Applied Insights 2016

Applied Insights 2016

Digital business has moved from an aspiration to the new norm. Companies have embraced cloud, mobile and analytics to engage customers and propel growth. They’re also charting new territory with digital services driven by the Internet of Things and cognitive computing to create new business models and revenue streams.

The IBM Center for Applied Insights has been tracking these trends and analyzing how leading organizations create strategic advantage. We’ve tapped into the experience of leading organizations around the world to highlight patterns of adoption and best practices for companies embarking on or advancing key business priorities that drive the digital enterprise. We focus on what organizations are doing and how they succeed.

This report aggregates insights from various quantitative and qualitative studies recently conducted

by the Center. From the proven to the cutting edge, these are the trends that are empowering organizations.

About the IBM Center for Applied Insights

ibm.com/ibmcai | ibmcai.com

The IBM Center for Applied Insights introduces new ways of thinking, working and leading. Through evidence-based research, the Center arms leaders with pragmatic guidance and the case for change.

http://www.ibm.com/ibmcai

http://www.ibmcai.com

Cloud

Mobile

Security

Analytics

Internet of Things

Cognitive

Quantum

Resiliency

Digital services


Hybrid cloud is the de facto state of IT. Two-thirds of organizations that blend traditional and cloud infrastructures are already gaining advantage from their hybrid environments. However, leaders among them use hybrid cloud to power digital transformation, going beyond cost reduction and productivity gains. What’s more, these leaders are using hybrid cloud to springboard to next-generation initiatives such as the Internet of Things and cognitive computing, aiming to disrupt and capture new markets.

Cloud

START | Cloud | Resiliency | Security | Mobile | Analytics | IoT | Digital services | Cognitive | Quantum

Source: IBM Center for Applied Insights study Growing up hybrid: Accelerating digital transformation (ibm.com/ibmcai/hybrid-cloud)

http://www.ibm.com/ibmcai/hybrid-cloud

Hybrid cloud is the new norm

70% of hybrid implementers report they will always have a blend of traditional IT and cloud

90%

!

of leading organizations say hybrid is crucial to their strategy and gives them greater ROI than all-traditional or all-cloud environments


0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

100%

2-3 years ago Currently 2-3 years from now

Traditional IT

Public Cloud

Private Cloud

Leaders use hybrid cloud to forge their digital futures

85% of leading organizations report that hybrid cloud is accelerating their digital transformation


EFFICIENCY & PRODUCTIVITY

DIGITAL BUSINESS

NEXT-GENERATION INITIATIVES

HYBRID ENVIRONMENT Comprehensive hybrid cloud integration and management

Hybrid cloud enables cost reduction and efficiency gains

Hybrid cloud enables new business growth

Hybrid cloud enables disruption

Leaders use hybrid cloud to jump-start next-generation initiatives

Leading organizations are more likely to be using hybrid cloud to drive initiatives in cognitive computing

5X


Chasers Challengers Frontrunners Frontrunners vs. Chasers

Commercializing insights 2.9x Cognitive computing 5.1x

Internet of Things 1.7x

14%

21%

7%

16%

21%

15%

40%

36%

36%

% using hybrid cloud to enable:

How do leaders gain more value than others from hybrid cloud?

Comprehensive hybrid strategy 3X more likely to have an enterprise-wide hybrid strategy

Hybrid transforms culture 2X more likely to report that hybrid cloud reduces shadow IT

Advanced hybrid management 5X more likely to be using advanced analytics to manage hybrid cloud

Improved security & data protection 2.5X more likely to achieve data protection through hybrid cloud


A foray into digital entertainment !Russia’s renowned Mariinsky Theatre was looking to expand its global reach by live-streaming opera, ballet and orchestra performances. The quality of the streamed content was a critical priority. By connecting its existing infrastructure to a scalable, high-performance cloud hosting solution, the theatre was able to accommodate a fluctuating number of viewers on its digital content streaming platform. As a result of this hybrid cloud deployment, the theatre was able to cut capital expense by $20,000, boost performance by 30 percent and accelerate infrastructure deployment by 99 percent. !!

