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What is digital transformation?

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Digital transformation is what's happening to organizations as they adopt new and innovative ways to do business based on technological advances. It’s the process of fundamentally changing something using digital tools and describes adopting technology and—potentially—cultural changes to improve or replace whatever existed before. Digital transformation isn’t a product or solution to be purchased, but it affects everything IT touches in every industry.

We feel technology’s absence (or malfunction) more poignantly than its presence. Our world is digital, and we expect technology to work for us, seamlessly. Most of the time it does. Our smart phones carry all the data needed (and more) to be productive all day long—from word processing tools to calendars, home energy notifications to transportation options, and food delivery services to weather forecasts. When technology doesn’t work for us on-demand, we feel its absence the most: waiting to pay cash at a toll booth because electronic receivers weren’t installed on the highway; visiting the downtown courthouse for a public record that should have been available online; watching conference call technology fail again.

That’s why organizations have to invest in technology that serves employees and consumers alike in ways we expect. Cloud computing, mobile apps, and Stuff-as-a-Service require new types of storage, data analytics, automation, and management. One innovation leads to another; new technology leads to process improvements which lead to new opportunities for new products, services, and customer experience. Then, users desire even more improvements because customer expectations have shifted to include certain experiences in their daily lives.

Think about it like this:

  • Products, like paper-based records in file cabinets, have become bits and bytes in containers on a cloud; even the file cabinet itself is abstracted and software-defined.
  • Services like hotel experiences and rental cars have been replaced with completely new business models of renting spare rooms and drivers summoned by your smartphone.
  • Processes like waterfall workflows have evolved into DevOps practices where teams work iteratively.

Better living through software—that’s what digital transformation is. 

Transformation through technology can be traced back dozens (internet), hundreds (printing press), or even thousands (wheel) of years. Creating software applications, building IT infrastructure, and rolling out business processes is not new—every tech publication from Business Insider to Wired has touted digital transformation, and the MIT Sloan School of Management has an entire initiative on the digital economy.

But exponential technological growth does have an origin story. It began with infrastructure, which became the foundation for applications that redefined business processes. In that way, everything is connected: the infrastructure determined what kinds of apps were used, which determined what kinds of processes worked best. 

Infrastructure

Digital transformation of infrastructure

IT infrastructure is the primary digital transformation disruptor. Mainframes led to servers, which led to networks, which led to cloud hosting, which led to today’s hybrid environments. But the need for every company to adopt or adapt to the latest infrastructural breakthrough didn’t happen immediately.

It all started with mainframes. The jurassic metal machines redefined data processing by doubling the amount of computations that could be processed in a minute. But the technology wasn’t adopted all at once. Governments were the first to put mainframes to work, and cut census processing time from a dozen years to just 1-and-a-half.

Once servers connected networks—particularly when a 2GB server began hosting the world wide web in 1991—businesses had to change their infrastructure approach or get left behind. Every business that wanted a place on the internet needed a server. And now, servers host intranets that support private clouds, connect to the internet to support public clouds, and support both via hybrid clouds.

Applications

Digital transformation of applications

Infrastructure hosts applications. Applications are how business gets done today, but this wasn’t always the case. Applications began disrupting the market around the same time servers became the popular infrastructural tool. (Think about that for a minute: New IT infrastructure wasn’t even fully mature when a different technological disruptor began shaking things up.)

Monolithic applications came first: 1 application to 1 server. Want a new application? You’ll need a new server. Input, output, and processing were often handled by a single piece of hardware. The breadth of an application's disruption was limited by businesses’ literal footprint—you had to have room for more servers if you wanted more (or better) applications.

Some monoliths gave way to n-tier architecture, which essentially breaks the functional pieces of the architecture up, allowing 1 server to handle the needs of more than 1 application. Using a client-server method, process requests were pooled in 2 tiers running on client systems (tier 1) that connected back to servers (tier 2). Today, some n-tier applications have been replaced by microservices, which break down apps into even smaller components.

Today, many businesses revolve around a single app. And many integral business processes—logistics, manufacturing, research, development, management—depend on apps. The rise in applications’ business prevalence was first due to server's market disruption and then to the evolution in application architecture. That architecture is still evolving today, and it’s affecting businesses' processes.

Processes

Digital transformation of processes

Business processes may not seem transformative, but they’re made so by the systems the processes depend on.

The waterfall approach allowed 1 group of researchers, developers, or operators to use a machine at any given time. It was a slow process with only a few code releases per year. This was because it took an entire mainframe to run (for example) the very complex mathematical calculations required to determine the orbital entry of astronauts. At a calculation rate of 2,000 process per minute, compared to today’s 1,000,000,000,000,000 that calculation could take days. On top of the time it took for a computer to process inputs and output results, each mainframe was larger and more expensive than today’s machines. So even if you could afford multiple mainframes, you may not have had anywhere to put them, since a single mainframe took up more than 350 square feet of space. With so few systems in such high demand, there weren’t a lot of process options besides a waterfall method.

Multi-tier processing allowed for more agile development processes, but development and operations teams still worked separately. This wasn’t a bad thing, each team simply required different workflows and environments. But it did lead to some speed bumps. Consider this, a developer might create a new app with great features. Those great features also hog a ton of resources, but that’s not something the developer thinks about because implementation is the operation team’s responsibility. On the other hand, the operations team might need to measure resource use by app tier, which means the developer has to shoehorn additional code into the app, which may or may not fit properly.

These are the kinds of hiccups that microservices and containers—which enable DevOps processes—alleviate. It makes tighter collaboration possible, where teams can iteratively optimize components using a consistent set of tools and with code that can be migrated between teams and environments as needed.

