This is a Wikibon Voice of the Community Report, sponsored by Hewlett Packard Enterprise Co. Voice of the Community posts are identified paid posts that appear on all pages of SiliconANGLE.com, supporting editorial efforts.

Premise

Firms must transform crucial digital business capabilities, but most struggle with the concept. Without information technology leadership, the struggle will continue, but many technology leaders are unsure how to appropriately support and lead these transformations. It is clear that new IT disciplines are necessary and new hybrid cloud management stacks are essential.

Research context

The most important force of change to business in 50 years is digital business transformation. Most businesses are not prepared for it; indeed, most struggle to understand it. However, Wikibon thinks it can be understood in simple terms: Digital business transformation is a response to the rapidly evolving role of data in business. Simply put, a digital business uses data to differentially create and keep customers. Moreover, one business can become more “digital” than another based on how much better that business uses data. During their journey, customer typically perceive improved customer experience when interacting digitally and are biasing choices to work with “more digital” brands.

The central role of data and the strategic impact of better data usage means that IT leaders must play a central role in digital business transformation. However, just as business leaders need to be educated on digital business transformation, so too must IT leaders better understand the crucial role that they will play and what they must do to play that role. However, the emergence of cloud computing appears to diminish the influence of IT just as it should be rising, but that’s mainly because a significant portion of traditional IT practices are rooted in managing system resources. IT leaders must start reengineering IT, establish new disciplines and adopt new hybrid cloud management stacks capable of supporting the rapidly evolving needs of digital business. But how? What should the priorities be?

To answer these and other questions, Wikibon convened a CrowdChat to discuss the impacts of cloud computing and digital business on technology and business professionals. For an hour in late January 2017, 88 industry experts who are part of the Wikibon community met online to discuss this topic. The conversation comprised nearly 350 collaborative observations that generated nearly 3.4 million customer impressions. Among the key findings from the collaboration (a summary of that CrowdChat can be found here):

• Solving the “problem of demand” sets the stage for digital business transformations.
• A Digital Business Platform is required.
• The Digital Business Platform requires an end-to-end approach to cloud.

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What is a CrowdChat?

CrowdChat is a community engagement tool used by Wikibon to research innovation. A CrowdChat brings together – online – experts in a domain to discuss complex technology, social and business issues. Wikibon posts questions to these experts, which catalyzes a bloom of conversational interactions about the subject. Wikibon analysts then combine these interactions with other research sources to develop the findings that we publish in a Voice of the Community research paper.

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Solving the ‘problem of demand’ sets the stage for digital business transformations

The first challenge facing any IT executive seeking to establish new functional priorities is to understand the fundamental nature of the business issues driving digital business transformation and, ultimately, the general impact these changes will have on IT functions. At its core, digital business transformation builds on previous periods of transformation, each of which matched new technologies – including information technologies – to large scale business challenges to alter business propositions and models, industries, even entire economies (see Figure 1). Using technology, businesses have transformed by learning how to optimally move things, manufacturer things and manage physical and financial assets at scale. Each of the transformations were made possible by IT inventions.

Today, we can move, manufacture, and manage almost anything at scale, but are the things the right things, at the right prices, and in the right volumes? And that leads to the challenge driving much of the digital business transformation: How to handle the problems of customer demand. Business executives are pushing each other to address concerns like: What do customers want? How much of it do they want? Where do they want it? How do we rapidly respond to changing customer interests? How can we gain favored status? These questions, and so many more, are motivating digital business transformation.

But businesses have been asking these complex questions for years. Why is digital business transformation happening now? Two reasons. First, customers are using powerful computing devices to change the balance of market power in the economy. Today’s customer has more choice precisely because the costs of discovering, evaluating, choosing, configuring, using and retiring options are dramatically lower than ever. And they’re executing that choice by being more discriminate, price conscious, and social in their market behavior.

As consumers use these devices and share their preferences and experiences, they generate and expel enormous volumes of data, which provides deep insights into wants, needs, and expectations — much of which is making its way into the cloud. And that – the emergence of the cloud – provides the second basis for the digital business transformation. The transformation is driving three new “truths” within IT that will dominate all digital business technology and organizational choices. They are:

• Customers are your most important users. The core reality of a digital business is that systems must be designed for external users, especially customers. This has enormous implications for system design, security, and operations decisions. Customer experience is becoming a central design point for UX, privacy/trust and data protection.
• New digital business capabilities are required. A digital business must excel at acquiring data, turning that data into models, insights and other sources of business value, and then taking actions based on that data (see Figure 2). Moreover, these new capabilities must simply and securely operate with existing high value systems.
• New data lifecycle is needed. At the center of these new digital business capabilities is a new data lifecycle that presumes greater sharing, reusing and combining of data than ever before (see Figure 3). Wikibon believes the new lifecycle will feature an architected approach to devising “information transducers” that can transform data in one form into another (e.g., analog into digital for big data ingestion, or digital back to analog for taking real-world action) to foster new data-oriented work in the enterprise.

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What does the Wikibon community say about digital business strategy?

