Historically, legacy systems such as mainframes could be augmented to some extent to meet modern expectations. But digital transformation increasingly appears to be driving a wedge between legacy systems and the functionality that are required to maintain competitive advantage.
Customers are embracing digital technologies as a normal and persistent part of their lives, and expectations around how digital experiences present value and inspire purchasing decisions is evolving continuously. This digital disruption is so rapid, that many companies are struggling to understand how to respond.
The transformation to digital business requires more than just a mobile app and a website to compete for the modern customer’s attention. Without applying digital thinking across everything they do, established firms will continue to fall short of their newer, more agile counterparts, and their biggest roadblock is legacy systems.
In fact, the leaders of the pack have completely retooled their organizational structures, operating models, business processes, technology, skills, and cultures. And interestingly, younger, tech-centric firms are often out-pacing their larger, established counterparts. For example, over the past decade, cloud-native fintech startups such as Square, PayPal, Venmo, and Stripe completely disrupted the financial services industry, redefining the space and overtaking their more traditional incumbent competitors. Those incumbents, slow to respond beneath the weight of legacy systems like mainframes, spent the better part of the 2010s retooling to catch up. Today, these same incumbents are facing a new breed of disruptive competitor in the form of defi applications such as Uniswap, Aave, and Sushi Swap powered by smart contracts on decentralized blockchain networks like Ethereum.
Were the measures these incumbents took to become more agile in the face of change enough to keep pace with the demands of continuous innovation? Only time will tell.
The shift to digital business across industries began with companies eliminating data centers and moving core applications to SaaS and IaaS such as AWS, Google Cloud Platform, and Microsoft Azure. In addition, core services’ migration to the cloud has empowered development platforms and mobile integrations, driving adoption even further. While historically, legacy systems such as mainframes could be augmented to some extent to meet modern expectations, digital transformation is driving a wedge between legacy systems and the functionality that customers require to maintain competitive advantage. In fact, the reasons large firms are falling behind small tech startups in many cases - lack of scalability, difficult integration, cumbersome collaboration, and costly changes, are the same reasons legacy systems are holding them back.
Truly going digital involves all aspects of a business from customer engagement to fulfillment, and everything in between. It encompasses paradigm shifts in systems and process integration and deeply influences strategic decision-making at its core. So where should you begin?
The Customer Experience
With the immersion of everyday life in internet connectivity, customers typically interact with a company through multiple channels and often make buying decisions based on the perception of simple, seamless usability of channel interaction. If this interaction becomes painful, the customer will often move on to other companies that offer a better experience. In many instances, the better customer experience influences buying decisions more strongly than the actual product or service being purchased. Adjusting or honing focus on the customer experience and developing microservices and modularity that allow for nimble systems evolution as market demand changes is key.
While adaptable customer experiences and their underpinning processes are important, the key is to enable business functions in such a way that they too can be modularized and used in multiple places. In today's world, this is done by implementing isolated, independent microservices. For example, if a customer purchases insurance, one step may require the customer to digitally sign their acceptance. If such a function is presented as a microservice (i.e. modularized), it can be reused in multiple places across many different customer engagement experiences. As digital transformation accelerates, the library of such reusable microservices will continue to grow. As the environment changes, business functions will be updated to meet the new requirements of the ecosystem. If at some point e-signatures are replaced by palm scans, updating the single microservice to meet that need ensures automatic propagation across all places that function is used. This adaptability enables fast and efficient change.
Ideally the modularity that the organization applies to microservices should be extended into the infrastructure that supports them, allowing for more cost-effective and efficient scalability of high-demand services. Although integration between these systems is key, isolating technology in terms of the business services they provide makes it possible to swap certain modules of technology gradually instead of completely revamping the infrastructure. As a result, cloud virtualization and infrastructure-as-a-service (IaaS) have become the rule, rather than the exception. Making changes and adjustments in these environments is simple, inexpensive, and immediate.
The Bottom Line
Continuous cycles of digital transformation and rapid functional evolution are here to stay. One of many reasons younger, tech-centric firms often outpace their larger, established counterparts in the is because legacy systems stand in the way for many established firms. While aligning the business for digital transformation may seem daunting and far-reaching, preparing legacy systems and the processes within them for the shift can be simplified greatly through modernization services delivered by trusted professionals. Contact us to find out how we can help you evolve.