Applying cognitive insights !Finland’s largest airline was looking to manage costs and grow revenue by offering new digital services to improve customer experience. The airline leveraged the flexibility of a hybrid cloud platform to integrate new cloud services with its existing infrastructure. As part of its digital transformation, it started using cognitive capabilities to improve employee productivity by enabling agents to more quickly find responses to customer needs and intelligent, online self-help tools for employees to locate information. With implementation underway, Finnair hopes to gain operational efficiency, reduce complexity and establish a foundation to support new growth initiatives.

Driving digital transformation through hybrid cloud


We live in an always-on world. But it’s getting harder for disaster recovery professionals to maintain an always-on environment. Fifty percent of organizations are not prepared to handle service disruptions from cybercrimes or attacks, though 55 percent are including an increasing number of "critical” systems in disaster recovery (DR) plans. But some companies are better at mastering disaster recovery. How are these leaders reaching the heights of business resiliency?

Resiliency

Source: IBM Center for Applied Insights study Masters of disaster recovery: How highly resilient organizations excel (ibm.com/ibmcai/disaster-recovery)


http://www.ibm.com/ibmcai/disaster-recovery

Develop an enterprise-wide strategy by working with senior executives and the board, then base your approach on both compliance requirements and consumer and business needs.

Approach disaster recovery holistically and strategically


Leaders are 2.5X more likely to maintain an integrated DR plan

Collaborate with risk leaders including security leaders and the CRO to enhance disaster recovery compliance and governance.

Collaborate with risk and security experts


Leaders are 3.5X more likely to involve the CISO in DR planning

Leverage new technologies

Incorporate new technologies such as cloud, advanced analytics, social and mobile into disaster recovery plans to both respond to and prevent future service disruptions.


Leaders are 15X more likely to use diagnostic analytics to pinpoint risk

Test rigorously

Design a robust testing plan that continuously improves through testing insights and includes infrastructure and supply chain connections.


Leaders are 2.5X more likely to test at least annually

Cybersecurity risk is an immense threat. It’s also a top C-suite priority, with funding for security efforts growing to reflect the gravity of the challenge. Security leaders are realizing that simply “checking the box” to address compliance requirements is no longer a sufficient strategy. Those further up the maturity curve are transforming their programs to be truly risk-based by using a sophisticated approach to determine risks and prioritize security investments.

Security

Source: IBM Center for Applied Insights study From checkboxes to frameworks: CISO insights on moving from compliance to risk-based cybersecurity programs (ibm.com/ibmcai/ciso)


www.ibm.com/ibmcai/ciso

What do CISOs struggle with?

Strategy How do I transform a compliance-based security program into one focused on risk?

Communication How can I best communicate risk to top management and manage expectations?

Consumability Do I have the skills, resources and tools to implement the right controls for success?


CISOs are increasingly turning to customized frameworks as the strategic tool of choice to assess risk and prioritize threats

85% !!

88%

of CISOs report that upper-management support for cybersecurity efforts has increased.

of CISOs report that their security budgets have increased.


Go to > From checkboxes to frameworks!

“I always try to make the compliance argument the last thing because I think that way too many programs are aligned around ‘What’s the minimum thing I have to do to get a check mark?’.” CISO, Retail


Takeaways to develop risk-based cybersecurity programs

Develop Customize frameworks to enable strategic assessment of real risks and cybersecurity priorities.

Direct Use frameworks as an effective communications tool to relay cybersecurity strategy.

Deliver Implement the guidance derived from frameworks.


