Blue chips are facing major disruption to their business models, the likes of which has not been seen since Amazon rewrote retail.
Web startups are using IT to add customer value, threatening established business models.
The old ways of running IT may be hampering the ability for older businesses to innovate – yes, IT departments should be adopting agile methodologies, splitting quick-win projects from the multi-year major IT programmes.
Such companies are delivering value by providing convenience, ease of use and an overall better customer experience than the traditional methods of booking taxis and hotels or sourcing suppliers.
They also do much more, extending their reach beyond their core business proposition to attain more customers by operating as part of an affiliate network, enhancing someone else’s unique selling point.
These companies represent a competitive threat to many of the business models created before the turn of the century – but IT can make a difference.
Consumerising business systems
Ross Mason, founder of Mulesoft, a company that provides application programming interface (API) management technology, says enterprise IT needs to adapt.
The old ways of running IT does not reflect a reality where a business needs to act on threats and opportunities as quickly as possible to gain a competitive edge or limit the impact of a rival.
Speaking to Computer Weekly at the Mulesoft Summit 2015 in London, he said: “There is a change in the role of IT.”
According to Mason, IT previously believed everything was technology related. He says: “IT touches every part of the business.”
This is not just about the consumerisation of IT, but the consumerisation of enterprise IT – the sacred cow of the IT department.
So rather than attempt to manage and support the enterprise IT systems, Mason recommends IT provides the business with managed access through defined interfaces, namely APIs.
“IT cannot own all the applications. Not every request for information should end up being an IT project,” he says.
Mason urges CIOs to decentralise access to enterprise systems and provide self-service through defined APIs so user departments can build their own applications.
“Most pieces of data should be opened up internally,” he adds.
This data, trapped in back-end systems, can be used by the business to drive greater customer satisfaction.
IT outside of the IT department is already happening.
Salesforce and other software-as-a-service (SaaS) applications are being purchased directly by the business, marketing spends more on IT than the CIO and mobile apps are often developed by web and mobile design agencies with or without the IT department’s knowledge.
As a result, the CIO needs to change the way IT is organised and look at the broader role of the IT function in the business.
In the past, the CIO may have had a grand vision to link enterprise IT systems together using a service-oriented architecture (SOA), exposing web services on an enterprise service bus (ESB) to provide unified access to the underlying systems. But, according to Mason, even though web services were meant to modernise IT systems, they were never opened up to non-IT departments.
Mason urges IT departments to stop trying to control access to enterprise systems and accept that some enterprise applications will be developed by other departments. The CIO should give the business freedom to do its own IT to enable customer-facing departments to optimise the customer experience they offer.
This leads to two types of IT: one focused on managing and maintaining the mission-critical systems of record, the core back-end systems; while the other works in an agile way to create business value quickly.
According to research analyst Gartner, a system of record is essential to how a company operates, and does not provide competitive advantage.
Projects based on a system of record tend to have clear outcomes and approaches to achieving these results, which ultimately amounts to doing the process as well as any competitor, says Gartner.
On the other hand, enhancing the usability of the company's e-commerce site, building a service around intelligent, internet-enabled devices or the convenience of a mobile app are differentiators.
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Mobile apps and internet of things (IoT) projects usually require a different approach to IT, since the business cannot usually afford the time to run months of formal specification, development and testing often associated with traditional enterprise IT projects.
Many of these apps are developed outside of IT. However, without a connection to the system of record, such apps are somewhat limited and arguably lack a fulfilling customer experience.
According to analyst Forrester, since a huge amount of intelligence about customers, products and history is tied up in back-end transaction systems, CIOs should consider unlocking these systems to make the data available to mobile and web developers.
“CIOs will have to invest in APIs that service-enable the existing systems. In doing so, the IT department can potentially eliminate redundant systems and enable a single view of the enterprise to support the entire customer journey,” the analyst noted in its Close the experience gaps with the right business technology report.
Rentokil is an example of one organisation that has begun to open up the APIs of its core IT systems to other parts of the business (see Rentokil opens up ERP APIs to the business). Over time, some of these APIs will extend to Rentokil customers, creating an API economy where both Rentokil and its customers are able to derive value from sharing APIs.
This is a phenomenum web startups have mastered.
On his trip to London, Mason said he booked through the Kayak flight search site, which connects to Priceline’s travel site, which in turn links to the global ticketing systems for travel bookings that ultimately connects to the airline, with payment then taken through PayPal. Each of the services adds to the overall customer experience offered by Kayak, but equally, each gains from a successful transaction.
Make APIs public to extend value
In 2014, Uber released an API, allowing systems such as OpenTable and Google Maps to use its service to offer visitors online taxi bookings, and so improve their overall customer experience.
“Wherever you want to go, you can connect into Uber,” says Mason.
Connecting to Uber potentially adds value to the websites by offering a more complete customer experience, while Uber gains valuable new channels to market.
There is clearly a risk opening up APIs. Access to the back-end core IT systems needs to be managed. Who has access to which API, what data can they view and what data can they change? Some systems such as commercial enterprise resource planning (ERP) or SaaS may incur additional software licences or pay-per-use charges. The finely tuned core IT system could be swamped by external requests.
However, while organisations need to give careful consideration over how to make APIs work externally, Mason believes affiliate networks of APIs can drive value and improve the overall customer experience.
Rentokil’s IT function has created a set of APIs available to other departments in the company, enabling them to create their own applications that communicate directly with the core ERP system, without IT having to get involved.
ServiceTrack, a mobile application for field staff, is one of the first apps developed using these APIs to provide mobile access to the core ERP. The app provides mapping and alerts, and enables the technician to see which jobs are next. It is also possible to book jobs directly from the device. Users can also email an issue, which is uploaded onto Amazon Web Services (AWS).
The app is being deployed on £100 mobile devices to technicians in Asia, a considerable saving compared with the £1,000 ruggedised devices deployed in the UK.
Antony Meadows, director of enterprise delivery at Rentokil Initial, says: “The business is starting to have capabilities to create IT.”
Among the key benefits for Meadows is that the app was developed outside the IT department, using Mulesoft to manage the APIs, exposing functionality to the developers in the business.
“With the API layer opened up, the business does not need to go to IT,” he adds.
While ServiceTrack is internally-focused to improve efficiency, Rentokil is also working on customer system integration, to integrate directly with the facility management IT systems used by its larger customers.
In terms of improving customer experience, Meadows says: “The system will remove thousands of hours of admin,” reducing the need for the customer to re-key information into its own systems.
For Meadows, opening up the mission-critical enterprise IT APIs has been a blessing.
“We are moving from a pure provider of IT to helping the business create value,” he says.