IT challenges in the year ahead

IT challenges in the year ahead

In 2016 we will see IT departments start taking digital transformation seriously. But we expect to see less about disruptive technologies and more on the implementation and convergence of a number of trends from recent years.

Digitalization in PAC’s eyes will focus on two trends: customer experience and the Internet of Things. The Internet of Things (IoT) includes Industry 4.0, connected cars, smart health, smart energy and smart cities. Organizations will look to mature technologies like big data/ analytics, social media, mobility and cloud computing to create new products and services, but also new business models, processes and value chains. Pioneers like Amazon, eBay,, Uber and Spotify have put existing businesses (and their IT departments) under greater pressure to rethink their business models.

IT is becoming increasingly important – but the IT department (potentially) less important

IT is becoming increasingly important especially in the context of new business opportunities through digitalization and Industry 4.0, but the IT department is losing its ability to control purchasing and planning. In many organizations the IT department was seen as "too slow, too expensive". Although IT departments could improve their reputation, the ongoing shift towards the cloud and shadow IT procurement may make this difficult. At the same time IT must still keep the lights on and provide ongoing IT services for the enterprise which are solid, secure and inexpensive. They also need to respond to major IT innovations quickly and dynamically integrate them.

In future, IT may have to divide in two: to become internal service provider for the existing IT services and core systems ("legacy") and run them efficiently, and at the same time become an IT innovation center for the business.

Often it is expected that efficiency increases in legacy operation provide (financial and human) freedom to invest in new technology. To make the standardization and consolidation of the IT landscape possible, the migration to cloud computing models (whether SaaS, PaaS or IaaS) and offshoring are necessary. IT must become a provider of automation and cognitive intelligence and usher in the next quantum leap in the optimization of IT operations. It remains unclear how the IT organization faced with these very different challenges will succeed in transforming itself.

In practice, it is likely to fail as IT will give “lights-on” operations a much higher priority. The drivers of IT innovation are therefore likely to be the specialist departments that typically rely on SaaS solutions. This often works well, as long as no integration or end-to-end SLAs are necessary. In the long term, however, this approach leads to very heterogeneous and "fragmented" IT services, which, at a later stage within a complex project, need to be consolidated again and put into efficient operation somehow. In addition, the new front office applications can only meet customer expectations if they are perfectly integrated with the back office, and back-end processes (such as logistics and accounting) are redesigned.

Modern application interfaces (APIs) make it easier today to connect but cannot solve all integration tasks. In the digital wave, REST (Representational State Transfer) is the most popular API to create connections between systems and applications. Easy to use, unobtrusive and appreciated by both business units and developers as well as the IT department, REST is seen as a catalyst for the creation and stimulation of digital ecosystems.

A rather new, quite promising organizational concept is spinning off "innovation teams" from classic IT departments. This approach is intended primarily to promote projects with a high potential for disruption by an innovation team developing new applications and systems together with internal experts and external service providers and subsequently introduce them into regular operations. This concept, which is currently being tested within the framework of big data analysis, appears promising, however, new job titles such as "data scientist" and "business analyst" and a skills mix of computer science, mathematics and statistics will be needed to make this work.

Innovations in the service of customers and employees

Software innovation includes, among other things, the increased focus on people, whether they are users of software products, customers or employees. The development of new user concepts will go into the direction of “any device”. Moreover, software is supposed to not only efficiently but also proactively support the individual user in their role. Self-learning systems (e.g. "machine learning" and "cognitive analytics") will play an ever more active role in this process: For instance, they suggest particular actions, submit proposals, or outline decision alternatives. The customer will become part of the software-driven business processes through mobile devices, portals and intelligent web services. For more and more companies, networking with their customers has already become a key differentiating factor. And the willingness of companies to spend money on appropriate software or cloud services is correspondingly high. "Customer experience management", "customer journey", "empathic CRM" are just a few of the much discussed concepts that stand for modern approaches to customer relationship management.