• “Organizations are evolving from seeing IT as a cost center to treating IT as part of core innovation team.”
• [Digital business strategy emphasizes] “time to value . . . agility . . . the ability to change with the market.”
• “It’s all about speed to market . . . cost is secondary.”

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Figure 1. Historical business transformations

Figure 2. Strategic capabilities for digital business

Figure 3. Data lifecycle for digital business

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What does the Wikibon community say about digital business capabilities?

• “The most critical apps . . . are focused on customer engagement.”
• “Product functionality, customer engagement, analytics, IoT [are most important], although not necessarily in that order.”
• “IoT is key to GDP growth from $4.2 trillion (2016) to $11.1 trillion (2025).”

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The Digital Business Platform

Traditional IT disciplines are incapable of planning, building and running the sophisticated new technologies and applications required to service customers, establish new digital business capabilities and support a new data lifecycle. IT leaders must enact a new framework of disciplines, cutting across people, process, technology and information. Wikibon calls this new framework the Digital Business Platform, or DBP. It’s comprised of five interrelated approaches to the work of architecting, developing and operating crucial data-driven, digital business capabilities (See Figure 4):

• Create data feedback loops. In today’s world, the difference between high-performing and low-performing companies is the ability to collect data from the market, devices or customers and make products/services adjustments that align to customer needs or operational conditions. As aspects of products become more digital, the opportunity to capture more data about interactions and context increases. Designing data feedback loops that facilitate necessary, secure and cost-effective flows of data within a digital business is a crucial competency for modern IT organizations.
• Rapidly building and testing software. While internally-facing applications are often focused on stable, repeatable processes designed to reduce cost, customer and community-facing applications must be more agile in adapting to new market opportunities and unexpected market changes. These applications must be built using architectures that allow frequent changes and simplify updates. Modern testing and deployment frameworks (often called CI/CD) become as important to digital business as ERP and CRM systems are to traditional business.
• Automate deployments. Over 70 percent of all security incidents are associated with manual processes. Too many IT organizations avoid or ignore the upfront work of automating as much as possible because they view it as too costly, or not a frequent occurrence. But customer-facing applications will change frequently, so automation must become a priority for IT operations teams that want to avoid being a bottleneck to marketplace success.
• Building the product/service around the API. In the digital world, the product/service is the API. This is the interface that the external world, customers, devices, or applications, will interact with. Beyond the web-native companies, many “traditional” businesses are exposing their services via APIs (such as Capital One, Target and General Motors). Some are even launching whole new businesses and business models (e.g., General Electric’s Predix). Designing a business’s set of APIs must be a deeply considered exercise. The working business API must be consistent with key brand promises, enact value propositions, foster operational options and secure IP. It must be regarded as a strategic IT discipline.
• Operations drives costs and differentiation. The biggest mistake that most IT organizations make about cloud computing is the belief that if they have similar technology to the cloud in their shop (e.g., virtualization, software-defined networking or storage, a service catalog) and that they can easily replicate a cloud computing experience. The flaw in this thinking is operations. Cloud computing suppliers have developed proprietary cloud service management platforms that can support a remarkable degree of rapid customer self-service and cost-busting automated operations. For enterprises to provide a comparable cloud experience internally, they must employ similar cloud management stacks.

Figure 4. Wikibon’s Digital Business Platform

The Digital Business Platform requires an end-to-end approach to cloud

Cloud computing is the natural target for implementing DBP. However, any large enterprise will require a hybrid mix of cloud computing resources to operate. Some workloads will be too costly or impossible to run in public clouds; a sizable percentage of edge IoT workloads, for example, feature data requirements and cost profiles that demand local execution (see Figure 5). Leading systems companies are delivering true private cloud, or TPC, options that offer the cloud experience – workload plasticity, pay-as-you-use capacity matching and automated administration – in on-premises packaging. Because of these practical workload realities, Wikibon believes that SaaS and TPC options will dominate IT spending over the next decade (see Figure 6).

However, to realize the promise of the cloud experience across a hybrid of public SaaS, public IaaS and TPC resources, enterprises need a new technology and sourcing foundation for ensuring simple multi-cloud management. While pieces of this new foundation are in place, significant new technology invention and innovative packaging of current and future cloud-related technologies are required. An end-to-end framework for hybrid cloud management is emerging, where end-to-end refers to data lifecycle, application lifecycle and execution pathways. These “hybrid cloud management stacks,” or HCM Stacks, will provide:

