Digital disruption is revolutionizing every business, regardless of size or industry: new organizational and competitive scenarios are emerging on the horizon, with business models that are radically different from the past. more
No organization is immune to change, which involves two main aspects. On one hand, the ability to apply digital technologies to any process with a view to optimization and efficiency; on the other, a cultural openness to innovation and a willingness to experiment, with the aim of rapidly developing new market approaches by riding the wave of digitalization.
The strategic value of digital transformation (and how to measure it)
In 2020, Deloitte described Digital Transformation as the combined result of technology implementations and methodological competencies: for example, analytics software is only effective when built on solid data management processes; smart working solutions work downstream of IT ecosystems built by balancing security and flexibility. Thanks to the know-how and process organization methods underlying new technologies, disruption enables the desired benefits (from product innovation to customer satisfaction), driving a decisive increase in financial performance.
The survey reports that in 2020, 45% of companies with net revenue growth above the industry average demonstrated a high level of digital maturity, 31% medium, and 15% low.
Today, several years later, Deloitte itself questions the exclusive use of financial KPIs to evaluate the impact of technology investments. This approach risks preventing digital leaders from fully capturing the value of technology investments, potentially leading to reduced budgets for technology spending.
So how can we correctly measure the true value of digital transformation?
Choosing the right KPIs to evaluate Digital Transformation
In 2023, as part of the research “Mapping Digital Transformation Value”, Deloitte’s Center for Integrated Research surveyed 1,600 business and technology leaders to understand which KPIs they used to measure the value of technology investments. The most commonly used KPIs turned out to be traditional financial metrics, process performance metrics, and traditional customer metrics. While these measures are essential, focusing solely on them can cause organizations to lose sight of the broader impacts of technology value. Why?
Many digital technologies influence the entire organization as a whole, its people, and even the planet, for example by improving resource efficiency and reducing environmental impact. What’s more, an organization’s technology investments can also have reputational, social, or emotional impacts that may not surface in common KPIs.
Therefore, to fully assess the value of technology investments (and protect them), organizations should consider both the most common impact measures and other forms of benefit that technology delivers. This broader measurement can provide a complete picture of the value generated, help justify continued funding, and offer a solid and consistent basis for deciding when not to invest.
Easier said than done. In fact, 73% of respondents believe that the inability to define exact impacts or metrics is a barrier to digital transformation, followed by the inability to collect data and organizational silos.
However, there are some encouraging findings, such as the fact that, globally, 46% of organizations reported using purpose-driven KPIs to evaluate technology impact. These measures include sustainability, social return on investment, and workforce diversity, equity, and inclusion.
In other words, despite the difficulties in measuring certain types of metrics, organizations that adopt a holistic evaluation framework gain a clearer view of the impact of Digital Transformation within their organization, and are 20% more likely to see significant business value from their digital transformations.
The role of IT today
Beyond the need to accurately assess the value of digital transformation, the role of Information Technology (IT) has been undergoing an epochal transformation for several years. IT, once dismissed as a cost center, is now becoming a profit driver. The Chief Information Officer (CIO) is therefore gaining an increasingly strategic position at the company’s decision-making tables, especially in companies that could benefit most from technological and digital evolution. A study highlights that the best-performing companies are more likely to have their digital transformation led by the CEO (33%), while CIOs and CTOs (36%) are the ones driving average-performing companies toward the digitalization process.
This evolution has been further accelerated in recent years, demonstrating how information systems and digital technologies are indispensable tools for resilience. The most technologically prepared companies were able to respond with greater speed and effectiveness to unforeseen challenges, rapidly enabling solutions such as smart working. Investing in digitalization continues to prove essential for ensuring operational continuity in an increasingly unpredictable context.
Evolution of Information Technology in Digital Transformation
Having framed the growing value of digital transformation and the evolution of metrics to measure it, and having identified the CIO as an increasingly strategic role and responsibility for companies, it is important to get down to the practical dimension. What does digital transformation consist of today? Which areas of a company does it involve? What are the pillars that can bring an efficient digital approach to life?
We can say that, on a practical level, IT transformation is reflected on multiple levels. First and foremost, the main criterion guiding technology choices is represented by business needs: the focus is no longer on the solution per se. Today, companies are looking for IT solutions that not only integrate multi-source data but also offer engagement, collaboration, and analytics capabilities. Traditional software, designed to run on on-premise infrastructure, is giving way to Cloud Native applications, developed on containers and for distributed environments.
