This time, we will consider what such companies are looking for and how they are trying to change.
table of contents
- 1. DX problems exposed due to the spread of coronavirus infection
- 2. Characteristics of legacy systems that hinder the realization of DX
- 2-1. Black box
- 2-2. Colonization
- 2-3.Vendor dependent
- 3. What companies looking to break away from legacy systems seek
- 3-1. Renewal of internal systems
- 3-2. Digital human resources who can understand business
- 4. Changes occurring in companies aiming to break away from legacy systems
- 4-1. Cloud services are increasingly used
- 4-2. New partnerships with vendors will be built
- 4-3. Forming a digital platform will expand cooperative relationships
- 5. In an era where proposal-oriented engineers who connect business and technology are active
Efforts to realize DX (digital transformation) are underway across industries and industries. On the other hand, many companies face problems with legacy systems. The current situation is that old systems, once called “mainframes” or “office computers,” are hindering organizational change.
Even so, more and more companies will try to solve the problem and turn to DX. This time, we will consider what such companies are looking for and how they are trying to change.
DX problems exposed due to the spread of coronavirus infection
In the wake of the spread of the new coronavirus, digital utilization in various fields has been promoted at a rapid pace. These include moving healthcare and education online and introducing telework in companies. It can be said that Japan as a whole was forced to confront the need for DX.
Amid this trend, the so-called ` `2025 cliff ” problem, in which aging in-house systems become a “hindrance” to DX, is becoming a reality. It is said that if Japanese companies do not solve this problem quickly, they will be unable to compete in the increasingly digitalized global market due to the increased costs of maintaining the current system.
Characteristics of legacy systems that hinder the realization of DX
Legacy systems aren’t just a problem because they’re old. The real problem is that it hinders the introduction of new technology and increases maintenance costs.
However, why are such systems still in use in so many companies? First, let’s take a look at the characteristics common to many legacy systems.
black box
Many companies have long avoided modernizing their internal systems. In-house systems were seen as a way to handle unproductive administrative tasks and procedures and were not a target for active investment. Particularly in recent years, due to the harsh economic environment, systems that have been “extended” for 20 to 30 years are no longer rare.
Many of the systems that have become legacies in this way have become complex due to repeated “patchwork” renovations. Nowadays, there are no people in charge of deeply understanding the system, and there are many cases where the system has become a black box that no one can touch. Even if we feel the need to make improvements or add functionality, it is difficult to implement them, and this is one of the causes of a loss of flexibility as a company.
Colonization
Legacy systems often result in organizational silos. Overly customized systems for each department exist within a company. This situation also leads to the distribution of data held by companies.
Organizational silos are probably the result of each department seeking its optimal solution. However, there is a risk that there will be a lot of waste when cross-divisional work occurs, which may reduce the productivity of the company as a whole. In addition, how to utilize data is important for realizing DX. Data shouldn’t be managed separately in each department, hindering organizational data utilization.
Check out this article to learn more about silos and the negative effects they have on businesses.
What is a silo? The harms that fragmented system designs and vertical organizational structures bring to companies
Vendor dependent
Many companies rely on external IT vendors to develop internal systems. There’s nothing wrong with that in itself. However, abandoning development entirely can lead to major problems. If you keep giving up on them for too long, you end up in a strange situation where the IT vendor is more knowledgeable about their systems.
This situation is called “vendor lock-in.” Your dependence on a specific IT vendor has become too great, and you are no longer able to control the internal systems that should be your own. However, as long as the system is still in operation, it is difficult to escape from the current situation. On top of that, there is the problem that support can be discontinued at any time, so you have to continue using the system with all the risks.
What companies looking to break away from legacy systems are looking for
Breaking away from legacy systems is an important theme for companies aiming to transform themselves to fit the future. To that end, companies are looking for next-generation systems and new talent.
Renewal of internal systems
Companies are moving away from legacy systems and at the same time moving to new systems that can serve as the foundation of their business. This does not mean recreating the same system as before. This is because it is clear that if we do not create a system that is different from what we have had so far, it will lead to “re-legacy”.
The new system must be consistent and flexible. Consistency means having a common system that can be used uniformly from any department within the company. This will enable companies to centrally manage and utilize the data they own in an organized manner. Flexibility means being able to quickly modify the system to suit your needs. In the future, companies will need to be agile to adapt to the rapidly changing digital market.
It is not very realistic to make such a new system upwardly compatible with the legacy system. Many companies decide to sort out the parts of their existing systems that should be kept and discard the rest.
Digital talent who understands business
It is said that approximately 70% of domestic digital human resources are concentrated in IT vendors. This is the exact opposite situation in the United States. It can be said that Japanese companies are in a situation where it is difficult to produce their systems in-house. To aim to revamp internal systems, the issue is how to secure human resources to support technology.
As companies seek to increase the proportion of in-house production, the presence of engineers with diverse perspectives will become increasingly valuable. These are people who can come up with ideas for new systems from a business perspective, rather than just creating systems based on requests. At the same time, there is a strong need for employees to have the initiative to take action on their own.
Changes occurring in companies aiming to break away from legacy systems
Where are Japanese companies aiming to break away from legacy systems heading? We will introduce some of the changes that are expected to occur in companies in the future.
Cloud services are increasingly used
In Japan, it is said that approximately 80% of the IT budget is the cost of maintaining legacy systems. To reduce costs, migrating your internal systems to the cloud will be one of the effective actions.
Now that various cloud services are available in areas such as document management and communication, it is possible to replace current systems to some extent by simply using existing services as is. The budget saved by utilizing the cloud can be allocated to things like introducing the latest technology.
New partnerships are built with vendors.
In the future, more companies will likely reconsider their relationships with IT vendors. Possible options include working to develop digital human resources in-house with the cooperation of a vendor who is strong in IT technology or launching a new business through a joint venture.
This trend aims for companies and IT vendors to become “co-creative partners” in the digital market. This can be said to be a way to solve the shortage of human resources and vendor dependence all at once in the Japanese market.
Collaboration expands through the formation of a digital platform
In addition to legacy systems, efforts to reduce development costs and streamline IT investments will become more active. For companies to maintain a dominant position in the digital market, it is important to introduce new technologies and develop their strengths.
It is thought that the “in-house principle” of developing everything in-house will decrease in the future. Instead, common digital platforms will form within each industry. This will enable us to build cooperative relationships with other companies in areas where commonality is possible while strengthening investment in areas where we need to compete.
In an era where proposal-oriented engineers who connect business and technology are active
Not only are legacy systems expensive to maintain, but they also inhibit the adoption of new technology. To compete in an increasingly digital and globalized market, companies must modernize their internal systems and prepare for change. Proposal-oriented engineers who can come up with ideas for new systems from a business perspective and act on their initiative will become a valuable asset.
