloud.Thiswouldincludethepotentialtoreuseon-premisescomponents(e.g.gatewaysandphones)aswellasmoveapplicationserversintothecloudwithlittletonodisruptiontoexistingusersorbusinessprocessintegrations.Blendedsolutionsshouldalsoprovideasinglelicensingstructure,forbothon-premisesandclouddeliverymodels.Conclusions Asorganizationsembracedigitaltransformationtoimproveworkflows,improvecustomerengagement,anddeliverinnovativenewproductsandservices,theyincreasinglyseecloud-basedcommunicationsasanintegralpartofachievingsuccess.However,rarearethosethatcanflash-cutexistinginfrastructuretothecloud.Rather,successcomesbyintegratingexistingplatformswiththecloud;strategicallyutilizingcloud-basedservicestoachievemeasurablevaluetoday,whilepositioningtheorganizationforgreateruseofthecloudtomorrow.ITleadersshould:

• Evaluatewherecloudservicesmakesense,especiallyfordeliveryofnewfeaturesnotsupported,orimpracticaltoimplementon-premises

• Evaluatevendorsbasedontheirabilitytosupportblendedcloudapproachesnow,whilesupportingeventualmigrationtoapure-cloudscenario

• LookforopenAPIsthatenableintegratingofworkflowsandbusinessapplicationsintocommunicationsplatforms

• PlanforafutureinwhichemergingtechnologieslikeIoTareintegratedintocommunicationsplatforms.

AboutNemertes:Nemertesisaglobalresearch-basedadvisoryandconsultingfirmthatanalyzesthebusinessvalueofemergingtechnologies.Since2002,wehaveprovidedstrategicrecommendationsbasedondata-backedoperationalandbusinessmetricstohelpenterpriseorganizationsdeliversuccessfultechnologytransformationtoemployeesandcustomers.Simplyput:Nemertes’betterdatahelpsclientsmakebetterdecisions.