Maverick perspective on cybersecurity strategy

Orchestrating the lifecycle of cyber defense A CISO of a financial services firm takes a targeted approach to frameworks in order to address the company’s business priorities. Using NIST, ISO and SANS, he developed a customized framework to address the attacks the company was seeing. The framework focuses on key risks including loss of financial data, financial account compromise, business continuity and regulatory risk. The framework also identified primary threat agents including hacktivists and organized crime. His team then developed a phased rollout plan to protect against the most common risks using a variety of tools orchestrated to span the full lifecycle of cyber defense, helping ensure business continuity even in the event of a single tool failure. Instead of a peer network of CISOs to guide his investment decisions, this maverick taps the Silicon Valley venture capital community to learn about disruptive new tools that can address his company’s security challenges.


Mobile has become the go-to standard for accessing applications and services. And while the mobile platform war may be over, the race is still on to create better apps faster and to seamlessly manage the mobile lifecycle from agile development to secure delivery to exceptional customer experiences. But only one-third of mobile application development projects are successful—fully achieving budget, schedule and project objectives. What are the star qualities for successfully managing mobile projects?

Mobile

Source: IBM Center for Applied Insights study Star qualities: What it takes for mobile development projects to succeed (ibm.com/ibmcai/mobiledev)


www.ibm.com/ibmcai/mobiledev

Experience and expertise make for a strong cast

Successful projects are 30% more likely to have at least one developer with more than five years of mobile development experience.


Platforms set the stage for flexibility

Successful projects are 35% more likely to use cloud-based platforms to develop the mobile application.


Collaboration keeps the production on track

Three-fourths of successful projects collaborate using agile software development methods, versus two-thirds of less successful projects.


User analytics inspires the next act

Two-thirds of successful projects analyze user behavior closely. Compared to other projects, they are 20% more likely to do so.


Leaders talk about their successful mobile projects

Analytics helps bank respond quickly to customers !Canada’s Tangerine bank offers a great example of the benefits of incorporating indirect feedback data. After the bank integrated a quality assurance service into its mobile app that combines behind-the-scenes usage data with direct customer feedback, the bank could more quickly act on customer input. According to the bank’s CIO, “[Customers] don’t have to wait six months for us to address their concerns.” What’s more, the CIO says, the feedback “helps us learn and make better applications.”

Accelerating mobile development with cloud !When the CIO for the San Francisco Bay Area Rapid Transit (BART) system wanted to give maintenance engineers and supervisors mobile access to the company’s maintenance reliability information system, he didn’t have months to wait. Using cloud-based integration services and platforms, the team reduced provisioning and development time by over 90 percent. This allowed them to develop the new mobile app in only 15 days, instead of an estimated six months. And new features can go live in 45 seconds—a huge win when it comes to meeting user expectations.


Data, the new natural resource is growing rapidly. Yet many companies are still early in their journey to set up and optimize their analytics function and related capabilities. However, organizations at the forefront are standardizing and optimizing analytics capabilities and skills to glean meaningful insights. What can we learn from forward-thinking enterprises to thrive in a data-rich future?

Source: IBM Center for Applied Insights studies Competing in the insight economy (bit.ly/CAI-InsightEconomy) Teaching organizations to fish in a data-rich future: Stories from data leaders (ibm.com/ibmcai/cdostudy) Breakthrough experiments in data science: Practical lessons for success (ibm.com/ibmcai/data-science)

Analytics


http://bit.ly/CAI-InsightEconomy

www.ibm.com/ibmcai/data-science

www.ibm.com/ibmcai/cdostudy

Organizations are turning data insights into tangible business value

are creating new forms of economic value from insight.

have monetized insight.

say data-driven insight will be a significant contributor to revenue over the next 3 years.

71%

32%

42%


Through three steps, data leaders can help their organizations fully capitalize on their data and achieve better business outcomes

Make data a priority

Develop from within

Free the data


Showcase your

results

Infuse data science into

culture

Design a data science

capability

Equip with the right

technology

Leaders can also offer practical advice for integrating data science capabilities within organizations


These data leaders are using data science to drive up revenue...

“We increased our business 40% year over year. And

the losses are about a third to a quarter of what the

industry is seeing.”

VP of Credit Risk Analysis & Econometrics, Banking

“These are opportunities in the millions, either in terms

of driving the top line, or just getting smarter in the online marketing space and

spend allocation.”

