Dell EMC study reveals habits of highly successful digital transforming organizations

The study found that only five per cent of the large companies surveyed are digitally transformed, but there are positive takeaways as well.

Mike Sharun, President of the Dell EMC Canada Enterprise Division

Dell EMC has announced the results of a new study conducted on their behalf by the Enterprise Strategy Group (ESG) on the adoption of digital transformation. The study is a real mixed bag in terms of what the data reveal. On the one hand, only five per cent of firms can be considered to be advanced in terms of their progress towards digital transformation. That’s not good. On the other hand, the data do recognize broad acceptance of elements of IT transformation like IT working closely with lines of business, which is a good thing.

“I think the results are positive,” said Mike Sharun, President of the Dell EMC Canada Enterprise Division. “It shows that IT is now talking business and agility and revenue generation. Just the fact we talk that instead of speeds and feeds is totally positive. It means our industry has seen the light of day and moved into the mainstream. We need to do this study again in 12 months to see where we come in on that curve.”

The ESG 2017 IT Transformation Maturity Curve study used a maturity model to determine the role that IT Transformation plays toward becoming a digital business. Responses to questions about their organizations’ on-premise IT infrastructure, processes and organizational alignment were used to classify the participating organizations into one of four IT Transformation maturity stages.

The most advanced stage, Stage 4, which ESG terms Transformed, also had the smallest number of organizations. Only five per cent have reached that stage, where they are furthest along in their transformation initiatives. These are defined as: leveraging IT resources to speed product innovation and time to market; automating manual processes and tasks; and running IT as a profit centre rather than a cost centre.

Stage 3, termed Evolving, has 41 per cent of the organizations. ESG defined this stage as showing commitment to IT Transformation and having a moderate deployment of modern data centre technologies and IT delivery methods.

Stage 2 – Emerging – made up 42 per cent. These are ones who have begun IT transformation, but still have minimal deployment of modern data centre technologies

Twelve per cent of the organizations fell into Stage 1, termed Legacy, which have made little progress towards digital transformation.

The “Transformed” organizations reported that 96 per cent exceeded their revenue targets last year, more than 2X the number of the least mature. They also were 8X more likely than the least mature organizations to report a highly cooperative relationship between IT and the business. They were 7X more likely than the least mature to be running IT as a profit centre rather than a cost centre, and were also 7X more likely than the least mature to have IT viewed by the business as a competitive differentiator. Finally, they were 6X more likely to leverage IT resources to speed product innovation and time to market.

“These data are an important differentiator of what digital transforming companies do to succeed,” Sharun said. “8X more likely for IT to have a co-operative relationship with lines of business? That was NOT the norm a few years ago.”

The majority of respondents also saw a strong relation between digital transformation and performance. Overall 71 per cent agreed that IT Transformation is essential to ongoing business competitiveness. Of the “Transformed” companies, 85 per said their organizations are in a “very strong” or “strong” position to compete and succeed in their market over the next few years. That compares to only 43 per cent of the Stage 1 companies.

One thing that jumps out of the data is that the largest organizations are likely to be further along their digital transformation journey, but that doesn’t necessarily mean that the axiom of the last several decades that small and nimble are more likely to be innovative has become obsolete.

“I don’t see what’s happening here as a reversal of that principle,” Sharun said. “What I see happening in the larger organizations is that they are looking at how they operate their transaction systems of record. The Stage 1 companies are spending 66 cents of every dollar just maintaining what they have, while with Stage 4, that number is 54 cents. They are using that differential, instead of putting it on the bottom line, to fund further digital transformation. Those operating principles on the business side are very different from the past.”

Large companies certainly are more likely to have budget to fund these initiatives, but Sharun said that isn’t the whole story.

“While large companies have an advantage because of their bankroll, none of these transformations work unless the senior executives are committed,” he said. “This has to be driven from the top. You can do it without a big bankroll, but you have to have commitment from the organization to make it happen, to changing IT from a cost centre to a revenue generator. As you work through an organization there are always going to be a lot of informal lines of authority in companies where there is resistance to changing things, and commitment from the top is needed to overcome that. It takes some heavy lifting to get away from just transactional systems and start driving agility, unless senior management drives that messaging down. It will also cost some money. It’s not going to be cheap.”

Sharun said the study produces several key takeaways that they will be impressing on the market.

“We want to get across that the transformation is all about delivering business outcomes with technology,” he said. “That’s the overriding theme. But to do this, it needs to occur at the workforce level, to make things user-friendly and effective for business like in the consumer space.

“A second issue relates to security,” Sharun continued. “In the past, security stopped agility. But to transform digitally, security needs to be a big part of that. It can’t just be about the perimeter any more. It needs to be business-driven, to have a policy designed around what your business.”

The third issue here is the need to automate, Sharun said.

“You have to align the business organization and IT organization, and you can’t do it manually,” he said.

The ESG survey was web-based, and was conducted between December, 9, 2016, and January 5, 2017. 1,000 senior IT executives, decision-making managers and staff familiar with their organizations’ current and future IT budget and spending plans and involved in their organizations’ infrastructure purchase processes were involved. Respondents came from the U.S., Brazil, the United Kingdom, Germany, France, China, Japan and Australia. While there is no Canadian data, Sharun doesn’t think that makes the results of less interest in Canada.

“I think the data is still relevant from a Canadian perspective,” he said. “The types of large organizations, like financial services and government, in this study are pretty similar regardless of the country. Those barriers broke down a long time ago.”

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