Reports of the on-prem enterprise application suite’s death are greatly exaggerated. While virtually all vendors of enterprise software now offer their products in cloud-based SaaS versions, customer migrations have been surprisingly slow.
Vendors of enterprise software have responded to this slow uptake. To serve customers on existing on-prem enterprise applications, several vendors have extended their road maps and support plans. This means customers can continue to run their critical application suites on-prem for longer.
That may sound advantageous for users of on-prem enterprise applications, but it creates a new dilemma. If an organization decides to keep enterprise software on premises, it’s likely to see associated support costs rise. Also, the organization can miss out on many of the cloud’s important benefits, including lower capital expenses, greater flexibility and near-instant scalability. On the other hand, an organization that wants to move its entire enterprise application suite to the cloud may find the one-time cost daunting. For a large enterprise, the price tag can run into the tens of millions of dollars.
That’s a significant expenditure, even if the long-term return on investment (ROI) is positive. In fact, this level of spending would likely need the approval of the CFO and possibly the board of directors. Given that the underlying functionality of the application would remain essentially unchanged, that approval could be difficult to obtain.
Another obstacle is the inability to meet demand for IT projects that are self-funding. This new demand is the result of multiple factors, including the global COVID-19 pandemic, sudden changes to the business environment, and the need for more flexible and scalable solutions. However, self-funding the migration of an enterprise applications suite to the cloud is essentially impossible. The numbers simply don’t work.
A selective approach to cloud migration
Fortunately, there is a way through this dilemma. Instead of undertaking single-step, large transformation programs to move entire software suites to the cloud, organizations can take a composable business approach.
This entails moving only selected business capabilities of an existing enterprise application landscape to the cloud, rather than moving the entire suite. The organization can then commence the strategic buildout of SaaS capabilities over time to complement its own strategic business imperatives and support its IT road maps.
For example, instead of moving an entire finance application to the cloud, an organization might move only the module that handles planning and budgeting. The result would be a hybrid arrangement: Some applications would remain on-premises, while others would be moved to the cloud. In addition, both on-prem and cloud-based modules would coexist with robust integration and security capabilities. In this way, the organization can gain the benefits of the cloud, but at a speed unique to its needs and capabilities. The organization can also provide measurable ROI at each of the modernization effort’s steps.
It’s worth a quick detour to consider the meaning of composable in this context. As defined by Gartner®, a composable business delivers outcomes and adapts to the pace of change by assembling and combining application building blocks that the business has either purchased or built itself. This involves a big shift as organizations move away from inflexible, monolithic applications and toward portfolios that are not only modular, but also highly adaptable to business change.
While still new, the composable business market is already significant in size and fast-growing. Here what’s coming by 2023, according to the Gartner research report entitled “Innovation Insights for Composable Modularity of Packaged Business Capabilities” (Yefim Natis et al., Dec. 2019):
- 60% of mainstream organizations will list composable enterprise as a strategic objective, and they will also use an increasing number of packaged business capabilities (PBCs).
- 20% of the functionality offered by leading SaaS vendors will be available as self-contained PBCs.
- 50% of all new SaaS implementations will incorporate independently packaged business capabilities available as API-centric (aka headless) services.
In addition, 70% of large and medium organizations will include composability in their approval criteria for new application plans by 2024, predicts another Gartner report, “How to Design Enterprise Applications That are Composable by Default” (Yefim Natis et al., April 2021).
How to go composable
While the composable business approach is relatively new, best practices have already emerged. One of these best practices is to follow what we call a composable business value transformation (CBVT) framework. This involves three steps:
- Focus on outcomes. Address top pain points and identify technology-agnostic business capability needs.
- Build momentum. Map business capabilities across your key enterprise applications and SaaS providers, along with your KPIs and other key measures.
- Create value-stream component maps. This involves process-mining your current application processes; monetizing the incremental improvements that can be achieved; and then incorporating custom pre-built PBCs as appropriate.
To see how CBVT can be applied in the real world, consider the example of a finance application. Here, CBVT can be applied in five related areas:
- Financials. Maintain process networks, improve risk management, improve invoice processing, etc.
- Procurement. Reduce operating costs, improve supplier collaboration, etc.
- Project management. Improve portfolio management, prioritize investments, etc.
- Risk management and compliance. Improve audit management, controls, policy lifecycle management, etc.
- Enterprise performance management. Automate planning and forecasting, digitize tax, etc.
Another best practice involves adopting the process classification framework and performance metrics curated by the American Productivity & Quality Center. APQC is an authority on benchmarking, best practices, process and performance improvement, and knowledge management. Its Process Classification Framework (PCF) provides a common language for communicating and defining work processes, important steps in constructing an organization’s value stream. The framework is structured across five levels, starting with the broadest level and becoming increasingly fine-grained: category, product, process, activity and task.
It’s also a best practice to create a business-value road map. This helps organizations understand and measure their current processes, identify likely future needs, and define process enhancements with supporting business cases that drive pain-point resolution and address outcome needs. Keep in mind, creating a business-value road map is not a once and done. Rather, it serves as a statement of direction that’s jointly owned by both the business and technology groups. As such, it needs to be reviewed periodically and updated as needed to reflect important changes within the organization, its associated industry and markets, and the road maps of its key software vendors.
These best practices can help an organization progress along its unique composable business journey. That can deliver valuable benefits, including greater speed and agility that may not be as achievable when moving an entire software suite to SaaS. In addition, the cloud’s ROI is easier to monitor as an organization’s road map evolves. What’s more, a composable business approach involves far less risk than does a single-step migration to the cloud, allowing organizations to modernize at a pace in line with their business needs.
Finally, the composable business approach can improve the experience of both customers and employees. It does this by improving business processes, unlocking data insights and simplifying operations — important moves that can also boost workforce productivity.
At DXC, we believe so strongly in the composable business approach that we’re using it ourselves to evaluate our own processes.
DXC has also adopted APQC’s process classification framework and performance metrics, and we’ve twinned those with the Business Process Intelligence tooling. This gives our organization a common language to communicate and define work processes. DXC can do the same for your organization.
How DXC can help you
Looking to get started with a composable business approach? DXC Technology consultants can help you understand your desired transformation outcomes as well as the pain points now blocking those ambitions. DXC can also help you adopt process mining, a powerful way to identify opportunities for application simplification and standardization, and deliver a road map that links measurable outcomes with every step of your journey.
Are you ready to start your composable business value transformation? Get in touch with DXC today.