Digital Transformation and the Challenge of Data Center Connectivity

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abstract of digital transformation

DC BLOX Connectivity Article 1 of a 3 Part Series

The job of the IT executive is changing. Rapidly. Digital transformation, driven by the accelerating advances and proliferation of technology, is impacting every industry and disrupting many. The business needs IT to help accelerate growth and avoid serious competitive threats. So, IT executives now sit in the C-Suite with a strategic mission to leverage technology to improve efficiency, decision making, business reach, customer satisfaction and profitability. The digitalization of business is separating the winners from the losers faster than ever. The stakes could not be higher. CIOs need to figure out how to get away from legacy infrastructure that works against the agility needed to win in today’s business environment. Part of that legacy infrastructure may include the company’s own data center.

So, what’s the CIO to do? Let’s start from the beginning.

What is Digital Transformation?

Digital transformation is the integration of digital technology into all areas of a business, fundamentally changing how you operate and deliver value to customers.

Digital transformation goes beyond IT and the traditional data center. It takes legacy models of operating and infrastructure and transforms them into lively digital-engagement models. Digital first, a communications theory invented by online content publishers, bypasses traditional print media in favor of the newer media channels. It provides a perfect illustration for the broader theme. Digital first emphasizes giving customers the information they want to access online, creating opportunities for self-service so they can transact when it’s convenient for them – 24/7/365. Business meetings, shopping, financial transactions, and many more segments of expanding value in day-to-day living are taking place through digital channels.

To enhance customer value, digital technology also works behind the scenes enabling mobile experiences, collecting and analyzing data, transporting information, connecting partners, and automating processes.

Using technology to enhance business is not new, it’s just the increasing pace by which new technology is being introduced. Creating new platforms, defining new paradigms, enabling new experiences. It’s an exponential growth curve that is changing business forever. If there was ever a time for IT to lead, it is now.

Why is Digital Transformation Important?

Those who don’t adapt face the possibility of extinction. It’s a harsh reality. You can’t grasp the future unless you can see what’s happening today. Digital technology moves the business into places customers gravitate. It changes marketing into an ecosystem. The statistics tell the story.

  • A stunning 52% of the Fortune 500 have disappeared in the last 15 years, many from failure to reinvent.
  • The tenure of the old guard Fortune 500 companies is diminishing, meaning they either lose market share, file for bankruptcy, or become acquired by other healthier organizations. The average lifespan of companies on the S&P in 2019 is slightly over 20 years, down from 33 years in 1964, and the trend is accelerating.
  • Companies turning over last year include Barnes & Noble, Eastman Kodak, Sears, and the New York Times. They were all outperformed by more digitally advanced competitors in their industries.
  • The International Data Corporation (IDC) projects 40% of all tech spending will go to digital transformations, reaching $2 Trillion in 2019.

Only one-quarter of the companies we surveyed have a clear understanding of the new and under-performing digital touchpoints. Yet eighty-eight percent of businesses say they are undergoing a digital transformation.

Altimeter

Digital business transformation can fuel a significant competitive advantage. You can see this phenomenon playing out with famous digital disruptors like Amazon, Netflix, and Uber. Research scientist Stephanie Woerner discussed the starting point for competitive advantage in her talk at the Massachusetts Institute of Technology, Sloan Boston Alumni Association, entitled, “Why your company needs a digital business model“. She gives the two critical factors in beginning the process for a strategic digital transformation plan: 1.) you must determine what your competitive advantage is, and 2.) take that competitive advantage to inform how you are going to innovate digital offerings for your customers.

What Is Driving Digital Transformation?

Digital transformation is enabled by technology, but it first and foremost is driven by business strategy. Defining your competitive advantage, enhancing customer experiences, operating more efficiently and reaching business objectives supported by technology. Still, there are some key technology trends that have essentially spawned digital transformation.

Mobile Workforce and Technology

Mobile phones, devices and apps are convenient, programmable and flexible, and have trained users to expect information and services 24/7/365.

The global mobile workforce is set to increase from 1.52 billion in 2017, accounting for 39.3% of the global workforce, to 1.88 billion in 2023, accounting for 43.3% of the global workforce. Globalization will continue to drive the growth of mobile office workers in all regions.

Gina Luk, Strategy Analytics

However, there is also complex infrastructure behind those apps. Mobile apps on mobile devices are connected to back-end systems and databases, and the data must transit multiple providers’ networks with sufficient speed and security from anywhere the end user may be.

Collection and Analysis of Data

Data miners and analysts in the digital economy are harvesting data from this mobile and connected market to gain insight about their customers. Big data, though, presents its own set of challenges. It eats up storage capacity and requires substantial processing power for analysis. The introduction of AI is making up the human resource gap in the data science fields. A benefit to these technologies is that they speed up the analysis of impossibly large volumes of data and provide real-time responses to complex queries.

