Q&A: Enterprise Modernization
How do your organization's modernization efforts compare with over 1200 organizations?
In December 2007 and January 2008, Saugatuck Technology and BusinessWeek Research Services conducted a double-blind survey of more than 1200 organizations around the globe. The study was designed to understand current modernization efforts as well as where enterprises saw themselves in three years.
The report was released in July. Its core describes a dozen key capabilities and how enterprises rate themselves (on a five-point scale) in terms of their capabilities, as well as their prediction of where the enterprise will be in three years. Areas probed include IT security, skills and expertise management, communication capabilities, the ability to support innovation, supply chain management, and IT management.
Enterprise Systems discussed the study and its findings with Michael Sauber, director of worldwide marketing at Unisys.
Enterprise Strategies: What is enterprise modernization?
Michael Sauber: Enterprise modernization is a way for businesses and government organizations to deal effectively with a continually changing business environment that brings unceasing pressure to deliver better and faster results, meet new external threats, and innovate with a flat or declining budget.
Processes and systems that worked just yesterday often can't keep up, so modernizing becomes an imperative. For some, it's about improving processes. For others, it's about assets and infrastructure. Unisys believes that modernization is most effective when it's approached holistically -- when business processes, applications, and technologies are analyzed together with their critical linkages determined and are then enabled to evolve together to drive higher performance and lower risk.
Modernization isn't a "one-and-done" or "rip-and-replace" process. It needs to be a series of focused initiatives, executed holistically, to align business and IT to address modern realities.
What's driving enterprise modernization?
Too many IT executives are in a budgetary straitjacket imposed by constricted notions of how IT can support business. They're spending 80 percent of their IT budget on infrastructure maintenance and funding innovation only as an afterthought. These constraints have been imposed largely by outmoded views of IT as a cost center, not an investment.
The Unisys Modernization Benchmark service helps executives find fresh ways of thinking so they can free IT to enable breakthrough performance gains with low-cost operating models that deliver maximum return on investment. Given the constantly changing economic factors and competitive environment enterprises face, it's imperative for IT to keep pace with changes and make those adjustments.
Why does the report call enterprise modernization a "journey?"
The changes driving enterprise modernization are continual and progress is necessarily incremental. Enterprises must continually transform and evolve their business strategy, processes, and IT infrastructure to get ahead.
For example, the Unisys research identifies a number of gaps between organizations' expectations about where their business needs to go and their actual ability to execute the necessary changes. Any company trying to fill all the gaps we uncovered would be overwhelmed. They need to identify the gaps that have the most upside potential when addressed and close them. Otherwise it's like boiling the ocean.
Prioritizing is the key. Not all gaps need to be filled. In fact, filling some gaps can be an empty investment. For example, your competitor can have a superior capability in an area that the market doesn't necessarily value. It doesn't give them any real competitive advantage, so there's no need for you to invest resources in closing it. Focus on another gap -- in your security strategy, for example -- that's more critical to improving business execution.
Your report points out that many companies are focusing on the areas they feel are most important, such as IT security. However, I find some of the predictions admirable but not likely to be achieved. For example, only 14 percent of enterprises rate themselves a "5" in their security, but 45 percent say will rate a "5" in three years. That's a big change -- something you call the "Capabilities Gap." Are enterprises being realistic in their expectations or is this wishful thinking?
The capabilities gaps detailed in the research study don't represent Unisys perception of where the market is heading -- but the perceptions and plans of respondents. The three-year view reflects organizations' expectations of where they will be. The difference between current state and future state is often a big one, and an organization's view of how to bridge the gap can be overly optimistic. That's why the benchmark information that the research provides is so valuable.
Unisys believes that those organizations will have a better chance at closing the performance gaps if they take a hard look at skill sets and other factors that can help or hinder progress. That way they can prioritize the projects they need to undertake in the proper sequence to give them the best chance to bridge those gaps.
Did any of the results surprise you?