Chief Analytic Officer, Travel

“We’re able to increase revenue because we are now

reaching people that we wouldn’t have otherwise

gotten to. And we were able to minimize the drain from other competing agents.”

Lead Data Scientist, Insurance

Increased business year over year

Grew top line and saved on bottom line

Reached expanded group of customers


…and are using data science to improve efficiency and effectiveness

“The churn model is a big success—between $11 and

$16 million dollars in savings per year has been a lot of

proof that what we do works.”

Chief Data Scientist, Telecom

“We were able to see that people were shopping earlier than ever before. We needed to have more toys on the shelf

by October; November was not good enough.”

Director Customer Service Systems, Retail

“I'm able to model the effect of a hailstorm on a set of stores that may sell out of shingles. We’re getting into

other data in order to enhance some of this bottom line

functionality.”

Data Scientist & Advanced Analytics Architect, Retail

Saved millions by reducing churn

Found new patterns in holiday shopping

Forecast effects of weather on sales


IoT is on the verge of widespread penetration, promising new business opportunities and benefits such as increased operating efficiencies, improved customer experience and accelerated innovation. IoT can be transformative for businesses that embrace its potential. But effective and fully implemented IoT systems need an integrated fabric of devices, data, connections, processes and people—all built on a solid and secure technology platform.

Internet of Things

Source: IBM Center for Applied Insights IoT articles (ibmcai.com/tag/iot/)


http://www.ibmcai.com/tag/IoT/

IoT has moved beyond the hype

of organizations expect IoT to transform their business or offer significant new revenue or cost-saving opportunities in the short term.1

of executives say they have adopted IoT-based systems or plan to do so.2

40%

62%


Industry leaders understand the transformative potential of IoT and are implementing IoT-based systems.

Connecting everything isn’t enough—real business value comes from IoT data insights

of manufacturers are currently collecting and using data generated by smart sensors to enhance manufacturing and operating processes.4

of IoT app developers spend at least 25% of their time with analytics or databases.5

35%

79%

IoT applications are generating large volumes of data that could reach 507.5 ZB per year by 2019.3


Business value will only come to those who improve their data capabilities, including storage, integration and analysis.

Trust, authentication and standards are essential to the widespread adoption of IoT

of enterprises will have digital security devoted to protecting IoT devices and services by 2017.6

of executives say that privacy and security concerns are a major barrier to IoT investment.7

20%

39%


Organizations must consider how to manage the complexities of connecting to a seemingly unlimited number of devices.

IoT enables disruption across industries

of retail decision makers believe IoT will drastically change the way companies do business in the next 3 years.8

80% The global number of connected devices being managed by utility companies is projected to grow to 1.53 billion in 2020, more than triple the 485 million devices reported in 2013.9


IoT can be a game changer for enterprises that embrace it, changing the way work gets done and improving the top and bottom line.

Digital services centered on empowered consumers are disrupting every industry, revealing new business models and opening up adjacent markets to increase economic value. New digital services are not only changing how entertainment is accessed, but also making commerce pervasive across smart devices and allowing education to penetrate far corners of the globe. An early example of this disruption—the automotive industry—serves as a great case study for how every industry can be impacted, and why every company should be poised to disrupt.

Digital services

Source: IBM Center for Applied Insights study

Digital disruption and the future of the automotive industry

(ibm.com/ibmcai/future-auto)


www.ibm.com/ibmcai/future-auto

“The auto industry is poised for more change in the next 5 to 10 years than it’s seen in the past 50.” Mary Barra, CEO, General Motors10

For over 100 years the automotive industry has created competitive advantage through engineering excellence. Going forward, this will no longer be sufficient.


The connected car is part of a wider

“system of systems,” with the potential to

create a dazzling array of new digital

services


Digital services in automotive: Control and disruption

The in-vehicle experience and the extent to which smartphones may displace OEM built-in technologies is a critical battleground.

OEMs are in pole position to own services and increase customer stickiness from in-vehicle data.

