Constant technical innovation is the key to growth and prosperity for all businesses, from the largest multinational to the smallest SME – whether they are a startup, a scale up or approaching relative maturity.
The scale of spending on digital transformation is staggering. Analyst group IDC predicts ‘direct digital transformation (DX) investment spending of $5.5 trillion over the years 2018 to 2021.’
IDC predicts that by 2020 - ’30 percent of G2000 (the world’s largest) companies will have allocated capital budget equal to at least 10 percent of revenue to fuel their digital strategies.’
Shawn Fitzgerald, IDC’s research director, Worldwide Digital Transformation Strategies says ‘This shift toward capital funding is an important one as business executives come to recognize digital transformation as a long-term investment,’ and he predicts a commitment to funding digital transformation that will ‘drive spending well into the next decade.’
Investing 10 percent or more of your turnover on modernising your technology infrastructure and enabling new digitally driven innovation might seem an unattainable challenge for many SME organisations, but if the world’s biggest companies deem such investment necessary, then small businesses should at least prioritise technology investment.
Of course, multinationals and SMEs face different challenges. Multinationals are likely to carry a heavy technology debt from past investment in legacy applications and infrastructure. SMEs on the other hand are likely to suffer from both some technology debt and a history of underinvestment in technology.
However, just as digital technology has enabled startups to create whole new industries and SMEs to enter global marketplaces, it also requires SMEs to invest as heavily and probably, in a more focussed manner than their multinational rivals, with their larger pools of capital and human resources.
Is cloud the only answer?
For more than a decade, tech vendors, analysts and the press have focussed on the revolutionary potential of cloud computing.
Cloud certainly has enormous advantages - allowing organisations of all sizes to access new products, services and innovation, but it has sometimes failed to live up to expectations, adding rather than reducing complexity and exposing organisations to hidden costs.
The high-tech startup with its founders operating on laptops from coffee shops or co-working spaces, using a host of cloud-based productivity and collaboration tools, is a modern business cliché. But business reality is often very different for SMEs – whether startups or established operations – and for large enterprises.
That is why, despite the hype, spending on cloud – Software as a Service (SaaS), Infrastructure as a Service (SaaS) and Platform as a Service (PaaS) – still does not account for the majority of global IT spending. Analyst group Gartner is predicting that by 2022, ‘traditional offerings will still constitute 72 percent of the addressable revenue for enterprise IT markets,’ with cloud providers taking 28 percent. Other analyst groups come up with slightly different estimates, but the message is plain – cloud is the future but there is a long way to go.
The case for hybrid IT
Today, and for several investment cycles to come, business technology professionals face a world where different cloud technologies and service providers are best suited to different types of organisation and different tasks.
For most organisations then, from the SME to the multinational enterprise, hybrid IT, which combines on premises infrastructure with public and private cloud technologies, is the default state.
Public cloud services are still sold with the promise that they can save costs – and for many organisation, the shift from CAPEX, through buying IT infrastructure and applications, to OPEX through renting, is a welcome benefit. However, the greatest value is in providing scalability, both up and down, and access to innovation and the fast-moving technologies that underpin digital transformation.
Private cloud offers potentially lower long-term cost of ownership - the seemingly cheap monthly bills for cloud services soon mount up. Private cloud also offers greater control and customisation and the flexibility to move non-sensitive workloads to the public cloud at peak periods of demand.
Whether public or private cloud is more secure is hotly contested, but some organisation’s contracts and some regulatory requirements limit their ability to put sensitive data into the public cloud. Many organisations also have business critical applications and data that they simply cannot move from their existing on premises locations.
The question for tech-savvy business and technology professionals is how to bring order to their hybrid world. It is to move from a ‘hybrid by default’ to a ‘hybrid by design’ state. This requires detailed planning and considered investment in hardware and software to deliver performance, security and compliance and to integrate and orchestrate the multiple cloud applications and platforms that organisations are running today.
There is a clear understanding of these challenges among SMEs. A recent IDG/Dell survey found those surveyed reported that IT simplification was the greatest challenge they faced (32 percent), followed by improving workplace productivity (18 percent) and reducing total cost of ownership (16 percent).
Q5. What is your primary challenge around your IT environment at the moment?
Similarly, SMEs understand that technology can overcome some of the main barriers to business growth, particularly skills and staff shortages.
Q1. What’s stopping you from scaling your business?
The survey also reveals that SMEs are testing and deploying the same sorts of emerging technologies as their larger competitors, with analytics, artificial intelligence and Internet of Things leading the pack.
Q4. What emerging technologies are you currently deploying/testing
Deployed and used correctly these tools can drive forward any organisation. Deployed piecemeal and without sufficient thought to integration and orchestration with existing systems and without a roadmap to the future, they can add layers of complexity to an already siloed technology ecosystem.
For some SMEs overcoming tech siloes can be as simple as the deployment of their first servers. For the more established organisations it can be moving to a software-defined infrastructure and architecture and rationalising ad-hoc use of cloud solutions to enable genuine hybrid IT that can provide operational agility and reduce costs.
We live in uncertain times, with economic insecurity and an ever-faster rate of digital innovation. That is why investing in IT infrastructure as well as services is crucial if organisations are to survive the current turmoil and prosper in future.
The stakes are high as Mark Yates, Research Manager, Digital Transformation, IDC Europe, highlights in a report on the dangers of underinvestment in tech.
‘There are companies out there that are able to do more with less or that have not yet pushed their IT systems to their full potential. And there is a great deal that can be done by restructuring the organisation and resetting business goals. But so much innovation today depends on use of cutting-edge technologies, that new spending will almost always be needed to remain competitive.’
His warning applies just as much to SMEs as to larger enterprises.
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