The Network ROI of Digital Transformation

BrandPost By Steve Wexler
Jun 22, 2017

By taking a business-value, network-focused approach to digital transformation, payback can be achieved in as little as six months.rn

“In 2017, global organizations will spend $1.2 trillion on digital transformation with discrete and process manufacturers contributing almost 30% of this spending, while the fastest growth will come from retail, healthcare providers, insurance, and banking,” says Eileen Smith, program director for IDC’s Customer Insights & Analysis Group.

The IT industry loves buzz words and hyperbole, but rarely do they live up to their advanced billing. That’s not the case with digital transformation, the business phenomenon being fuelled by technology — i.e., cloud computing, Internet of Things (IoT), big data and analytics (BDA), mobility, social media and security. DT is changing everything, and it’s quickly becoming a case of “digitize or die.”

Disruption is the new normal:

  • 42% of enterprises expect major disruption as the deployment of new digital technologies continues to play out in their respective fields;
  • 55% of major organizations are being increasingly threatened by startups, a factor that is driving 40% of them to become fully digitally transformed by the end of 2018.

The business stakes are immense: according to more than 2,000 senior executives from nine major industrial sectors and 26 countries, digital transformation will increase annual revenues by an average of 2.9% and reduce costs by an average of 3.6% per year. That’s game changing. But for those companies going all in on DT, the benefits lead to an extinction-level event: they’re looking at both revenue gains and cost reductions in excess of 30%, at the same time.

IDC predicts that spending on digital transformation technologies will exceed $1.2 trillion in 2017, an increase of 17.8% over 2016.

“Changing competitive landscapes and consumerism are disrupting businesses and creating an imperative to invest in digital transformation, unleashing the power of information across the enterprise and thereby improving the customer experience, operational efficiencies, and optimizing the workforce,” says Eileen Smith, program director in IDC’s Customer Insights & Analysis Group.

So it’s no longer a case of if you will embrace digital transformation, but when and how you will pay for it. The top three digital transformation initiatives at organizations today are:

* Accelerating innovation * Modernizing IT infrastructure for increased agility, flexibility, management, and security * Improving operational agility to more rapidly adapt to change

“Digital transformation investments are ultimately about business survival through disruption,” writes Dan Bieler, principal analyst, Forrester Research. “Disruptive transformation must be viewed as a strategic investment, with the real value of DT investments relating to long-term revenue growth, not short-term technology ROI.”

“This needs to be a business-driven event,” says Dave Mihelcic, head of federal strategy and technology, Juniper Networks. “Digital transformation must focus on business value — both to your customers as well as internal stakeholders.”

CIOs need to be directly involved in this business-driven discussion, Mihelcic adds. The new conversation is about how to reduce workload for the IT staff, reduce the total cost of ownership, and “deliver new and innovative services to end customers as well as to internal customers or employees, so they can innovate and deliver to their customers faster.”

With IT budgets experiencing anemic growth— 1.4% in 2017, and just 2.9% in 2018 — you might consider starting with network infrastructure improvements to fund your DT initiatives. The reduction in costs, improvements in performance, and rapid returns on investment mean your network upgrades can pay for themselves.

Network Upgrades to Fund DT Initiatives

The explosive growth in data and devices make a network that’s responsive, agile, and easily managed, and one that is automated, critical. By 2020 there will be 4.1 billion Internet users, 26.3 billion networked devices and connections, and datacenter traffic will jump 330%.

The network is at the heart of any digital transformation: in a 24×365 connected world, no network means no business. Yet IDC has stated that in the next two years almost a third (30%) of large and midsize businesses will suffer a service failure due to mismatches in power delivery and IT workload profiles caused by hardware obsolescence.

Even without the threat of shutdowns, enterprises today waste more than 50% of their IT budgets on inefficient application workload placement, configuration, and management. Most businesses experience network errors caused by human mistakes on a regular basis, and non-automated networks average 5-6 errors per month.

Selecting an appropriate DT initiative should start with looking for “places where process optimization and automation can have the maximum impact,” Mihelcic says.

However, you also need to consider standards, he cautions, because not all networking vendors’ standards are the same. “It’s critical to have standards based approaches.”

A DT-ready network can be surprisingly affordable: an average return on investment of 349% over five years and payback in as little as six months. Automation is an essential element of such a network; an IDC study found that companies lowered their networking costs by 33% using network automation solutions from Juniper.

The focus on simplification and abstraction reduces operational complexity, enabling customers to deploy new network services faster, and improve capacity utilization and network resiliency through deep telemetry. Juniper’s zero-touch networks rely on telemetry, automation, machine learning, and programming with declarative intent.

Juniper believes that network automation is one of the critical approaches a CIO can take to reducing TCO. It’s an evolutionary path that starts with human-driven automation, followed by event-driven automation and finally machine-driven automation, where machine-learning tools are used to train the system, Mihelcic says.

“Really this is the ultimate goal of any network automation team,” he says. “Juniper has already moved to machine-driven automation in the security space, where we have the software-defined secure network, or SDSN, where the analytics actually learn from network events.”

Your network is the foundation on which digital transformation is built, connecting you and your customers, your critical applications, and your staff and partners. The fact that making your network DT-ready will pay for itself, while also helping to fund additional DT initiatives, is an added bonus.