What is Digital Transformation

Digital transformation is the change associated with the application of digital technology in all aspects of human society.-Wikipedia

Digital Transformation is a buzz-word which has been cropping up in a big way over the last few years. Everyone talks of the need to have a Digital Transformation. But what exactly is it?

As defined in Wikipedia above we see a slightly limited definition, as it covers only half of the term “Digital Transformation”. The other half is the word “transformation”. When we talk of transformation, we associate it with a “Paradigm Shift” or Foundational change. This essentially means in the context of a business; that every aspect of the business from the operating model to the consumer needs changes. This is necessitated by change in consumer demand, competition and technology impact.

Technology has been affecting us for decades. Are you aware that it was an employee of Kodak, who demonstrated the first proof of concept of a working “Digital Camera” and by around 1989 and a working model like the ones available today was showcased? There was stiff resistance to this product internally at Kodak as it was felt that it would negatively impact their camera and camera films business. The quick shift to Digital Photography and the demise of Kodak is history.

Going further back by a hundred years, Western Union, the first true Communications company in the world failed to get on the bandwagon of a new product developed by Alexender Graham Bell, “The Telephone”. The rest is history

In the words of the Oxford dictionary, transformation is “a marked change in form, nature, or appearance”. Transformation of businesses has been happening for a very long time, the only change is that the latest change is impacted by technology.

Digital Transformation is now looked at as Transformation of business by the impact of Digital Technology, or being more specific Information Technology. Information technology has begun influencing business to such a large extent that business dynamics have been transformed. Logistics companies run on IT; e-commerce has changed retail; a downing of IT can stop all travel. Witness the outage in August 2016 wheren an outage at Delta airlines caused 2300 flights to be cancelled. HSBC, RBS and so many other banks have been greatly affected by well reported IT failures.

So we come to the moot point, all business, no matter which industry they operate in, are heavily reliant on IT. It is not enough for one or two functions like Marketing, Sales, Production to be digitally or IT aware and comfortable. All support departments HR, Finance, Purchase and others  have to be equally aboard on “Digital Transformation”. To achieve Digital Transformation you need to bring about a change in Mind-set, Processes, delivery capability and communication with all stake holders. 

Lessons from the EC2 Crash

The advantages of utilities is that they are available when you need them and are cheap, as in less costly. They can be turned off by the user at his desire which helps regulate the cost. The reverse is that it can also happen that the utility can get shut off and then you are left in the lurch. It’s like using electricity from a grid, available on demand, metered to your consumption, perfect for business, till it shuts off and leaves you in the dark.

The Cloud has often been compared to a utility service only much safer and robust, available to match your budget and needs so that your business is cost effective and can expand with capital constraints. The fact is that cloud services have been available for quite some time and have been relatively reliable. This perception however, took a bit of a jolt last week, on around the 21st of April when Amazon Web Services’ Elastic Compute Cloud or EC2 had a disruption in services for clients, in some cases for more than 36 hours. There were around 75 sites which crashed because of this outage. Needless to say the clients were not happy with some being at the risk of being put out of business, an event which has happened in previous cloud outages from other vendors.

The EC2 service has been available for more than five years, and has grown over time. The outage happened not because of any internet issues or security issues, which many would have thought to be the key culprits. The fault lay somewhere else, in one of their data centres and an ongoing upgrade there.
For those clients dependent on EC2 or any other outsourced service this again highlights the danger of choosing to outsource services without having a clear assessment of needs and business impacts of failure. It highlights the importance of contingency plans for business continuity.

Outsourcing is a reality and makes business sense. However the question of outsourcing is not just about saving money on a transactional cost calculation basis but a wider overall cost benefit analysis. With passing time organizations need to be cost effective while continuing to provide excellence in their services. No organization will have a monopoly forever, allowing it to charge a premium. It would need to constantly innovate, and reduce its costs of operations.
For this, organizations need to constantly train and imbibe in its people the value of excellence. In the words of Aristotle

“Excellence is an art won by training and habituation. We do not act rightly because we have virtue or excellence, but we rather have those because we have acted rightly. We are what we repeatedly do. Excellence, then, is not an act but a habit.”

The lessons learnt from the EC2 crash are that outsourcing and its implications need to be learnt and that there is no substitute for constant training to provide excellence in service.

“Data Centres-Another Growth Story”

The great communicator, US President Ronald Reagan once famously said that “Information is the oxygen of the modern age. It seeps through the walls topped by barbed wire; it wafts across the electrified borders.” This huge quantum of information available through different means is at the heart of the expansion of data banks available to organizations, governments and the general public. So where does all this information or data get stored?

Data or information is stored in interlinked servers across the world, some in isolated locations and some in server farms or data centres. A data centre is thus used to house servers, computer systems and connected peripheral parts like telecommunications and storage systems. To support its working it is dependent on continuously available power supplies and data communication services.

With the ever increasing quantum of data and consequently data centres there has been an evolution of the data centre industry from a guideline perspective for housing data centres and the business perspective. From the guideline perspective the first major integrated standard guideline for the infrastructure of data centres was the “Telecommunications Industry Association’s” TIA / EIA 606-A “Administration Standard for Commercial Telecommunications Infrastructure” of May 2002. It was followed up by the TIA - 942 Telecommunications standards for Data Centres in April 2005. This was meant for use by Data centre designers in the building development process and covered the following:

• Site Space and Layout
• Cabling Infrastructure
• Tiered reliability
• Environmental Consideration

The tiered reliability mentioned above ranges from Tier 1, which allows upto 28.8 hours downtime annually to the most stringent Tier 4 allowing a downtime of only 15 Minutes annually.

From a business perspective the growth story in India has been quite bright. As per various studies made by the Gartner, IDC and Springboard research the growth till 2014-2015 seems set to be at a rate of upto 39% CAGR (Compounded Annual Growth Rate). Gartner has predicted that the total market capacity would see an increase from about 1.3 Million square feet of data centre space to about 5.1 million square feet in 2012. This figure did not include data centres in less than 1000 square feet area which were numerous as well.

IDC meanwhile predicted the size of the market as 10,000 crores by end of 2011 against a market valued at 6000 crores in 2009. It is further predicted that India has the potential to be the hub for markets in the Middle East, East Africa and Southeast Asia.

One driver for the growth of the third part data centre industry has been the deficiency of skilled manpower and technical skills within most organizations to manage captive data centres and the associated budget constraints. While there are drivers, there are challenges too.

The growth story is just beginning and evolving. It presents enormous opportunities in the IT / ITES space.