‘Failed digital transformation projects will negatively impact revenue’

Digital transformation initiatives and the business impact of APIs are dominating boardroom conversations across organisations looking to take the initiative ahead of competitors.

A study from MuleSoft looks at how IT decision makers (ITDMs) are handling these digital transformation efforts, and the impact on IT operations and management change.

The global survey of 650 ITDMs reveals that four out of five businesses are expected to see a negative impact on revenue in the next 12 months if they fail to complete digital transformation initiatives.

>See also: The truth about digital transformation

IT budgets have remained relatively static, but ITDMs have seen project volumes grow, on average, by 27%. As a result, IT departments are being stretched even thinner. Most concerning, the research reveals an IT delivery gap, with two-thirds of ITDMs admitting they were unable to deliver all projects asked of them last year.

Integration headaches are creating an IT delivery gap and hindering innovation

One of the main contributors to the growing IT delivery gap is integration, which continues to be a significant drain on time, budget and resources. The survey results show the vast majority (89%) of ITDMs believe that integration challenges are slowing or hindering digital transformation within their organisations.

According to Gartner, worldwide IT spending is projected to total $3.7 trillion in 2018, an increase of 4.5% from 2017. Based on the survey results, organisations are spending nearly a quarter of their annual IT budgets on integration and thus could equate to over $800 billion spent on integration in 2018.

On average, organisations are using 1,020 individual applications across their business. However, on average, a relatively small number (29%) of these applications are currently integrated or connected together.

A significant number of ITDMs admit that point-to-point integration has created some of the biggest headaches their organisations have ever seen. This is clearly a source of frustration for many ITDMs; in fact, at least 80% agreed “point-to-point integration must die in the next five years if organisations are to reduce costs, deliver on business needs faster, remain competitive, deliver innovation faster, and extract more value from data.”

>See also: Digital transformation failure is a business failure

“When it comes to digital transformation, it is no longer a case of ‘if’ but ‘when’ for organisations. However, there is growing impatience at a business level to make the goals of digital transformation a reality right now, as those that fall behind will start to lose revenue and market share fast,” said Ross Mason, founder and vice president of product strategy, MuleSoft.

“Today, CIOs and IT decision makers are under a huge amount of pressure to meet business expectations, but it’s clear that they are struggling to keep up. Integration challenges are creating an IT delivery gap, and organisations can no longer afford to let it drain time, resources and budget.”

Inefficient IT operating models are slowing the pace of change

It is clear that organisations need to adopt a more efficient IT operating model. Yet, this is easier said than done as ITDMs continue to face the age-old dilemma of ‘keeping the lights on’ versus innovating. Furthermore, when it comes to building new applications and services, it is very common for development teams to work in isolation, meaning organizations are unable to discover and reuse the assets that have been created.

• ITDMs continue to spend the majority (63%) of their time on “running the business” activity compared to innovation and development projects.
• 93% of ITDMs admit that their application development process could be more efficient.
• Just a third of organisations’ internal IT software assets and components are available for developers to reuse – 83% of ITDMs say their organisation does not always reuse software assets when it comes to developing new products and services.

>See also: Digital transformation hindered by enterprise approach

API strategies are delivering greater efficiency, innovation and revenue

For organisations to deliver digital transformation and innovate quicker, they need to enable self-serve IT, where the wider business can do more on its own without relying on central IT for each project. By making IT assets discoverable and reusable via APIs, organisations can become more agile and competitive to drive revenue.

• 93 percent of ITDMs believe that IT self service will be critical to their digital transformation success. From those organisations that own APIs, more than half (58%) have been able to leverage them to increase productivity; while nearly half (48%) have increased innovation.
• By leveraging APIs, organisations have been able to increase employee engagement and collaboration (43%), meet line-of-business demands quicker (35%), increase IT self service (35%) and decrease operational costs (34%).
• On average, ITDMs reported that a quarter of their organisation’s revenue is now generated from APIs and API-related implementations. More than a third (35%) of respondents stated over a quarter of their organisation’s revenue came from APIs.

>See also: 5 factors defining digital transformation in 2018

Marshall Van Alstyne, MIT digital fellow and Boston University professor, commented: “As the digital economy continues to grow, more organisations are starting to realise the benefits of an API strategy and the financial benefits it can bring. MuleSoft’s Connectivity Benchmark Report corroborates our own findings that there is a positive relationship between the intensity of API usage and financial performance.”

“Digital transformation isn’t just a matter of buying new software and hoping it solves all problems. In today’s digital economy, more data, applications and devices need to be connected than ever before – yet organisations are suffering from the chronic integration issues of the past. However, through application networks, organisations can make more of their IT assets reusable and make application development much more efficient. This will truly transform how IT functions in the modern enterprise and deliver greater value to the business”.

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Nick Ismail

Nick Ismail is a former editor for Information Age (from 2018 to 2022) before moving on to become Global Head of Brand Journalism at HCLTech. He has a particular interest in smart technologies, AI and...

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