Altran Madrid - Parque empresarial Las Mercedes, Campezo, 1 28022 Madrid. Tel. +34 91 550 41 00 Altran Barcelona - Distrito tecnológico 22@, Llacuna, 56-70, Edifi cio A, 08005 Barcelona. Tel. +34 93 272 32 20 © 2019 Altran Innovación S.L. Photographs: Pexels ©, Adobe Stock © Graphic Design: FJMartín PROLOGUE PROLOGUE

Nowadays, all companies have to consider the of many companies in the face of these disruptive opportunity to generate greater value from their business forces, which are fundamental to the smooth running through new digital services, which better meets the of their business, and explained by the refusal of the needs and expectations of their customers. To this management bodies to accept that such forces exist. end, information systems play a key, indispensable However, all is not necessarily lost if we move from denial role. Therefore, companies have to consider the use to acceptance of the actual situation and take measures of virtualisation and new IT technologies available to to survive in the centre of this disruption—measures that implement technical transformation of the architecture, the book proposes and analyses. structure and functionality of these systems. Therefore, in this year’s report, rather than providing This transformation will enable these systems to create advice, we summarise your opinions collected in the new business models that will offer new digital services survey on this digital transformation of the systems. We in line with what customers need and that will inspire a have to take into account that the speed required for the loyalty resulting in greater use, increased revenue for the change will depend on two key variables: company and lower customer loyalty costs. • The criticality of customer satisfaction and However, this transformation process does not appear experience to each business, as well as their loyalty to be easy, as indicated by the multiple players in the levels, combined with the aggressiveness of market. competitors. • The importance of technology to each company, Every company has systems on which they run the as satisfying customers requires making visible the applications that support their current business. The technology and the opportunities for innovation JOSÉ RAMÓN MAGARZO new systems are able to offer advanced architecture, that it provides. unmatched fl exibility, diverse functionality and better CEO Spain of Altran To evaluate the aforementioned criticality to the value than the traditional systems. Nevertheless, the customer, we need to answer questions such as: necessary replacement process is not clearly defi ned and depends greatly on the type of company, as well Is it easy for one of our customers to change to a as on the pace and sequencing of the replacement of competitor? Are the products and services that we offer, the components of the traditional system. There is no key to our customers? Do our products and services infaillible recipe for doing this, which optimises migration achieve full customer satisfaction quickly? Can new times, costs and the resulting functionality in the new competitors enter our market easily? systems. In fact, you have to take risks, as this report shows. It also looks at the position of companies facing these risks and the challenges of IT digital transformation, To evaluate the aforementioned criticality to technology, which we have gathered from a survey of more than 120 we need to answer questions such as: executives from various sectors of the economy. Are our digital channels the principal means for Keeping in mind these risks, we have chosen as the delivering customer value? Do any of our competitors reference book for this year’s report “Disruption denial: have a faster, higher quality digital delivery than our why companies are ignoring the disruptive threats that company? Do you think about automation as a good way are staring them in the face” written in 2016 by David of cutting costs or as a way of creating new opportunities Guillebaud, an INSEAD graduate. The book explores for the business? Do you believe that software developed the forces of digital disruption, ranging from digital by our company is a differential, competitive factor in the technologies, new algorithms and businesses to the market? new millennials, showing where these forces can affect traditional businesses. It also shows that the inertia

4 PROLOGUE

Affi rmative responses to these questions mean a high criticality, both in customer relations and technology. Therefore, the digital transformation must be at the highest level and implemented as quickly as possible. We would say that the company has to reach an advanced stage of digitalisation. This means developing innovative tactics and practices to experiment and conduct simulations that will keep our company in a prestigious prominent position, among those companies with excellent performance in the market. When the responses are mostly affi rmative regarding technology but not for customer-related matters (or vice- versa), the objective is usually an average level of digital maturity. In this case, we need to apply best practices to the competencies defi ned as key to the business and treat them with suffi cient rigour, coordination, responsibility and scale to keep up with those competitors that do reasonably well in the market. If the responses are mostly negative for both customer and technology-related matters, progress towards digital transformation can take place at the rate that best suits the company, without forgetting that it eventually has to evolve. This requires initiating all the activities necessary for digital transformation, including people, processes, governance and technology, and ensuring that the organisation has the appropriate competencies solidly established. The focus and methodology used in this report is applicable to any company in any industrial sector. We are very grateful to the Telecommunications, Media and Services Division at Altran Spain and to Altran Consuting, whose shared ambition has led us to launch this report, which will enable us to help our customers through the dangerous territory of digital system transformation. We hope that reading this report will help you develop your business in this new digital era.

Yours sincerely,

JOSÉ RAMÓN MAGARZO CEO Spain of Altran

5 PROLOGUE 3

INTRODUCTION 7

THE DIGITAL IT TRANSFORMATION STORY 10

EXECUTIVE SUMMARY 16

MARKET ACTORS AND OFFERINGS 20

BUSINESS STRATEGIES AND MODELS 30

KEY COMPETITIVENESS FACTORS 47

INVESTMENTS 55

SECURITY 65

OPERATING MODEL 69

SOURCES AND GLOSSARY 75 INTRODUCTION INTRODUCTION

INTRODUCTION This report, entitled “Game over. Transform your company to win the digital game”, aims to analyse the digital IT transformation across all industries. To create the report, executives from a range of leading companies were chosen to take part in a survey to obtain a global vision of the digital IT transformation. One hundred and twenty-three people holding a range of positions in various industries took part in the survey. The industries involved cover a wide range of surveyed business sectors, forming a representative sample from which to draw conclusions. While the sectors are very different, they are not exclusively technology-related and all need IT transformation for their companies to remain competitive. The people who took part in the survey hold positions, which are either related to digital transformation or which directly infl uence the company’s IT strategy, making their opinions highly relevant. The participants in the survey were CEOs, CIOs, CTOs and other executives involved with digital transformation. The structure proposed by Altran for this report covers various aspects or topics considered key to understanding the digital IT transformation from different perspectives: • Market actors and offerings • Business strategies and models • Key competitiveness factors • Investments • Security • Operating model

8 INTRODUCTION

In addition, to ensure greater granularity in each of the aforementioned aspects, we also considered the technological aspect into account when analysing the transformation (except security and the operating model). To do this, we defi ned a layered model consisting of a representation of the high-level technology stack that has already been implemented successfully and heavily invested in by digital native companies.

Layered ICT model 12% IVZMGIWERHJYRGXMSREPMXMIWFEWIHSRHMǺIVIRX CEO digital technologies: Cognitive (AI, chatbots) 54% Services and functionalities Automatic (Robots and intelligent systems, machine learning) CIO & CTO Distributed (Blockchain, integrated ecosystems) Connected (IoT/IoE, Smart Cities) 34% Other executive profiles Generic platforms: API managers Application and container managers Datamanagers Platforms Identity managers, Security managers TIGMǻGTPEXJSVQW (i.e. IoT, vídeo) Telecommunications, manufacturers 32% and suppliers of ICT services Physical and logical elements: Computation Infrastructure Storage Banking, Insurance and Services Base software 18% Controllers, managers and virtualisation orchestrators 17% Energy, Industry and Construction The period for the interviews and collecting the results ran from April to July 2018. 14% Technology, Media and Education

12% Retail, Logistics and Tourism INDUSTRIAL SECTORS INDUSTRIAL 7% Other

9 THE DIGITAL IT TRANSFORMATION STORY THE DIGITAL TRANSFORMATION STORY

THE DIGITAL IT TRANSFORMATION STORY From the beginning, we have been used to business models comprising an operating model and an income model. All companies operate in this structure. Operating Model Income Model

Capacities Customer relations Suppliers Partners Value Customer Collaborators proposition segment Resources Channels

Cost structure Income flows

Over time, companies have spent large amounts of money building proprietary IT infrastructure, processes, systems and organisations to ensure that their business model functions correctly. Product and service offerings were designed on these IT platforms to cover the needs of the different customer segments and the entire organisation relied on systems and processes designed for the effi cient delivery of value to the customer, to provide management with the information necessary to manage the company and to comply with internal and external reports and legal obligations. IT became very important for companies, as they needed to improve their business model continuously according to changes in their activities and to respond appropriately to the needs of the business. Rather than just being important from a strategic point of view, it was considered as a driving force that kept the company moving.

11 THE DIGITAL TRANSFORMATION STORY

As the scope and needs of the business grew, hardware and software capabilities In summary, traditional companies had to improve their capacity to operate their improved and the cost of covering these needs increased exponentially. The IT businesses, to adapt to the digital world and to manage the “archeology” implicit in function started to have a life of its own and, faced with growing demand began to be legacy systems, with the technical debt they involved and had built over time. unable to meet the demands of the business units and time and cost improvements. However, the transformation of new technologies resulted in a faster movement Faced with this reality, an entire IT industry was created, which provided high-priced towards the platform concept. Platforms consist of a set of systems and networks that services to support IT departments, burning through employees and money to facilitate access, creation and interaction between applications created either by the improve and accelerate the required developments. platform builder or by collaborators who develop for the platform. As the Internet and the digital world developed, it became clear that traditional To deal with this change of structure, the agenda of a company’s CEO would have companies were at a disadvantage compared to digital native companies, which to be taken into account. This topic would only take up a small part of any such were born into this digital world. The latter were developing business platforms using agenda and the CEO would perhaps not be aware of its importance, given that it the most modern infrastructure, tools and technologies on the market. Traditional only seems to be a threat, without taking into account that digital transformation companies understood that they had to divest themselves of the cost and complexity and market actors may constitute a real threat to the continuity of the company in of their legacy systems. the long term. This is when denial occurs. This happens when a person faces a fact Some companies put a middleware layer over their legacy systems, equipped with that is too uncomfortable to be accepted and rejects it, claiming it is not true despite APIs (application programming interfaces), to access and interact with their systems overwhelming evidence to the contrary. There are three types of denial: from the digital tools and applications situated above this layer. Often, these efforts to restructure platforms failed due to the complexity of the legacy systems, following years of updates and programming patches. Furthermore, resources with suffi cient knowledge to update, manage and operate these legacy systems were becoming scarcer, given the growing obsolescence of these systems.

TYPES OF DENIAL IN RELEVANT SITUATIONS Minimise the Denial pure Project onto uncomfortable fact and simple others

Admit the fact but deny its importance Deny the reality of the uncomfortable fact Admit the fact and its importance but directly deny it in some way, blaming someone or something else that has nothing to do with us

12 THE DIGITAL TRANSFORMATION STORY

Normally, the methods most used by Management to avoid facing the problem are In other words, the capitalist company model requires executives to focus on to project onto others and to minimise the fact. Their arguments usually claim that elemental disruptive change rather than fundamental change. Short-term results they are short-term issues or currently fashionable but not applicable to the future. have to be achieved at any cost, while incentives and rewards are rarely aligned There is a long-term view in which they believe they do not yet need to make any with strategic, long-term results. The survival of executives means that they focus on changes. The last view is related to their competitors, believing they will not be incremental improvements, as short-term performance is rewarded over managing capable of displacing companies or, on the other hand, will start the transformation long-term threats. Faced with disruptive changes from new competitors or new believing it is not benefi cial and will create problems. Traditional culture perceives business models, executives are unable to react. They become stuck in the reality of anything new as a threat and worthy of suspicion just as intuition. Perhaps the their current business models and value networks, convincing themselves that the greatest risk is for companies that are performing well, as it is very diffi cult to convince new competitors do not represent a threat, even if their impact on the business starts a board to make signifi cant investments if the company is running smoothly. A to become noticeable. The dilemma they confront reinforces the denial of what is successful company tends to ignore threats. happening. In these types of situation, executives fi nd themselves faced with a dilemma that is In addition to support from management, the creation of a business model for the often diffi cult to resolve and usually not resolved. Executives and board members digital era entails this model, based on a platform structure in order to survive in this fi nd it diffi cult to respond to a disruptive change. world. With this platform, the model would have the capacity to operate, scalability and market value. These diffi culties stem from the rules and limitations of a shareholder-based capitalist system. The law places fi duciary responsibility on the Boards of Directors, which have to look after the interests of the shareholders, the real owners of the company.

