Legacy IT operations slow profitability, customer experience and innovation

26 June 2018 Authored by Consultancy.uk

Large companies which have successfully upgraded their legacy IT are reaping the benefits. A new report finds that digital leaders are able to book higher revenues than their lagging peers, and spend less on through improved and more streamlined operations.

Companies across all sectors are increasingly coming under pressure to realise the potential of technological innovations, as they look to avoid falling prey to digitally disruptive competitors. A key indicator of this sea change in innovation is the booming digital transformation consulting market, which is now worth more than $44 billion, as clients tap firms for support of their overhauls.

However, despite vast commitments of resources towards retooling the digital technologies of top businesses, recent studies have shown that in most cases, digitalisation efforts fall short of achieving top-line growth. In large part, this is largely down to the legacy IT infrastructure of many organisations, which can struggle to get the most from the latest digital advances, hampering transformation efforts.

Now, a new study from global IT consultancy Capgemini looking into the automation of internal IT operations has further suggested that automation is not simply the be all and end all when it comes to shaving down costs. While it can be measurably good for efficiency – 75% of the fastest movers in digital innovation said that automation has led to lower operating expenditure – a failure to address several key factors can reduce its effects drastically.

Driving costs down

The researchers surveyed more than 400 IT executives across eight countries, all of which work at companies with revenue of $500 million or more. The subsequent paper produced by Capgemini and Sogeti shows that companies focused on three main aspects to see their costs reduced effectively.

Firstly, by automating, companies can obviously reduce the amount of manual labour required in their supply chain. Fewer manual labourers being needed theoretically means that firms spend less on wages – and this is often one of the first aspects of automation to be discussed during a transformation process, as well as when discussing automation in the broader public arena.

The fastest movers in automation maturity prioritise the automation of monotonous tasks first and foremost. 73% of application testing processes in these organisations is now automated, at nearly four times that of followers. While this process is often discussed in terms of jobs lost, this actually often sees labour moved into higher value roles, with firms starting to upgrade the skills of their existing staff in line with their DevOps strategies – benefitting management practices and the employability of their staff in the process.

The automation advantage: share of survey respondents reporting a positive automation impact on indicators of business performance

Second, top performers work to combine automation with cloud technologies. As this negates the necessity for the costly storage of data in physical storage facilities, it means that the total costs of ownership for IT also fall. 77% of the fastest movers adopted this tactic, compared to just 47% of their peers.

Finally, 84% of rapid adopted of automation said their company’s potential agility has improved, in relation to automation. Teams are working more efficient together, thanks in part to their new freedom from more monotonous tasks. However, it is worth bearing in mind that agility does not inherently improve simply by implementing automation, and that a solid agile methodology in the workplace is still key to realising this potential boost.

Spread benefits

While the focus is on costs being cut as a result of automation, however, its benefits can be much more widespread. According to three quarters of fast movers in automation, it can lead to increased revenues, while a further 76% also maintain it can do the same for overall profitability.

On top of the financial aspect, automation can also have a number of benefits in each part of a business’ operations. 86% of the fast movers surveyed said automation has helped to improve the customer experience offering – something which has become increasingly important amid ramped up competition. According to a recent Accenture study, companies with poor customer experience could be putting a combined £107 billion at risk.

As well as this, a further 75% said they had been able to use automation for business model innovation. In terms of innovation, automation can boost the speed of delivery, and when innovation is IT related, the quality of technology produced is often better too. For example, the fastest adopters of automation now deploy code twice as often as the followers, while a more select 5% of fast movers deploy code continuously.

The most effective ways to overcome automation obstacles

According to Franck Greverie, Leader of Cloud and Cybersecurity at Capgemini Group, this shows the multitude of benefits automation can bring if adopted consistently. He explained, “Not only does automation enable an organisation to be more agile, it also frees up skilled employees’ precious time to focus on higher value tasks such as innovative projects and deployments. Firms that embrace the technology now stand to gain a great competitive advantage.”

Bottlenecks

However, companies also face problems. With the potential of automation having received such a level of hype, big companies are quickly jumping on the bandwagon. As can be seen from size of the digital transformation technologies market, which according to IDC now $1.2 trillion, an increase of 17.8% over 2016.

This pace is expected to will continue with a compound annual growth rate (CAGR) of 17.9% over the 2015-2020 forecast period and reaching $2.0 trillion in 2020. Yet there are some factors holding many companies back with their automation projects.

Many firms are holding back from using cloud technologies to automate legacy IT operations due to reservations over cybersecurity – thanks in particular to a 12 month period which saw entities of all shapes and sizes – from the NHS, to the world’s largest cybersecurity consultancy, to the IT suppliers of the Winter Olympics – compromised by hackers. Security (27%) and data privacy (19%) concerns are cited by firms as the toughest obstacles in the move to automation of IT operations processes.

While public cloud and PaaS platforms offer built-in tools that automate many tasks, legacy systems do not. Automation of legacy technologies and processes therefore becomes essential to keep pace with the cloud, so that new software or features can move from development into production in minutes, even on traditional applications, if a slowing of the effects of automation is to be avoided.

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