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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.