BENEFITS OF THE PLATFORM MODEL Capacity to operate Scalability Market value

When consuming products or services, digital natives A platform-based business model enables the Currently, a company’s tangible assets contribute research and base their decisions not only on their scaling of the business beyond imaginable limits. The to just 25% of its value, while the remaining 75% is needs but also on the opinions of the community model will have internal capacities that enable it to based on the value of its intangibles. And one of in which they are involved. This community not only be aligned to meet the needs of customers and the the main intangibles valued is its business model consists of their family and friends but also colleagues company’s partners or collaborators. With a good and whether it is underpinned by a platform that they meet on social networks. Consequently, the design, it can even support signifi cant increases in the enables it to participate in the various confi gurations platform on which their business model is based volume of interactions of the platforms in the digital world. This means must have functions that enable an easy interaction that a combination of the right model and platform between the consumer and his/her community, in translates directly into the company’s share price and order to facilitate decision-making about the product market value or service

13 THE DIGITAL TRANSFORMATION STORY

Returning to the IT stack, the mode that companies use to evolve their IT function Regarding the transversal layer of the operating model, we need to mention that is a layer model, comprising infrastructure, platforms, services and functionalities, due to the success and speed with which the businesses of young, disruptive digital operating model and security. One of the key aspects analysed in detail is security, native companies are growing, many large companies are trying to copy or learn which should not be overlooked in any digital strategy. from their operating models. All of this has led to the evolution of current operating models and even to a new concept dubbed “startuptation” or “startupisation”, The fundamental component of the infrastructure layer is the cloud or, more which involves emulating the way that start-ups work to acquire the agility to accurately, the process in the cloud along with technologies such as NFV (Network scale and implement transformational leadership, key factors in managing digital Function Virtualisation) and SDN (Software Defi ned Networking). This layer requires transformation and focusing on the experience of the customer and/or end user. decisions about the functions and characteristics of this cloud, as well as the technical support of the elements that constitute it, giving rise to aspects such as the hybrid In terms of security, executives fi nd themselves in a turbulent environment in their IT function. Among many other topics, we will need to discuss how data inside the organisations due to the new policies and technologies designed to cope with the cloud is accessed, how this access is structured, where we situate the application changes needed in their different lines of business. This transformation to security not development functions, how to migrate from a traditional data structure to a only affects decisions about security products at the physical layer level but is causing cloud-based one, what type of cloud is the most suitable (public, private, hybrid or companies to rethink how to organise themselves internally, how to assess the risks multicloud), what type of cloud architecture to use. In terms of SDN and NFV, we they are facing and how to prioritise future investments to help manage the fi nal need to prioritise which objectives are sought with these technologies, including layer—data management. costs, time-to-market, new services, network and application improvements, All of this complicates the migration from a set of traditional systems to a platform- management fl exibility, etc. type IT structure. The consulting fi rm Gartner has promoted the idea that there is In the platform layer, we must not forget that we are starting from legacy systems a bimodal capacity for change in the digital era, in other words, a combination of from which we need to migrate to a technologically advanced digital platform. linear focus—with an emphasis on predictability and stability—and non-linear focus. We will have to decide which route we are going to take for this transformation, This involves using the best of the legacy systems while, at the same time adding the from beginning the new platform from scratch (removing the legacy) to gradual innovation inherent to platforms. It requires being in innovation mode and legacy transformations of different types. The migration of data from traditional systems mode at the same time. to the new platform and the cloud is another key point to study, because it could The process of trying to move directly from legacy systems to a platform structure consist of a mass migration, a gradual migration or other possible modes. We also is given too much emphasis. Attempting this jump usually involves issues of need to discuss the functionalities of the platform that make it more competitive in comprehension, readiness, leadership, technology and a lack of accurate knowledge. the business context in which we are operating, such as its capacity for integration, These problems are the reason why organisations reject the initiative and much scalability, fl exibility of deployment, availability of APIs and much else. We need energy, time, money and momentum is lost. This is why it is better to undertake the to defi ne the strategy for the components that will be used to create the platform, process in two phases. whether they are developed in-house or created from pre-integrated packages of best-of-breed components. In terms of the services and functionalities layer, it is clear that the new digital technologies may give rise to many new services based on these technologies, including the Internet of Things (IoT), mobile payments, Blockchain, virtual reality and artifi cial intelligence. Therefore, we need to decide what types of services will be offered to customers and what their primary focus and strategy is, from reducing time-to-market to increasing differentiation.

14 THE DIGITAL TRANSFORMATION STORY

The fi rst phase involves considering legacy systems as assets to exploit and reshape, in order to move from the initial situations with the legacy systems, “playing not to lose” when acquiring digital capacities, developing a customer-focused digital agenda that everyone can understand and relate to. This means extracting the necessary data from the legacy systems and integrating it digitally with customer-focused innovations, establishing APIs as a prior step to becoming a platform. Moreover, the digital capacity provided by APIs would not let us connect PLAYING TOO PLAYING TO and interact with external platforms. This phased approach enables a company in a traditional industry that needs STRONGLY WIN to innovate in its customer relations to “stay in the game” and not have to take actions that may have a negative Radical transformation, Changing the game impact on the global transformation process. After implementing the fi rst digital enabling phase, the basis for prone to failure a business model that is compatible with a platform structure is then established. However, we need to be very careful and make coordinated progress with legacy systems and new customer-relationship systems to ensure that both parties progress symmetrically and in parallel, otherwise the probability of failure will be very high. While digital innovations are being discovered, created, tested and selected, we need to be analysing the DIGITAL reality that legacy systems can offer at the same time. The minimum viable product (MVP) concept—the idea of products or services that although basic can be readily launched—may be possible given that analysis has already ENABLEMENT determined that the legacy systems are capable of providing the functionality needed for their introduction. In Digital, customer-based this way, element by element, a customer-focused digital structure will be completed, enabling us to move to the agenda second phase. Once this phase has been completed, we will now be ready and capable of moving to a platform-based business model, i.e. “playing to win”. These platforms will enable interaction between supply and demand, between our LEGACY PLAYING NOT customers and their ecosystem (of which we are part), with our products and services, as well as with our suppliers TO LOSE and collaborators. SYSTEMS Responding to market demands

Migration from a set of traditional systems to a platform-type IT structure

15 EXECUTIVE SUMMARY EXECUTIVE SUMMARY

MOVING ON AFTER THE SHOCK OF TECHNOLOGY DISRUPTION AND THE NEW DIGITAL ACTORS

For the fi rst time ever, the future is now more important than the present. Companies consider it crucial to develop capacities to facilitate new business models and improve customer relations; they see this as more 1 critical than gaining a competitive advantage through possible cost reductions in their IT transformation The goals which companies are hoping to achieve from digital transformation are, mainly, greater value for their business, although they are also seeking cost savings by swapping out traditional systems for superior technology. Companies place medium-high to high importance on the potential of new business models (65%) and changes to the customer relations model (63%) compared with cost reductions (32%). Tourism, media and telecommunications operators consider the most important vector to be change in the customer relations model, while tourism again, with services and industry, place primary importance on new business models.

However, companies still have their feet fi rmly on the ground. There are some basic aspects of traditional IT 2 management that still require a focus on the present Although companies consider it crucial to develop capacities to facilitate new business models and changes to the customer relationship model, they still believe it is necessary to focus more on traditional IT management (e.g. ensuring security and reliability and helping with automation) than on new options and new tools for transformation.

Companies show a low level of digitalisation that could be classifi ed as “emerging” 3 Only 55% of companies have a digital agenda and advanced IT architecture and capacities. Sectors such as banking appear to be the most digitally advanced, while the industrial sector shows the lowest levels of digital penetration. The most pressing subject right now is the effective implementation of agile work models, which only 35% of companies report having in place. On average, companies currently have an “emerging” digital operating model which they aspire to convert into an advanced digital model in the medium term. Some sectors such as tourism, technology and software manufacturing show a more advanced level of digitalisation in their operating models. Although their points of departure are different, all companies aspire to evolve their operating models, thus showing a fi rm commitment to transforming themselves digitally. To achieve this, they need to put into practice concepts such as transformational leadership and scaling agile practices.

17 EXECUTIVE SUMMARY

However, the use of digital transformation technologies seems to be in line with its use in other countries 4 60% of companies are now using new storage platforms, multicloud-based architectures and advanced analytics. The cloud is used as an infrastructure base for digital transformation. The development of an API architecture in the cloud for connection to other systems or platforms is the most important option for 60% of companies, principally in the media, energy and banking sectors. Meanwhile, the development of a hybrid cloud and cloud-based applications is considered equally important, driven by companies in the insurance, technology and consulting sectors. Furthermore, 90% of companies consider infrastructure based on software-defi ned networking (SDN) and network function virtualisation (NFV) key to making the management of network resources more fl exible, while 80% see it as key to controlling the network from applications in order to operate effi ciently and reliably.

Banking is seen as one of the main sectors from which to draw inspiration and use cases for other industries, although the Internet giants cast a long 5 shadow Banking is seen as a reference for identifying ideas, initiatives, use cases and best practices in relation to digital transformation. However, sectors with a high level of digital transformation, such as operators or banking itself, consider that those to watch are Internet actors and digital natives. Not just because of their focus on R&D but also because of the amount of money they spend on it.

The roadmap preferred by companies is based on a gradual transformation of sets of old systems, along with a gradual migration of data by client 6 segment Other options, such as transforming without including their legacy systems (which would be accessed by APIs) or transforming from zero, building new front and back offi ce systems, appear to be less attractive, and in some cases, impractical options, for companies.

Emerging or disruptive technologies are still not generating a signifi cant impact on business, except for the Internet of Things (IoT), which is also 7 considered, along with Artifi cial Intelligence (AI), to be the most attractive in the short term However, the IoT is the only technology having a real impact on companies’ business. There are even some technologies like blockchain, whose large-scale use in production environments is rare or non-existent. Obviously, the appeal of these new technologies depends greatly on the type of company, as well as the industrial sector in which it operates. The IoT is the most attractive to telecommunications operators, IT and network suppliers, industry and consultants. If we add the retail sector to the above, this group forms the basis of the appeal of AI.

The proper implementation of cloud strategies, integration, scalability and fl exibility of solutions and platforms, as well as customer orientation are the key 8 factors for IT transformation Implementation of cloud-based solutions and the capacity for integration into different environments are seen as key to infrastructure. It is also interesting to point out that companies generally attach great importance to the easy incorporation of specialists from the different areas required, such as data, analytics, security, mobility and architecture. In terms of platforms, companies see competitive factors as being a fl exible, modifi able architecture with a high capacity for integration, the connection of end-to-end activities, and a high degree of scalability to deal with increasing load and transaction volumes. Flexible processes capable of agile deployment are considered to be another important factor. If we consider IT services and functionalities, 60% of companies see in-depth knowledge of customer needs to be the most important factor. However, an adequate choice of the best emerging technologies is needed to create solutions that will satisfy the customer (36%) and to improve these services and functionalities continuously (34%).

18 EXECUTIVE SUMMARY

Infrastructure investments are focused on the cloud, cybersecurity and IT system optimisation 9 According to nearly 45% of companies, the supply of services from the cloud, cybersecurity improvements and systems optimisation are the main areas of investment. Virtually all industrial sectors express a similar opinion.

In order to protect mission critical systems in the short term, executives consider investment in changes of operating model to be a priority (a combination 10 of security personnel and operations personnel, as well as greater involvement of management and development teams) Companies believe that security personnel must work alongside operations personnel to manage mission critical systems. They also expect the development teams to play a greater role and to commit themselves to protecting their critical assets. There is no great divergence of opinion across the different industrial sectors.

Investments in the creation of platforms are focused on the use of pre-integrated packages to avoid the costs of integration, along with best-of-breed 11 components According to 42% of companies, mainly in the tourism, banking and telecommunications sectors, the most popular option when investing in platforms is an integrated package, along with the use of best-of-breed components. It is signifi cant that only 10% of companies, primarily in energy, insurance and media, support the developed in-house option, because of its higher cost.

Companies see fi ve areas on which to focus their security-fi nancing efforts 12 More than 50% of the executives interviewed agree that the focus on security-fi nancing efforts must be in fi ve areas: management of cloud-based security services, improving capacity for responses to security attacks/breaches, integration of security development and its tools into the SecOps concept, data protection, and the compliance, inspection and recording of all incoming and outgoing traffi c in the cloud.

Security must be ensured from the bottom up. Companies consider it critical to keep security tools up to date against elevated threats 13 Most executives think that investment in keeping security tools up to date should be increased, although management of the interdependence of the on- premises world and the cloud is an area that should also receive more investment.

19 MARKET ACTORS & OFFERINGS MARKET ACTORS & OFFERINGS

INFRASTRUCTURE The new services required in this digital era have a direct effect on the methods of storing, processing and connectivity of the infrastructure of data centres, which have become a vital element, constantly evolving to achieve digital transformation. Companies that want to obtain a sustainable competitive advantage digitally have several options on the market when selecting a service provider in the cloud, for both storage and processing, public and private. There will always be one option that is most appropriate for each company, which will enable them to achieve their business objectives.

Amazon Web Services 51% Microsoft 28% Google 19% Oracle 2%

Figure 1: Main public storage actors out of the weighted total

According to the survey we conducted, more than half of executives agree that Amazon Web Services (51%) is the leading actor for public storage, followed by Microsoft (28%), Google (19%) and Oracle (2%). Analysing the responses by the relative importance given to each actor, we concluded that Amazon Web Service was the most important actor, chosen by 100% of the people who participated in the survey and dominating the worldwide public cloud market, with a 45% share according to a Synergy Research report of February 2017. The actors chosen as having medium importance in our survey were Microsoft and Google, with 78% and 22% respectively. Actors given low importance included Google, with a 75% share, and Microsoft and Oracle, with a 13% share.

