IT transformation: Ushering in the digital business model

IT transformation describes the steady conversion of fixed, monolithic infrastructures to the cloud computing era, where technology is better delivered and aligned to the needs of business.

IT transformation describes the steady conversion of fixed, monolithic infrastructures to the cloud computing era, where technology is better delivered and aligned to the needs of business.

phill patton it transformation

But the point of IT transformation goes beyond that. It extends to the ability of IT to support emerging business models that dovetail with the powerful technological capabilities possessed by the modern customer. Cloud has transformed IT; now IT has the capability to transform business to the digital model.

Let’s take a step back. The first wave of IT transformation took place in the early 2000s. As companies such as Amazon and Barnes & Noble demonstrated the validity of online, low-inventory, technology-driven business models, their ability to compete effectively with real-world retailers heralded a fundamental change to the status quo. Today, on the back of these proven models, a far less number of readers buy their books in retail stores.

Organisations everywhere, of any scale, were obliged to sit up and take notice of how more efficient, more scalable and more aligned IT systems and resources were becoming an essential aspect of the ability to compete.

These companies set the precedent for transformed IT: they were able to achieve efficiency and performance like the world had never seen before, thanks to their effective use of information. The example is far from limited to book sales or even retail for that matter. Digital businesses include companies such as Google, Facebook, LinkedIn, TradeMe – they are designed so as much of the business as possible is digital, rather than existing in the physical world.

What drives the digital business model?

Regardless of whether the business engages directly with consumers or if it is business-to-business, there is a global force that underpins the push towards transformed business models. Simply put, that force is the availability of powerful and pervasive technology.

The average smartphone has capabilities tgat include geolocation, a full unified communications suite, navigation and all the power of the internet. The citizen is digital; s/he wants to do business digitally, simply because these models offer more convenience, more value and lower prices.

For businesses ‘born digital’, these are not significant issues. After all, their business models always were digital, while their founders and management ‘think digital’, too. More challenging by far is the ability and capacity of ‘real world’ businesses to transform their business plans to take into account the ‘brave new world’ of online everything.

But does the baker down the street need to take notice of this digital world? Arguably, yes. Even smaller organisations have an opportunity to ‘go digital’ and improve their performance. Think promotions, special offers, the ability to impress and delight customers.

They also face a threat: should they fail to impress, their competitors might use the electronic tools at their disposal to take the high ground.

From IT-as-a-Service to transformed business models

No, the baker cannot afford a big IT spend. Nor can the boutique retailer, even with several outlets. Nor can probably the greater majority of the 220,000-odd businesses in New Zealand. That brings us right back to transformed IT, delivered as a service, perfectly aligned to the needs of the organisation paying for it.

A good deal of Kiwi businesses have made this vital first set of steps: by using online services such as Dropbox, Xero, Gmail and Google apps (or more broadly, made the shift to an IT-as-a-service model), IT transformation is a reality for them. In the transformation to digital business models, the more important ingredient is not wads of money, but rather cognizance and the vision to execute.

Again, it is digital information and its optimal use which can be of benefit to the business. There is no shortage of information; big data, driven by the internet such as social media, online shopping and information gathering is a reality. By using that data effectively, businesses can translate the online presences of their customers, combined with other information (weather, holidays – you name it) into advantage.

Transforming to the digital business model is certainly daunting. However, the tools and the technology are eminently available. More than that, the motivation should be substantial. Not only does it present a massive opportunity, it is also a considerable threat: even ‘old-world’ businesses find themselves in the position of ‘consider it, or consider failing.’

Phill Patton is country manager for EMC New Zealand

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