Digital Transformation Reality Check

When last week the CEO of the world largest software company is said “We’ve seen two years’ worth of digital transformation in two months”, it had me wondering about digital transformation (DT) and my understanding of this wonderful term. As a student of technology based transformations and a practitioner of IT led business success, my reading of DT was fairly simple and shared by a large number of CIOs, CDOs, and CXOs across companies and industries. While many vendors and partners pitched their wares as the means to get to the ultimate nirvana state of digitally enabling the business, they were largely a cog in the wheel and not the whole wheel or a major part of it.

Many would have seen an image that in jest points to the cause of forced digital transformation not being the CIO, CDO, CTO, CEO, or for that matter any person, but a virus; the same virus that has changed the way of working for the entire world bringing business’ down, forcing everyone to stay at home to stay unaffected and alive. Almost everywhere work from home became the only way to continue basic operations and run whatever remained of their business. In a struggle for survival, the need for connectivity and basic tools exploded. The inertia for the adoption of collaboration tools was replaced by enthusiasm and across corporate layers people started embracing these.

Many small and large technology providers took advantage of the situation to proclaim their role in digitally enabling their customers. Their offerings ranged from cloud based software solutions, mobile enabled applications, applications for managing appointments, note taking, digital publishing and not to forget the collaboration tools for voice, video, chat, conferencing, editing and sharing documents, workflows, the list is endless ! Almost every enterprise that had some ongoing operations and dialogues probably had most of these deployed; the scale at which it was now required needed additional subscriptions and deployments.

So I went back to my library to refresh my memory and found 2 definitions that resonated with the majority and the foundation of my discussions with people and companies in the past. They are:

1.      Digital transformation is the integration of digital technology into all areas of a business, fundamentally changing how you operate and deliver value to customers. It’s also a cultural change that requires organizations to continually challenge the status quo, experiment, and get comfortable with failure.

                                                            And

2.      Digital transformation is the process of using digital technologies to create new — or modify existing — business processes, culture, and customer experiences to meet changing business and market requirements. This reimagining of business in the digital age is digital transformation.

The lockdown over the last 2 months and more brought about the New Abnormal. Companies attempted to enable as many people as feasible with tools to continue working. Sales calls continued on video/voice calls, meetings conducted on collaboration platforms, data moved to the cloud for access by the teams that needed it, and access to core applications controlled to the WFH enabled. All of this did fundamentally create a change in existing business process, culture, customer experience and probably a long lasting one. It is unlikely that the situation will revert to normal any time soon. So if you take the literal meaning of the definitions above, the answer would be yes there was digital transformation.

But, isn’t digital transformation planned with a step by step review of process, people, technology and consideration over impact – to customers and internal stakeholders – and change that needs to be managed. Does it not require endless meetings and buy-in from teams to the new way of working and automation that improves outcomes? Should not legacy and status quo be challenged to discover the optimal digital footprint for the enterprise? What about the investment and budgets and ROI, impact on operating expenses? Who will drive the change and create a sustainable model? Is this digital transformation or a digital reaction to the new abnormal necessary for survival and a semblance of continuity?

I believe that the new abnormal has triggered a wave that does away with the conventional decision making cycle and metrics for technology tools and solutions that enabled the enterprise to function even if with reduced operation and manpower. The elephant in the room that needs confrontation is the continuity of the current once business starts moving again and the normal as everyone knew and understood makes a comeback. Will the additional investments, ad-hoc changes and approvals for access, implications on licensing and more, the mountain to climb would be the shift back or keep the new way of working as the new normal. There is no one way to go, it would be dependent on the company, industry, geography and the amount of cash in the bank.

The seeds of digital transformation have been sowed – grudgingly or forcibly imposed with no choice; it is up to the enterprise to build on top of this after strengthening the potentially shaky foundation. And the answer is yes, what would have taken 2 years has taken 2 months, though it may not be sustainable as it is and will require a lot of rework.

That’s another story !