21 MARKET ACTORS & OFFERINGS

However, when analysing private storage, we can Hewlett Packard 24% see that the share is more widely distributed than IBM 19% for public storage, with 10 different actors with great Dell Technologies 15% market potential. Amazon Web Services 14% From this perspective, it seems that when we talk NetApp 12% about storage in a public cloud, the main actors are Microsoft 8% the Internet giants (digital native companies whose Google 3% core business did not initially involve provision of Oracle 2% these solutions but who were able to obtain scale in VMware 2% order to resell these services). Meanwhile, the major Hitachi Vantara 2% IT vendors seem to hold sway for private cloud services. Figure 2: Main private storage actors out of the weighted total Analysing the weighted responses out of the total showed that, in terms of processing, the public perspective versus the private does not differ greatly from the numbers for storage. However, we identifi ed a wider range of options (although some of these were residual) for the preference of companies regarding actors and offerings for processing in the public cloud. PUBLIC STORAGE PRIVATE STORAGE The future of infrastructure not only involves the Amazon Web Services 46% Hewlett Packard 26% concept of the cloud but also projects such as the Open Compute Project (OCP – a community Microsoft 25% Dell Technologies 20% focused on redesigning hardware technology to Google 15% IBM 15% provide effective support for the growing demands Hewlett Packard 5% Oracle 7% of IT infrastructure), the Telecom Infra Project Dell Technologies 3% Amazon Web services 6% (an open source hardware consortium, whose Oracle 2% Intel 6% mission is to disaggregate network hardware into NetApp 2% Microsoft 4% modules and defi ne building blocks of open source Cisco 2% Dimensiondata 4% software) and advances in quantum computing, all VMware 4% of which hold promise for the transformation of IT Cisco 4% infrastructure in the coming years. Super Micro 2% In the survey, we also analysed the main actors of Huawei 2% infrastructure virtualisation and Software Defi ned Google 2% Data Centre (SDDC), which includes SDN elements, software-defi ned storage and virtualised computing. Figure 3: Main public and private processing actors (percentage of the weighted total) To this end, we prepared rankings based on the opinions of the executives surveyed.

22 MARKET ACTORS & OFFERINGS

VMware 40% VMware 26% Openstack 33% Juniper 21% Other 8% Opendaylight 21% Ericsson 8% Cisco 16% Huawei 5% Nokia 9% Mirantis 5% Other 7%

Figure 4: Main actors in server virtualisation (percentage of the weighted total) Figure 5: Main SDDC actors (percentage of the weighted total)

Other VMware Huawei Openstack VMware 10% Other For server virtualisation and SDDC solutions, the main actor identifi ed as the fi rst 20% 70% 20% Huawei 10% 10% option was VMware, with 40% and 26% respectively of the weighted total. This actor 10% has marketed products that make it a benchmark in the following areas:

• NSX Data Centre, which consists of a network virtualisation platform for the HIGH MEDIUM LOW software-defi ned data centre (SDDC) offering network and security functions IMPORTANCE IMPORTANCE IMPORTANCE using software disconnected from the underlying physical infrastructure Ericsson

• VMware cloud foundation, which offers an integrated cloud infrastructure of Openstack 20% Ericsson VMware Mirantis IT, storage, network, security and cloud management services resources to 10% 60% 30% Openstack execute business applications in both public and private environments 10% 20%

Occupying second place in the rankings of the server virtualisation survey was Figure 6: Actors in server virtualisation voted by degree of importance Openstack at 33%. However, if we analyse it by relative importance, Openstack was chosen by 60% with an intermediate importance level. The “Others” category occupied third place. This category included actors such as: Citrix, XEN and Red Hat, with an 8% share, along with Ericsson (8%) with the same share. Other Juniper Cisco Other 10% VMware 11% Nokia 11% 11% Nokia 30% 11% 10%

HIGH MEDIUM LOW IMPORTANCE IMPORTANCE IMPORTANCE

Juniper 20% VMware Juniper Opendaylight 33% Cisco Opendaylight 44% 30% 44% 30%

Figure 7: Actors in Software Defi ned Data Centre voted by degree of importance

23 MARKET ACTORS & OFFERINGS

PLATFORMS Currently it can be said that the most important tech companies are those that provide platform services, as they provide to other companies who want to transform themselves digitally, the sought-after characteristics associated with the digitalisation of operations, such as agility, connectivity, security, customisation and real-time access to information. These companies are offering a wide range of capacities and functionalities for their customers on a single platform that ranges from the operating system, server scripting environment, database management system and server software to technical support, storage, network access, hosting and design and development tools.

Amazon with AWS Cloud Platform 43% Google with Google App Engine 30% Microsoft with Azure API Apps 20% IBM with IBM Watson 3% Salesforce with Heroku 2% Bosch Software Innovations with Bosch APIs 2%

Figure 8: Most relevant API managers with their respective platforms out of the weighted total

24 MARKET ACTORS & OFFERINGS

50Bn Connected devices

According to our survey, the most relevant API managers with their respective 25Bn platforms are: Amazon with AWS Cloud Platform with 43% of the weighted total, followed by Google with Google App Engine at 30%. 12,5Bn World population 500M 7,6 M Other signifi cant platforms for consideration by companies that want to effect digital 7,2 M change are the IoT platforms, because in the near future the number of connected 6,8 M devices per person will be almost double the current fi gure in the worldwide market. 6,3 M 0,08 1,84 3,47 6,58 Connected devices Figure 9 shows that in 2015 there were 3.47 connected devices per person, while per person in 2020 it is estimated that there will be approximately 6.58 connected devices per 2003 2010 2015 2020 person worldwide. More devices than people

Taking into account the actors and offers of these platforms, the results of our Figure 9: Connected devices compared to world population survey show Amazon’s AWS out in front with 39% of the weighted total, followed by Microsoft’s Azure Suite with 29%. As well as collecting data from connected objects, these platforms offer very interesting features that enable real-time parameter Amazon with AWS IoT 39% monitoring, alert and notifi cation scheduling, as well as the scheduling of automatic Microsoft with Azure IoT Suite 29% actions to activate or deactivate these objects. The ranking continues with the platforms aimed primarily at the industrial sector, such as GE Predix from General General Electric with GE Predix 12% Electric at 12% and the PTC ThingWorx Platform at 10%. Both on 3% were the PTC with PTC ThingWorx 10% Oracle IoT Cloud Service and the Bosch IoT Suite. The “Other” category contained Oracle with Oracle IoT Cloud Service 3% the Ericsson IoT platforms: the Device Connection Platform (DCP) and the IoT Bosch with Bosch IoT Suite 3% Accelerator. Other 3%

Figure 10: Major IoT/IoE platform managers with their respective platforms out of the weighted total We also need to analyse the major cybersecurity players in this platform layer. This area is currently a signifi cant issue in any digital strategy. The undisputed leader in the opinion of the interviewed companies was Fortinet, with 41% of the weighted total, followed by Juniper Networks and Cisco, both on 20%. These players offer innovative products that use predictive analysis and integrated intelligence on threats to provide Fortinet 41% an automated response much in demand by all digital businesses. Juniper Networks 20% Next in the ranking was Checkpoint at 15%, which, analysing the responses by Cisco 20% relative importance (Figure 12) scored highest in the intermediate importance Check Point 15% category. Much further down the ranking based on the weighted total was Sophos Sophos 2% and SonicWall, both with 2%. SonicWall 2%

Figure 11: Main cybersecurity platforms out of the weighted total

25 MARKET ACTORS & OFFERINGS

Juniper Networks Currently, one of the most recommended strategies for companies to start their Fortinet 30% Fortinet Check Point digital transformation is migration to the public and private (and hybrid) cloud. In 60% Fortinet 22% 11% addition, the micro-services paradigm stands as a fundamental part of companies’ 20% new IT architecture. Therefore, we also analysed the major container managers and their respective platforms. HIGH MEDIUM LOW IMPORTANCE IMPORTANCE IMPORTANCE Analysing the ranking out of the weighted total showed Google with Kubernetes as the benchmark, with 48% of the weighted total, followed a long way behind by Sophos Apache Mesos with Apache Aurora at 17%. Mesosphere with Docker Engine was in Cisco 11% third place with 14%, followed by Huawei with Cloud Container Engine. The “Other” 44% category featured OpenShift by Red Hat and Rancher. Juniper Networks Cisco Check Point Cisco Sonic Wall 20% 20% 40% 10% 11% For these players to remain as container manager benchmarks, it is key that they offer the necessary integration capacities with solutions, platforms, etc. from a range of Figure 12: Main container managers with their respective platforms out of the weighted total public and private cloud vendors.

Google with Kubernetes 48% Apache Mesos with Apache Aurora 17% Mesosphere with Docker Engine 14% Huawei with Cloud Container Engine 9% Other 7% Wercker with Dockers Containers 5%

Figure 13: Main cybersecurity platforms by degree of importance

26 MARKET ACTORS & OFFERINGS

SERVICES AND FUNCTIONALITIES Digital clients demand speed in the delivery of the services they purchase, along with quality of service. Therefore, the highest technological layer (in direct contact Banking 22% with customers and users) is the one that determines the quality and end speed with Retail 16% which companies delivery digital products and services to the market, supported by Internet players 13% the two layers below it (infrastructure and platforms). Therefore, for IT services and Telecoms 12% functionalities, we performed the analysis from the point of view of the company and Transport and Logistics 10% its customers. Automotive 8% In this digital era, customers are increasingly digital regardless of the services they Tourism 7% purchase or use. This means that companies (regardless of the sector they are in) Entertainment 6% must offer products, services and a relationship model that are likewise increasingly Industry 5% digital. Therefore, another company or other companies from another sector or Other 1% industry may emulate the success of companies from one sector or industry. From our survey analysis, we were able to conclude that the main industries for success Figure 14: Industries with the most success stories or stories that are easily transferable stories and/or stories easily transferable to others are: banking, in fi rst place with 22% of the weighted total, followed by retail with 16%. According to Forrester Research, the best European application this year was that of BBVA Spain, which has a wide range of new generation features and tools for managing personal fi nances, along with a perfect balance between comprehensive functionality and an excellent user experience. There are several good examples in the retail sector, such as IKEA, which uses virtual reality to enable customers to see how furniture will fi t in their own homes. Another similar example is Mango, which has added an innovative feature to its mobile app, based on augmented reality and image recognition technologies, which enable customers to scan images of the brand’s garments and other catalogue products, magazine advertisements and advertising hoardings to then make purchases through the app or fi nd the products in-store.

27 MARKET ACTORS & OFFERINGS

The results show that other industries follow the banking example, forming a chain of infl uence that runs from Internet actors to banking and from there to other sectors. Internet Players invest the most in R&D and therefore are the most advanced in this regard, serving as exemplars for many companies as leaders in a range of new technologies who also resell the R&D and implement it in their own services.

Amazon 22,6 Alphabet 16,6 Intel 13,1 Microsoft 12,3 Apple 11,6 Jhonson&Jhonson 10,4 Ford 8 8 Pfizer 7,6 General Motors 7,3 Figure 15: Chain of infl uence for identifying use cases Oracle 6,2

Figure 16: R&D expenditure by companies in 2017 (in billions of dollars)

As can be seen, the main technology and pharmaceutical companies invest the most in research and development to be pioneers in their sectors. Banking takes ideas from these companies, without investing as much as the Internet players, and becomes a model for other industries. The industries that draw most on the banking example are retail, as mentioned previously, logistics and services. In this way, the companies in these industries that have undergone digital transformation are ready to compete better and more effi ciently against their competitors, acquiring knowledge from other industries that gives them a competitive advantage. Companies are aware of the importance of investing in technology for digital transformation and for some companies, such as telecommunications operators, this constitutes their primary investment:

Technology 39,2% Customer 26% Culture 17,6% Operations 10,2% Strategy 4%

Figure 17: Investment priorities of telecommunications operators for the digital transformation (of business)

28 MARKET ACTORS & OFFERINGS

As discussed, technology by itself is not capable of leading the digital transformation for either the IT function or the company. Therefore, companies are putting effort into enabling technologies, such as serving customer experience tools.

Artificial intelligence 27% Machine Learning 19% Chatbot / NLP 19% Augmented/Virtual reality 10% RPA 8% Robots 5% Blockchain 5% Neuronal networks 3% Other 3%

Figure 18: The most important enabling technologies for customer experience tools

The executives interviewed placed artifi cial intelligence as the most signifi cant enabling technology for customer experience (27%). Second place was shared by the Machine Learning and Chatbot/NLP technologies with 19%. Augmented reality was in third place with 10%, followed by RPA with 8%, and robots and blockchain, both with 5%. Last, on 3%, were neuronal networks and “Other”, which included Big Data. The results make it clear that the technologies that will help change the customer relationship model, provide better understanding of the customer’s needs (even inferring them), or improve decision making are those in fi rst place. Process automation/robotisation—extremely important to achieving the highly desired process effi ciency—are in second place in terms of improving the customer experience, although tools for the orchestration and monitoring of customer itineraries play a fundamental role.

