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On The Road, Speed Kills; In The Cloud, Speed Wins

Oracle

Time to market. Talent acquisition. Customer feedback loops. If you’re not faster than the competition in all of these domains, your business is going nowhere fast.

That’s what digital transformation is all about—but digital transformation isn’t for wimps. It’s an ongoing technical, procedural, organizational, financial, and cultural challenge, no matter the industry. It requires equal parts vision and doggedness.

Francois Lancon, who oversees Oracle’s Asia-Pacific business, understands this challenge better than most, having worked with customers across the region’s 25 countries for more than 15 years. While acknowledging that the term digital transformation is being “abused and overused” by the marketing establishment, Lancon nonetheless sees it as a top CEO priority. Modern CIOs, therefore, are taking on the mantle of digital leadership, he says, while old-school CIOs will be left behind and ultimately replaced.

In a wide-ranging interview on the subject at Oracle’s office in Sydney, Australia, Lancon discussed what digital transformation is and isn’t; laid out the main obstacles to success and the common mistakes companies are making; touched on which industries are most vulnerable to digital disruption; and insisted there’s only one reason companies are turning to the cloud as part of their transformation efforts.

Back to Front

Lancon views digital transformation as the end-to-end digitization of the business processes within an enterprise. It’s not just something the HR or finance or marketing team does in isolation. It’s end to end—back office (finance, HR, manufacturing, and more) to front office (sales, marketing, customer service, and so on).

Those processes are generic to most enterprises, he says, and as long as they’re run on legacy on-premises applications, they can be extremely inflexible and expensive to maintain and upgrade, especially when they’ve been highly customized. Moving them to shared cloud services can help generate two things: IT cost savings/improved efficiencies, but more important, consistent, best-in-class processes, ultimately accelerating companies’ ability to innovate.

The real payoff will come when companies tie their front- and back-end applications together and connect them to their sensor-laden devices, machines, infrastructure, and other “things” to get real-time feedback on their products and business operations.

“The cherry on top of the cake is the analytics,” Lancon says. The analytics generate what he calls the “CEO view” of the business’s financials, operations, and customer experiences. “What you want to have is an end-to-end view of your data,” he says. “But the difficult part is not to get the data points, because with ‘big data’ you can get too many data points. What you want are deep insights into three or four main things.”

What’s Getting in the Way?

Lancon says he talks with CIOs pretty much every week, and all of them are on the path to digital transformation. “But not all of them are going at the same speed,” he emphasizes. “And they’re not all doing it the same way.”

A common problem he sees is when companies start the transformation journey in a decentralized way, amounting to multiple, uncoordinated journeys. “And the issue is, when you start trying to put the pieces back together, it becomes highly disruptive because they don’t fit together,” Lancon says.

Some companies are appointing chief digital officers to coordinate their digital purchases and innovations, “and those companies are going to move faster than those doing point solutions,” Lancon says. A year ago, he estimates, about 95% of Oracle’s customers had lots of departments starting lots of digital initiatives. Six months ago, 10% to 20% of them started to recentralize those activities. Within a year or two, he predicts, more than half of Oracle’s customers will be moving to an integrated, companywide approach because they’re starting to see that the decentralized approach doesn’t work.

Modern CIOs now recognize that they shouldn’t be managing IT anymore, he insists. “They’re moving into managing business processes, making sure the digital transformation of the enterprise is happening, and that they’re owning it.”

Evolution of the CIO

Lancon has seen the CIO role evolve in three waves. The first model centered on the “CIO almighty,” he says, whereby CIOs built and maintained the infrastructure, guarded the data, controlled permissions, and rolled out new technology on their own terms.

“Then the CIO was viewed as running these antiquated on-premises systems, and all the businesses were thinking, ‘This guy is living in the past while we’re headed to digitization in the future,’” he says. “And that was a year or two ago. Now flip that again, and the smart CIOs are back in power. They own the digital transformation of the enterprise that the businesses are starting to align behind.”

So is it the case that those companies hiring chief digital officers are those whose CIOs still haven’t stepped up to the digital transformation challenge?

“I think it depends on the complexity of the company,” Lancon says. “If you’re at a large bank or very large telco, you may need both because there’s so much to do. Those two people need to be very aligned.”

In financial services, for example, the established players have no time to waste as scores of “fintech” startups, with a combined market value of close to $100 billion, promise better, cheaper digital-only services in a range of sectors, including payments, investment planning, lending, and insurance. Players in the oil and gas sector, Lancon says, are more focused on how digital technologies can help them reduce costs in the short term, as revenues from their core business collapse. If you’re a highly regulated utility, you probably have a little more time to get your digital house in order. “I think there’s an urgency in every industry,” Lancon says, “but not at the same level, so you’re not going to operate at the same sequence.”

Emotion, Regs, and Inertia—Oh, My!

So what are the main obstacles to digital transformation? Lancon cites three.

“The number one obstacle is emotional—the loss of control, the loss of ownership,” he says. Part and parcel of that were concerns about information security, allowing a third party to guard the keys to the digital kingdom. Those concerns have become less prevalent over the past six to 12 months, as customers now have a better understanding of the security controls that are available in Oracle Cloud, Lancon says. “That’s a major step.”

The second obstacle continues to be industry- and country-specific regulations. Cloud providers have responded with “some very creative solutions,” he says, citing Oracle Cloud Machine, which offers customers some of the same services available in the Oracle Cloud—compute, middleware, database, and tools—in an integrated system that resides on a company’s premises. Cloud providers are also building data centers in customers’ countries to address concerns about performance and some country-specific legal restrictions.

The third and most overwhelming obstacle is inertia, the fact that companies have sunk a lot of investment into their complex, aging IT infrastructures, including tens of millions of dollars of customizations, and their various departments are comfortable (even complacent) with them. Replacing them requires business buy-in and considerable realignment. “This is the one being resolved right now,” Lancon says. “That’s the big one.”

So of all the reasons companies should embrace the cloud, which is the most important one? To lower their operational cost structures? Increase their agility? Free up IT resources for more innovative work?

“Oh, there’s only one: speed,” Lancon says. Most companies spend only a very small fraction of their total budgets on IT, he notes, so the cost savings are “interesting,” not game-changing. The cost part of the equation “isn’t going to change the life of your company,” he says.

But accelerating speed to innovation will. Lancon points to the gaming industry, where Niantic changed the dynamic overnight when it brought together two established technologies—augmented reality and GPS—to create the blockbuster Pokemon Go application.

“Companies need to react to change at a very different speed than they did five years ago,” he says. “This is what cloud brings you: speed. You can change things faster than your competitors. And if you still have the old stuff, you can’t. This is what it’s all about.”