Car sharing, ridesharing and increased use of social business are recasting economic value.


Digital services in automotive: Control and disruption


Ø Use a “fail fast” approach to new business models

Ø Consider non-traditional partnering

Ø  Sense and respond to rapidly changing customer needs

How can the auto industry adapt and thrive?


We are entering a cognitive era. Through cognitive systems, we’re finally unlocking a host of unstructured data that’s previously been unusable. Unlike computers of the past, these systems are capable of understanding natural language, and they can reason and learn. This opens an entirely new realm of possibilities. Over time, cognitive computing will transform jobs, businesses and entire industries. It will augment the best of our human thinking—helping us better understand and manage our world’s complex systems. It will enhance and extend our expertise, enabling a “smarter us.” But what does it take for an organization to “become cognitive?”

Cognitive computing

Source: IBM Center for Applied Insights study!Becoming cognitive: Insights from interviews with the first wave of Watson users!!!


How is cognitive computing different?

Ø  It differs from advanced search or analytics

Ø  It learns as it’s taught

Ø  It requires a new kind of interaction

Ø  It allows us to solve problems in new ways !!!

!“What gives me hope is that the Edisons of the world can now fail 10,000 times faster, so we'll get more out of them.” CEO, Computer Services solution provider


What types of benefits are users seeking?

Ø  Improve decision making

Ø  Gain competitive differentiation

Ø  Ask better questions

“Rather than us being dictated by the tools, we're dictating what the tools should do for us. I think that change in how people and things communicate is the most scalable, broadly applicable element.” Director of Product Strategy, Retail solution provider

Ø  Free up expertise

Ø Manage complexity

Ø Augment skills


How are users preparing their organizations?

Casting the vision A clear use case, strong executive support, a long-term plan for adoption and deployment, and an innovative organizational culture are all essential to forging a strong vision at the beginning of the cognitive journey. !!

Managing expectations Pioneering organizations set expectations carefully with both end users and senior executives. This allows them to keep the hopes and desires of the organization in sync with the realities of the cognitive platform.


How are users preparing their organizations?

Orchestrating cognitive training Organizations have to commit to properly training their system. They have to make the right experts available and encourage their involvement. These experts have to see things through to the end—training, testing and helping deploy.

!

Driving via a diverse team Organizations need the right team members with the right technical skills and subject matter knowledge to both deploy and use cognitive systems. Users will also need to develop new skills and operate differently than they are used to.

. !

Applied Insights 2016 IBM Center for Applied Insights

“I can't imagine building a technology company now without at least thinking about the cloud or mobile. Cognitive will be like that. The decision won't be whether to use it or not; it will be figuring out how.” CEO, Healthcare solution provider


Quantum computers promise exponentially more speed and power than what is achievable with computers today. Harnessing such capabilities would provide extraordinary business advantages in areas as diverse as pharmaceuticals, encryption and weather forecasting. Quantum has the potential to impact problems on a global scale. The possibilities of solving what is unsolvable today are significant for businesses and for the planet. And the wait may be shorter than you think.

Quantum computing

Source: IBM Center for Applied Insights study A quantum of possibilities: The business advantages of taking the quantum leap

(ibm.com/ibmcai/quantumcomputing)


www.ibm.com/ibmcai/quantumcomputing

The quantum advantage for business Greater speed and power offer clear benefits across industries. But the real differentiator is that these benefits compound quantum's true strength—an entirely new way to tackle problems.


“Quantum is a very good example of the rapid progress that we can accomplish if we are ambitious and focused as scientists and as a community. Think about the opportunity for the planet.” Alan Aspuru-Guzik, Harvard University


Impact on applications & industries

Government!Pharmaceutical!

Financial services!Manufacturing & Industrial!

Travel & Transportation!Telecommunications!

Preparing for a quantum future

Nurture new skills and roles as quantum scientists and engineers, as well as entrepreneurs and quantum generalists will be in demand.