But collecting large amounts of data for AI analysis comes with massive demands for capacity, which is tending to drive infrastructure into cloud environments for reasons of cost and scalability. However, for certain applications data collection and analysis may need to be done closer to the edge, as for IoT sensors and devices where rapid response is required over low latency connections. In either case, data analysis nearer to the consumer is driving IT environments to further disperse.

New Computing Paradigms

Public cloud services have emerged as a major force in the evolution of IT infrastructure across every industry. With its ability to provide on-demand infrastructure and services, it helps businesses avoid capital outlay, eliminate hardware deployments, and scale applications. According to IDC, the public cloud services market is expected to achieve a five-year (2016-2021) compound annual growth rate (CAGR) of 21.9% with spending totaling $277B in 2021. Infrastructure-as-a-Service (IaaS) and Platform-as-a-Service (PaaS) provide virtualized compute, storage and network infrastructure that enables workloads to run in public cloud environments like AWS, Microsoft and Google versus in their own data center. And businesses rely on Software-as-a-Service (SaaS) platforms like Salesforce to manage customer relationships, ADP for payroll, and NetSuite for Enterprise Resource Planning (ERP). IDC says that Software as a Service (SaaS) will be the largest cloud computing category, capturing nearly two-thirds of all public cloud spending in 2018.

However, legacy systems and applications aren’t always suited to the Cloud. There are time and cost factors to the conversion process. Specialized hardware and environments may also prohibit cloud migration, as well as security or compliance concerns. Hybrid IT solutions provide the answer to keeping those systems not suitable to the cloud in the data center while migrating other workloads into the Cloud. In many cases, legacy systems need to communicate directly with applications in the public cloud. Hybrid IT is growing rapidly as research firm MarketsandMarkets predicts the hybrid cloud market to be $91.7 billion by 2021, up from $33.3 billion in 2016.

Edge computing is emerging as a logical step in the evolution of IT architecture. Certain applications can’t afford the longer travel time and higher latencies inherent in a centralized architecture, so edge computing brings data processing closer to the end user. With the coming of 5G’s high bandwidth and inherently lower network latency, along with the emergence of smaller data centers in tier 2 markets, a tiered data processing model becomes viable. Local computing resources in edge data centers handle immediate application responses, while a centralized tier (in the Cloud, for example) aggregates and analyzes data across many locations. The network capacity and resiliency needed to support high volumes of data coming in and going out of the data center then becomes crucial.

Network Speed and Capacity

Undoubtedly, one of the enablers of the digitization of business with its increasingly distributed infrastructure is the continued growth of high capacity, high-speed networks. To fully leverage the tremendous volume of data being produced and analyzed over multiple touchpoints, there must be networks that can adequately and securely transport it. So those networks need to be big, fast and resilient while being available when and where they are needed.

And those networks are here. As TeleGeography likes to say, “100G is the new 10G.” More high-speed networks are enabling bandwidth-hungry applications, and prices for 10G and 1G connections are all falling rapidly. On top of that, software-defined networking is proving it can deliver the agility to network provisioning that has been the hallmark of cloud computing.

Automation and Collaboration

Businesses continually strive for improvement to the bottom line, so applying technology to make processes more efficient, to make workers more productive, and to enable groups of workers to share knowledge and collaborate is expected. But technologies continue to grow more sophisticated and are contributing ever more significantly to business effectiveness.

For example, AI helps users interact with systems through intelligent conversational interfaces for chat and voice assistants while facilitating automated responses, improving the quality of customer service and reducing resource costs.

Salesforce.com uses LiveOps’ Cloud Contact Center to deliver global customer-support services, a technology that allows contractors to provide support services from home and set their own hours, increasing access to needed tech talent.

Examples of Digital Business Transformation

IT is definitely in the hot seat, but the rewards are there when your company gets things right. “Digital innovators,” says Forrester, “actually rewrite the rules of business, and they do it to improve customer outcomes while simultaneously improving operational objectives.”

OnePlus Systems – Smart Dumpsters
OnePlus Systems, based in Northbrook Illinois, is the original manufacturer of container fullness and control systems. These systems equip containers with sensors designed to weigh them and to transmit information to a central database, where a routing application schedules pickup only when they are full. Their solutions allow the world’s largest retailers, manufacturers, property managers, hospitals and hospitality operators to reduce costs, increase operating efficiency, and gain insight into the daily functioning of their businesses.

Imagine now five companies bidding in a municipality for a waste removal contract. The company deploying OnePlus Systems’ solution outperforms and out-prices the competition. When a company deploys technology that changes the underlying economics of the market, the competition has to transform too.

