Ambidexterity and the 2-speed enterprise software market

June 23, 2014

Dyslexia mode

Summary:: Enterprises must strike the right balance between the digital opportunity of cloud and careful evolution of their existing operations

The gulf between technological progress and technology investment is creating a two-speed enterprise software market. Organizations want to invest in new technology to stay competitive. But at the same time, they fear the disruption that new technology will cause.

A small minority of organizations sit on one side or the other of this divide. They are the lucky ones (especially those who are entirely up-to-speed with the latest technology). The vast majority face an uncomfortable decade ahead as they negotiate a path that requires them to straddle both sides of the divide simultaneously.

In the slow lane sit the established core operations of the enterprise that have been automated since the 1990s or before. These venerable systems are often locked in place by compliance and reporting requirements that make any change a complex and long-winded affair.

In the fast lane are the innovative, often customer-facing business units that want to use the next generation of cloud and mobile applications to work smarter or seize competitive advantage.

Beyond cost savings

You can see this divide played out in several different scenarios that have become so commonplace they are almost clichés:

Systems of engagement versus systems of record
Ambitious, highly connected, digital businesses versus non-digital incumbents
Line-of-business decision makers versus the IT department

Those whose prime responsibility is focused on maintaining the existing systems — that's usually the IT team — tend to see new technologies such as cloud computing as a tool for enhancing their existing processes, of doing the same stuff but doing it better or at less expense. This 'slow-speed' mindset is the wrong approach, warned two contrasting speakers at last week's Cloud World Forum in London.

Correy Voo, infrastructure CTO at banking giant UBS, speaking in his capacity as president of the Open Data Center Alliance (ODCA), said that moving existing applications to the cloud is generally a waste of money because they don't take advantage of the opportunity to do things differently once they're in the cloud:

Don't lift a legacy application and try and make it fit in a cloud environment. There are some applications and technologies that will not work [in the cloud]. Build greenfield.

Dr Will Venters of the London School of Economics echoed this advice when he warned that buyers ignore the potential to think about moving to more digital ways of doing business if they evaluate cloud computing purely as a means of saving costs.

Doing a cost comparison leads us to see cloud as a straightforward sourcing decision ...

You need to look beyond cost saving and imagine a world that is changing.

IT not consulted

Of course, what is happening in the two-speed enterprise is that various departments and divisions are already embracing digital business concepts, often without consulting IT management.

Venters quoted an Accenture survey that found that 72 percent of cloud procurement comes from strategic business units, compared to just 28 percent from centralized IT. Many organizations' official procurement processes can't even accommodate the on-demand flexibility of SaaS, he added.

Established enterprises have to recognize this divide and find a way for these differently paced activities to coexist, he said:

If you're inside a big business, you need to decide how you can develop a digital business strategy to harness cloud ...

We talk about ambidexterity. You need to be agile and slow at the same time. Dealing with that is a real challenge.

Becoming ambidextrous

Will Venters © Professional Images — Will Venters

Venters went on to describe more of the changes he and his colleagues foresee for the enterprise in the next few years, some of which will allow for a transition to that more ambidextrous state. First, he listed five cloud innovation trends that their analysis predicts as "both likely and necessary" in the next five years:

Cloud becoming the harbinger of the service dimension in external IT and business services industry

Continuing trend from IT products to business services

In-house functions becoming smaller, high performance, business savvy, sourcing architects

Reconfiguration of the supply industry — consolidation, innovation, new collaboration and competition

Innovations in business organizational forms — towards the ambidextrous, agile cloud corporations ...

He then outlined six ways in which cloud will change organizations (and society) in the long term:

Increased collaboration with stakeholders

Adoption of new forms of IT capability internally

Blurring of lines between work and home

IT department reinterpreted, giving new strategic direction

External parties will harness IT in new ways

Integration of IT in new ways in stacks

But will enterprises be able to adapt fast enough? Advice from Correy Voo included three key points when looking at enterprise cloud adoption. While the first spoke to the two-speed divide, others sounded significant notes of caution when dealing with cloud vendors:

It's about better not cheaper: "When you're trying to build a business case, focus on productivity gains rather than simple cost savings ... You'll always be able to find a way of doing it cheaper in-house. Trying to compare traditional datacenter build to cloud datacenter build is an impossible task."

Don't take vendors on trust: "There's a hype problem in the cloud space right now. We need to be a lot more careful and specific about what we're talking about ... My advice? Test everything."

Look for providers that cater to your industry: "While we recognize the need to use cloud services, we also feel the need to understand how our business operates ... Trying to take a generic cloud solution and bend it to the needs of your industry is a difficult thing to do."

Verdict

When organizations talk about hybrid cloud environments in which public and private IT assets co-exist, the discussion often ignores the business dimension. Ambidexterity will be useful as a concept if it helps refocus on the importance of adding more agile digital business processes into the organization, with technology serving as a tool to enable that goal.

It's also valuable in emphasizing the importance of giving equal weight to both sides of the two-speed divide. Even though the established core systems are getting most of the IT spend today, that is likely to change in the future as investment ramps up in the more collaborative, outward-facing systems of engagement that straddle the enterprise boundary.

The notion of ambidexterity can help vendors frame the way they support customers as they transition towards the cloud and mobile platforms the vendors are all promoting today. Their product portfolios have to cater to both the slow lane and the fast lane of enterprise technology adoption, while helping both to evolve as rapidly as they can bear.