We were surprised by the five key gaps between expectation and execution capability revealed by our research (and detailed in the press release) announcing it and the Unisys Modernization Benchmark. [Editor's note: the press release is available at http://www.unisys.com/about__unisys/news_a_events/07168896.htm]
The gap in security surprised us the most. In all our research over the last five years, security has always been near the top of the list of management concerns. Yet 60 percent of the 1200 respondents to this survey rated their security model as non-existent, limited, or moderate. One would think they would have attained a more advanced security model by now -- especially when 75 percent expect theirs to be state-of-the-art within three years.
We also were surprised that 72 percent of respondents said they currently treat IT as a support function. Given the criticality of IT to business success nowadays, one would think it would be better recognized and invested in as a strategic factor -- especially because 52 percent of the respondents expect it to be a differentiator for them in three years. Without careful prioritization, they could be in for a longer haul than they expect.
You point out how IT and business groups don't always seem to be aligned. This was pointedly noted when you report, "More than 25 percent of respondents indicate that IT operated independently from the business with regard to investment decisions."
That's a gap that the respondents will need to think carefully about closing. It's related to the gap between treating IT as a support function and an investment. The respondents -- and any other enterprise management in the same situation -- should consider the extent to which they want to continue using precious IT funds in a way that doesn't demonstrably advance their organization's business objectives.
What are the top two business initiatives enterprises plan to undertake according to your research? What about IT initiatives?
Enhancing workforce skills and expertise and improving processes and performance are the two main business initiatives the respondents told us they're undertaking. Those are very important for improving customer relationships, which respondents identified as a key business objective, as well as worker productivity and overall business performance.
The main IT initiatives are ensuring data security and integrity and improving external customer service and relationship management. Those are related to each other and to the two business priorities. The more an organization is sensitive to and effective in maintaining security standards and data integrity, the more customers will trust it and the more willing they'll be to maintain and expand the level of business they entrust to it. The security investment also suggests an awareness of the need to begin addressing the expectation/readiness gap in security to which we've alluded previously.
Investments with short payback periods are key, especially in these uncertain economic times. Where is IT spending its money, and given the current ratings and three-year predictions, is IT putting its money where it should?
The survey indicates that the respondents' IT organizations are spending money on the two main IT initiatives cited above, as well as on integrating and enhancing systems and processes. All three support the top two business objectives the respondents cited --acquiring new customers and building closer relationships with existing customers.
This indicates that organizations are putting their money where it should be. The security investment could be called a defensive maneuver -- it's about mitigating risk and defending potential threats to the business, and those are important for customer retention. Investing in IT resources for customer service and relationship management is more of an offensive move, aimed at acquiring new customers and gaining new business from existing customers.
The report recommends that although organizations "may be good at identifying their priorities, they may not have the confidence and capability to execute on them." Saugatuck says an enterprise will "either look to hire additional personnel with Enterprise Modernization experience … [or] will contract with a professional services firm that has Enterprise Modernization experience and a methodology." Given tight IT budgets, outsourcing such a project may be unlikely. What suggestions can you make for an enterprise that wants to handle the project themselves?
It is usually more cost-effective for an organization to hire an expert partner -- especially when that partner has an analytical service such as the Unisys Modernization Benchmark, based on proven processes and market benchmarks. That kind of service is the most effective way to deliver the results the organization needs. The organization can look internally and assess itself, but it won't necessarily have points of comparison between itself and peers in the marketplace.
An external partner working from an objective benchmark can help an organization find deficiencies and advantages relative to competitors. Doing a purely internal assessment without an external comparison is like flying in the dark.
What is the Unisys Modernization Benchmark?
The Unisys Modernization Benchmark is a process that allows an organization to measure its level of modernization -- i.e., how effectively it is using processes and systems to deal with constant change in the business environment and deliver better and faster results, meet new external threats, and innovate with a flat or declining budget. The benchmark enables assessment across six core factors:
- Business resilience
- Collaborative business
- IT as a business enabler
- Open business and IT
- Green business
- Business execution
Using this benchmark, an organization can assess itself against industry and geographic peers or the entire market. This insight enables management to make better investment decisions, set performance improvement priorities and establish a reference point to track progress.
Unisys Modernization Benchmark is different from many other benchmarking processes because it looks at business and IT factors together. This approach acknowledges the interdependencies that exist among business strategy, processes, applications, and IT infrastructure, and it lays the groundwork for achieving true alignment between the business and IT.