Ask a CEO which technologies his or her company must have to digitally transform the organization, and you’ll likely hear about advanced analytics and the internet of things (IoT). I’d posit that while plenty of other technologies also play vital roles, these are the keys that unlock the digital value door. But these technologies can’t excel on the static, closed IT systems of yesterday – systems that are no longer agile or scalable enough to enable digital business. Instead, they require a digital core of pre-integrated yet loosely connected cloud applications that sit on top of elastic, resilient data platforms.
This digital core of applications enables agile development and preventive operations on hybrid cloud platforms. The core also serves as the engine that drives customer engagement and accelerates insight- and event-driven decision-making to continuously optimize business operations.
So, what are the key components that make up this digital core?
At the center is a managed, enterprise platform as a service (PaaS) for hybrid cloud that offers a resilient and secure environment, provides APIs for access to the vendors’ development platforms (i.e., SAP Cloud Platform, Oracle Application Builder Service) and can be deployed on private, virtual private and public clouds.
From there, the core includes all the systems of continuous change for DevOps, including continuous assessment, delivery, release and deployment, and monitoring and operations.
The digital core relies on an intelligent automation platform that prepares data for machine learning systems, neural networks, text to speech, decision-making and other advanced applications and builds algorithms for business and IT.
Next are the business applications – the systems of insights, record and engagement:
- The systems of insight cull events and data from internal and external sources to create contextual recommendations, trigger service and apps, and improve decision-making in transactional interactions. These systems are the data foundation for machine and deep learning, therefore pivotal to establish algorithmic automation at the business process and IT operations layers.
- The systems of record run operational, recurrent business activities with cost-efficient transactions and process execution.
- Systems of engagement allow partners and customers to gain insights into the company’s products and services, conduct transactions, communicate and trace collaboration. These systems provide outcome-driven, differentiating services that are adapted to customers, leverage mini- and micro-service architectures and demand frequent change.
When all of these components of the digital core work together, an enterprise’s value streams are enabled, providing the right environment for experimentation and expansion into new markets and partner channels.
Here’s an important point: Don’t overlook the importance of your business applications in the digital core. Organizations that treat ERP and other mission-critical business applications as if they are no longer needed in a digital world run the risk of preventing the business from scaling and innovating at speed. Business applications like ERP effectively power operations, and modernizing this operational core is a must. Otherwise, success in the digital economy may elude .
Core ERP processes will continue to be essential parts of any digital business platform, because the business processes for which ERP was designed are critical to successful deployments of digital initiatives. Core ERP, in this context, means a stable set of operational, iterative ERP end-to-end business processes that execute transactions and analytics designed to run the business.
And here’s another important point: Large, monolithic on-premises ERP suites are not conducive to the agility required for digital business. This means that you must have a more flexible ERP foundation – one that’s designed to support your company’s commoditized business processes separately from the more innovative digital business initiatives so those value-added activities always receive the resources they need.
It is also necessary to adapt your ERP strategy to better support a digital business platform that extends into the organization’s ecosystem. In a digital ecosystem, enterprises, competitors, customers, regulators and other stakeholders form a mutually beneficial, interdependent business network that shares standardized digital platforms.
Some organizations mistakenly believe that establishing a B2B or B2C commerce site — or simply hosting their ERP applications in the cloud — will make them a digital business. Independent software vendors are adding to this confusion by pressuring organizations to move to a cloud solution, even though they can’t define a clear business case or roadmap. The best option is to partner with vendors who’ve changed their approach, become cloud-first operators and have earned your trust. In the long term, a trusted/strategic partnership will win over high-pressure tactics and bullying.
With a digital core in place, enterprises will have the foundation they need to support the kind of advanced analytics – predictive and prescriptive – that is fundamental to customer, citizen and user engagement. Analytics underpin the mediation and value exchange occurring in digital ecosystems, which are expanding with IoT implementations and all the physical products that are acquiring digital footprints. From these, enterprises can channel new services and sources of revenue. The advanced analytics portfolio will likely include distributed and embedded analytics, as well as accompanying capabilities such as logical data warehouses and in-memory computing.
There’s just one more point I’d like to make: Moving to digital is not a small, incremental change, and enterprises that treat it as such will fail to thrive (or even survive) in the digital era. Digital business brings about fundamental changes, with new business models that involve major shifts in how an enterprise operates and interacts. A major component of digital business comes down to managing data. This cannot be sustained efficiently without a renovated digital core that includes stable and reliable core ERP processes executing standard transactions designed to run the business.
In future posts, we’ll explore how a modern digital core is enabling digital transformations in industries. Stay tuned.