29 BUSINESS STRATEGIES & MODELS BUSINESS STRATEGIES & MODELS

Company types according to their response to digital disruption OVERVIEW ABCDE The transformation from traditional IT systems to the digital world is an incontrovertible fact in any type of Companies Ambitious, Solid, stable Companies focused Digital sceptics for company. Advantages such as agility, speed, time- operating in aggressive industrial sectors on operations whom the digital to-market and cost will be exploited by companies industries where companies that (e.g. banking) in moderate IT world is a low in every industrial sector. high differentiation invest in order to that are gradually growth sectors priority, seeing the However, not every type of company or sector has between be able to adapt to updating in the that adopt digital IT function as an the same needs for implementation of the digital competitors is key. changes in customer digital IT world solutions in order administrative tool IT world due to the competitive situation in their These companies relationships. but who act at a to achieve a high markets, the nature of their industrial processes and need to be very IT digitalisation measured pace and level of operating other reasons that we will analyse below. In general, aggressive in order is necessary to with due caution. excellence (focused companies approach this digital IT transformation in to compete and compete successfully They are focused on management of fi ve different ways. grow in the market. on creating multiple atoms rather than IT digitalisation is key channels to interact bits) to survival with customers and improve accessibility and the customer experience

31 BUSINESS STRATEGIES & MODELS

Net promoter score (NPS) 19,6% 28,2% 15,2% 19,6% 17,4% Availability of new technology to the end user is a metric that predicts the 11,8% 27,5% 23,5% 19,6% 17,6% Availability of new IT infrastructure and knowledge of customers when technology they make purchases and 8% 24,2% 12,9% 19,4% 35,5% The potential to cut costs Digital innovation by competitors and new recommendations, measuring 24,3% 18,5% 20% 18,6% 18,6% actors the overall brand loyalty of The availability of new data about customers or 17,6% 23% 24,2% 17,6% 17,6% customers business operations The potential for new business models or 39,5% 24,7% 19,8% 13,5% There is a strong positive 2,5% products and services 40,2% 23,3% 23,3% 8,4% Changes to the customer relationship model relationship between NPS 4,8% correlation of a company, HIGHER LOWER 11 2 345 given that loyalty promotes IMPORTANCE IMPORTANCE growth due to a reduction Figure 19: Vectors driving the digital IT transformation in abandonment rates, improved product mixes or It is clear that the ways of approaching the IT The “obsession with customers” is obvious in the an improvement in brand transformation of these different types of company must digital world and telecommunications operators still perception due to word of differ and we put this to the opinion of the interviewees. have a long way to go in this regard, something that will be helped signifi cantly by digital transformation. The most popular options were “Changes to the mouth Looking at comparable customer satisfaction indicators, customer relationship model” and “The potential for such as the NPS, in different sectors we fi nd that the new business models or products and services”, which, telecommunications sector is well below the sector as shown, were also the most widely voted for options average at the tail of a large collection of sectors such of all the responses. As Figures 20 and 21 show, more as retail, logistics, insurance and fi nancial services, as than 50% of those surveyed work in the operator shown in Figure 22. industry and placed great importance on “Changes to the customer relationship model” and “The potential for new business models or products and services”. Looking specifi cally at changes to the relationship model in the telecommunication operator sector, we see that, despite major technological advances and signifi cant expenditure on information technologies, there remains particular concern for strengthening the customer relationship, thereby improving customer satisfaction.

32 BUSINESS STRATEGIES & MODELS

25% 25% 50% Technological 25% 25% 50% Technological

50% 25% 25% Energy 50% 25% 25% Energy

42,8% 28,6% 28,6% Vendors IT Networks 42,8% 28,6% 28,6% Vendors IT Networks

42,8% 14,3% 28,6% 14,3% Retail 42,9% 14,3% 28,5% 14,3% Retail

22,2% 44,5% 22,2% 11,1% Other 22,2% 44,5% 22,2% 11,1% Other

53,8% 23,1% 15,4% 7,7% Telecommunications 53,8% 23,1% 15,4% 7,7% Telecommunications

60% 20% 20% Media and education 40% 20% 40% Media and education

80% 20% Tourism and logistics 60% 20% 20% Tourism and logistics

33,3% 33,3% 16,7% 16,7% Banking and insurance 33,3% 33,3% 16,7% 16,7% Banking and insurance

44,5% 11,1% 33,3% 11,1% Industry 62,5% 12,5% 25% Industry

15,4% 30,8% 30,8% 15,4% 7,6% Services 66,7% 16,7% 8,3% 8,3% Services

HIGHER LOWER HIGHER LOWER 13452 13452 IMPORTANCE 1 IMPORTANCE IMPORTANCE 1 IMPORTANCE

Figure 20: Changes to the customer relationship model by sector Figure 21: The potential for new business models or products and services by sector

Average (44,8) Due to the current situation, the vast majority of companies are undertaking or will Retail 56 undertake the digital transformation of their IT systems. To understand what stage Logistics 54 of the transformation a company is at, we can look at a simplifi ed evolution of digital Other 50 penetration within the IT world of a company and of the principal service components, Distribution/Wholesale 50 starting with the drafting of a digital agenda and fi nishing with the capacity to innovate Manufacturing 48 in the digital fi eld and being able to measure its progress. Insurance and real estate 45 Consulting 44 Media 43 Financial services 42 Services 41 Technologies 38 Telecommunications 27

Figure 22: Average NPS by industry

33 BUSINESS STRATEGIES & MODELS

Low digital penetration High digital penetration

55% 55% 56% 49% 35% 39% 19%

IT architecture Digital Digital relationship Digital metrics in and advanced Data analysis Agile operating model Digital innovation agenda with the customer operation IT capacities

There is disquiet about A project has already Capacities for the Simplification of the Multi-channel, self-service, Capacity to create new Applying metrics to assess digital matters and an been undertaken that management and analysis operating model to make it digital interaction and digital services to handle digital variables with initial plan has been defines a new IT of customer and business more flexible and excellence in the customer both customers and results that satisfy service prepared to architecture and the data, focused on adaptable. And to improve experience internal processes, and process objectives undertake the project necessary capacities improving both sales time-to-market applying the status quo of have been planned to actions and the customer technology move to take the digital experience and process agenda forward excellence

Figure 23: Evolution of companies to digital penetration As shown, almost half the companies have a low degree of digitalisation, as the In sectors such as telecommunications, industry and services, there is a balanced initial phases of digitalisation receive the most votes. The data analytics stage distribution between the different phases of digital penetration, except for industry, received the most votes, followed by advanced IT architecture and capacities and which has a smaller presence in the more advanced phases of digitalisation. the very early digital agenda stage—all three in the primary phases of digitalisation. Consulting and banking seem to be the most developed in terms of advanced In addition, for most companies (65%) establishing an agile operating model, in digital penetration and are in the fi nal phases of digitalisation. We can conclude that which the business and technology areas operate side-by-side, and the time -to- the digital transformation in Spanish companies remains in an initial phase in most market is improved, remains unfi nished business. industrial sectors. We need to take into account that there are two different rates at work when it comes to degrees of digital penetration in Spain. On one hand, the Note that 39% of companies believe they have a digital innovation model, which is public sector is moving at a slower rate than private companies or SMEs that are surprising considering: still relatively unaware of digitalisation. On the other hand, IBEX35 companies are • The low R&D expenditure of Spanish companies, given that €285.50 was further advanced in terms of digital transformation. spent on R&D per person in Spain in 2016 compared to an average of €590.50 in the European Union

• The low rate of digitalisation: 45% of companies did not even have a digital agenda according to our survey

34 BUSINESS STRATEGIES & MODELS

The digital capacities of a company are evident in how Solid digital capacities make starting new initiatives and where it invests in digital opportunities. The volume easier and less risky, while having the advantage of of investment is not as important as the reasons for increasing revenues to generate more cash. In addition, the investment and, above all, the impacts they have. solid leadership generates synergies that free up 45 % New technologies such as social networks, mobility cash for new investments and commits employees to and data analysis are not just intended to send signals identifying new opportunities. Together, both capacities of companies are to customers or investors but also to get closer to provide a positive cycle of continuous growth of the at a low level of customers, empower employees and transform internal company’s digital competitiveness. digitalisation business processes. Nevertheless, it takes more than just So, rates of digital transformation implementation vary technology. It also requires leadership, which transforms greatly depending on the sector, as shown in Figure 25. the technology into value for the business. Companies that master the digital world (digital masters) are The following fi gure shows company types presented excellent both in their digital capacities and their in digital terms, as well as the challenges that the leadership capacity. Others only master their digital companies will face in each quadrant. capacities and some only their leadership. Others have not yet started their digital transformation and are weak in both areas.

Followers of fashion Digital experts

Many advanced digital tools are used in silos Solid digital vision that integrates all actions There is no overall vision of digital matters Excellent governance between silos No firmly developed coordination between digital Many digital initiatives that generate business action parcels There is value in a measurable way The digital culture is also found in silo form Solid digital culture

Beginners Conservatives Management scepticism regarding the value that Integrated digital vision but still poorly developed few advanced advanced digital technologies provide digital tools, although traditional digital capacities are usually Digital capacity Starting to address some digital experiments mature Solid digital governance between silos Immature digital culture Initiatives underway to create digital capacities and culture

Leadership capacity

Figure 24: Types of company based on digital and leadership capacity

35 BUSINESS STRATEGIES & MODELS

38% 25% 21% 16% High technology Figure 25 shows that the Internet players are the most digital, followed by banking, which is based on 35% 23% 23% 19% Banking them, and all the other industries follow.

33% 33% 13% 21% Insurance IT digitalisation is focused on improving adaptability, resilience, speed and agility, data analysis and 31% 19% 50% Tourism customer relationships. To assess whether there are improvements in these areas, interviewees were 31% 17% 48% Telecommunications 4% asked a set of questions aimed at understanding 26% 30% 17% 27% Retail the current status of their companies regarding digitalisation. 24% 16% 28% 32% Consumer goods We fi nd that for more than 66% of companies “IT 20% 40% 20% 20% Utilities design guarantees security and reliability” and “IT systems help automation and increase effi ciency”, 17% 26% 17% 40% Industry Manufacturing are statements that represent the status of their company. Furthermore, these statements stand out 7% 17% 43% 33% Pharmaceuticals markedly above the rest. It cannot be said that they are closely related Digital experts Conservatives Followers of fashion Beginners to IT digitalisation but rather to traditional IT management. Figure 25: Distribution of digital implementation by industry On the other hand, the least weighted statement by far was that “advanced analytics and Big Data are an integral part of IT solutions”. The rest were in the mid zone, where we fi nd statements very much in line Both advanced analytics and Big Data are an 14,8% 29,5% 29,5% 15,9% 10,3% integral part of IT solutions with IT digitalisation, which leaves the impression that this digitalisation is still in its initial phase. 6,8% 29,5% 37,5% 18,2% 8% IT applications are developed and deployed quickly It is strange that 45% do not believe that advanced 5,8% 26,4% 25,3% 28,7% 13,8% IT systems help increase customer satisfaction via an analytics and Big Data are an integral part of IT attractive digital experience solutions while 56% of respondents say they have IT systems drive self-service for business functions data analytics covered. 5,8% 20,7% 36,8% 24,1% 12,6% and the customer relationship Similarly, it is paradoxical that 70% of respondents 7,9% 21,3% 27% 24,7% 19,1% My company's IT architecture is agile, adaptable and scalableconsider IT architecture to be somewhat agile, scalable and adaptable but only 35% think that is 9,2% 21,8% 36,8% 28,7% IT systems help automation and increase efficiency 3,5% has an agile operating model.

23,6% 37,1% 32,6% IT design guarantees security and reliability Developments that may occur in digitalisation 2,2% 4,5% are based on the adoption of new technologies, Definitely does not Does not represent Represents them which we can classify as modern technologies to Represents them Perfectly represents them distinguish them from traditional technologies. represent them them very much to a high degree

Figure 26: Current status of companies in relation to IT digitalisation

36 BUSINESS STRATEGIES & MODELS

Another way of assessing the digital situation of your IoT technologies have a penetration slightly higher than company is to analyse which of these technologies form 30%. All of this confi rms that companies are in initial part of the implemented solutions. phases of adapting the technologies most related to IT digitalisation. +66 % In terms of the companies’ catalogue of current technologies, the new storage platforms and the new Due to the specifi c nature of their businesses, the of respondents agree development platforms are the technological areas banking and insurance sectors have moved furthest with on the importance that have penetrated furthest into companies in relation advanced analytics and innovative data environments to their digital transformation. If we consider all of the that have little penetration in other industries. Likewise, of the options, companies where a technology is in selective or general IoT technology has a strong presence in network “IT systems help use, we gain a clear indication of the current penetration industries, such as telecommunications and energy. of each new technology in the digitalisation framework. automation and Due to the specifi c nature of their businesses, the While the new storage platforms, multicloud-based banking and insurance sectors have moved furthest with increase effi ciency” architecture and advanced analytics are being advanced analytics and innovative data environments and “IT design implemented in around 60% of the companies in that have little penetration in other industries. Likewise, guarantees security the sample, technologically optimised advanced IoT technology has a strong presence in network infrastructure and innovative data environments are industries, such as telecommunications and energy. and reliability” in around 50%. The new development platforms are present in around 40% of companies.