Caterpillar’s Predictive Diagnostics “Repair Before Failure”
Caterpillar, the heavy machinery manufacturer, provides a telematic predictive diagnostic hardware system that operates on the premise that prevention is better than cure. It builds sensors into their equipment that will alert fleet owners when something like a transmission is at risk, something that sure is handy when your 100-ton crane is 50-miles away from your repair shop. Caterpillar has done the research and provides a strategy on how to cut costs in half or more by following early maintenance strategies. When you are spending millions on fleet purchases, the investment seems much safer when you know equipment will last longer and perform better.

Caterpillar pursued this new technology specifically to ward off competition, and it obviously raises the bar for any unfortunate company they are up against.

Obstacles to Digital Transformation within the Enterprise

After surveying over 1000 business decision makers, Riverbed found that five of the most significant barriers when working towards a better digital strategy include:

  1. budget constraints (51%)
  2. overly complex or rigid legacy IT infrastructure (45%)
  3. lack of full visibility across the digital or end-user experience (40%)
  4. lack of available or appropriately-skilled personnel (39%)
  5. lack of buy-in from leadership on prioritizing digital initiatives (37%)

The report also revealed that 77% of global decision makers believe it’s important for businesses to actively invest in improving digital experiences within the next year. Some key areas business decision makers suggest investing in are modernizing networks and infrastructure, better monitoring and managing user digital experience, improving service desk capabilities, and accelerating application development.

With an increasingly distributed IT infrastructure, it’s no wonder that modernizing networks and infrastructure is so critical to their success and is at the top of their to-do list.

A Key Problem with Digital Transformation

Mobile users want to consume services from wherever they are. IT departments need to leverage SaaS applications and public cloud infrastructure to avoid costly and time-consuming on-premise deployments. Databases must be managed securely in the company’s data center. Information needs to be shared with partners. Data has to be protected off-site. So, for a business planning their digital strategy, let’s review the components and relationships that may be involved.

Partners – Business is frequently done in cooperation with partners. For example, supply chains require the exchange of orders, inventory, shipment schedules, pricing and invoicing and interconnectivity is required to facilitate the exchange of this information digitally.

Mobile Apps – Applications may need to extract data from some remote system and to present it to the mobile user from anywhere and then to execute and manage transactions such as purchases and deliveries.

Cloud Providers – E-Commerce, remote data backup, databases, Internet-of-Things and websites are just a few of the myriad of applications and services that are running in cloud environments. And in hybrid IT environments, there may be interaction between private cloud or legacy systems running in company-owned data centers and public cloud apps. Businesses are also increasingly using multiple cloud providers to optimize a variety of use cases.

SaaS Providers – Services like Salesforce, ADP and Microsoft Office 365 support millions of users and are accessed from wherever those users are located, worldwide. Of course, users expect performance as if they were accessing a local system. In addition, interaction may be required with company-developed business applications.

Devices & Sensors – The Internet of Things (aka IoT) is resulting in a proliferation of devices requiring the movement of data across networks. Think about a home automation system that allows users to control thermostats and security cameras from a mobile phone. Or a sensor in a wearable device collecting information and feeding health recommendations back to the wearer. Current projections are 25 billion devices will be connected in the next five years. According to the McKinsey 2017 Enterprise IoT Executive Survey, 96 percent of companies expect to increase their IoT spending over the next three years, with some planning to devote as much as a quarter of their IT expenditures to IoT-related capabilities.

Customers – Providing access to your business’s services 24/7/365 at the convenience and location of the end customer is a main objective of digital transformation initiatives. Pushing out user interfaces far beyond the company’s data center, while enabling rapid, secure access to sensitive data is at the core of the challenge.

With the spreading of IT infrastructure far and wide, and an increasingly distributed ecosystem of partners, how will the IT organization connect it all? The local communications provider may be able to address connections from the company-owned data center to some components, but they are often limited in their reach, and there are few alternative options. Can the provider supply a private connection directly to your public cloud provider? To multiple providers? Can they provide the bandwidth needed for high-volume applications? Will they provision a low-latency connection to an Internet Exchange to access hundreds of other providers? How quickly can they provision the services you need? Are their solutions cost-prohibitive with no alternative vendors to consider?

Many businesses are recognizing the folly of trying to connect everything from their company-owned data center. So, they are moving infrastructure to public cloud providers instead, believing that they can address their connectivity challenges. But can they?

Stay tuned for the next article in our Connectivity Series, The Cloud vs. Colocation for Connecting Digital Infrastructure. We will explore why the cloud may not always be a good platform for integrating today’s distributed IT infrastructure, and suggest how a connected multi-tenant data center may be a foundational element of ITs future architecture.

About DC BLOX
DC BLOX is a multi-tenant data center partner offering the infrastructure and connectivity essential to power today’s digital business. DC BLOX’s, software defined network services enable access to a wealth of providers, partners and platforms to businesses across the Southeast. DC BLOX data center locations are in Atlanta, GA, Chattanooga, TN, and Huntsville, AL. Its newest location is under construction in Birmingham, AL.
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