How a Refresh of Core Systems Can Pave the Way to Digitization

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Inflexible and aging legacy systems can be the Achilles’ heel of businesses in the digital era, as they are required to respond to customers and market opportunities faster than ever before.

The customers of today are used to seamless digital experiences, with access to information at their fingertips and where companies understand their online behavior and seek to form strong customer relationships.

The challenge is that the ability to offer this superior customer experience requires a huge amount of data and agile IT systems that can generate meaningful insights and provide the kind of experience that customers are used to from companies like Amazon and Apple.

This has led a growing number of businesses to consider modernizing their core IT systems as their existing complex patchwork of legacy systems struggles to keep pace with rapidly changing business requirements.

“Too many organizations are stuck with an alphabet soup of inflexible, aging and poorly integrated systems that soak up resources while making it harder, not easier, to meet business goals,” says Prakash Hemdev, Senior Vice President and Global Head of Strategy and Marketing at Cognizant Digital Systems & Technology.

According to research from Hackett Group, IT organizations are at a crossroads, having to ensure that legacy applications and processes are not redundant due to modernization, and having to embrace digital as a cornerstone of their business strategy.

“IT organizations are at a crossroads—with one foot in the new digital world of cloud, big data analytics, social media, mobile, and the Internet of Things (IoT), and another foot in the past, constrained by legacy technologies and skill sets,” says Mark Peacock, leader and principal of Hackett Group’s IT Transformation practice.1

1 “New Research from The Hackett Group Spotlights Four Digital Transformation Imperatives for IT,” The Hackett Group, Nov. 1, 2016

How a Refresh of Core Systems Can Pave the Way to DigitizationModernizing your core systems can build the foundation for digitizing your organization to redefine business operations and communication with customers.

Organizations are stuck with

an alphabet soup of inflexible, aging and poorly

integrated systems

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The results of TechTarget’s 2017 IT Priorities Survey reveal that IT managers place a priority on investing in new technologies like cloud services and mobility. At the same time, the survey found that organizations in both Europe and the U.S. suffer from a lack of budget growth. Only 39% of European respondents had an increase in IT budgets for 2017, while in North America, the bigger the company, the more likely budgets are cut.2

While technologies like cloud, mobility, analytics, big data and the IoT help businesses in their drive toward embracing digitization, these initiatives are still highly dependent on the foundation of core systems that contain operational, sales and supply chain data and processes.

As such, efforts to transform into a digital business require a transformation of the core to build a modern base on which to support the newer, innovative technologies.

“Modernization is an imperative for competing in today’s customer-aware, hyper-personalized and always-on digital marketplace, in which customers expect products and service offers that are based on the digital trails they leave with every interaction,” says Rajesh Balaji Ramachandran, Senior Vice President and Global Delivery Head, Enterprise Application Services at Cognizant Digital Systems & Technology.

2 “IT priorities 2017: A mix of forward-looking and traditional tech,” TechTarget, Feb. 22, 2017

Efforts to transform into a digital business

require a transformation

of the core to build a modern

base

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How to make, keep-or-cut decisions

As organizations embrace digital as a cornerstone of their digital strategy, they need to first decide which systems need to be retired. The challenge is knowing exactly when older systems reach a tipping point beyond which the cost of maintaining them is more than the value they provide to the business.

That time may be when the underlying technology platform is no longer supported by the vendor, when staff with skills to maintain the core system are hard to find, or when the current technology is prohibitively expensive to license.

Another situation is when the system does not meet business needs due to a new IT vision to support aggressive business goals, or when the company needs to build an application with new capabilities due to a restructuring or merger/acquisition.

“There are many excuses not to modernize, ranging from fear of spending in an uncertain or sluggish economy to not knowing where to start, to the difficulty of measuring the value of existing applications, to lack of top management support, to the fear of new technologies such as cloud,” says Ramachandran.

While there are many factors to consider when deciding whether to keep or cut legacy systems, the evaluation should focus on achieving business efficiency to meet business goals, balancing IT spend against service quality, and the cost of operations and maintenance.

Reinvention of strategies for a successful journey

Approaches to modernizing core systems can range from complete transformation, where the core systems are exchanged for a single large program at one go, to incremental improvements, where one system is tackled at a time.

Gartner forecasts worldwide spending on enterprise application software will grow to more than US$201 billion in 2019, with the majority of funds “are going toward modernizing: functionally expanding or substituting long-standing business and office applications with cloud-based Software-as-a-Service,” according to Bianca Granetto, Research Director at Gartner.

The rip and replace approach of removing the previous system and replacing it with a brand new system may offer a spanking new foundation to innovate and be modern enough to remain relevant for several years into the future. However it can cause significant business disruption as the replacement is often a software package, and it may be a challenge to customize it to provide the capabilities that the legacy system had offered.

Cognizant recommends

taking a modular and incremental approach to modernizing

the core

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Global services provider Cognizant recommends taking a modular and incremental approach to modernizing the core, enabling businesses to minimize risk and optimize benefits, and transform themselves while operating as usual.

This incremental approach involves staged funding and running a series of small-scale, low-consequence experiments with ultra-fast iteration and validation cycles.

Besides having to grapple with a large and complex legacy system, the journey to successful modernization may be complicated by existing core systems that comprise siloed systems that have undergone incremental enhancements and are under the purview of territorial company stakeholders. To ensure a successful core reinvention, consider the following:

• Support from the top. Keep clear lines of communication with stakeholder management. Besides demonstrating the value of modernizing the core, IT leaders need to get buy-in from top management and the different business teams, and then work to maintain that buy-in. Modernizing the core can involve projects that run several years, and its success can hinge on continued support from both management and the different business units.

• Plan a core strategy driven by business needs. A move toward digitizing the business involves reinventing the entire business process. To enable business process transformation, avoid simply replicating existing legacy processes onto a new software package or cloud platform. Instead, simplify the processes by cutting the number of

Modernizing the core

can involve projects that

run several years

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steps required, and streamline with application- and infrastructure-integrated transformation. Where possible, add enterprise automation to automate as many processes as possible, to cut costs, improve productivity and provide better customer experiences. This may affect existing operating models, how customers are approached, and how data is managed and accessed.

• Get input from different business teams. Get the business units—customer facing units like sales and customer service, operations and supply chain—to help redefine processes for a digital business. To successfully navigate the digital transformation journey, companies should try to measure the full spectrum of digital services delivered to customers and then assess the quality of the digital experience.

• Opt for a managed, staged approach. Aim for an iterative rollout to minimize the volume and impact of changes. Adopt a parallel adoption approach where there is a comparison of old and new systems. Follow strong project management and governance practices.

• Refresh and build in resilience. Keep platforms up to date by upgrading to the latest software releases or migrating to modern operating environments like cloud platforms or virtualized environments. Build a resilient IT system that can fend off the new and unpredictable threats that come with digitization.

• Layer on new capabilities. This can mean implementing new software packages or cloud services that can perform the core processes that were previously available only on legacy systems.

• Workforce transformation. Ensure that the IT department and end users learn the new technology, and if necessary, provide extra support with external skills.

While reinventing the core system is no mean feat, having a well-thought-out plan with an incremental approach will be a key step toward adopting a new IT baseline that is ready for innovation and digitization.

Where possible, add enterprise

automation to automate

as many processes as

possible

ABOUT COGNIZANT’S DIGITAL SYSTEMS & TECHNOLOGY

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