Why a software-first attitude is a must for Internet of Things era ahead

'The new digital business model needs to be written in software,' and those who understand software need to step up to lead the way.
Written by Joe McKendrick, Contributing Writer

Technology managers need to step up and help business leaders navigate the intricacies of digital competition, and embrace the Internet of Things. Digitally savvy players are throwing a "wedge" between companies and their customers -- as well as employees. However, leaders need to be willing to begin the transformation in their enterprises.

Photo: Joe McKendrick

That's the warning from Karl-Heinz Streibich, CEO of SoftwareAG, speaking at the software provider's recent confab in Rome. "The new digital business model needs to be written in software," he said. "Not on paper, not hardware wise, but in software."

For anyone doubting the significance of software's impact on even the most well-run businesses, consider what's taking place within the automobile industry, he relates. "Software will become the prime source of innovation. In the German car industry, and you see the gearbox of the S-Class of Mercedes, you could cut it through and see tens of thousands of pieces. In the past, no competitor would be able to disrupt that within the next 100 years, because the automaker had 100 years of engineering advances. But in the new electronic car, the new connected car, in the new networked society with shared services, you don't need the mechanical gearbox anymore. It can run on software."

This is but one example of an IoT-driven digital disruption sweeping all industries, Streibich adds. The companies succeeding in this new digital environment, he continued, see themselves as "software companies first," he explains. Those that do not will not survive the next few years.

A company doesn't have to be an Uber-type disruptor to adopt this new model, he states. Rather, it's a matter of modernizing and extending information technology to support new digital initiatives. This means reliance on IT executives, managers and professionals to deliver new capabilities. "Digital companies already have a microservices oriented architecture, while non-digital existing companies still have IT application silos that are inflexible, not agile, and a nightmare," Streibich explains.

While SoftwareAG -- a middleware provider -- has an obvious interest in this argument, Streibich points to a pervasive reluctance to rally the organizational will needed to make necessary changes. "The CEOs I meet are already aware of that what to do, but can't, for various reasons," he states, citing estimates that 85% of executives in moribund organizations are still well aware they need to make the digital move.

If anything, this reflects Clayton Christensen's "innovator's dilemma," which states that leaders of existing companies are locked into high-margin businesses to please shareholders, leaving low-margin opportunities -- underserved markets -- wide open for disruptive competitors. Software-driven products may have lower margins than more expensively crafted physical products, and this may stop enterprises short of making a full digital dive.

The technology for making the digital move is widely available, and most CIOs, IT managers and IT professionals know where to find it and how to install it and make it work. Business executives will need guidance and support on the best routes to take, and ongoing education from their IT advisors on how it will make the long-run difference.

(Disclosure: SoftwareAG assisted with my travel expenses to the meeting.)

Editorial standards