In today’s era of global digitalization there are many examples that show that IT matters. Developments like cloud computing, the IoT and AI are proving that IT has again become a business driver, says WERNER VOGELS, CTO of Amazon.com.
How companies can use ideas from mass production to create business with data
Strategically, IT doesn’t matter. That was the provocative thesis of a much-talked-about article from 2003 in the Harvard Business Review by the US publicist Nicolas Carr. Back then, companies spent more than half of their entire investment for their IT, in a non-differentiating way. In a world in which tools are equally accessible for every company, they wouldn’t offer any competitive advantage – so went the argument. The author recommended steering investments toward strategically relevant resources instead. In the years that followed, many companies outsourced their IT activities because they no longer regarded them as being part of the core business.
A new age
Nearly 15 years later, the situation has changed. In today’s era of global digitalization there are many examples that show that IT does matter. Developments like cloud computing, the internet of things, artificial intelligence, and machine learning are proving that IT has (again) become a strategic business driver. This is transforming the way companies offer products and services to their customers today. Take the example of industrial manufacturing: in prototyping, drafts for technologically complex products are no longer physically produced; rather, their characteristics can be tested in a purely virtual fashion at every location across the globe by using simulations. The German startup SimScale makes use of this trend. The founders had noticed that in many companies, product designers worked in a very detached manner from the rest of production. The SimScale platform can be accessed through a normal web browser. In this way, designers are part of an ecosystem in which the functionalities of simulations, data and people come together, enabling them to develop better products faster.
Value-added services are also playing an increasingly important role for both companies and their customers. For example, Kärcher, the maker of cleaning technologies, manages its entire fleet through the cloud solution “Kärcher Fleet”. This transmits data from the company’s cleaning devices e.g. about the status of maintenance and loading, when the machines are used, and where the machines are located. The benefit for customers: Authorized users can view this data and therefore manage their inventories across different sites, making the maintenance processes much more efficient.
Kärcher benefits as well: By developing this service, the company gets exact insight into how the machines are actually used by its customers. By knowing this, Kärcher can generate new top-line revenue in the form of subscription models for its analysis portal.
More than mere support
These examples underline that the purpose of software today is not solely to support business processes, but that software solutions have broadly become an essential element in multiple business areas. This starts with integrated platforms that can manage all activities, from market research to production to logistics. Today, IT is the foundation of digital business models, and therefore has a value-added role in and of itself. That can be seen when sales people, for example, interact with their customers in online shops or via mobile apps. Marketers use big data and artificial intelligence to find out more about the future needs of their customers. Breuninger, a fashion department store chain steeped in tradition, has recognized this and relies on a self-developed e-commerce platform in the AWS Cloud. Breuninger uses modern templates for software development, such as Self-Contained Systems (SCS), so that it can increase the speed of software development with agile and autonomous teams and quickly test new features. Each team acts according to the principle: “You build it, you run it”. Hence, the teams are themselves responsible for the productive operation of the software. The advantage of this approach is that when designing new applications, there is already a focus on the operating aspects.
Value creation through data
In a digital economy, data are at the core of value creation, whereas physical assets are losing their significance in business models. Until 1992, the most highly valued companies in the S&P 500 Index were those that made or distributed things (for example the pharmaceutical industry, trade). Today, developers of technology (for example medical technology, software) and platform operators (social media enablers, credit card companies) are at the top. Also, trade with data contributes more to global growth than trade with goods. Therefore, IT has never been more important for strategy than it is now – not only for us, but for every company in the digital age. Anyone who wants to further develop his business digitally can’t do that today without at the same time thinking about which IT infrastructure, which software and which algorithms he needs in order to achieve his plans.
If data take center stage then companies must learn how to create added value out of it – namely by combining the data they own with external data sources and by using modern, automated analytics processes. This is done through software and IT services that are delivered through software APIs.
Companies that want to become successful and innovative digital players need to get better at building software solutions.We should ponder how we can organize the ‘production’ of data in such a way so that we ultimately come out with a competitive advantage. We need mechanisms that enable the mass production of data using software and hardware capabilities. These mechanisms need to be lean, seamless and effective. At the same time, we need to ensure that quality requirements can be met. Those are exactly the challenges that were solved for physical goods through the industrialization of manufacturing processes. A company that wants to industrialize ‘software production’ needs to find ideas on how to achieve the same kind of lean and qualitatively first-class mass production that has already occurred for industrial goods. And inevitably, the first place to look will be lean production approaches such as Kanban and Kaizen, or total quality management. In the 1980s, companies like Toyota revolutionized the production process by reengineering the entire organization and focusing the company on similar principles. Creating those conditions, both from an organizational and IT- standpoint, is one of the biggest challenges that companies face in the digital age.