8% 14% 11% 29% 31% 7% Multicloud-based architecture

18,9% 10% 32,2% 27,8% 8,9% New forms of storage 2,2%

16,7% 18,9% 36,7% 13,3% 10% Innovative data environments 4,4%

5,5% 15,6% 14,4% 41,1% 17,8% 5,6% Advanced analytics

13,3% 17,8% 28,9% 27,8% 10% Technologically optimised advanced infrastructure 2,2%

18,9% 22,2% 16,7% 20% 14,4% 7,8% Internet of Things

11,1% 18,9% 18,9% 26,7% 14,4% 10% New development platforms

Still not considered Under consideration In pilot phase In selective use In general use Don't know, no answer

Figure 27: Current technologies of companies

37 BUSINESS STRATEGIES & MODELS

INFRASTRUCTURE Perhaps the central element of the infrastructure and platform strategy for digital In essence, the new cloud strategies consist of providing the capacity to move IT transformation is the concept of the cloud and its instrumentation. The cloud processes continuously between public and private clouds and create a consistent provides the granular computing capacity, the storage, the base software and the architecture between both environments. Its defi nition could be “a multicloud is a virtualisation managers and orchestrators related to SDN, NFV and SDS (software process environment in the cloud that uses a mixture of public and private cloud defi ned storage). There are four types of cloud: private, public, hybrid and services that enable applications and data to be shared between them”. multicloud. In other words, a company may be testing an application in a public cloud and If you ask a group of CIOs what the hybrid cloud is, you may obtain as many answers exploiting its production applications in a private cloud, or vice versa. As an example as the number of companies they work for. A medium-sized company uses dozens of of a hybrid cloud strategy, some companies use one type of cloud for production cloud services because business lines normally feel pressure to innovate and there is and another type for testing, development, support or advanced analytics. What is insuffi cient time to develop a strategy to fi nd the most effi cient and cost-effective way making an authentic hybrid cloud strategy increasingly possible is the huge amount to exploit them. of new orchestration capabilities that help move applications between different clouds. According to Microsoft’s defi nition, a hybrid cloud is an IT environment that combines a public and a private cloud and enables data and applications to be shared According to Oracle, some CIOs are still uncertain about the hybrid cloud. Customers between them. When the demand for IT resources and processing fl uctuates, hybrid have a variety of opinions about the cloud when seeking technologies that enable cloud computing enables companies to seamlessly scale their local infrastructure them to manage their own risk gradually. Customers want to start modernising their in the public cloud to manage any workfl ow, without having to allow third-party applications and converting them into authentic applications in the cloud, adding data centres to access all their data. Organisations obtain computing fl exibility them to their virtual machines, databases and middleware, but all within their process and capacity from the public cloud for basic, less sensitive computing tasks, while centre. Thus, in the future, when they want to migrate to a public cloud, they will not maintaining the company’s critical applications and data in local infrastructure. have to remake their applications. However, the market itself is shaping the defi nition of hybrid cloud and actors are Microsoft has also developed a hybrid cloud offering in conjunction with its public starting to agree on the defi nition of a hybrid cloud strategy. We can also include the cloud offering. This enables customers to take processes used in a public cloud and multicloud concept. This simply means more than one cloud: public-public or public- deposit them in a private cloud used in their customer process centre. private. Multicloud strategies provide multiple benefi ts, although one of the most Although more orchestration tools are available every day, moving a process from important is preventing the risk of vendor lock-in. i.e. dependence on a single cloud one cloud to another cloud of a different type is a genuine challenge. Moving provider. applications and, above all, data, is very expensive. Creating something that is compatible with more than one type of platform in the cloud and also paying to move the data currently presents signifi cant challenges.

38 BUSINESS STRATEGIES & MODELS

Imagine making a transition from Oracle to SQL Server. It is no simpler or cheaper than if we had done it 10 years ago. This leads to cultural problems that may reject the notion of migrating to a hybrid cloud. In any case, the hybrid cloud strategy fi nds the right set of technologies in the cloud and orchestration tools that make business organisation faster and more effi cient. At this point we need to understand how the infrastructure strategy is based on use of the cloud. To do this, we need to know which are the most obvious points of this strategy within companies. After analysing it, we obtained the following results.

13,8% 17,2% 17,2% 51,8% Reselling generated cloud capacities to third parties

19,1% 31,9% 12,8% 23,4% 12,8% Master multicloud management and balance the hybrid and public clouds Integrate points of contact with the customer to access data in the cloud and be 12,5% 23,2% 35,7% 14,3% 14,3% able to carry out transactions Increase the load on the hybrid cloud while reducing it in the "on premises" 20,6% 19,1% 27,9% 16,2% 16,2% systems Move first to the cloud for deployment of new applications and prioritise the 25,8% 30,6% 19,4% 17,7% 6,5% integration of business 30,8% 21,5% 18,5% 12,3% 16,9% Break down the traditional data silo structure

32,3% 29,2% 21,6 % 12,3% Develop a traditional data silo structure 4,6% Establish the cloud as a preference and develop an integrated API architecture 47% 18,2% 15,1% 9,1% 10,6%

HIGHER LOWER 1 2 345 IMPORTANCE 1 IMPORTANCE Figure 28: Key factors considered by companies to explain the infrastructure strategy involved with the use of the cloud

In view of the results, companies see the concept of integration from the infrastructure layer as key elements for the infrastructure strategy: • Establish the cloud as a preference and develop an integrated API architecture • Develop a traditional data silo structure • Break down the traditional data silo structure

Contrary to what happens with the Internet giants, the vast majority of companies do not consider the option of reselling cloud capacity to third parties relevant. This is understandable, given that economies of scale are needed to be competitive in the resale of these types of capacities, something that most companies in the IT infrastructure fi eld do not have. Media, energy and banking companies choose the fi rst option as the leading element of their strategy, while insurance, technology and consulting fi rms think that the key element is the second of the options shown.

39 BUSINESS STRATEGIES & MODELS

Another aspect of interest in terms of cloud management We cannot infer from the results that companies see capabilities is network virtualisation through managers, these new technologies as enablers for launching new controllers and orchestrators to create both NFV and digital services, given that different industries have +80 % SDN. different positions. of interviewees consider that Almost all companies (90%) believe that the fundamental application of SDN and NFV technologies is aimed technologies such as SDN and NFV at achieving greater fl exibility in the management of provide the infrastructures with network resources. Also, they consider it relevant to be able to control the different network confi gurations from the necessary capabilities to: applications, which offers them effi ciency and reliability. This does not directly imply that the application is aimed • Effi ciently and reliably control at reducing operating costs, given that only 20% of from applications companies consider this as a primary objective. • Have the necessary fl exibility

Another of our objectives with SDN is to reduce the capex necessary for 10% 30% 30% 10% 20% network deployment

20% 40% 30% 10% The aim of NFV and SDN is to reduce network operating costs

20% 50% 10% 10% 10% SDN enables us to avoid network bottlenecks due to its dynamic resilience In general, NFV and SDN will be the basis of multiple network services that 30% 20% 40% 10% can be monetised in the future With SDN, we improve the competitiveness of our products by reducing launch 40% 30% 20% 10% times of network services SDN enables us to control the network from applications. It enables us to 50% 30% 10% 10% operate efficiently and reliably and launch new services quickly

50% 40% 10% Another aim of NFV and SDN is to achieve greater flexibility in the management of network resources

Strongly agree Agree Agree somewhat Disagree Don't know, no answer

Figure 29: Statements by companies on SDN and NFV

40 BUSINESS STRATEGIES & MODELS

PLATFORMS Using platforms can help companies change the way they do business. They can provide important benefi ts in terms of time, cost and usability via open source technologies, cloud processes, resource sharing as well as access and traceability in the use of functionalities and data. All this helps provide interoperable, confi gurable, structurally lightweight solutions for immediate use.

Based on SOA Confi gurability Security Access to APIs for subscription Service Inherent business logic based on the Access control, monitoring and auditing use and recording functional purpose of the application – Regulations – APIs for internal use – Specifi c for applications – Fraud control – APIs for external use – Functional requirement

Driven by rules and Common data model Workfl ow policies Defi ne once and reuse it Workfl ow for broad spectrum User, Access, Order, Actions – Customer – Partner – Field strength – Access Regulatory – Account – Region – Approvals – Rules of business – Service – Price – Order management –Off erings – Contract – User – Distribution of inventory use – Collections

Multi-tenant Driven by BPM Access control/Regulatory requirements/ Database independence Business, reports and decision- Operational fl exibility Supplier fl exibility making process

– Brand – Flexibility – Centralised control – Company – Cost – Commercial use cases – Partners Organisation

Figure 30: Main characteristics of the platformisation focus

41 BUSINESS STRATEGIES & MODELS

Many companies see opportunities for growth through the use of platforms as a vehicle for new business models and ways of interacting with customers, users and third parties. It is also important for them to optimise investment in legacy systems and increase business margins. 50 To support traditional systems and drive the new generation of digital services, companies need fl exible, adaptable and, where possible, pre-integrated platforms that meet the appropriate standards.

40 24 With the appropriate platforms, companies can simplify and transform operations and improve customer services. Using confi gurable platforms ready for immediate use, companies can modernise the legacy environment and 24 facilitate process reengineering to simplify operations. These platforms enable companies to subject their IT systems 13 13 to radical changes to launch new products and services more quickly at a lower cost. 22 45 In order to make the digital IT transformation, it is vital to decide the order to take actions on the system. In principle, 14 there are four paths for this transformation. 20 22 In both the short and the medium term, the “Gradual transformation of old systems” was the option most valued by 13 the interviewees, while, in the long term, the most valued option was “Transformation from scratch”. However, it is logical that these opinions differ depending on the industry in question, as not all sectors have the same urgency or SHORT MEDIUM LONG strategy for transformation. Gradual transformation of old system It is possible, even within the same sector, for companies to consider very different options in response to their assemblies competitive situation, the market they are in and the nature of the products and services they offer. Gradual transformation of all or some old systems Transformation without replacing legacy systems Transformation from scratch

Figure 31: Transformation pathways used to undertake the digital transformation and their different time horizons LEGACY TRANSFORMATION STRATEGIES Gradual transformation Gradual transformation Transformation without Transformation from of all or some of the of old system replacing legacy scratch old systems assemblies systems

Gradual transformation of all or some Gradual transformation of old system Transformation without replacing A complete new IT system would be of the old systems using component-to- assemblies with replacement based on the legacy systems, which would be created from scratch using modern component replacement, using best-of- pre-integrated packages accessed through APIs used by the new software and state of the art architecture. systems. Gradual transformation of old Once the system is built, data and breed components. If they were all or, in some cases, best-of-breed type systems by best-0f-breed components customers would be migrated from the replaced, we would be talking about a components. The inclusion of legacy or pre-integrated packages. old system complete replacement, including the systems would also lead to a complete legacy systems replacement This would be a partial replacement, although with the appearance of being complete by isolating the legacy systems from the transformation

42 BUSINESS STRATEGIES & MODELS

A very important process for companies is the migration of customer data and services from the old system to the now transformed system. There are three different scenarios for doing this: For the short, medium and long-term, all the interviewees preferred the phased scenario. 60 Using the phased/segmented scenario and an appropriate test plan, the new software and the integrity of the databases can be validated, in a manageable period and with enough time to make appropriate corrections before 40 launching the software into production on the new system. IT vendors fi nd the short-term phased scenario the most 72 relevant, while consultant and energy companies consider the medium term the most relevant. Lastly, long term was the option that received the most votes from media and retail companies.

23 Although data and application tests are performed every day in the Big Bang scenario, this option carries a high risk 55 as, even when running simulations, it is very diffi cult to avoid errors on the new system. Even when these are corrected, the testing and correction period could still be abnormally lengthy. 5 33 In the last scenario, known as From Scratch, customers who hired new services not previously available would be 12 placed in the new system once the new system was in production. It is a largely non-invasive system but with an indefi nite migration completion date so that, ultimately, the old system remains active for a long time, creating high SHORT MEDIUM LONG maintenance costs due to the coexistence of systems. Big Bang Figure 32 shows the results obtained from the different companies in terms of the customer migration model and its time horizon. Phased / Segmented

From scratch

Figure 32: Customer and data migration model and time horizon

DATA MIGRATION STRATEGIES Big Bang Phased/Segmented From Scratch

Mass migration of data from the old Gradual migration of data by Use of the new system only for new system to the new so that, from one customer segment from the old customers who contract services day to the next, old customers have system to the new. In this method, once the new system is active. The their old data in the new system, unit tests are carried out by plan would be to confi gure, create stored in the new databases and segment, with a reduced volume of architectures, develop platforms processed by the new processes customer data and data from some and develop applications to support and software that has now be of the services contracted by those the new services in the transformed transformed customers system

43 BUSINESS STRATEGIES & MODELS

SERVICES AND FUNCTIONALITIES In economic sectors where competitive pressure due to digital disruption is relevant, the implementation of new services and functionalities in the IT sphere must have a twin focus. The fi rst focus must be “outwards”, both to secure more customers and to supply new services that are better adapted to their needs, with the aim of increasing returns and optimising the effi ciency of multiple contact channels, seeing how to take advantage of digitalisation to redesign the main business, and the benefi ts of new opportunities for diversifi cation. The second focus must be “inwards” to increase effi ciency and productivity of internal operations using digital tools and to keep working on improvement.

