Digital Transformation: Let Moore’s Law Work Its Magic

In case you didn’t notice, about 18 months ago a shift occurred. If you bought services that have social streams, mobile apps or embedded analytics, or are delivered via the cloud, you “digitally transformed” your company. Digital transformation as an industry meme is nearly omnipresent. Transformation, driven by sensors, autonomics and, of course, social, mobile, analytics and cloud is the new way business gets done.

This theme raises an interesting dilemma, however: If systems do not have social streams, mobile apps or embedded analytics, and are not delivered via the cloud are they not digital transformation? ERP systems don’t use mechanics or hydraulics to calculate payroll, so they’re not analog systems and must therefore be digital systems, but according to today’s mantra, digital transformation occurs with the adoption of SMAC technologies, not legacy ERP systems.

I would argue that we’ve been “digitally transforming” for decades now, as first and second generation implementations of ERP, CRM and KM systems focused transforming manual (analog) processes into 0s and 1s. However, this transformation petered out as these systems aged and morphed from transformation agents into legacy platforms. As every CIO knows, a pile of ongoing funding is required to maintain the currency of these systems, much less to continually drive functional enhancements.

Today, the frenzy around SMAC has clouded the IT services industry’s collective judgment. New technology services and platforms are being linked with a fundamental transformation of the enterprise. While many characteristics of the SMAC “stack” are indeed revolutionary, I prefer instead to focus on how the technology is delivered, regardless if they neatly fit into the SMAC stack or not. This is where the real transformation can take place, because if it’s delivered using a shared, multi-tenant architecture, some pretty amazing things can start to happen.

As we’ve discussed before, sharing software, infrastructure and services creates massive economies of scale and allows providers to focus on innovation, rather than supporting old code and hardware. When providers are allowed to put their focus on the windshield, rather than the rear-view mirror, the pace of innovation quickens, allowing them to take advantage of exponential increases in computing power, machine learning and faster bandwidth.

As an example of this exponential growth, picture a chessboard. If you were to put a single grain of rice on the first square, and then double the amount of rice on each subsequent square, how much rice would you have when all the squares are filled?

That is a lot of rice.

When most people encounter this classic problem, they try to work it out in their head. Then, after the numbers start to add up, they make an educated guess, somewhere around a few hundred to a few million grains of rice. The answer is actually 18 with another 18 zeros. Let that sink in a bit: 18 quintillion grains of rice. This vast heap of rice sitting on top of our fictional chessboard would tower over Mount Everest, and is 1,000 times more rice than is produced annually worldwide.

This story is an example of the astonishing power of exponential growth, but it’s not limited to fictional chessboards. It’s transforming the global economy as we speak: Self-driving cars, Jeopardy champions and humanoid robots are possible now thanks to the fact that computing power is doubling every 18 to 24 months. According to Eric Brynjolfsson, in his newest best seller, “The Second Machine Age,” we’re at the cusp of (or have already entered) an era where technology advances that have happened to date will be dwarfed by the advances coming our way in the very near future, in part thanks to Moore’s Law — the principle that processing power for computers will double every two years.

And there’s the kicker. Most of today’s digital assets within the enterprise are dedicated, single-tenant platforms that cannot, or are limited in their ability to, take advantage of these exponential increases in productivity. These assets are typically refreshed every three to five years, and assuming a five-year cycle, two doublings in processing power have taken place while the dedicated assets sit idly by (and often haven’t even been fully implemented). Additionally, many outsourcing customers are grappling with contracts that focus on replicating their current environment (which often is already outdated) and refreshing at some point in the future. Meanwhile, multi-tenant platforms race ahead driven by the amazing changes we see in computing processing power and software on a near-daily basis.

Contrast this with shared platforms. These digital assets are continually subjected to Moore’s Law given customer demand for more “consumer” type experiences and external competition from nimble firms focused on taking small slices of the outsourcing pie. Multi-tenant services “evolve” faster than their traditional single-instance brethren.

The good news is that not all systems need to take advantage of this exponential improvement. The focus of digital transformation should be on systems of engagement [PDF] — those systems that interact with customers, employees and partners. These systems need to keep pace with the exponential change happening all around us. The general ledger does not.

So, rather than simply implementing SMAC technology to drive transformation, strive to use shared architectures for your systems engagement, and focus on your contracting model to make sure that the innovation inherent in these platforms is not artificially constrained. If you can do these two things, your systems — and your organization — will be better positioned to participate in the “digital transformation” revolution.

About the author

Stanton helps enterprise IT and sourcing leaders rationalize and capitalize on emerging technology opportunities in the context of the global sourcing industry. He brings extensive knowledge of today’s cloud and automation ecosystems, as well as other disruptive trends that are helping to shape and disrupt the business computing landscape. Stanton has been with ISG for more over a decade. During his tenure he has helped clients develop, negotiate and implement cloud infrastructure sourcing strategies, evaluate and select software-as-a-service platforms, identify and implement best-in-class service brokerage models, and assess how the emerging cloud master architecture can be leveraged for competitive advantage. Stanton has also guided a number of leading service providers in the development of next-generation cloud strategies. Stanton is a recognized industry expert, and has been quoted in CIO, Forbes and The Times of London. You can follow Stanton on Twitter: @stantonmjones.