The Boston Consulting Group and CAST, a leader in software analysis and measurement, have established a partnership to help companies address functional, data, and technical complexity in their IT landscape and operations. This article describes the problem and its solutions.
Complexity can be crippling in IT. Functional, data, and technical complexity can be a big barrier to digital transformation—especially for companies that have expanded internationally or by M&A, or evolved over generations of hardware and software advances. The difficulty of addressing this complexity helps explain why, in sectors such as financial services, venture capital–backed start-ups are circling traditional companies sharklike, sensing the blood of inertia in the water. Digital banking start-ups have received more than $65 billion in equity funding since 2005, including more than $3 billion during the first quarter of 2016.
A digital transformation is a huge undertaking, even under favorable circumstances; complexity magnifies the challenge. BCG research has identified four root causes of complexity, ranging from rapid business growth to growth by acquisition to lack of clarity regarding sourcing models. (See “Simplifying IT to Accelerate Digital Transformation,” BCG article, April 2016.) Companies seeking to transform existing infrastructure and applications (as opposed to building greenfield functionality) that do not first tackle their functional, data, and technical complexity issues are setting themselves up for failure.
One approach to attacking complexity is to use the application and data simplification lever of BCG’s Simplify IT framework, which focuses on simplifying the data landscape and consolidating and decommissioning applications, and on clearly defining interfaces—or replacing them with less complex alternatives. Our experience with some 500 companies that have used the Simplify IT approach shows that those that do attack functional, data, and technical complexity achieve cost savings of 15% to 20% of their total IT budgets while increasing their agility and reducing risk. The effort also opens the door to new capabilities, such as omnichannel customer interactions, and helps businesses prepare themselves for more-comprehensive transformation. Yet many companies ignore or overlook this essential task.
Reducing functional, data, and technical complexity involves three key actions:
- Identifying where redundancies reside
- Assessing and improving key software characteristics (especially changeability) and risk factors
- Measuring the impact of IT simplification activities in terms of systems processing capacity, frequency of operational or security failure, total cost of ownership, time to market, and business value