Where are enterprises in their digitization journey?
So, where are enterprises in their Digital Transformation journey currently? As explained in the previous blog on “Which Paths are Enterprises taking to SAP S/4HANA”, there are essentially two methods of digitization, that is, Core-to-Edge and Edge-to-Core.
However, most of the organizations have a landscape with a non-digitized core and some parts of the edge digitized. Edge digitization includes digitization of processes such as Vendor Management, Business Planning, E-commerce, Regulatory compliance, Customer Relationship Management (CRM), Learning Management System (LMS), and Performance Management among others. Some organizations also have analytics on the cloud, although it is a much more difficult option. Apart from the above, recent trends suggest that Business Planning and Consolidation in the cloud is also a viable option. Enterprises are somewhere between 40 to 50 of the transformation journey. And that is when the realization starts to set in. Going full scale and trying to digitize the edge can lead to some major problems while connecting back to the non-digitized core. Most of the enterprises start facing unforeseen challenges and difficulties at this point. So, that is where most of the organizations are these days- 50 to 60 percent of their edge digitized and they have a non-digitized or not so intelligent core like SAP has with SAP S/4HANA.
So, the preferred option is the Edge-to-Core approach. Most of the enterprises today are somewhere between the 20 to 50 percent of their edge digitization cycle and that is where the pain starts kicking in. When they want to further digitize the edge, they already start seeing difficulties in connecting back to the non-digitized core. That is when the problems start getting bigger. Enterprises also realize that the effort of actually connecting the edge back to the core is much higher. In one particular instance, the cost of reconnecting the edge back to the core was more than the cost of the edge itself. The customer couldn’t understand why it was taking so much of effort to connect back to an SAP ECC system. This was because the ECC system did not have a fully deployed micro-services architecture.
Organizations are at crossroads, so they are left with a decision to go ahead and start digitizing the core or start moving things in parallel between the edge and the core. And also, digitization must be done at an optimal cost to provide better value to the enterprise without actually incurring too much of license costs. This means that further digitization of the edge is not possible without the core getting digitized in the first place.
So, customers really are at crossroads where they have to get back to digitizing the core.