Another paradigm shift is the transition from descriptive analytics to predictive and prescriptive analytics, made possible by the availability of real-time data from multiple sources, as well as artificial intelligence systems.
Finally, the Internet of Everything broadens the concept of networking, with the proliferation of connected devices and available information.
Bringing the concept of digital transformation to an even more concrete level, three characterizing and enabling factors can be identified. They are Cloud Transformation, Cloud Native applications, DevOps & Agile: the three pillars of Digital Transformation.
Below, we will analyze each of these three areas in detail.
First pillar of Digital Transformation: Cloud Transformation
According to Gartner, today, cloud tends to be viewed as a technology platform, but this perspective will change significantly by 2027. Cloud computing will not only be a technological approach for application distribution but will also serve as the primary engine of business innovation.
Cloud is indeed establishing itself as the most advantageous architectural model today, thanks to a range of benefits.
Getting into the technical details, there are three types of Cloud architectures:
- Private: assets are consumed as a service within the company’s data center, which can reside in owned facilities or be leased from Cloud providers;
- Public: resources are delivered from the provider’s infrastructure, accessible via the Internet and shared among multiple users;
- Hybrid: the type destined to prevail, which involves a mix of public and private Clouds.
FURTHER READING: What is Hybrid Cloud? When to choose it, examples, advantages Pros and cons of multi-cloud: is it right for your company?
The advantages
Despite the differences, common benefits on the IT and business front can be identified that a company can gain by opting for a Cloud Transformation path.
First and foremost, among the most appreciated characteristics, we must mention the guarantee of operational continuity and, more generally, of resilience. A distributed environment across multiple data centers, geographically distant and accessible via the network, ensures users the availability of services always and everywhere, even in the face of disasters.
Cloud providers, thanks to economies of scale, can equip themselves with high-performance and cutting-edge technologies, including in terms of security. No company - whose core business is not IT systems - would be capable of equal investments to protect its own infrastructure.
At the same time, the ability to rapidly purchase technology assets as a service, within pay-as-you-go contracts, allows building IT environments in a flexible, scalable, and more cost-effective way, especially when managed according to the FinOps approach.
In short, the Cloud is the tool that enables aligning information systems with business needs, balancing robustness and agility.
ALSO READ: FinOps: why switch to Cloud financial management Digital Transformation and resilience: what the Coronavirus taught us
One more reason…
The Cloud also becomes the means of support for companies’ internationalization policies, as it allows for the rapid setup of infrastructure and technology resources close to the target market.
For example, SparkFabrik’s China Unit service enables Italian companies to strengthen their presence in China through the partnership with Alibaba Cloud and a range of consulting activities. The goal is to provide companies with a secure and compliant infrastructure that enables them to offer high-quality, fast, and efficient services to local customers.
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The importance of Cloud Management in Digital Transformation
The advent of Cloud Computing triggers a profound business transformation. Organizations increasingly feel the need to master the art of managing and controlling cloud environments. Good cloud management is essential to support the rapid evolution of processes and products, facilitating increasing outsourcing to the cloud and fostering digital transformation.
We therefore speak of Cloud Management to refer to the set of practices, technologies, and tools used to manage and control the environment of a Cloud infrastructure. This often occurs in multi-cloud contexts, given that the trend is to use services from multiple providers such as AWS, Microsoft Azure, and Google Cloud Platform simultaneously.
It therefore becomes crucial to integrate and coordinate these different Cloud infrastructures as a single entity, centralizing activities such as resource provisioning, performance monitoring, security management, capacity planning, and cost management.
FURTHER READING: Cloud Management: fully harnessing the potential of the cloud Multi-cloud orchestration: tips for doing it the right way
All of this may seem complex for a company aiming for digital transformation but still uncertain about which path to take. However, the benefits of the cloud and its proper management are accessible thanks to dedicated services and technology partners like SparkFabrik. For example, Cloud Migration services enable strategic planning and execution of Cloud migrations, maximizing the potential offered by providers such as Amazon AWS, Google Cloud Platform, Microsoft Azure, and Alibaba Cloud. Alternatively, Managed Cloud Services give companies all the power of the Cloud without the management complexity, allowing them to free up valuable resources to redirect toward value-added activities, while simultaneously reducing costs and issues arising from managing complex infrastructures.
Second pillar of Digital Transformation: Cloud Native applications
In new Cloud ecosystems, traditional applications, designed with a monolithic structure to run in client-server environments, may not function correctly or with adequate performance levels. This gives rise to the need for an alternative approach to software development, which is now in a consolidation phase: the Cloud Native paradigm. This paradigm enables organizations to fully leverage the advantages of flexibility and speed of time-to-market promised by the Cloud.