Learn from lean
Can we transfer this success model to IT as well? The answer is yes. In the digital world, it is decisive to activate data-centric processes and continuously improve them. Thus, any obstacles that stand in the way of experimentation and the further development of new ideas should be removed as fast as possible. Every new IT project should be regarded as an idea that must go through a data factory – a fully equipped production site with common processes that can be easily maintained. The end-product is high-quality services or algorithms that support digital business models. Digital companies differentiate themselves through their ideas, data and customer relationships. Those that find a functioning digital business model the fastest will have a competitive edge. Above all, the barrier between software development and the operating business has to be overcome. The reason is that the success and speed and frequency of these experiments depend on the performance of IT development, and at the same time on the relevance of the solutions for business operations. Autoscout24 has gained an enormous amount of agility through its cloud solution. The company meanwhile has 15 autonomous interdisciplinary teams working constantly to test and explore new services. The main goal in all this is to have the possibility to quickly iterate experiments through the widest range of architectures, combine services with each other, and compare approaches.
In order to become as agile as Autoscout24, companies need a “machine” that produces ideas. Why not transfer the success formulas from industrial manufacturing and the principles of quality management to the creation of software?
German industrial companies in particular possess a manufacturing excellence that has been built up over many decades. Where applicable, they should do their best to transfer this knowledge to their IT, and in particular to their software development.
In many companies, internal IT knowhow has not developed fast enough in the last few years – quite contrary to the technological possibilities. Customers provide feedback online immediately after their purchase. Real-time analyses are possible through big data and software updates are generated daily through the cloud. Often, the IT organization and its associated processes couldn’t keep up. As a consequence, specialist departments with the structures of yesterday are supposed to fulfill customer requirements of tomorrow. Bringing innovative products and services quickly to market is not possible with long-term IT sourcing cycles. It’s no wonder that many of specialist departments try to circumvent their own IT department, for example by shifting activities to the cloud, which offers many powerful IT building blocks through easy-to-use APIs for which companies previously had to operate complicated software and infrastructure. Such a decentralized ‘shadow IT’ delivers no improvements. The end effect is that the complexity of the system increases, which is not efficient. This pattern should be broken. Development and Operations need to work hand in hand instead of working sequentially after each other, as in the old world. And ideally, this should be done in many projects running parallel. Under the heading of DevOps – the combination of “Development and Operations” – IT guru Gene Kim has described the core characteristics of this machinery.
Ensuring the flow
Kim argues that theorganization must be built around the customer benefit and that the flow of projects must be as smooth as possible. Hurdles that block the creation of client benefits should be identified and removed. At Amazon this starts by staffing projects with cross-functional and interdisciplinary teams as a rule. Furthermore, for the sake of agility the teams should not exceed a certain size. We have a rule that teams should be exactly the size that allows everyone to feel full after eating two (large!) pizzas. This approach reduces the number of necessary handovers, increases responsibility, and allows the team to provide customers with software faster.
The earlier client feedback flows back into the “production process”, the better. In addition, companies must ensure that every piece of feedback is applied to future projects. To avoid getting lost in endless feedback loops, this should be organized in a lean way: Obtaining the feedback of internal and external stakeholders must by no means hamper the development process.
Learning to take risks
“Good intentions never work, you need good mechanisms to make anything happen,” says Jeff Bezos. For that, you need a corporate culture that teaches employees to experiment constantly and deliver. With every new experiment, one should risk yet another small step forward behind the previous step. At the same time, from every team we need data based on predefined KPIs about the impact of the experiments. And we need to establish mechanisms that take effect immediately if we go too far or if something goes wrong, for example if the solution never reached the customer.
Anyone who has tried this knows it’s not easy to start your own digital revolution in the company and keep the momentum going. P3 advises cellular operators and offers its customers access to data that provide information about the quality of cellular networks (for example signal strength, broken connection and the data throughput) – worldwide and independent of the network operator and cellular provider. This allows the customers to come up with measures in order to expand their networks or new offerings for a more efficient utilization of their capacity. By introducing DevOps tools, P3 can define an automated process that implements the required compute infrastructure in the AWS Cloud and deploys project-specific software packages with the push of a button. Moreover, the process definition can be revised by developers, the business or data scientists at any time, for example in order to develop new regions, add analytics software or implement new AWS services. Now P3 can focus fully on its core competence, namely developing its proprietary software. Data scientists can use their freed-up resources to analyze in real time data that are collected from around the world and put insights from the analysis at the disposal of their clients
The cloud offers IT limitless possibilities on the technical side, from which new opportunities have been born. But it’s becoming ever clearer what is required in order to make use of these opportunities. Technologies change faster than people. And individuals faster than entire organizations. Tackling these challenges is a strategic necessity. Changing the organization is the next bottleneck on the way to becoming a digital champion.
Money talks and electronic gaming evolves
Computer gaming has evolved dramatically in the last two years, as it follows the money, writes ARTHUR GOLDSTUCK in the second of a two-part series.
The clue that gaming has become big business in South Africa was delivered by a non-gaming brand. When Comic Con, an American popular culture convention that has become a mecca for comics enthusiasts, was hosted in South Arica for the first time last month, it used gaming as the major drawcard. More than 45 000 people attended.