FOCUS FOR IMPLEMENTATION OF SERVICES AND FUNCTIONALITIES

Existing business New business

• Relationship model • Up / Cross - selling Outwards • Reduced interaction costs • Enabler of new products, services and modelss • Satisfacción / Churn

Inwards • Efficiency • Effectiveness

44 BUSINESS STRATEGIES & MODELS

As a consequence, perhaps the fi rst thing that Internet of Things 24% companies should do is explore and analyse which Artificial intelligence 23% technologies bring the most value to achieve Blockchain 12% greater effi ciency. However, we cannot forget that Mobile payments 10% looking both outwards and inwards are two sides of Augmented reality 9% the same coin, so in many cases these services could have a double function: towards the customer and High-definition and high-speed videos 7% towards internal processes. Virtual reality 7% Sale of customer data to third parties 6% Currently there are different sets of technologies High definition voice 2% whose joint implementation is referred to in the lines above. These sets would give rise to various types Figure 33: Most attractive technologies for this year of focus that could be classifi ed according to the technologies. Examples include technologies such as Big Data and advanced analytics, IoT/IoE, virtual and augmented reality, Blockchain, etc. Reducing time to market 23% IoT and artifi cial intelligence were considered the Facilitating new business models 21% most attractive technologies for this year ahead of Adapting the company to changes in the environment 19% all others. Improving efficiency/costs 15% The decision about which IT services to implement Improving decision-making 8% or evolve, both internally and for customers will Increasing customisation 8% depend on the company’s situation, the competency and focus required based on the strategy that has Improve up- and cross-selling sales 5% been defi ned. Figure 34 shows the main focuses for Improve churn 2% the creation or modifi cation of IT services: Figure 34: Principal focuses for the creation or modifi cation of IT services out of the weighted total

45 BUSINESS STRATEGIES & MODELS

The three main focuses in order are: “Reducing time We can see that the main sectors where the primary R&D tyrannies to market”, “Facilitating new business models” and focus is to reduce time to market are IT/network “Adapting the company to changes in the environment”. vendors, consulting, media and retail. The sectors where Time-to-market obsession “Improving effi ciency and costs” was in fourth place. It the focus is on facilitating new business models are IT/ is clear that the main focuses tend towards improving network vendors, consulting, telecommunications and Digital disruption the business for customers and the environment ahead insurance. Lastly, the media, retail, insurance and energy of cutting costs, despite the continuous budgetary sectors selected adapting the company to changes in pressure to which IT has historically been subject. the environment as the primary focus. Cutting-edge technologies The results show the close relationship between digital transformation, emerging technologies and innovation Global or Marginal through the so-called six R&D tyrannies. The main sectors that support the three primary focuses Differentiation for are shown in Figure 35: competitive separation

Draconian regulations Facilitating Adapting the Reducing new company to time to business changes in the market models environment

Implicit in reductions in time to The selection and use of better Adaptability is a basic market is the improvement of business models is crucial to characteristic enabling changes all development and enabling companies to transform in the environment to be met deployment processes, themselves and meet the enabling companies to launch demands of digital customers more and better products and services quickly

Media IT/Network vendors Retail

Consultants Consultants Media

Retail Telecommunications Insurance

IT/Network vendors Insurance Energy

Figure 35: Principal focuses for the creation or modifi cation of IT services (by sector)

46 KEY COMPETITIVENESS FACTORS KEY COMPETITIVENESS FACTORS

KEY COMPETITIVENESS FACTORS The new digital era brings with it new paradigms and new business contexts. The environment in which companies The key competitiveness factors are conditioned run their businesses is increasingly competitive and, in some cases, increasingly dynamic. to some extent by this new context and are related to four basic dimensions: governance, people, processes and technology. In this report, we focus NEW BUSINESS CONTEXT on the aspects related to IT transformation, given that this transformation: Volatility Uncertainty Complexity Ambiguity • Acts as a catalyst for customers’ needs and expectations. Technologies—especially the Characteristics: Characteristics: Characteristics: Characteristics: smartphone supported by the Internet—are driving the transformation that is sweeping us all up in its torrent of change The challenge is Despite the lack of The situation has many The causal relationships unexpected or other information, the interconnected parts are completely unstable and may last basic cause and effect and variables. Some uncertain. There are no • Supports the principles of putting the focus for an unknown period of the event are known. information is available precedents: you are on the customer. Companies that have but it is not necessarily Change is possible but or can be predicted but facing unknown difficult to understand; not given its volume or nature unknowns adopted an operating model focused on the the knowledge is often may be difficult to customer are encouraging others to imitate available process this strategy. Technology plays a fundamental role in creating the principles involved in this customer focus: customer leadership, Example: Example: Example: Example: knowledge-based motivation, speed and connectivity Prices fluctuate after a The launch of a pending Businesses in many You decide to move to natural disaster takes a product from a countries, all with immature or emerging supplier offline • It is essential for success. The ability of your competitor confuses the unique regulatory markets or launch company to implement technology defi nes future of the business environments. Tariffs products that are not and the market and cultural values part of your core its ability to progress in the development strengths and implementation of new technologies and to improve its positioning with regard to Figure 36: New business context which apply to companies from dynamic sectors improving its digital maturity

48 KEY COMPETITIVENESS FACTORS

INFRASTRUCTURE

Because every company has its own specifi c characteristics, needs and problems, In fact, there are already companies that are using one type of cloud for production each will have a specifi c digital transformation process. However, there are certain and another for tests, development or advanced analytics. steps in the process that all or most organisations must take to achieve this Therefore, it is not surprising that the competitiveness factors in the infrastructure transformation. For example, migration to the cloud is becoming a basic path to be layer identifi ed as primary by the surveyed executives have to do with the cloud and followed by companies from different sectors. The cloud provides ease, practicality the hybrid cloud concept. The most chosen competitiveness factor was “creating and speed for the design, development and launch testing of their digital services cloud-based solutions” at 46% of all people surveyed, followed by “integration of and products. Likewise, as discussed in the business strategies and models chapter, disparate solution environments” at 41%, while “incorporating specialists” from a it is vital to avoid vendor lock-in. Therefore, it is highly probable that many companies range of areas such as analytics, data, security, mobility and architecture was in third will choose to develop and exploit their production applications in a private cloud place. and test them in one or more public clouds.

46% 41% 36% 29% 22% 21% 13%

Cloud-based solutions Environment Incorporating Use of IoT Zero trust security Automation and Contextual privacy with integration specialists recovery customers

Creating cloud-based Integration of disparate Being able to easily Use of IoT to acquire Implementing zero trust Automation of the backup Achieve contextual privacy solutions to drive solution environments, incorporate specialists in information through security (treating all and recovery of with customers, gaining customer-focused using public, private and analytics, data, security, sensors and develop network traffic as applications authorisation to compile functions accelerate hybrid clouds, as well as mobility and architecture knowledge based on such untrustworthy) by applying (availability/continuity and use their data in an software development and both legacy and modern information encryption, tokenisation plans) to achieve minimum agreed context host key applications for systems and data-masking downtime on these the business technologies applications

Figure 37: Competitiveness factors considered most important within the set of factors proposed for the infrastructure area

49 KEY COMPETITIVENESS FACTORS

Analysing the sectors that have selected these Cloud-based Environment Incorporating three main factors, we can see that the tourism solutions integration specialists sector has committed to all of them. However, telecommunications operators have chosen Creating cloud-based solutions Disparate solution environment Being able to easily incorporate disparate solution environment integration and to drive customer-focused integration using private, public specialists in analytics, data, incorporating specialists, a factor that was chosen by functions accelerate software or hybrid clouds, as well as legacy security, mobility and IT and network vendors, consultants and the retail development and host key and modern systems architecture sector. applications for the business In addition, the “cloud-based solutions” factor was chosen by the media industry, IT and network vendors, consultants and the energy sector. The following table shows the main factors with the main Tourism Tourism Tourism industrial sectors that support them.

Media Telecommunications Telecommunications

IT/Network vendors Energy IT/Network vendors

Consultants Banking Consultants

Energy Insurance Retail

Figure 38: Main competitiveness factors in the infrastructure area and their principal industrial sectors

50 KEY COMPETITIVENESS FACTORS

PLATFORMS The companies that are transforming digitally are We identifi ed this as one of the pressing topics supported by technological platforms in multiple areas. affecting companies in their digital transformation Despite the vital role of these platforms, it is important journey. It seems that the operating model is not the to acknowledge that they can be built incrementally primary priority, but it continually appeared in the top and in different ways. Therefore, according to the results positions of the answers to the questions asked and of our survey, one of the main competitiveness factors can be considered a necessary benefi cial factor for is “having an easily modifi able architecture capable of transformation. connecting end-to-end activities”, as stated by 45% of Another of the main factors was “designing APIs and the people surveyed, followed by another factor related applications as building blocks in order to maximise to the growth of platforms, “having platforms capable their reuse”, mentioned by 31%. This factor enables of being scaled quickly and in the volumes needed for companies to reuse capacities, enable the generation of business” at 41%. rapid prototypes and coordinate the business ecosystem. As well as architecture, companies consider another main competitiveness factor in this layer to be “establishing fast, iterative and compatible processes with agile deployment models”, with 38%, given that this is one of the most appropriate models for successfully dealing with the changes required by companies in order to transform themselves digitally.

51 KEY COMPETITIVENESS FACTORS

45% 41% 38% 31%

16% 15% 12% 5%

Easily modifiable Platform capable of Fast and compatible API and application Risk management General roadmap Adaptability and Innovation program architecture scaling processes design capacity to evolve

Having an easily Having platforms Establishing fast, Designing APIs and Managing the risk Have a general Adaptability and Establishing a formal, modifiable architecture capable of being scaled iterative processes applications (for throughout the roadmap for specific capacity for simple repeatable innovation capable of connecting quickly and in the compatible with agile containers and company's ecosystem platforms and plans for evolution and program end-to-end activities volume necessary for deployment models. application managers) the components in an replacement (high integration business as building blocks in orchestrated, coherent capacity) order to maximise their way reuse (with minimum setting of parameters)

Figure 39: Competitiveness factors considered most important within the set of factors proposed for the platform area

52 KEY COMPETITIVENESS FACTORS

SERVICES AND FUNCTIONALITIES Currently, one of the most important competitive Another aspect related to this factor is the capacity of advantages that companies have is knowing and companies to offer self-service platforms. This focus connecting with their customers from any channel at enables customers to save time and allows companies to any time. These new forms of relationship are possible cut costs through artifi cial intelligence or chatbots, with or may be improved by adopting digital initiatives. mobile applications and online communications. This, in addition to increasing customer satisfaction, The third most important competitiveness factor was can also generate productivity gains. The next step “testing the design hypotheses with real use data and that companies seek is integration of the customer obtaining the necessary feedback to continually improve experience between the different channels to obtain solutions” with a score of 34%. This focus enables a unique view of the customer, enabling the customer companies to improve continually, which translates into to move between the different channels transparently, greater quality of the products and services that they without experiencing any interruption if they want to offer. This infl uences companies’ product and service move from physical to digital channels or vice versa. development areas and consists of design testing tools In this digital era, there is greater awareness of the needs and development processes, both of design and testing. and expectations of customers. That’s why the majority Another main competitiveness factor is deploying of interviewees agreed that the main competitiveness specialised systems for customers, employees and factor in the services and functionalities layer is “in-depth partners on broad spectrum technologies, which scored knowledge of the needs of the customer in order to 31%. These involve systems and/or tools that, as well as design the best solutions”, which scored 60%. including customers and their needs, include employees The second factor identifi ed by companies was and partners. This results in a greater response to “searching for, evaluating and selecting the most customers from employees and partners due to the appropriate emerging technologies to be applied to speed and ease offered by the use of these tools, where customer solutions”, with a score of 36%. For example, customisation is key to providing them with intelligence. several companies in different sectors are boosting their analytical data capabilities, with Big Data and advanced analytics, in order to understand their customers in greater depth.

53 KEY COMPETITIVENESS FACTORS

60%

36% 34% 31% 23% 18% 7%

Knowledge of the Most appropriate Design hypothesis and Specialised Employees with Investment Financing customer emerging technologies continuous systems empathy prioritisation adjustment improvement

In-depth knowledge of the Seeking, evaluating and Testing design hypotheses Deploying specialised Having employees with Prioritising investments to Being able to adjust needs of the customer in selecting the most with real use data and systems for customers, customer empathy and better serve the customer intra-year financing based order to design the best appropriate emerging obtaining the necessary employees and partners in technological knowledge on the customer solutions technologies to be applied feedback to continuously broad spectrum experience with the to the solutions that improve solutions technologies such as the implemented solutions customers request most web, smartphones, customisation and others

Figure 40: Main competitiveness factors in the platform area and their principal industrial sectors

54 INVESTMENTS INVESTMENTS

INVESTMENTS Investment in IT and its infrastructure is changing. From a phase in which the principal focus was optimisation of existing IT systems, other aspects are appearing, along with optimisation, which make the digital transformation of the following possible:

• The integration of data, applications and processes, which facilitate the agility and adaptability of IT solutions

• The supply of infrastructure to provide services from the cloud, an area in which investment in hybrid and multiclouds largely account for investments of this type

• Developing and deploying technologically advanced systems, which implies the existence of infrastructure capable of providing the base platforms for this development

• Improving the management of IT systems and, above all, automation of this management to achieve a more effective, effi cient operation

• Installation of software-defi ned storage systems

• Improvements to security in overall terms for an effective defence against cyber attacks

• Automation of processes to align them with digital applications and management of operations

These represent generic areas of investment in the IT function. In the following chapters we take a closer look at investment priorities for the technological layers of the infrastructure, IT platforms, services and IT functions.

56 INVESTMENTS

INFRASTRUCTURE Surveyed companies believe that infrastructure investment Improving cybersecurity 47% priorities should be focused on four fundamental aspects: Supply of infrastructure and services from the cloud 46% Improving the management and automation of IT systems 45% • Improving cybersecurity Optimising existing IT systems 45% Installation of SDN, NFV and SDS (Software defined storage) 23% • Supply of infrastructure and services from the cloud Figure 41: Infrastructure investment priorities for surveyed companies

• Improving the management and automation of IT systems

• Optimising existing IT systems Tourism and logistics 22,2% 22,2% 27,8% 11,1% 16,7% Services and consultants 24% 24% 20% 4% 28% The focus on investment in technologies for the Defi ned Data Media and education 18,2% 27,3% 18,2% 9% 27,3% Centre Software is given a lower priority than the four focuses Telecommunications 17,3% 15,4% 21,1% 23,1% 23,1% identifi ed above. This leads us to infer that either companies 12% 24% 24%16% 24% have already undertaken data centre consolidation/renovation IT/Network vendors initiatives or that when determining new future hybrid or multicloud Technology 33,4% 22,2% 22,2% 11,1% 11,1% strategies the application of these technologies will not be Energy 23,5% 23,5% 23,5% 6% 23,5% considered. Banking and insurance 23,1% 23,1% 30,7% 23,1% The point of view of the different industrial sectors does not greatly Industry 31,6% 15,8% 21% 31,6% differ although actors such as telecommunications operators pay Retail 29,4% 35,5% 11,7% 11,7% 11,7% special attention to the application of technologies such as SDN/ Other 21,7% 26,2% 21,7%8,7% 21,7% NFV or technologies to optimise existing systems.

