Covid-19 has accelerated the journey to digital transformation, demonstrating the perils of being left behind on the digital highway. Knowing the importance of DX is a strong motivator for taking action, but for many companies, it’s not as simple.
“There are barriers,” said Pat Phelan, VP Market Research, Rimini Street, a global provider of enterprise software products and services, and the leading third-party support provider for Oracle and SAP software products.
Phelan joined Steve Proctor, Vice-President Marketing and Communication with ITWC, during ITWC’s Digital Transformation Week program to discuss overcoming these barriers to digital transformation.
“In a recent survey of CFOs, 80 per cent of respondents said that digital transformation was a top priority and 71 per cent indicated it would be key to their company’s success,” said Phelan, who oversees Rimini Street’s research across the enterprise software market, including applications and technology strategies, software vendor support, third-party support, IT leadership trends and IT optimization. The greatest difficulty, she stated, is finding the money to make it happen.
The problem, according to Phelan, is evident in a Gartner survey showing that companies are still spending about 91 per cent of their budget on legacy solutions. “Every IT decision maker has to be focused on shifting that to 50 per cent for legacy and 40 per cent for innovation,” she told Proctor.
Shifting the Spend
One way to address this budget imbalance is to shift ERP costs to something that will take a smaller percentage of the overall spend. “We see companies every day paying double what they could be in terms of maintenance fees on their existing applications and data bases,” she explained. “That budget being spent on legacy applications is a great place to start to try to shift some of the spending.”
In reply to a question from Proctor about the wisdom of following a vendor-driven roadmap as opposed to a business-driven roadmap, Phelan was adamant that the former is designed to maintain existing business and encourage customers to buy the vendor’s latest products. “The challenge here is that you may not need that new product and your existing solution may be working just fine,” she said.
Phelan urged viewers to remember that changing from one platform to another is not going to move the needle in terms of adding business value, allowing better scalability, and opening new revenue opportunities. “The point is that a vendor driven roadmap is very clearly pushing you to buy more of the vendor’s products and stay with their technology stack,” she said.
In contrast, a business driven roadmap allows the business goals and strategy to inform digital investments. Even when it comes to cloud, there’s a case to be made for refusing to adopt the latest thing. “Don’t let the shiny new cloud product or service or contract woo you away from something that’s already working well,” said Phelan.
The Heart of the Matter
Proctor and Phelan agreed that the best strategy is to understand the need to be cloud first and consider the impact this will have on customers and other stakeholders. “There’s just not enough budget to go around,” said Phelan. “In order to stretch that budget as far as possible, first get to the heart of the business needs and strategic initiatives. Otherwise, you may not be able to fund it.”
Another angle, said Phelan, is that moving to the cloud without careful planning could end up costing companies much more than they are currently paying. She also suggested looking at the costs of backing off if Plan A doesn’t work and urged companies to be wary of being backed into a corner by their cloud investments.
The session concluded with cost optimization strategies for moving about 40 per cent of the budget to innovation. “Overtly go after rigor, structure, responsibility, and accountability for managing cloud usage,” Phelan advised. “And don’t be afraid to optimize special licenses by going back to vendors and looking at new ways to negotiate contracts.”