Negotiations during lockdown

From my earlier post “The new abnormal”, one of the points that connected with the majority of IT leaders was “If not already initiated, renegotiate – licenses, maintenance contracts, and third party and outsourced manpower requirements”. Individually almost none could get the attention of their partners who were always there to discuss more licenses, services, or audits for difficult customers. Dropping all their inhibitions, personal rivalries, and competitive distancing, the CIOs organized themselves into a collective group to take on the big and small software and service providers. The mission of these groups, which represented a reasonable spend for the industry, to seek the true spirit of partnership in difficult times.

In the good old days the engagement with the IT fraternity was all about being partners in success, starting from engagements to identify use cases, define financial models for calculating returns, scale up and scale out, digitalization and digital transformation, month and quarter end license deals. When the going got tough for some of the software providers, they decided to scan through lists comprising existing customers who were growing, old customers who did not buy anything after the initial set of licenses, and those who were suspected of using unlicensed versions of COTS (Commercial-Off-The-Shelf) solutions. Not very amiable discussions these, some of them did hit pay dirt for the partners.

For everyone business has come to a grinding halt, the WFH addresses administrative tasks and virtual meetings; it does little for the broken supply chain or halted production. While a few online players continue to reap some benefit, their overall business activity is down to less than half (there are always a handful who can be called out as exceptions). With no revenue, the crying need is to find ways to manage the costs associated with IT. The CIO collective decided to partition themselves by vendor (not a partner anymore), to bring some weight behind their quest for relief. The ask was not unreasonable by any stretch:

1. Surrender unused or excess licenses that were taken for planned growth
2. Deferment of annual renewals of SaaS licenses and AMC due at the beginning of the financial year (April to March in India)
3. Reduction in service fees with reduced scope of work, or reduced load factor for IaaS, or network fees
4. Extension of timelines for pending payments and payment in instalments
5. Furlough contracted workforce until the situation starts coming back to normal

Thus started the long arduous journey; the group tweeted their angst tagging the vendors local and global leadership teams, sent emails which hundreds of CIOs forwarded for effect; reminders and follow up with reversed rigor – typically seen from vendor sales teams and management to close signing a deal. There was some hope among the group that they would be able to create some impact that everyone could benefit from. The list was quite impressive representing marquee names and many aspirants. Reversed reality if there was one, the turned tables evinced only couple of acknowledgements as if the rest went down a black hole.

So what transpired? Among the dozen odd vendors to whom the communication was sent, barely a couple decided to respond to the flood created by the CIOs. The rest had probably a dam large enough to prevent the water from carrying through to the management teams; don’t worry, we will take care of this – so I heard from a couple of account managers talking to their CEOs. It is also likely that they did receive the mails but ignored the content or intent behind the chain mails. The situation will not last forever and given enough time, the noise will die, only to be forgotten in the activity that would follow the return to the new abnormal. As for the respondents who respected the community of customers, there were the following threads which did not necessarily please the protagonist CIOs.

The first one acknowledged the communication by the group and reiterated the difficult times that have befallen everyone. Difficult times when new business has died away and existing receivables are tending towards bad debt with significant rise in days of outstanding. Difficult times that have necessitated the creation of additional investments in infrastructure or services for their customers to support WFH and related issues. Difficult times with the teams working longer hours to ensure that quality of service is not compromised. And in such difficult times the question of any reduction in prices or renegotiations does not arise whatsoever. With piling inventory and ceased production, we are equally concerned about the financial viability of our services.

Interestingly the second admonished the group for creating a rift in the relationships that have been built with so much effort, give and take, and nurtured with ample doses of support. Ups and downs should not be construed as an opportunity to question the foundations on which the partnership has been laid. There cannot be an overarching policy or decision that would apply to all relationships with a reduction or deferment of payables; it decapitates our business and our ability to provide continued support. We too have fixed costs which we need to service; renegotiations are a no-no, you already have the best of prices for what you buy and consume. Please talk to your respective relationship managers to review what we can do for you.

We are equally hit versus divide and break, both strategies fail to address the problem at hand for CIOs thus creating a permanent crack as everyone fights for survival. What will be the final outcome, we wait and watch.

Latest! A very large global IT vendor refused the premature surrender of partial licenses from a marquee customer stating that the licensing terms have no provision for early termination.

