Everywhere you turn, there is another new strategy for your technology stack. Cloud, everything-as-a-service, webscale architectures and some proprietary solution (or at least proprietary sounding) from every vendor under the sun. They’re all competing for your attention. They all make the claim that their solution will revolutionize your technology stack and allow you to spend more time on business solutions and less on technology.
And for the most part, they’re right. At least sort of.
From a technology perspective, we’re seeing some of the greatest innovations that we’ve perhaps seen since the dawn of the modern “computer age”. In many of these cases, these technologies are not merely incremental updates to long-existing technology platforms, but are the real deal – major breakthroughs in how technology is architected and managed. It’s truly an exciting time.
But that doesn’t change the fact that even the greatest, most innovative technology is still just technology. Technology, in and of itself, is not and has never been transformative. It is only in the application of technology to solve true business problems that it becomes a source of advantage. So while I am truly impressed with the new technologies that are emerging every day, it does not change the fact that as an IT or business leader, you must look beyond the pitch and hype and craft what I call a “Value-based Technology Strategy.”
A Value Driven Approach
Now if I’m being honest, you could probably accuse me of my own version of hype by calling for a “value-based technology strategy.” After all, shouldn’t our technology strategies ALWAYS have been based on value? In theory, I would say yes. But the more practical reality is that most technology strategies were driven primarily based on what I would call “assumed value.”
A business sponsor (or perhaps IT itself) would identify a business problem and identify a technology-based solution to that problem. There was the obligatory ROI calculation, but otherwise, it was an exercise in budgeting and left up to the business sponsor to decide if the price was worth paying. The business value of the technology was essentially assumed.
In the Digital Era, a much more holistic approach is required. This isn’t about deciding if any given technology or investment is “valuable” or will have a rapid “return on investment”, but instead it’s about understanding how the organization creates and sustains competitive and differentiating value in the marketplace and then crafting a technology strategy to support and protect that value creation.
A Four-Tier Value Model
When you begin to look at crafting your technology strategy from the perspective of competitive and differentiating value, things start to become clearer. The biggest challenge when it comes to all of these new, breakthrough technologies and approaches is figuring out where to apply them. But the value-driven strategy model makes this much more clear and apparent.
We believe, in fact, that you can craft a four-tier value model that drives your technology strategy. The four tiers are:
- Legacy Tier
- Webscale Tier
- Hybrid Tier
- Commodity Tier
The Legacy Tier
The first tier is made up of those existing technologies that simply don’t need to be changed. Let’s face it, not every piece of your technology stack should necessarily be modernized. But you must be careful to not use that statement as an excuse for simply continuing to do things the way that they’ve always been done. The truth is, most of your technology stack should be transformed. It will be critical that you develop a technology strategy that is focused on strategic value – and that will demand that most of your legacy technologies go away. However, a few elements of your technology stack should remain and will make up your “legacy tier” if they meet the following characteristics:
- Does NOT provide competitive or differentiating value to your organization – this is critical because if it DOES contribute to this type of strategic value, you almost certainly will need to move it to the much more agile “webscale tier”
- Is Operationally Stable – if the technology element is operating in a stable, reliable and maintainable fashion, it is a candidate to remain in the legacy tier. If it is unstable in any way, however, you should be looking at the cost-benefit of moving it to the hybrid or commodity tier, depending on its business function
- Is Cost Neutral – if the cost of migrating the technology to one of the other tiers outweighs the reasonable ROI against the technology’s operating costs, then it should probably remain in the legacy tier provided that it’s not providing strategic value and is operationally stable
For most organizations, there will be numerous elements of the technology stack that may qualify to remain in the legacy tier. These will often be “run the business” type applications, often running on mainframes or old “big iron” platforms. While these applications and systems are important and valuable, they do not provide true strategic or competitive value to the organization (no one chooses to purchase from you BECAUSE of these systems), so agility is not critical. And if they are stable and the cost to replace them outweighs any reasonable ROI, then it makes sense to just leave well enough alone.