ALSO READ: Microservices and cloud-native applications: advantages over a monolithic application
Third pillar of Digital Transformation: DevOps & Agile
The ability of software to respond precisely to business demands is the key to the success of the digital enterprise. Cloud Computing, microservices, and containers converge toward this objective and encourage the adoption of Agile and DevOps development techniques, particularly suited both for developing Cloud Native web applications and for modernizing legacy applications with a Cloud Native approach.
Agile methodologies prescribe breaking down the project into iterative, sequential, short-duration cycles, each aimed at achieving a small improvement to the product until the final objective is reached. Every change made is released and verified directly by users, so as to collect feedback and intervene promptly in case of errors.
The DevOps methodology emphasizes collaboration between Developers and Operations throughout the entire application lifecycle (development, testing, and delivery), ensuring greater speed compared to traditional development processes. The use of microservices lends itself very well to DevOps practices: each microservice is an independent functionality and therefore allows small teams to collaborate toward achieving a common goal. This means that it is even easier to proceed with incremental and continuously tested releases.
ALSO READ: Agile and DevOps: what they are (NOT) and how they interact What is Agile methodology: examples and advantages
The role of Artificial Intelligence and Open Source in Digital Transformation
In recent years, Artificial Intelligence (AI) has gained great relevance, both in business contexts and beyond. Less discussed, but equally rich in potential, is Open Source, understood as software with open and modifiable source code. These two areas are emerging as fundamental elements for the success of modern companies. But what role can they play in the digital transformation of organizations?
Artificial Intelligence should not be considered merely an enabling technology, but a strategy capable of transforming operational models. For its part, Open Source provides fertile ground for flexibility and continuous innovation, reducing costs for companies and accelerating time-to-market.
In particular, the adoption of Open Source solutions democratizes innovation, enabling companies to rapidly integrate AI into their processes through continuously evolving tools and frameworks. These tools support the development of advanced applications, useful across every business area - from marketing to IT - improving operational efficiency and customer experience. Furthermore, they address critical challenges such as data management and ethical issues, creating a collaborative environment and allowing companies to share resources and knowledge to tackle complex problems more effectively.
Artificial Intelligence, made accessible by Open Source tools, cuts across organizations, automating repetitive tasks, optimizing workflows, and freeing up resources for strategic activities. It analyzes enormous volumes of data, offering insights that guide informed business decisions and help predict market trends. It improves customer interaction through personalized and timely support, anticipating their needs through predictive analytics.
AI’s ability to stimulate innovation enables companies to explore new business models and improve products and services, reducing risks and accelerating time-to-market. In conclusion, Artificial Intelligence, supported by Open Source solutions, is a powerful catalyst for Digital Transformation. Companies that can leverage these resources will be better positioned to face future challenges and capitalize on the opportunities offered by digitalization, strengthening their competitiveness and innovation.
Starting a Digital Transformation project in your company
The digital component is increasingly pervasive within organizations, permeating every function and business process. The ability to correctly innovate the underlying technology stack becomes a critical success factor and even a matter of survival.
Embarking on the digital journey means calibrating the right technology mix in relation to the company’s specific characteristics, planning innovation paths rationally and being careful not to disrupt delicate balances.
Digitalization therefore requires a business-centric approach: it is the needs of the company and its customers that determine the appropriate technology choices. This shift in perspective represents a key step toward innovation and requires specific competencies, which can be found in a qualified partner.
FURTHER READING: Application modernization: what it is and what are the advantages
By your side for technological innovation
SparkFabrik meets the current needs of businesses, complementing its technology offering with a methodological approach as well.
For example, we organize workshops dedicated to User Story Mapping, a technique that analyzes the interactions between the user and the web product through a shared process within a working group. Essentially, a typical user experience is imagined, mapped, and graphically represented, highlighting the user’s main needs and desires.
Among the consulting services aimed at Digital Transformation, SparkFabrik also offers the Cloud Native Assessment, which evaluates the status quo in terms of technology, processes, and culture, so as to define a personalized application modernization path. Individual cases are then examined, opting for the best solution and choosing from different approaches: from Lift and Shift (the simple transposition of traditional applications to the Cloud) to the complete modernization of applications with the introduction of containers and the adoption of new development paradigms such as microservices or Serverless.
In short, digital disruption requires digital culture (and awareness of its value), the right technologies, and above all, specific competencies, which often only a partner with proven experience can provide.