• Real cloud choices. The cloud services industry is evolving rapidly. Any credible hybrid cloud management stack must support simple utilization of public cloud leaders such as Amazon Web Services and Azure, leading TPC software platforms (e.g., OpenStack) and popular cloud modes – (e.g., virtual machines, bare metal). However, it must also facilitate introduction of new cloud options into an enterprise as they become attractive. Only a few companies have the technical know-how, market reach, financial resources and strategic dedication to credibly pursue and deliver a real, open cloud management stack. It will be one of the most hotly contested areas of competition in the computing industry. Moreover, the choice of hybrid cloud management stack will be among the most important facing any IT leader in a digitally transforming enterprise.
• Consistent cloud experience. Digital businesses will not be passive consumers of cloud resources; most will provide digital services themselves, in forms like SaaS-based engagement. Thus, the real goal of a digital enterprise is to establish the DBP that works for it, given its customer base, value propositions and business models. While ensuring choice, new hybrid cloud management stacks must strive to ensure a common, role-based experience across cloud options. This is a crucial design consideration for IT leaders: how to become a cloud service provider to a digital business.
• Developer-friendly tooling. While developers might have experimented with cloud options to end-run IT operations practices, they are sticking with cloud computing because that’s where the best new tooling is being created and new business models best supported. New technologies like containers are making possible exciting new approaches – like microservices – to conceiving and composing complex applications. New hybrid cloud management stacks must accommodate rapidly evolving developer technologies and be accessible to developers, development tools and applications through well-architected APIs. That means that all infrastructure devices – everything – must be software-defined, poolable and reasonably self-servicing (subject to practical expensing and security policies).
• Exploitation of rapidly evolving intelligent technologies for system management. Some of the most exciting applications of emerging machine learning and artificial intelligence technologies are within the IT management sphere. The types of applications being deployed by digital businesses to provide differentiated digital experiences are too complex to be manually operated, but too valuable and dynamic to be automated through static management tools. Crucially, because software “learning” is dependent on access to expertise for initial training and data for contextual richness, HCM Stacks that are early to market with rich intelligence out to the box will improve fastest and establish strong market leadership.
• Rock-solid control of cloud resources. While the HCM Stack should be expected to evolve rapidly, in other ways it must maintain sound business practices that are defined external to IT. Finance is near the top of that list. HCM Stacks must present unified, yet configurable, billing and showback capabilities capable of accurately representing and commensurating cloud expenditures. Most users will understand the need for accurate representation of costs, but why is accurate commensuration so important? Because as cloud facilities evolve, IT leaders will be asked to evaluate options and trade-off choices to optimize digital business resources. Additionally, adding application resources to the platform must be intrinsic and simple. This includes providing a coherent API that developers and software houses can use to exploit the platform’s management capabilities and a marketplace for matching customer needs to vendor offerings in the HCM Stack.
• Secure digital business. Securing workloads and data end-to-end across cloud instances will require an important rethinking of an already complex topic. Cloud leaders are taking that step by implementing security technology and practices that no longer differentiate between internal and external traffic, use a minimum-viable privilege approach to access, and design security from “data out.” HCM stacks will be crucial to scaling these approaches, providing facilities for commonly managing and automating highly distributed security zones across diverse groups of cloud service suppliers.
• Collaborative business management of digital resources. Digital business embeds technology deeper into strategic business activities, including increased automation. Cloud makes the planning, building and running of these resources simpler. The combination of these two factors ensures that managing enterprise cloud resources will be a team sport that will require the efforts of both business and IT professionals (see Figure 7). This will dramatically alter the relationship of IT to the business in important ways. First, it will elevate the role of digital technology professionals in the business. Second, it will undermine the role of IT personnel incapable of moving from asset-oriented comfort zones.

Figure 5. Data movement costs can make public cloud options impractical
(Source: Wikibon, “The Vital Role of Edge Computing for IoT: 2016 Update,” 11/8/2016)

Figure 6. Wikibon worldwide enterprise IT projections

Figure 7. Who most strongly influences cloud adoption
(Source: Wikibon CrowdChat, January 2017)

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What does the Wikibon community say about cloud utilization?

• “Saying that on-prem is cheaper than public cloud or vice versa is not helpful without proper context.”
• “Today, just about anything can be done in public cloud. The question is: what . . . should be done?”
• “The difference between public and private is often about business particulars and their perception of the cloud. For example, we see firms moving data into the cloud for better security and others move data out of the cloud for better security.”

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Summary

Digital business transformation, at scale and across cloud suppliers and locations, will require an intensive and coordinated effort by business – an effort that IT must help lead. The effort must start with a global understanding of the challenge, which Wikibon characterizes as the “problem of demand.” Solving that problem – which is the basis for most business change today – requires IT groups to center designs on customer experience, excel at crucial digital business capabilities and institutionalize work around a new data lifecycle.

Wikibon believes that technology organizations must point toward a “digital business platform” that provides direct support for the new types of work digital business requires. This platform will be based on five different classes of service disciplines, one each for handling data assets, accelerating development, managing APIs, automating deployments and modernizing operations. Taken together, these disciplines are the basis for modernizing IT and comprise the roadmap for the technology and data underpinnings of any digital business.

Instituting the DBP requires more than architectural concepts. New hybrid cloud management stacks for enfranchising distributed cloud resources into coherent and reliable business assets are emerging. HCM stacks must support traditional and emerging technology roles, work streams and service relationships. This will be an area of intensive technology invention and fevered market competition. HCM stacks will be highly strategic to any digital business. HCM stack adoption must be planned and committed to succeed.

Action item

Digital business transformation is inexorable, as is its impact on IT professionals and organizations. CIOs and IT leaders must devise a strategic roadmap to deploy a digital business platform capable of sustaining digital business and over time deploy hybrid cloud management stacks capable of sustaining end-to-end planning, building and running of complex hybrid cloud workloads.

Images: Wikibon