The good (and bad) thing about digital transformation is that there’s no single, simple solution. Changing how you work with technology tomorrow depends entirely on how you work with technology today.

So, where are you? Are you still relying on monolithic stacks of traditional software? Are your developers already working in public cloud environments but struggle to port apps back in-house? Are your lines of business ready to make their own technological decisions instead of waiting for, well, everything? Wherever you are, that’s where you start. If you think you're behind the 8-ball when it comes to your digital transformation efforts, know that you're not.

Because everyone starts from a different place, there’s no digital transformation strategy, playbook, or roadmap that’s universally applicable. You can’t create revolutionary art by committee or framework and you can’t design innovative IT that way, either. Your organization may need to rethink its existing software, development methodologies, business processes, and personnel responsibilities or you might already be in a good architectural position and just need to add new functions.

Embracing digital transformation is a long-term strategy, not a short-term tactic. It must involve lasting cultural and technological change in order to bring lasting organizational and business success. It doesn’t have to be revolutionary or disruptive. Evolutionary, incremental, and iterative progress is still progress. The goal should be to get comfortable with change before the market demands it. Because the market will demand it. Whether your business flies planes or sells newspapers, the threat of disruption looms. In short, business transformation requires digital transformation.
 

Digital transformation should be supported by a strong IT service management (ITSM) foundation.

Digital transformation is the unstoppable forward march of technology. This disruption can come from anywhere, and often seems to come out of nowhere.

For example, the hotel industry has been disrupted a number of times. Finding a hotel once required driving through a town looking for a neon vacancy sign. Phone books were perhaps the first disruptor, and hotels that were listed had the advantage. The internet was the second disruptor: Hotels with websites booked web-savvy guests, while those without an online presence could not. Travel websites that aggregated travel fares and bookings through application programming interfaces (APIs) were the third disruptor. Hotels that incorporated standard APIs and connected with travel sites benefited.* The fourth and current disruptor is mobile devices, which led to a sharing economy that’s redefining the entire hotel industry, giving a competitive advantage to early adopters. Travelers can now bypass hotels by renting someone’s couch, room, apartment, or home. Each disruptive stage for the hospitality industry led to better a user experience.

Disruptive tools lead to disruptive ideas, which lead to disruptive practices. Consider: mobile phones existed before the sharing economy was made practical. APIs reduced barriers to new customers and travel aggregate sites took advantage of that; mobile phones simplified customer access and eager property owners took advantage of that. Disruptors outside the market (APIs and mobile devices) can lead to disruptors inside the market (travel aggregate sites and sharing economy apps). It’s all connected.

An Incumbent’s Guide to Digital Disruption

Source: Chris Bradley & Clayton O’Toole. An Incumbent’s Guide to Digital Disruption. McKinsey Quarterly, May 2016. *Sort of. The whole travel aggregation technology, which resulted from the rise of APIs, ended up being a race to the bottom—the most affordable rate. This was profitable for some and costly to the rest, but it was still preferable to missing out on potential customers. This disruptor is actually a perfect example of:
1. How technology shifts the way consumers expect to be served.
2. How disruptions don’t always benefit the markets and companies they disrupt—sometimes, they just benefit the customers.

Artificial Intelligence: the next disruptor

Artificial Intelligence (AI) technology will become the next largest disruptor in the digital transformation of businesses. No matter the industry, the machine learning, data analyzing, and automation capabilities of AI will impact how a business transforms to meet the future in some of the following ways.

  1. Automation. AI streamlines the automation of repetitive and rule-based tasks increasing efficiency while freeing human resources to focus on more complex and strategic activities.
  2. Analysis. AI’s ability to analyze large volumes of data quickly and accurately can provide valuable insights that help companies understand customer behavior, optimize processes, and identify new opportunities.
  3. Personalization. Machine learning algorithms enable businesses to create personalized experiences by analyzing customer preferences allowing companies to tailor their products, services, and communication to their customers.
  4. Predictive analytics. Predictive analytics, powered by AI, allow businesses to forecast trends, anticipate market changes, and make proactive decisions related to inventory management, demand forecasting, and risk management.
  5. Enhanced security measures. AI can strengthen cybersecurity by detecting and responding to threats in real-time. Machine learning algorithms can analyze patterns and anomalies to identify potential security breaches, helping businesses protect sensitive data and maintain the integrity of their systems.

Analytics and data processing from AI can contribute to agile decision-making and continuous business improvement. This agility can allow organizations to respond quickly to market changes to stay competitive. Additionally, by analyzing performance metrics, identifying areas for optimization, and providing feedback loops, AI can contribute to continuous improvement cycles. Agile and iterative approaches are essential to the digital transformation helping businesses adapt to changing conditions and refine their strategies over time.

Perhaps more than other digital transformation initiatives, the adoption of AI brings challenges related to ethics, data privacy, and workforce adaptation. Businesses need to navigate these aspects carefully to ensure responsible and effective implementation of AI technologies.

The technologies that spur successful digital transformation—big data, mobile, cloud, containers—are all open source. The biggest implementation of big data—Hadoop—is based on open source technology. The largest mobile operating system is based on Linux. The leading container cores—Kubernetes and Moby—are open source. Today’s largest public cloud providers use open source software, and the most-used private cloud product is OpenStack®.

Red Hat has been a trusted name in open source technology since 1993. As both the creator of enterprise-grade open source software and contributor to leading open source projects, Red Hat leads innovation in cloud computing, containers, and automation.

If digital transformation is evolution spurred by technology, and the leading digital technologies spurring digital transformation are open source, then digital transformation is inherently open source.

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