The Webscale Tier
I believe that within the next five to ten years, 80% of what a typical IT organization does will occur outside of the enterprise – that’s in the Hybrid and Commodity Tiers that I’ll explain in a moment. But most of the 20% that remains will be here, in the webscale tier. The webscale tier is where your most strategic technologies will live.
In the Digital Era, technology will either drive or enable virtually all elements of competitive and differentiating value for your organization. Think of almost any organization in any industry that is winning in the market and you will see that technology is a key driver or underpinning of their success. Every organization must identify which parts of their technology stack provide that differentiating value and invest heavily to ensure that they have the scalability, reliability and agility within that stack to ensure that their differentiating value is protected and perpetuated.
Whether you call this “private cloud”, “hyperconvergence”, “webscale architecture” or something else, the underlying characteristic of this tier is that it enables your organization to rapidly provision, scale and adapt your infrastructure elements to mimic the sort of environment that organizations like Amazon and Google have created for themselves. When you’re building this tier, you should be looking to organizations like Nutanix and Simplivity, along with more traditional players like VMWare, HP Enterprise and Cisco (just make sure those solutions are giving you the type of scalability and adaptability you require). This tier will either live within your own data center or in a co-location type facility, but the key factor is that these will be the most important elements of your technology stack and you must control them in order to protect and deliver competitive value to your organization.
The Hybrid Tier
The next tier is made up of those technologies that either support or enable your competitive differentiation, but more indirectly. These could also be development platforms or sources of potential competitive disadvantage, should they go bad. While these elements of the technology stack may reside on your internal webscale infrastructure, you will most likely find it more advantageous to deploy these utilizing a “hybrid strategy” using a mix of managed solutions deployed in co-location facilities (like those of Equinix or Sungard) and IaaS/PaaS solutions from Amazon’s AWS or Microsoft’s Azure.
The elements of the technology stack deployed into this tier are important and support differentiating value to the organization, but are not differentiating themselves. As such, your objective is to protect their value contribution, but to delegate as much of the management as possible to free your employed staff to focus on the elements within your webscale tier, while ensuring the type of agility and flexibility you require at this layer.
The Commodity Tier
The final tier is comprised of those elements of the technology stack that provide no direct competitive or differentiating value to the organization. These technologies are likely important to the organization, but like your legacy elements, none of your customers purchase from your organization because of anything that these technologies support.
The goal within this tier therefore is to ensure reliable operational support at the lowest cost of operations as possible. This will most likely push you to Software-as-a-Service offerings such as Salesforce, Workday and their hundreds (or thousands) of peers. It is important to realize that any element of the technology stack deployed within this tier, by definition, provides no differentiation over your competitors. Of course, that does not mean that these technologies are not important or do not provide value, but as your primary objective is to leverage technology to provide competitive value to the organization, your goal is to deploy these technologies with as little cost and overhead as possible.
While no technology strategy is simple, this approach will help you ensure that you’re making the right investments for the right reasons and help to sort out where to actually apply all of these break-through technologies and approaches. More important, however, is the fact that which technologies or solutions fall into each tier will be different for your organization compared to your competitors – or at least they had better be if you hope to be able to actually differentiate yourself in the market. This approach ensures that competitive and differentiating business value is the driver of your technology strategy and investments. And that’s a recipe for an organization that wins in the Digital Era.
About the Author:
Charles Araujo is an industry analyst, internationally recognized authority on the Digital Enterprise and author of The Quantum Age of IT: Why Everything You Know About IT is About to Change. As Principal Analyst with Intellyx, he writes, speaks and advises organizations on how to navigate through this time of disruption. He is also the founder of The Institute for Digital Transformation and a sought after keynote speaker. He has been a regular contributor to both InformationWeek and CIO Insight and has been quoted or published in Time, CIO, Computerworld, USA Today, and Forbes.