Avnet IT sheds operations legacy to support business transformation

When Avnet moved from just distributing hardware to providing IoT services, the IT organization had to transform as well.  How do you move from an on-prem focused team with an SAP-heavy infrastructure to a business-focused team with a microservices architecture?  Max Chan, who became CIO after six years with the company, says that mission statements, rotational programs, and low-code applications are the right start.

Martha Heller: How are digital technologies impacting Avnet’s business model?

Max Chan: For nearly 100 years, Avnet has bought, sold, and shipped electronics components all over the world. But in the last 10 years, our industry has seen a major market shift as customers and suppliers have gone through significant changes. To better meet our customers’ needs, we’ve expanded from being just a distributor to becoming a technology solutions provider.

When we first started this journey, we basically added IoT products to our traditional business, but we did not change our business model. But today, we are driving a full transformation not only in how we do business, but in the business we are in.

How did your company begin the transformation?

We started by creating a new ecosystem for our customers. This ecosystem enables us to help professional engineers, entrepreneurs and startups take their tech projects from idea to design and from prototype to production. We then continued both to develop and acquire the capabilities we needed to extend our reach beyond our traditional customer segments to businesses in need of IoT.

For example, we can now manage customers’ IoT data on our platform and provide them with analytics capabilities. We also have a new partner program that brings together a network of experts, tools and resources to give our customers what they need to bring their products to market. We can now help customers put the required pieces of IoT together: the device, the gateway, the network, the cloud, the applications and the artificial intelligence that brings them the insights from all of the connected devices.

How are you changing IT to support this transformation?

For the last 20 years, we ran everything on an SAP platform, but when we moved into the IoT space, we realized that the SAP platform no longer met our needs.  

To shift from our traditional SAP focus, we created a new three-part mission statement:

1. We will be more agile. For us, agile is less about the formal development methodology and more about focusing on solutions that we can deliver in six weeks or less.
2. Everything we do in IT will create value to the business. We will not move forward with requests that are not directly related to solving a problem.
3. Everything we do will be cost-effective. After 20 years of SAP, this is a game changer.

From that mission statement, we identified five challenges for the IT organization:

1. How can we drive efficiency by reducing our cost to serve on a year by year basis?
2. How can we leverage governance to ensure that we do what is critical to the business?
3. How can we run the business at a reduced cost but still have performance, resilience, and scalability?
4. How do we ensure cybersecurity and compliance?
5. How can we move our workload away from on-prem to the cloud?

How have you begun to execute on those challenges?

We knew that we needed IT to move away from operations to focus on business transformation, but we had to think through how to change the culture. If we just told the team that after spending the last 12 years building a world class data center here in Phoenix, we are chucking it and moving to the cloud, they would pull out their hair.

So, we organized our IT transformation into four steps.

Step 1: Over the last nine months, we moved application support to Infosys. This is helping IT move from “hands-on keyboards” to defining business problems.

Step 2: We are simplifying the landscape so that it is more modular, which allows us to introduce capabilities, like IoT, into our new business model. We are shifting to microservices so that we no longer have replication of data on different systems.  

Step 3:  With this microservices architecture, we are introducing new technologies into the stack, like Salesforce and technologies in the robotic process automation space.

Step 4: With low-code platforms, we are leveraging the concept of “citizen developer” so the business does not always have to rely on IT for technology capabilities.

What is an example of a low-code solution?

We work with a large number of technology OEMs and the technology is not always interchangeable from one OEM to another. This makes matching technology to a particular OEM a complex process. With a low-code application, people in supply chain, who have both deep business knowledge and an affinity for data, can create an application that simplifies the matching validation process. They don’t have to wait in the IT queue.

How are you changing the culture in IT?

We are evolving IT’s brand across the company from operations support and IT delivery to value creation and innovation. We are starting by ridding ourselves of operations support completely and setting a goal of being involved in only 30 percent of the delivery work. Our expertise is the business, so we should leverage strategic partners to deliver. This is a big shift for us. A year ago, the team spent 95 percent of its time on operations and delivery. We are completely changing that profile.

For innovation, we have initiated a rotational assignment where IT people, like enterprise architects or supply chain technology leaders, leave their day job for six months and go out to see what new technologies can solve business problems or simplify our landscape.

What is your advice to CIOs leading a major transformation?

Make sure you, the senior leadership team, and your CEO are all talking about transformation in the same way. Everyone needs to know this is not just Max driving his own agenda. When our 15,000 employees hear the CEO talk about cloud and agility in the same way that I talk about it, they know that we are really doing this.