Improving Installation of Improving Supply of Optimising existing cybersecurity SDN, NFV and the management infrastructure IT systems SDS systems and automation and services of IT systems from the cloud

Figure 42: Types of infrastructure investments that companies are going to make (by sector)

57 INVESTMENTS

Boards of directors are inclined to increase security investments We will combine security personnel with equipment operations staff specifically dedicated to mission critical applications 38% provided that there are proposals with a suffi ciently solid business model. To this end, the focus must be on two main areas: Management and development teams will increase their roles and commitment to protecting critical assets 34% • Management has to demonstrate that the investments proposed We will devote more staff and technology so they can never be violated 19% will go where the organisation sees the greatest possible security value We will focus on new equipment investments in this area and reduce investments elsewhere 7% • Management has to continue looking beyond technology and Figure 43: How do companies propose to protect mission critical systems in the short term consider organisational and staff-related matters

One of the best ways to maximise the impact of new investments in security is to direct them into mission critical systems. It is worth noting that companies clearly choose two ways: Telecommunications

15,8% 52,6% 5,3% 26,3%

Services and Consultants • Combining security personnel with equipment operations staff 28,6% 35,7% 35,7% specifi cally dedicated to mission critical applications

IT/Network vendors 23,1% 38,4% 15,4% 23,1% • Management and development teams increasing their roles and commitment to protecting critical assets Other 20% 20% 10% 50%

Industry 20% 30% 10% 40% The choice of two ways demonstrates the growing awareness of security, not only in the layers most related to technology, but also in Energy 22,2% 33,3% 44,5% the potential changes in the operating model to introduce security as a critical element (for example, implementing brands such as SecOps or Media and education 12,5% 50% 12,5% 25% Design to security). In fact, the fi rst two options were preferred by almost twice as many Tourism and logistics 25% 25% 12,5% 37,5% interviewees as the third, which gives them much greater weight in terms of what companies think. Technology 42,9% 14,2% 42,9% Based on industrial sectors, the choices were divided as shown in Banking and insurance 16,7% 50% 33,3% Figure 44. The main sectors that gave majority support to the fi rst two options Retail 20% 40% 40% were tourism, telecommunications operators, energy, consulting, media, technology and IT/network vendors. We will devote more We will combine We will focus on Management and staff and technology security personnel new investments and development teams so they can never be with equipment equipment in this area increasing their roles violated operations staff and reduce invest- and commitment to specifically dedica- ment elsewhere protecting critical assets ted to mission critical application

Figure 44: How do companies propose to protect mission critical systems in the short term (by sector)

58 INVESTMENTS

PLATFORMS SOFTWARE DEVELOPMENT FOCUSES Perhaps the fi rst decision on platforms and services that impacts on the investment chapter is the focus on Produced in-house Best-of-breed Pre-integrated how to carry out the developments necessary for new components package applications and platforms, as it will impact signifi cantly on the Capex needed for its implementation. Applying agile development methods to The use of software components that Set of best-in-category components that Basically, there are three focuses for developing optimise the efficiency of the resolve specific processes or platform have already been pre-integrated the software needed for the planned digital IT development processes, which are classified as the best in their category transformation: Develop it within the company, choosing best-of-breed components or choosing pre- It enables us to develop following They provide a high percentage of the Reduces the cost and risk of integrated packages. the exact requirements for requested requirements through integration optimising our processes and parameter setting Looking at the results, companies are mainly opting for Setting their parameters when dealing platforms Less customisation with customer requirements is less pre-integrated packages and choosing best-of-breed Total software customisation The cost of achieving the appropriate than that of each individual components. In this way, they are pursuing: Method used by OTTs with excellent functionality of a process or component results in terms of functionality and component is more affordable reliability • The highly sought after integration capacity These components must be for the most standard elements (or less integrated among themselves distinguishing) in a way that does not require Significant investments are required if The cost of these integrations The customisation of requirements is great efforts at customisation/adaptation they want to achieve results within a between components is significant the weakest of these integrations reasonable time There is a risk of significantly delaying between components is significant • Having leading-edge functionalities with the the results of the project option of setting parameters for functionalities that require systems to be adapted to business processes and not vice versa (considering that these processes or parts of them are not as Pre-integrated package with best-of-breed components 42% relevant as for developing support software Best-of-breed components 19% within the company) Other 15% Pre-integrated package 13% Produced in-house 10%

Figure 45: Options for achieving development adapted to requirements and customisation, the cost and the risks

59 INVESTMENTS

Telecommunications 13% 54% 33% Note that in the “Other” option, most executives cited the option of developing software in the Services and Consultants 27% 10% 36% 27% company and acquiring best-of-breed components, Produced in-house assuming the costs of development and integration. IT/Network vendors 25% 11% 39% 25% In terms of which sector supported which majority Industry 37% 13% 50% Best-of breed components option, the energy, retail, media and education sectors were most committed to the produced in- Other 29% 14% 14% 43% house software option, while industry advocated for Pre-integrated package pre-integrated packages. Retail 33% 17% 33% 17% From a fi nancial point of view, we need to Tourism and logistics 20% 40% 40% analyse the objectives sought with this digital Package with best-of-breed transformation. Two fundamental axes can be Banking and insurance 20% 20% 60% components considered: transforming to obtain greater value for the business and achieving savings by removing Energy 40% 40% 20% legacy systems. An additional axis involves a mixture Technology of both. 25% 50% 25% Other

Media and education 25% 25% 50%

Figure 46: Options for achieving development adapted to requirements and customisation, the cost and the risks

TRANSFORMATION OBJECTIVES – FINANCIAL PERSPECTIVE Objetive 1 Objetive 2 Objetive 3 Transforming to obtain greater value for Achieving savings by retiring legacy Objective 1 and 2 together the business using a revamped IT system systems and replacing them with compo- nents that use more modern technology

Greater versatility and flexibility Enables the implementation of It is focused both on saving costs and increasing income Increasing income and modern systems at a much lower competitiveness operating and maintenance cost Higher development and implementation cost Replacing legacy systems is secondary Supports maintenance costs for longer The focus is on enriching the services offer and customer satisfaction, thereby increasing income

The costs of maintaining legacy Is more about savings than achieving Higher IT transformation cost systems remain new income

60 INVESTMENTS

There is no clear consensus on the objective of this digital IT transformation. On the one hand, nearly half of the executives are inclined to establish the aim of obtaining greater value for the business, new services and greater customer satisfaction (inclined to turn the digital transformation into a strategy to earn more income). While the other half prefer to address the two axes simultaneously (transforming to obtain greater value for the business and achieving savings by removing legacy systems, i.e. not only trying to increase earnings but, at the same time, trying to cut costs).

Replace legacy systems to optimise costs 4% Obtain greater value for the business, new services and greater customer satisfaction 48% The two options above at the same time 48%

Figure 47: Companies’ digital transformation objective

There are opposing positions if we analyse the different industries. On one hand, sectors such as banking, insurance, media and education are committed to obtaining greater value for the business, while sectors such as retail and IT/Network vendors also want to reduce costs.

Media and education 75% 25% The two options above Technologies 50% 50% at the same time

Tourism and logistics 40% 60% Replacing legacy Energy 60% 40% systems to optimise costs Banking and insurance 80% 20% Obtaining greater value Retail 16,7% 16,7% 66,6% for the business, new services and greater IT/Network vendors 14,3% 14,3% 71,4% customer satisfaction Industry 42,9% 57,1%

Other 57,1% 42,9%

Services and Consultants 72,8% 9,1% 18,1%

Telecommunications 35,7% 64,3%

Figure 48: Companies digital transformation objective (by segment)

61 INVESTMENTS

SERVICES AND FUNCTIONALITIES Digital services, which are the basis of the digital transformation, with services directed towards customers or optimising internal operations, need an investment portfolio that ensures adequate funding for a successful transformation. The types of investments we need to consider include:

• Base investments. These are investments in infrastructure, platforms and tools that enable advances in the digital experience of customers or in the digitalisation of internal operations. They are normally centralised investments, backed by the CEO, for which it is diffi cult to obtain a profi t and loss statement a priori because they confi gure the main part of the investments that are going to start the project for the company as a whole

• Maintenance investments. These are necessary to keep the business operating, to minimise risks or to respond to external factors such as regulation or compliance

• ROI-related investments. These are closely linked to the roadmap (use cases) of the digital transformation. They are normally investments based on projects with objectives focused on obtaining a certain ROI. They usually form part of the normal cycle of fi nancial planning

• Investments in the fi rst phase of innovation. These investments are more speculative and their returns are highly variable. They are normally directed towards fi nancing incubators, digital laboratories, research partnerships or specifi c experiments. They must be managed in a similar way to venture capital investments

The investments must be balanced to create long-term capacity and short-term ROI, seeking investments that generate as much value as they consume. For example, the cost savings through digitalisation of IT systems can be used to fi nance other portfolio initiatives to create new capacities or develop new innovative products.

62 INVESTMENTS

We must not forget that we are talking about funding exposed investments so we need to fi nd out what their funding mechanisms are. These are usually one of the following three models:

BASIC FINANCING MODELS

Central Local Financing supported fi nancing fi nancing by collaborators

This is normally used when the services provided When the transformation projects on their roadmap It may be possible for a partner to provide initial belong to a central function or when coordination directly benefi t one part of the business, local fi nancing in exchange for contracting a certain volume between different business lines is needed to balance fi nancing is the most appropriate. One example could of services for a set period. It may even be possible to the investment be an e-commerce application of one of its divisions. agree with the partner to act as a pilot customer for If possible, it is always best to try and extend projects the services in exchange for a substantially reduced

that have local fi nancing to the rest of the company price

The success of digital transformation is based on both AI/ML 15,6% 35% 16,9% 10,4% 18,2% 1,3% what is done and what is not done. There are so many 2,6% opportunities for digitalising the business that it is easy IoT 13,2% 23,7% 11,8% 17,1% 17,1% 14,5% to lose focus. But when it comes to making a strategic 2,6% commitment, investing real capital and involving RPA 15,8% 28,9% 13,2% 7,9% 21% 7,9% people, simply maintaining focus on the digital 5,3%

transformation provides real business value. Block-chain 35,5% 36,9% 9,2% 10,5% 1,3% 1,3% 5,3%

Much of the success of the transformation comes NLP 24% 24% 13,3% 13,3% 12% 12% from investment that is well focused on emerging 1,4% technologies, such as artifi cial intelligence (including Other 25% 25% 25% 25% machine learning) or IoT technologies.

We have We are We are We are We already Our solution Don't no plans starting to investing developing have is generating know some investigate in related strategy installed a Income no answer technologies solution Good return and has a high business impact

Figure 49: Status of emerging technologies in companies

63 INVESTMENTS

Except in the case of the IoT where a minority of customers have already started to identify the impact on business of the application of this technology, none of the other technologies are yet generating an impact on business. This fact, together with the fact that about 40% of the companies interviewed have no plans to, or have just begun to, investigate the range of technologies, or that only 10–15% of companies have a natural language processing (NLP) or robotic process automation (RPA) solution installed, make it clear that companies are in a very early phase of transformation. To show the scope of these investments from the perspective of industrial sectors, the table below shows which industrial sectors have companies in the most advanced phases of transformation using these technologies.

AI/ML IOT RPA Blockchain NLP

We are developing the strategy

We have already installed a solution

Our solution is generating significant income

Banking Consultants Education Energy Telecommunications Insurance Technology Tourism IT/Network vendors

Figure 50: Status of emerging technologies in companies (by sector)

It is worth pointing out the activity of the insurance sector in these technologies. Likewise, we can see that the most delayed technologies in terms of implementation are NLP and blockchain. In fact, blockchain technology has still not been implemented effectively and is not generating signifi cant impact on business.

64 SECURITY SECURITY

SECURITY

A little more than a year ago, several companies around the world suffered the Wanna Cry cyber attack on users of Windows operating systems. Although Microsoft pre-warned of this incident so that its customers would have enough time to install the patches necessary to prevent undesired entry to their systems, the IT pirates took advantage of the known security breach that enabled them to take control of computers that did not have the patch. This meant that all the companies that experienced the attack did not have a data security plan or, if they did, did not execute it properly.