The New Abnormal

Varying stages of lockdown – voluntary and forced – created stress for CIOs and tech teams globally; Work-From-Home (WFH) became another 3-letter acronym that everyone embraced willingly and only a rare organization had capacity that could scale up and cater to the large swaths of workers who suddenly fell in love with their laptops. Those who shunned webinars, web conferences, and electronic tools of collaboration were all now talking about scheduling online meetings with all and sundry. IT organizations flooded with calls on VPN connectivity challenges, access to applications, and capacity of collaboration tools, managed to scrape through by the skin of their collective teeth.

As weeks turned double digit and the tunnel appeared to be endless with no visible light, speculation started on, what CIOs need to focus on and what the future foretells for the tech industry as a whole, whenever the end comes. Webinars aplenty with CIOs, academicians, vendors, consultants and self-proclaimed experts, who discussed and debated actions that IT organizations will need to take. Strategies and plans were bandied around for the hapless and the informed, confusing more than bringing clarity. It was reminiscent of what happened during the financial meltdown a decade or so back and probably Y2K and dotcom bust, the events that remain firmly imprinted on the industry. The joke going around is that the current abnormal accelerated digital transformation faster than what the collective might could achieve in the past.

Everyone now acknowledges that the new abnormal will continue and what we all knew as normal would be the good old days of nostalgia. Social distancing brought virtual closeness and it has already become the norm for meetings, events and getting together with digital engagement a preferred option; it is evident that human behaviour will not be the same in the foreseeable future. After grudgingly accepting the new abnormal, leadership teams have now started (thinking of in some cases) planning for the resumption of life; everyone accepts that it would be slow progress and life may never come back to the good old days. As workers go back to manufacturing facilities and services start operating again, the reopening will require enormous effort. So what is the real impact for technology teams?

The discussions and debates between the folks above provided for aspirations that largely assumed that they can set aside the elapsed time and go back to life as usual. Some talked about bringing back paused projects, restart of digital transformation and automation, aggressive deployment of mobility, and focus on cloud with variable models. It took a couple of the weather-beaten members to bring them back to reality; revenue and cash flow, review of office spaces with everyone not required to work from a central location anymore, or a push for automation to reduce costs, and finally positions that need to be extinguished with a smaller business. So the 10 recommendations were:

1.      Address the ad-hoc that was created to manage the extraordinary demand for WFH; whether it is connectivity solutions, exceptions to policies around access to applications and other products used for collaboration and conferencing.

2.      Manage licenses required going forward for solutions that some functions or individuals may have procured or downloaded free versions of.

3.      Ascertain the impact these may have created on the cybersecurity or compliance requirements and remediate.

4.      If not already initiated, renegotiate – licenses, maintenance contracts, and third party and outsourced manpower requirements.

5.      Relook at the roles and staffing within your function; roles that can be let go with the resultant impact being managed. Hiring freeze, exception only if critical resources exit.

6.      Wear a business hat and challenge other functions assumptions on solutions and costs; shave 20% or more costs across the board. Automate, automate and automate.

7.      Consumer behaviour has changed permanently; enable seamless customer engagement across channels – applies equally to both B2B and B2C.

8.      Create information visibility across layers for effective decision making without significant additional investment in tools and technologies.

9.      Defer payments to manage cash flows and match incoming revenue; critically review suspended projects and ones that were waiting to take off. The lens for evaluation is no longer the usual strategic intent and ROI (Return on Investment), it is about what is necessary for survival. The building of new capabilities and applications can wait for another time when there is money in the bank.

10.   Watch industry trends and benchmark efforts to ensure that we don’t lose relevance with the market or to our customers.

Oh I am sure that given some more time and deliberation, a distinct list of another 10 can be created and that would be equally relevant. The abnormal reality is that there is no normal now for which we can prepare and sustain; depending on the industry, the actions will be different and all actions will not work for everyone. The playbook will have to be rewritten by every company and it will remain a living document even in the short-term. Tech will be in the forefront of every decision; after all tech is what allowed some semblance of normalcy and continuity of operations.

It would be foolish to relegate tech at this time; having said that some organizations will and some tech leaders will fail to rise to the opportunity. After all, everyone does not like history !