Budgeting for the 'Digital Enterprise'

In my experience, strategic planning for transformation is critical to lower costs while increasing innovation and agility.
Written by Oliver Marks, Contributor

The whiteboard diagram below has played an important part in my life for the last few years. Drawn in more than one digital transformation and collaboration workshop session at client sites, usually by IT people who are up at night worrying about budgets and keeping their job (by their own admission), it's a pretty simple conundrum. 


"If we go ahead with a new layer of technology to meet the needs of better collaboration/systems of engagement  to drive towards our business goals, at what point will the new layer of technology lessen the overall cost of IT while making us more efficient and better positioned to innovate and be more agile?" By adding a new layer of IT spend on top of the existing (lower black line) in other words,when will the tipping point occur to get us back into the black and thus make us better off and more efficient than when we embarked on this effort? 

The question typically comes from people whose job it is to keep the core infrastructure running, often under huge pressures. It is often the subject of arguments by business professionals in the same workshop who are frustrated and hamstrung by what they perceive as Enterprise Resource Planning era clunkiness, and who need the business to get into this centuries business paradigms.

Vinnie Mirchandani has written a terrific new book The Digital Enterprise with Karl-Heinz Streibich, the Chief Executive Officer of Software AG, which explores examples and ideas around how modern firms are reshaping themselves to drive innovation across a wide spectrum of global industries. Reading through it triggered in me all the hard work that goes into enabling that transformative effort — vision being manifested in practical, efficient terms to realize more competitive businesses that have shed old paradigms and restrictions in order to move ahead against their less agile rivals. It's easy to talk about around whiteboards, but hard to do.

Streibich and Mirchandani have put together a compelling series of cameos which are useful tools to identify why the orchestration of digital enterprise components is so vital in a business world that is accelerating ever faster into a post QWERTY keyboard, location irrelevant, connected network fueled by ever greater data streams and sophisticated contextual decision making.

A fundamental that is touched on in the book, but is well worth focusing on, is the inexorable shift from systems of record, where emphasis is on cost cutting and keeping the often archaic back room systems running to move to systems of engagement where the focus is on innovation and growth. John McCarthy of Forrester has produced some excellent thinking around this core thinking which nicely supplements The Digital Enterprise. (You may need to be a Forrester client to see some of his material)

Mirchandani and Streibich expand on these ideas:

Recent years have witnessed a growing shift toward systems of engagement, which “will overlay and complement our deep investments in systems of record.

Systems of engagement are oriented towards making enterprise technology as usable and engaging as consumer technology by focusing primarily on the most current digital communication and collaboration technologies.

Obviously an industrial strength, low latency back end is what powers these attractive, modern mobile accessed applications...

Today, many enterprises are entering a third phase: information systems for competitive advantage….. The personalities and companies that contributed cases to this book are embedding technology in their products and services, moving to technology-enabled business models, and utilizing technology to redefine their distribution channels.

They are implementing digital technologies in both product-facing and customer-facing areas. This is technology that helps generate revenue, that helps to improve business results for companies in their social and economic environments, and that helps public agencies provide better citizen services.

From an IT perspective 'The new style of IT' comes after strategic thinking that defines what the well organized 'digital enterprise' should look like and what it should deploy, and with KPI's and budgeting set for how it performs. 'Information systems for competitive advantage' is a good middle ground premise for how and why Line of Business and IT work together towards mutually beneficial goals.

I've known Mirchandani for several years and admire his sharp, incisive mind. His enterprise blog is excellent and he has two previous books, both worth reading. Importantly, Vinnie isn't a purveyor of  'fru-fru dust', to use an accusation made to me by a CIO at the start of one of my workshops where the above whiteboard conversation loomed large (that CIO went on to work with me in the future once he saw the practicalities and value of the approach we worked out). Mirchandani has deep knowledge of the arcane world of enterprise scale architectures, deals and costings and lives in the real world, this isn't yet another armchair quarterback 'visionary-who's-never-worked-in-a-large-company' blind leading the blind impractical read.

You can feel the knowledge and depth Streibich and Mirchandani's bring to the table coming through in The Digital Enterprise — The moves and motives of the digital leaders.

"Not every business is a digital business, but every business must become digital" 

The opening premise is today's reality...the bigger question is how to get there as painlessly as possible and at scale, avoiding the fragmentation and siloed thinking that bleeds out profit and efficiency in large organizations.

"Regardless of industry, company size or business function, the mega trends (mobile, social, cloud and big data) are transforming business processes and technology platforms in fundamental ways. Digital has re-shaped how companies manage security, loyalty, support, public service, supply chain, talent and other critical functions".

'Has' is the case with the 20 or so disparate and successful examples discussed in the book: figuring out how to reshape with digital transformation is on the agenda at most companies further back on the digital enterprise hockey stick in our current era, with only companies drunk with unassailable profitability or who are asleep at the wheel and not paying attention to where there competitors are heading.

The Monday morning nine o'clock reality is still how to get over the strategic and budgeting hump I illustrated above... those that don't succeed in planning this out are going to fall behind very fast as society evolves rapidly to an ever more connected digital state.

I recommend Karl-Heinz Streibich & Vinnie Mirchandani's work as a useful read to help you with visualizing and putting together strategy and orchestration of digital enterprise, which often feels like a giant jigsaw puzzle even when you get your head around all the constituent parts.

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