Of course, how an organization’s leadership team reacts is also a key differentiator. Still, technology is highly likely to play a pivotal role in driving their desired actions and outcomes.
The shackles of legacy technology
Depending on what reports you read, it’s estimated that as many as three-quarters of manufacturing companies and almost 90 percent of financial service providers rely on legacy systems for their day-to-day operations. And that the average enterprise spends 60-80 percent of its IT budget purely to keep the lights switched on; that is, on keeping its legacy systems running.
Legacy systems may give a sense of control and oversight— comfort even—but their rigidity can also restrict an organization’s agility and ability to pivot to new business models. And they present other risks. For example, when those maintaining them retire or resign, that valuable experience and knowledge can also walk out of the building with them.
And in my view, one of the main disadvantages of legacy technology is its lack of compatibility with other IT solutions. This absence of integration can lead to business units operating in silos, and costly inefficiencies, such as re-keying data and avoidable human errors. Another significant disadvantage is that moving away from or modernizing outdated technologies is challenging. This apparent inertia explains why so many companies continue to rely on them, despite their increasing unsustainability.
But move and modernize we must, because, in this increasingly competitive and turbulent world, we must do more than survive day-to-day; we must thrive.
A tale of three cloud apps
Let’s pause to reflect on that figure I mentioned; the average enterprise spends up to 80 percent of its IT budget just to keep the lights on. Just think about what they could accomplish with that money instead! Innovate? Most certainly. But I would add a caveat; innovate only when there is a compelling business case to do so.
Let’s look at the stories of three businesses. One sells an augmented reality mobile game, one is an online review platform that publishes crowd-sourced business reviews, and the other is a ride-hailing company that connects passengers with drivers.
A well-known search engine’s maps application has become ubiquitous in our lives. Since the early 2000s, the technology behemoth has invested multi-millions of dollars in the infrastructure of its cars, cameras, crews, and backend processing to map millions of miles of roads in countries worldwide. Another layer of application is its satellite view. In conjunction with a computer program that renders a 3D representation of Earth, it stitches together high-resolution photographs taken by satellites above.
So, when the augmented reality mobile game blends an imaginary world with the real world, the online review platform pinpoints nearby restaurants, or the ride-hailing company calculates the distance of the nearest car, they all use the same maps app in their offering. They didn’t spend billions of dollars building their own maps – they leveraged accessible and relatively inexpensive tools that the search engine company has taken years to perfect.
The cloud gives you wings
Fundamentally, these three companies concentrated their energies on doing what they are great at. And this is what the cloud enables; you can leverage an ecosystem that allows you to select and integrate technologies for seamless operations. If you were to develop them in-house, some of these technologies would be prohibitively expensive. Their beauty lies in the fact that some of the world’s finest minds have created them and—through economies of scale—make them affordable to the masses. Like the examples I mentioned, the cloud gives you the space to devote your talents to developing your unique place in the market.
And should things change, as they will inevitably do, the cloud gives you that flexibility to scale up or down and add or subtract technologies. Granted, I am simplifying things to make my point. Cloud ecosystems can be complex; that complexity can be tricky to manage and demands a holistic approach. But experts exist to guide you, and this is where SAP is at its best, helping our customers to be the best in what they do best.
This leads me to my final point. Agility and innovation are codependent; they both need a solid foundation – and that foundation is the cloud.