The event and its attendance was expected to be a major dampener for the annual rAge gaming expo, which took place just weeks later. Instead, rAge saw only a marginal fall in visitor numbers. No less than 34 000 people descended on the Ticketpro Dome for the chaos of cosplay, LAN gaming, virtual reality, board gaming and new video games.
It proved not only that there was room for more than one major gaming event, but also that a massive market exists for the sector in South Africa. And with a large market, one also found numerous gaming niches that either emerged afresh or will keep going over the years. One of these, LAN (for Local Area Network) gaming, which sees hordes of players camping out at the venue for three days to play each other on elaborate computer rigs, was back as strong as ever at rAge.
MWeb provided an 8Gbps line to the expo, to connect all these gamers, and recorded 120TB in downloads and 15Tb in uploads – a total that would have used up the entire country’s bandwidth a few years ago.
“LANs are supposed to be a thing of the past, yet we buck the trend each year,” says Michael James, senior project manager and owner of rAge. “It is more of a spectacle than a simple LAN, so I can understand.”
New phenomena, often associated with the flavour of the moment, also emerge every year.
“Fortnite is a good example this year of how we evolve,” says James. “It’s a crazy huge phenomenon and nobody was servicing the demand from a tournament point of view. So rAge and Xbox created a casual LAN tournament that anyone could enter and win a prize. I think the top 10 people got something each round.”
Read on to see how esports is starting to make an impact in gaming.
Blockchain is generally associated with Bitcoin and other cryptocurrencies, but these are just the tip of the iceberg, says ESET Southern Africa.
This technology was originally conceived in 1991, when Stuart Haber and W. Scott Stornetta described their first work on a chain of cryptographically secured blocks, but only gained notoriety in 2008, when it became popular with the arrival of Bitcoin. It is currently gaining demand in other commercial applications and its annual growth is expected to reach 51% by 2022 in numerous markets, such as those of financial institutions and the Internet of Things (IoT), according to MarketWatch.
What is blockchain?
A blockchain is a unique, consensual record that is distributed over multiple network nodes. In the case of cryptocurrencies, think of it as the accounting ledger where each transaction is recorded.
A blockchain transaction is complex and can be difficult to understand if you delve into the inner details of how it works, but the basic idea is simple to follow.
Each block stores:
– A number of valid records or transactions.
– Information referring to that block.
– A link to the previous block and next block through the hash of each block—a unique code that can be thought of as the block’s fingerprint.
Accordingly, each block has a specific and immovable place within the chain, since each block contains information from the hash of the previous block. The entire chain is stored in each network node that makes up the blockchain, so an exact copy of the chain is stored in all network participants.
As new records are created, they are first verified and validated by the network nodes and then added to a new block that is linked to the chain.
How is blockchain so secure?
Being a distributed technology in which each network node stores an exact copy of the chain, the availability of the information is guaranteed at all times. So if an attacker wanted to cause a denial-of-service attack, they would have to annul all network nodes since it only takes one node to be operative for the information to be available.
Besides that, since each record is consensual, and all nodes contain the same information, it is almost impossible to alter it, ensuring its integrity. If an attacker wanted to modify the information in a blockchain, they would have to modify the entire chain in at least 51% of the nodes.
In blockchain, data is distributed across all network nodes. With no central node, all participate equally, storing, and validating all information. It is a very powerful tool for transmitting and storing information in a reliable way; a decentralised model in which the information belongs to us, since we do not need a company to provide the service.
What else can blockchain be used for?
Essentially, blockchain can be used to store any type of information that must be kept intact and remain available in a secure, decentralised and cheaper way than through intermediaries. Moreover, since the information stored is encrypted, its confidentiality can be guaranteed, as only those who have the encryption key can access it.
Use of blockchain in healthcare
Health records could be consolidated and stored in blockchain, for instance. This would mean that the medical history of each patient would be safe and, at the same time, available to each doctor authorised, regardless of the health centre where the patient was treated. Even the pharmaceutical industry could use this technology to verify medicines and prevent counterfeiting.
Use of blockchain for documents
Blockchain would also be very useful for managing digital assets and documentation. Up to now, the problem with digital is that everything is easy to copy, but Blockchain allows you to record purchases, deeds, documents, or any other type of online asset without them being falsified.
Other blockchain uses
This technology could also revolutionise the Internet of Things (IoT) market where the challenge lies in the millions of devices connected to the internet that must be managed by the supplier companies. In a few years’ time, the centralised model won’t be able to support so many devices, not to mention the fact that many of these are not secure enough. With blockchain, devices can communicate through the network directly, safely, and reliably with no need for intermediaries.
Blockchain allows you to verify, validate, track, and store all types of information, from digital certificates, democratic voting systems, logistics and messaging services, to intelligent contracts and, of course, money and financial transactions.
Without doubt, blockchain has turned the immutable and decentralized layer the internet has always dreamed about into a reality. This technology takes reliance out of the equation and replaces it with mathematical fact.