Business leaders of all stripes, not only CIOs, are talking about Digital Transformation these days. Even the World Economic Forum is publishing White Papers on the Digital Transformation of Industries. Even still, whether it’s Netflix passing over the 120 Million Monthly Subscribers mark while still managing 25% Year-on-Year growth, or Peloton stealing gym memberships with over a 100% year-on-year growth rate, it’s clear that businesses need to deliver better and more holistic experiences to customers through digital channels in order to succeed.
However, organizations often struggle on their digital transformation journey in two fundamental areas. First, in the ability to fund transformational projects. Second, defining and implementing a strategy that ensures their organizations have the skills necessary for the transformational projects.
For example, in a survey of 300 technology and business stakeholders sponsored by Jabil, limited budget, employee pushback, and lack of expertise were all included in the top 5 challenges to digital transformation.
Funding Transformational Projects
One reason organizations lack budget for transformational projects is because such a large amount of that budget is allocated to existing technologies. According to research from Gartner approximately 70% of IT budgets are spent maintaining the critical systems that keep the business running. 19% is spent on growth, what Gartner categorizes as investments required to support the growth of existing platforms. This could be thought of as enhancements or expansions to existing systems.
This leaves just 11% of the budget available to implement technology systems and enact new business models, what Gartner refers to as “Transform.” This is in stark contrast to startups or “cloud born” companies that invest upwards of 50% of their budgets in transformation initiatives.
How can organizations increase the budget available for transformational projects to more effectively compete with digital disruptors, or even become a disruptor? The answer may lie in the commoditization of existing infrastructure as thoroughly and quickly as possible. The trend of commoditization has been repeated many times in the history of information technology. Examples include the move to commodity hardware and UNIX to Linux migrations that have taken place over the last several decades.
Nicholas Carr referred to these as “infrastructural technologies” as opposed to “proprietary technologies” in his article, IT Doesn’t Matter. In May of 2003 Carr asserted that unlike proprietary technologies, which allow for longer-term strategic advantages, infrastructural technologies, “in contrast, offer far more value when shared than when used in isolation.“ In the end, Carr provided this advice:
"When a resource becomes essential to competition but inconsequential to strategy, the risks it creates become more important than the advantages it provides."
Heeding this advice, organizations need to analyze their current IT infrastructure spend to find areas that can be treated as a commodity. One area, as an example, includes commoditizing virtual infrastructure. Virtualization is a mature technology and provides little sustainable competitive advantage to organizations. Organizations should embrace open source alternatives such as virtualization based on KVM that can provide significant savings and increases in innovation by way of the open source development model when compared to proprietary virtualization solutions.
The savings from commoditization can be invested in new digital transformation initiatives, much like Intermountain Healthcare demonstrated with their migration to Red Hat Virtualization and increased investment in DevOps initiatives with OpenShift and Ansible.
Executing Transformational Projects
The need to fund digital transformation is critical, but even with proper funding, these projects are at risk without a strategy in place to enable the individuals who need to execute them with the right skills. Organizations should ask themselves what the skill set looks like to successfully execute digital transformation.
Setting aside cultural, behavioral, and process skills for a moment (not to diminish them, but to focus on the technical skill set required for the purposes of this article), the skill set for digital transformation is rooted in the knowledge of open source technologies and centered around the Linux operating system. Major cloud providers and transformational technology in the areas of virtualization, big data, containers, function as a service, and machine learning are fundamentally linked to open source and the Linux operating system.
It’s no wonder, given the strong link between digital transformation and open source and Linux. A 2017 Linux Foundation Jobs Report, developed in partnership with Dice, suggested 89% of hiring managers found it difficult to hire open source talent. This is because the future of much IT is based on open source technologies and Linux skills and workers with these skills appear to be consumed faster than they can be replenished. More specifically in the report, the importance in skills around Linux containers had more than doubled in a one year period, from 27 percent to 57 percent - an indicator of increased demand for open source technology and Linux skills.
This demand for Linux skills and open source technology makes perfect sense when you consider that fundamental technologies required to develop and operate container-based workloads at scale are rooted in the Linux kernel. Technologies such as cgroups for fine grain resource control, Linux namespaces for partitioning of Linux containers, and SELinux for mandatory access control are foundations by which organizations can build and run their next generation platforms. Having employees that are skilled in the Linux operating system,open source technologies, and DevOps practices and methods can be critical to the success of digital transformation projects.
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The Common Thread
Perhaps the most interesting insight that can be found between being able to fund digital transformation projects and having the skills in house to successfully execute them is that they are linked by the people using Linux and open source technologies. Having employees that understand the fundamental technologies that are the very foundation for the future of IT means having employees that understand Linux.
Similarly, having employees that can help commoditize existing infrastructure so that more budget can be allocated to the future of IT means having employees that understand Linux. This ability for a unified skill set to both commoditize and innovate is key to crossing two major hurdles on the road to digital transformation - funding and execution.
Where to Start
A good first step that organizations should consider is training employees in the critical areas of open source technology, such as the Linux operating system. Red Hat offers Learning Subscriptions that provide access to a massive catalog of Linux training. Focus on the fundamental Linux technologies that are at the core of the digitally transformed IT landscape such as KVM-based virtualization, Linux containers, Network Function Virtualization, big data, and machine learning.
Training in these areas helps produce a workforce that is skilled for the future and digital transformation. It also provides access to the specific application of those fundamentals to commoditize infrastructure in order to reduce costs so that budget can be reallocated to the most important projects instead of the ones that offer diminishing returns. This solves two problems with a single investment.
Once an organization’s employees have the necessary skills for both transformation and commoditization projects they should consider examining which areas of their infrastructure they could commoditize and what impact the savings could have on digital transformation initiatives. Solutions such as the Red Hat Infrastructure Migration Solution, for example, provide a proven methodology for reducing infrastructure costs while simultaneously assisting organizations with digital transformation initiatives to help realize savings.
Alternatively, many organizations turn to services teams to decrease time-to-value and risks of technology adoption. Red Hat Services has focused engagements to accelerate both transformation and commoditization projects. Red Hat Services Open Innovation Labs and journey-based programs like NFV Adoption guide customers through collaborative, cross-functional transformation and iterative methodologies to empower innovation and business agility. Meanwhile, Red Hat Services Solutions provide design, delivery, and mentoring that help take the guesswork out of commoditization efforts while strengthening new, open source skill sets.