Legacy System Key Barrier In Digital Transformation: Study
Companies must operate key digital initiatives at scale and focus on a broad range of technologies to reach the most advanced stage of digital transformation, according to a new Infosys research, which also predicted legacy systems as the single biggest barrier to digital transformation in 2019 and beyond. (Read the full report here)
Infosys found businesses can be grouped into three clusters based on their progress along the digital transformation journey, with visionaries who understand the potential of digital to completely transform their business, followed by explorers who commit to digital programs driven by the need to enhance customer experience and finally watchers, who see digital through the prism of efficiency.
To more deeply understand what characterizes organizations at different stages of the transformation journey, Infosys identified 22 key digital initiatives and surveyed where companies stood on implementing each one. Companies were then assigned a Digital Maturity Index score from 0 to 100 according to their progress on pursuing and implementing these 22 key initiatives.
The research revealed that as companies advance in their journey, they begin to operate more digital initiatives at scale, with visionaries averaging 12 at scale, and having completed pilots on seven additional initiatives. Explorers average six digital initiatives at scale and have completed pilot projects for seven more. While watchers typically operate at scale on only one or two digital initiatives, with another one or two initiatives in the pilot testing phase.
The 22 digital initiative were also categorized under four big buckets: foundation initiatives – implemented to modernize legacy systems; mainstay initiatives – focused on core digital transformation elements such as automation and AI; customer initiatives – focused on improving the customer experience; forefront initiatives – focused on harnessing cutting edge technologies, such as augmented and virtual reality, drones and blockchain.
This research found that as companies advance along the digital transformation journey, they tend to focus on different buckets. Watchers concentrate on scaling up foundation initiatives. Explorers focus on a broader range of initiatives including mainstay and customer – yet are sometimes held back by a lack of progress in scaling up foundation initiatives. And visionaries bring many initiatives to scale alongside the foundation, mainstay and customer categories. Visionaries are also the only businesses making substantial progress on scaling up forefront initiatives.
The key challenges
When asked about what the biggest barriers to digital transformation will be in 2019, the percentage of respondents citing the ‘inability to experiment quickly’ was 22 percent and ‘insufficient budget’ was 30 percent. However, ‘legacy systems’ was at 41 percent – making it the single biggest barrier predicted for 2019. Lack of change management capabilities and relevant skills are also seen as key hurdles in 2019. As companies navigate their digital journey, the need to digitize their core and manage change at scale will grow in importance.
Industries and digital maturity
The survey revealed significant differences in digital maturity by industry. The highest maturity levels were found in technology, manufacturing, telco and financial services sectors. While industries such as consumer goods, logistics and healthcare ranked near the bottom regarding their digital transformation progress. Compared to other industries, retail is in the middle of the pack, with many legacy retailers not having made much headway. Perhaps surprisingly, the automotive sector lags other sectors in terms of its digital maturity. While autonomous and connected vehicles grab headlines, much work is needed to modernize legacy systems and integrate the automotive ecosystem.
Implement AI strategy
To become more like visionaries, companies should develop and implement a comprehensive strategy for using automation and AI to bolster human capabilities, rather than focusing shortsightedly on cutting costs. They need to put in place a formal digital transformation strategy, and share that plan with employees, customers and partners alike.
Incumbent companies need to do three things, said the research, first – establish the technical foundations for digital transformation; second – build technological capabilities and talent; and third – innovate at the speed of agile development. Two ways that companies can enable themselves to do this are by amplifying their existing capabilities, by focusing on high-value projects with the greatest potential impact. And, by partnering with the ecosystem to gain access to complementary skills and resources. The research revealed that companies currently partner for two-thirds of their digital initiatives.
Jeff Kavanaugh, Executive Editor at Infosys Knowledge Institute, comments, “Understanding the distinct practices of visionary businesses is valuable for companies seeking to navigate the next step of their digital transformation journey. The Infosys Digital Radar 2019 is equally relevant for business leaders, such as those attending the World Economic Forum in Davos this week, who are looking to accelerate the global economy and evolve their mindset from efficiency to experience so everyone can contribute – and benefit from – the abundant opportunities that await discovery in 2019 and beyond.”
Phil Fersht, CEO and Chief Analyst, Horses for Sources, observes, “2019 will be the year of ‘how’. The ’why’ (customer experience, revenue impact, internal alignment) and the ‘what’ (emerging technologies) of transformation are now clear to enterprise leaders, after the intense debate of the last couple of years. The findings of the Infosys Digital Radar 2019 point to the core need for enterprises to address the ‘how’ and focus on executing their digital transformation. Execution requires integration in every sense of the word – technology, talent, organizational change and leadership to achieve scale and deliver exponential benefits.”