This is no longer just a domain of marketing, sales or customer service, but also a task for the IT department. IT must provide the technical basis for optimal customer experience, for instance by means of the integration of back-end and front-end systems, because the expectations raised at the interface to the customer must be met in the back-end as well. The CIO will have to coordinate the multitude of digitalization projects and intelligently integrate front-end and back-end processes with each other to ensure optimal customer experience.

Innovative personnel management is supposed to focus on the human being. Driven by skills shortage, but also using the possibilities in the areas of social collaboration, web applications, mobility and related data analyses, more and more companies are turning towards new methods of employee development and qualification. Innovative personnel management will become a competitive factor.

Cloud computing, big data/ analytics and the Internet of Things will become reality

Cloud computing has now even reached medium-sized companies, and adoption is progressing in leaps and bounds. Almost every company is now using some form of cloud services, however many organizations are not yet fully aware of the operational challenges of this service model. The standardized and highly dynamic cloud platforms need a completely different concept of operation compared to in-house data centers or individual outsourcing agreements. This will become a huge task for infrastructure management and application management in companies from 2016 to 2020.

Big data/ analytics seem to have been pushed back from the public eye a little, but in practical implementations, the opposite is the case. Especially the new business/IT drivers digitalization and IoT are promoting the use of big data/ analytics. By (partially) timely analysis of larger amounts of structured and unstructured data from different sources, new data-driven business models and strategies are emerging. In addition, data analysis will more and more find its way into application software in order to provide forecasts for the process context.

Another new development is the emergence of Internet-of-Things (IoT) platforms. Thus in 2015 numerous manufacturer-specific as well as manufacturer-independent offers were presented. These platforms form the bridge between terminal devices equipped with sensors and embedded systems and the classic enterprise IT. These types of offering had so far been subjected to a proof of concept; in 2016, however, we can expect more IoT projects that realize industry-specific use cases based on these IoT platforms. The long-term trend is towards "self-service IoT", that is the possibility to quickly and easily develop, test and implement new business ideas and models from within the lines of business, based on IoT platforms. Next year there will already be providers positioning themselves in this arena.

Other topics that will gain in importance in the IoT environment: artificial intelligence, open source and cyber security. In artificial intelligence, we are still at the beginning, however, this concept is more and more being seen in future use cases in particular in the context of Industry 4.0 and the connected car. In comparison, the penetration of open source is much more advanced: infrastructure (Linux), cloud computing (OpenStack), software development environments (Java), integration platforms (Application Server API), big data (Hadoop). Cyber security is playing an increasingly important role in commercial and administrative IT – and the requirements are constantly changing. While in the past it used to be simply about securing the infrastructure, now a holistic approach is required to address data security, governance and security operation centers (SOCs). Even in this environment, big data/ analytics and artificial intelligence are used to predict possible, future threats from existing attacks and react to them. On the other hand, cyber security is also becoming more important in technical IT, particularly in the IoT environment.

Convergence of legacy and digitalization

Agility, adaptability, flexibility, reactivity, scalability, speed, simplicity, but also security and efficiency – the requirements and expectations of a sustainable IT strategy are high. In the short term, it must help create the necessary space for innovation, but also merge existing systems and new digital platforms and processes in the long term. This strategy can only be created by the CIO, who is already today confronted with a highly complex task. Even the question of the right technologies and the future platform per se is anything but trivial. It is a question whether to go for SAP with HANA technology and/or S/4HANA, AWS, Microsoft with Azure, IBM with SoftLayer and/or BlueMix,, T-Systems with Dynamic Services and/or Open Telekom Cloud, or Google Apps. When the choice is made, the right models for implementation/migration, integration, operation and orchestration should be defined.

In future software development projects, agile methods, such as those enabled by the Scrum framework, promise huge advantages over previous approaches, because projects can be completed faster and with better quality. At the same time, DevOps is gaining in importance with CIOs when it comes to integrating software development into IT operations already in the early stages of the design process. The requirement is to increase efficiency and pace of development, testing, putting into operation and operation itself by means of an integrated and coordinated process. But even this very positive change will require significant adjustments to the IT operating processes and skills, which can and will only be implemented very slowly over the next few years.