Expand quantum education programs to train for new roles that encompass physics, engineering, computer science and business.

Open innovation between academia and business will be necessary to accelerate quantum innovation, finance projects and encourage adoption.


Cloud!

Mobile

Security!

Analytics

Internet of Things

Cognitive

Quantum

Resiliency

Digital services


Applied Insights 2016 thought leadership publication summary

Growing up hybrid: Accelerating digital transformation (ibm.com/ibmcai/hybrid-cloud) Masters of disaster recovery: How highly resilient organizations excel (ibm.com/ibmcai/disaster-recovery)

From checkboxes to frameworks: CISO insights on moving from compliance to risk-based cybersecurity programs (ibm.com/ibmcai/ciso)

Star qualities: What it takes for mobile development projects to succeed (ibm.com/ibmcai/mobiledev) Competing in the insight economy (bit.ly/CAI-InsightEconomy), Teaching organizations to fish in a data-rich future (ibm.com/ibmcai/cdostudy), Breakthrough experiments in data science (ibm.com/ibmcai/data-science)

IBM Center for Applied Insights IoT articles (ibmcai.com/tag/IoT/)

Digital disruption and the future of the automotive industry (ibm.com/ibmcai/future-auto)

Becoming cognitive: Insights from the first wave of Watson users

A quantum of possibilities: The business advantages of taking the quantum leap (ibm.com/ibmcai/quantumcomputing)

http://www.ibmcai.com/tag/IoT/

www.ibm.com/ibmcai/data-science

www.ibm.com/ibmcai/future-auto

www.ibm.com/ibmcai/quantumcomputing

www.ibm.com/ibmcai/mobiledev

http://bit.ly/CAI-InsightEconomy

www.ibm.com/ibmcai/cdostudy

www.ibm.com/ibmcai/ciso

www.ibm.com/ibmcai/disaster-recovery

www.ibm.com/ibmcai/hybrid-cloud

ibm.com/ibmcai

www.ibm.com/ibmcai

Sources and references:

1. “Gartner Survey Shows More Than 40 Percent of Organizations Expect Internet of Things to Have a Significant Impact Over Next Three Years.” Gartner. 2015. http://www.gartner.com/newsroom/id/2977018

2. “We Asked Executives About The Internet Of Things And Their Answers Reveal That Security Remains A Huge Concern.” Business Insider. 2015. http://www.businessinsider.com/internet-of-things-survey-and-statistics-2015-1

3. “Cisco Global Cloud Index Projects Cloud Traffic to Quadruple by 2019.” CISCO. 2015. http://newsroom.cisco.com/press-release-content?type=webcontent&articleId=1724918

4. “The Internet of Things: What it means for US manufacturing.” PWC. 2015. https://www.pwc.com/us/en/industrial-products/assets/big-data-next-manufacturing-pwc.pdf

5. “Internet of Things - Vertical Research Service.” Evans Data Corporation. 2015. http://www.evansdata.com/reports/viewRelease.php?reportID=38

6. “Gartner Says that the Internet Of Things Will Change Cybersecurity Forever.” Gartner. 2015. http://www.gartner.com/newsroom/id/3123018

7. “We Asked Executives About The Internet Of Things And Their Answers Reveal That Security Remains A Huge Concern.” Business Insider. 2015. http://www.businessinsider.com/internet-of-things-survey-and-statistics-2015-1

8. “The Internet Of Things In Retail: Great Expectations.” Retail Systems Research. 2015. http://rsrresearch.com/wp-content/uploads/2015/08/2015IoTRSR.pdf

9. “Transforming industries: Energy & Utilities.” Ericsson. 2014. http://www.ericsson.com/res/docs/2014/gtwp-op-transforming-industries-aw-print.pdf

10. Mary Barra, General Motors CEO, speaking at The Code Conference. May, 2015 – www.mobileworldlive.com/apple-says-car-ultimate-mobile-device and www.cnbc.com/2015/05/27/readying-apple-google-connected-tech.html

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Technology

Applied Insights 2016