The shift to digital in thinking

Record date: 28.09.2023.

In this podcast episode, we spoke to Sándor Mester and Ferenc Gazdag about the need for a change in thinking around digitalisation.

Résztvevők

Sándor Mester - Moderator Mester Sándor
Ferenc Gazdag - VISZ Vice-President Gazdag Ferenc
András Tresch - Quattrosoft managing director Tresch András

Note that the podcast is in Hungarian.

Summary

This was another episode of the joint podcast series by IT Business and Quattrosoft, where we explored digital transformation in detail. The conversation included Sándor Mester as the host, Ferenc Gazdag as the vice president of the Hungarian Association of IT Leaders (VISZ), and myself, András Tresch, representing Quattrosoft.

What is Digital Transformation, Really?

One of the fundamental questions in our discussion was whether digital transformation actually exists. According to Feri, there's nothing extraordinary about this process - it's essentially "an IT system implementation supported by process organization and reorganization that meets business needs." In digital transformation, it's primarily the people and processes that need to change.

We agreed that when we talk about digitalization, we moved from the analog world to the computerized world decades ago. The real challenge now isn't taking data from paper to computers, but genuinely transforming processes. Most organizations have merely transferred their paper-based processes to digital systems without real transformation.

At Quattrosoft, we define the implementation of BürOffice as "process digitalization" since the term "digital transformation" has become too broad in recent years, with people including everything from agricultural data to mobile applications.

The Key to Successful Digital Transition

We started the conversation with an important statistic: only 30 percent of digital transition projects are successful. What could be the reason for this?

According to research by Teksystems, an American consulting firm, 80% of leading companies believe digital transformation should be part of business strategy, while among laggards, this ratio is only 56%. Several important lessons can be drawn from this:

  • Business needs and ROI: Digitalization should always be determined by business needs. Every digitalization step must bring business benefits. Leading companies precede all investments with ROI (Return on Investment) calculations, and these payback periods are increasingly stringent - previously 18 months was acceptable, now 6-month returns are often expected.
  • Executive commitment: If the top executive (or at least the executive responsible for the area) doesn't support the project and maintain interest, the project is doomed to fail. If leaders aren't willing to change and continue to request reports on paper or in Excel, having a digital reporting system is pointless.
  • IT and business collaboration: The team leading digital transformation must have the right mix of IT professionals and business representatives. Feri clarified that there are actually four players: business dreamers, business executors, digital dreamers, and digital operators. Each viewpoint must be considered, and all this needs a fifth player - leadership.

IT-Driven vs. Business-Driven Digitalization

During our conversation, we agreed that IT-driven digitalization projects are doomed to fail. There are several reasons for this:

  • Technology isn't a goal in itself: Digitalization isn't an activity for its own sake but should support the business to increase profitability.
  • Well-thought-out processes: Often, all that happens is that old, inefficient processes are digitalized, whereas the real opportunity lies in rethinking processes. As Feri put it: "The process needs to be made digital, and people's skill level and ability to think outside the paper-based box must be developed."
  • Flexibility: Large, boxed products are often not flexible enough for special needs. As we jokingly put it, it's like the "old Soviet barber machine: at first, everyone's head is different."

Migration - The Critical Point of Digital Transition

During the conversation, we discussed in detail migration, i.e., the process of transferring data from an old system to a new one. This can be a stumbling block for many projects. Our fundamental lessons:

  • Migration strategy: As Feri put it, "the migration strategy begins with how we cross over." You shouldn't let go of the old system until you see how the data transfers to the new system.
  • Data quality and regulations: Often, data from old systems doesn't meet the rules expected in the new system. We've seen government projects where migration costs were triple the system development costs, and they were ultimately declared unsuccessful.
  • Orphaned systems: In many cases, the old system has become orphaned, with little or no documentation, yet the data somehow needs to be transferred.
  • Performance: Performance is also critical in migration - we're talking about millions, tens of millions of items, and if a system can only load 60,000 items per day, that could mean weeks of downtime.

Project Scaling and Duration

The issue of project duration also came up. From the top executive's perspective, longer IT projects may be at risk due to the rapidly changing business environment. In our experience:

  • Short cycles: If more than 3 months pass between requirement specification and system delivery, the business area will certainly have new ideas. We had a client where implementation phases were never longer than 3 months.
  • Gartner's "two-speed IT": There's the basic infrastructure, which we develop slowly and deliberately, and there are rapid developments that meet business needs. Feri calls this approach "adaptive IT" because, in his view, speed can vary by system, and we're not just talking about two speeds.
  • Procurement challenges: In public administration, procurement can mean a 6-month delay, which is why they often try to set up monumental projects to avoid running new procurements every two months.

Technological Challenges and Vision

At the end of the conversation, we also touched on technological challenges and vision:

  • System maintenance: Old systems often "freeze," aren't updated, which can lead to security and compatibility issues. As Feri put it: "In the digital world, standing still means a slight incline in terms of money too" - meaning additional costs.
  • Artificial intelligence: We're looking at how artificial intelligence could be incorporated into processes, but this raises numerous questions. On-premise execution isn't yet trivial, and cloud solutions raise data protection concerns.
  • Database technologies: Due to Oracle's new licensing policy, many are looking for alternatives, moving towards Azure MSSQL or PostgreSQL.

The Role of VISZ in Digital Transition

The Hungarian Association of IT Leaders (VISZ) plays an important role in exchanging experiences. According to Feri, innovative, forward-thinking leaders with a digital mindset who are curious and participate in community life are overrepresented in VISZ membership.

There's a lot of cross-industry communication among VISZ members - for example, the energy industry talks with an IT service provider, or education with an agricultural company's IT leader. This facilitates the flow of ideas and the adoption of good practices.

Summary

The success of digital transformation depends on properly aligning business needs and technological possibilities, having committed leaders, and implementing real process transformation, not just digitalizing existing paper-based processes. Quattrosoft's more than 20 years of experience in process digitalization helps our clients create real business value and not just implement superficial solutions.

Migration, system sustainability, and continuous technological evolution are challenges every company must face during digital transition. At Quattrosoft, we're continuously working to help our clients in this process with state-of-the-art, yet business-valuable solutions.

Note that the podcast is in Hungarian.