Figure 51: Impact of the global Wanna Cry cyber attack (May 2017)

66 SECURITY

With new technologies designed to support the digital It is true that digital transformation enables businesses 1 Increasing priority transformation of companies in the different business to increase their income, but we can also see that it lines and sectors, the executives of these companies are creates new sources of risk. The data that is processed Detection of security breaches increasingly aware of security and cyber security. This and may be vulnerable is not only related to business 0,9 not only affects decisions about security products or fi gures or company earnings but also includes data 0,8 the infrastructure layer but it is also making companies about customers (in some cases highly sensitive), Defending immediately against think about how to organise themselves internally, how increasing the risk of a breach of new data laws (General zero day attacks to assess the risks to which they are subject and how Data Protection Regulation – GDPR) or even increasing 0,7 to prioritise future investments, in all layers, from the reputational risk. Therefore, when deciding to undertake physical to the “data” entity. Currently, there are new digital transformation initiatives, we need to consider 0,6 mechanisms that endanger the security of company security as a fundamental part of the strategy. Patching and decontaminating known information, which require new and different security 0,5 vulnerabilities The survey shows that companies see security system measures to remove and/or counteract them. updates as a critical element on which to increase 0,4 Recovering systems affected by investment (21% of the weighted total). It follows that breaches companies have learned from what happened with 0,3 Wanna Cry. Embedding security within IT systems 0,2

Keeping security tools up to date 21% 0,1 Protection against known security threats End user authentication 19% Managing the interdependence of the on-premises world and the cloud 18% 0 Si h End user training 15% Figure 53: Prioritising security measures to confront new digital Managing the fact that the IT organisation has less direct control over data and applications 15% challenges Difficulty protecting assets when they are located outside of the corporate parameter 13%

Figure 52: Set of elements where it is necessary to increase investment

In second place, executives believe that the “critical In addition, as shown in Figure 53, according to the element for increased investment is end user survey, companies believe that extra priority should authentication”, which scored 19% of the weighted total. be given to “security breach detection”, as well as In terms of this element, various companies, including “Defending immediately against zero day attacks”. Google and Facebook, have already progressed with user authentication processes, with the already recognised two-step verifi cation functionality, also known as double factor authentication. Managing the interdependence of the on-premises world and the cloud is considered as the third critical element for increased investments with 18% of the weighted total, which translates into a joint global vision with the on-premises world and the cloud world.

67 SECURITY

Furthermore, more than 50% of the people surveyed In addition, 35% of the people surveyed agreed that of those surveyed agreed that companies should focus their security the best way to prevent their assets against breaches recommend focusing investments primarily on questions related to: service by cyber criminals is to “constantly update anti-virus funding efforts on five aspects management and cloud-based security monitoring, and related tools”, followed by a “process to identify inspecting and recording the traffi c entering and leaving vulnerabilities and subsequently remedy them” at 30%. the cloud and fully reinforcing the importance of the cloud as a central element of the infrastructure and Service management and cloud-based security monitoring platform strategy for digital IT transformation. They should also focus on data protection and compliance, which is already a legal matter at the European level, improving attack response capability and integrating security development and its tools into the SecOps concept, which involves collaboration between IT security Inspecting and recording all and IT operations for effective risk mitigation. traffic that enters and leaves the cloud

Constantly update anti-virus and related tools 35% Process to identify vulnerabilities and remedy them 30% Security training for all employees 25% Data protection and compliance, Dedicate more resources to preparing to defend the such as encryption and data loss organisation against security breaches that have just 10% prevention systems occurred and that may affect us

Figure 55: Actions that make assets less attractive to attack

Improving response capability against attacks or potential breaches by configuring the appropriate human resources

Integrating security development and its tools into the SecOps concept

Figure 54: Focus of funding efforts

68 OPERATING MODEL OPERATING MODEL

Very Emerging Optimum OPERATING traditional digital digital Current They have heard of the digital Understands digitalisation and Understands and knows how to digitalisation transformation has already begun to do things to transform itself digitally and transform itself into a digital already has a high level of MODEL position company digitalisation Globally, companies that operate in a number of sectors are striving increasingly to orient themselves Organisational Rigid, inflexible organisational Rigid but flexible organisational Its organisational structure is very towards their current digital customers and to structure structure flexible impose the dynamism typical of this world onto structure their own organisations. In this way, companies are looking for the opportunity to rethink their operations to take advantage of new technologies and undertake their own digital transformation Employee Its employees have a traditional Its employees have a mentality The employees feel the need to journey. Therefore, executives need to analyse their culture culture in which collaboration is with a certain openness to collaborate with multiple current situation and where they want to be in the limited to the area in which they working in multi-disciplinary stakeholders to enrich their own future in order to plan the transformation journey work teams work that needs to be taken by the whole organisation, as this will depend on its current situation and the desired future situation. Leadership The leaders fail to convey the The leaders stimulate the They have transformational vision need for digitisation employees intellectually and leaders, digital visionaries that use To identify the current situation and the desired support them even if they are inspirational communication as situation of the companies being studied, we have unclear where they are going the main tool for stimulating their identifi ed three digital evolution scenarios of the employees operating model, taking into account six dimensions that characterise them: Work They use a traditional work The work methodology they are They are starting to use or already methodology model using is intermediate, a mix use the DevOps, SAFE, Lean or between the traditional and the Agile models lean and agile

Partnership The partnerships they establish The partnerships established are They create partnerships to ecosystem are to achieve complementary for operational integration and to exchange information and/or capabilities exchange information capabilities, seeking cooperation and obtaining power. Shapes its ecosystem using networks of power Figure 56: Levels of digital evolution in the operating model

70 OPERATING MODEL

Looking at the results, we can identify that the average Note that partnership ecosystems are at an even earlier company has an “emerging digital” operating model, stage than emerging (traditional model). Additionally, taking into account that only 39% of companies have some sectors such as tourism, technological companies Votes agile models to support their digital transformation. and software manufacturers are at a more advanced 50 Correlation: stage than the average. 99,9% 40 30 Current situation Future situation 20 Emerging Digital Dimensions Emerging Digital 10 Traditional digital Advanced Traditional digital Advanced Current digitalisation position 1 23Scenarios Organisational structure Votos Employee culture 50 Correlation: 99,6% 40 Leadership Work methodology 30 20 Partnership ecosystem 10

Total average Tourism Technology SW manufacturers 1 23Scenarios

Figure 57: Specifi c dimensions, scenarios and sectors Organisational structure Work model Despite having been presented separately, leadership Given that companies intend to change their operating and employee culture, and the organisational structure model from the emerging scenario to the advanced and work methodology are highly correlated. This means digital scenario, they need to put various instruments into Figure 58: Degree of correlation between structure and organisational model and culture and leadership that employee culture cannot be transformed without practice. changing the leadership style and that work method In the case of leadership and culture, implementing cannot be changed without redefi ning organisational transformational leadership may be a very powerful aspects. instrument. Transformational leadership consists of As expected, companies’ ambition regarding their a model in which leaders inspire and motivate their operating model is to effectively deploy the advanced followers to perform better by appealing to their values digital model. In this way companies show their and sense of purpose, thereby facilitating large-scale determination and resolve to complete their digital organisational change. transformation journey.

71 OPERATING MODEL

These transformational leaders encourage their teams to work towards a common goal through their vision, values, DISRUPTIVE TECHNOLOGIES communication, example-setting and evident concern for the personal needs of their followers, because they focus RANKING 2018 on getting followers to identify with the organisation and commit to supporting organisational objectives.

Artificial intelligence Praise and acknowledge the attainment of objectives and Blockchain improvements in the quality of Digital transformation work; personal congratulations Communicate in a way gnition Augmented reality Reco that inspires and al I on ns rs p motivates, even in a Internet of Things e ire P d uncertain or changing C o Edge Computing Has a clear m environment m concept of where u

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Conversational Platforms Challenges followers to think about problems in Event-driven new ways Cloud Computing Deep Learning Figure 59: Characteristics of transformational leadership Robotics and automation Failure as a service In terms of the partnership dimension, the analysis position themselves at the desired level, not only in Digital and physical design as one obtained from the scenarios was that companies should relation to the products or services that have already Ethics economy go through two levels to reach the desired scenario and been developed but also on matters relating to the should advance one level with regards to the position exploration and research of emerging technologies. New ways of designing dimension. This combined with the fact that the average For the dimensions of the work model and company currently has no major developments in Parallel air traffic control system organisational structure, one instrument to use would terms of emerging or disruptive technologies, make be the implementation of scaled agility models. Commercial space flights it essential that partnerships are established with For large and/or traditional companies, the process technology companies and start-ups that have the Fold-Up smartphones screens for achieving this scaled agility model is called capability that every company needs to successfully Intel and Moore’s law “startupation” (see Figure 62).

Source: 72 OPERATING MODEL

A success case in this respect was the ING bank, which used the Spotify operating model—Scaling Agile@Spotify. This model completely changes the interaction between people in traditional organisations, establishing a fl exible, modular and fl at organisational model structured into tribes, squads, chapters and guilds.

Tribe Tribe

Tribe Agile Agile Tribe leader Coach Coach leader Chapter Chapter

Chapter Guild Chapter

Squad Squad Squad Squad Squad Squad Squad Squad

Chapter leader Product owner

Tribe Guild Squad Chapter Product owner A set of squads with Association focused on the The basis of the new agile Association focused on the Member of the squad but not interconnected missions exchange of knowledge and organisation. The basic work exchange of knowledge and the leader experience through various The tribe leader is empowered experience through various unit Responsible for coordinating squadrons to establish priorities and make tribes Comprises staff from different the activities of the squad budgetary allocations that functional areas Responsible Manages accumulated work, define interfaces with other from end to end for achieving the remaining tasks and tribes to ensure the effective planned objectives priorities exchange of knowledge The composition may evolve/change, depending on the evolution of the mission Chapter leader The squad is formed once to Head of the chapter achieve a mission Hierarchical manager of the members of the chapter in terms of development, coaching, staffing and performance management

Agile coach Preparing/training staff /squads to create high-performance teams Figure 60: Startupation as a process to achieve scaled agility for large traditional companies

73 OPERATING MODEL

DevOps Design Thinking The best operating models for competing in a digital world according to the companies surveyed are DevOps and 28% 17% Agile, with 28% and 23% of the weighted total respectively. In addition, 100% of those surveyed mentioned the DevOps model and 78% mentioned Agile, so the use of a combination of both could be noted.

LEAN Startup The ideal future situation or advanced digital scenario considers the following three fundamental objectives: 20% • Focus on the customer/user • Innovation • Reduced time-to-market Scale Agile@Spotify 3% The work methods and frameworks are not an end but a means to reach planned objectives, so it’s not important Agile (i.e. Scrum) which specifi c methodologies are used, provided that they take into account the fundamental concepts of: 23% SAFe (Scaled Agile Framework) 9% • Scaled agility Figure 61: Operating models to compete in the digital world • Experience of the customer or end user

Small digital native Large-scale companies companies

Narrow services portfolio Broad services portfolio Flat structure, low organisational complexity High organisational complexity, deep structure Ultra-defined value proposal Unique focus Iterative focus, learning from customers in each interaction One-time development (boil the ocean) Independent, talented employees Hierarchical decision-making; internal movement of Aligned personal-organisational objectives employees Entrepreneur mentality Establishment of cascading corporate objectives Employee mentality

Scaled agility "Scaled" journey Agile models are not the "Startupation" journey (Outside-in transformation) end but the means for (Inside-out transformation) Redefine the structure serving customers better Change the leadership Develop internal practices, processes Change the culture and policies for the largest teams and Focus on customer and user Make the customer first priority units Reduced time-to-market Break organisational silos Establish solid governance Flexibility to adapt to Flatten out teams unpredictable demands Reinforce talent and knowledge management and needs Effective innovation

Figure 62: Paradigmatic scaled agility model

74 SOURCES& GLOSSARY SOURCES & GLOSSARY

SOURCES Guillebaud, D. Disrupt ion denial: why companies are ignoring the disruptive threats that are staring them in the face, 2016 The IT transformation Playbook, Forrester,2018 Westerman, Bonnet, McAfee. Leading digital: turning technology into business transformation, 2014 Rogers, D. The digital transformation playbook, 2016 Loucks, McAuley, Noronha, Wade. Digital Vortex, 2016 Kim, Humble, De Bois, Willis. The DevOps handbook, 2016 Transforming the Telecom Value Chain with Platformization. Tata Consulting Services, 2017 Cloud deployments through a tailored Multicloud Strategy, Gartner, 2018 Waste in Lean Product Development, Massachusetts Institute of Technology, 2010 Digital Maturity Model (DMM): A blueprint for digital transformation, TM Forum, 2017 Newman, M. Digital transformation tracker 1: The race is on, TM forum, 2017 Boasman- Patel, A. Building a comprehensive digital transformation strategy, TM forum, 2017 Willets, N. The 2020 Digital Partner. Seizing the open ecosystem opportunity, TM forum, 2017 Reimagining telco operations in a hyper-digital world, Arthur D.Little, 2018 Transformación Digital de IT, Altran Consulting, 2018 Technology Rada Vol.18, ThoughtWorks, 2018 Reichheld, F. The ultimate question 2.0, 2011 La inversion en I+D+i, 2018. EAE Business School Microsoft, Google and IBM Public Cloud Surge is at Expense of Smaller Providers, Synergy Research, 2017

76 SOURCES & GLOSSARY

GLOSSARY

AI: Artifi cial Intelligence

API: Application Programming Interface

Blockchain: Type of record book distributed to maintain a permanent record and to test the handling of transactional data

Building Blocks: Modular system structures or functionalities

CAPEX: Capital expenditure

Chatbot: Program design to simulate the conversation of a human being by text or voice interactions

CIO: Chief Information Offi cer

Compliance: Compliance equirements

CTO: Chief Technology Offi cer

DevOps (Development and Operations): Designed to unify software development (Dev) with software operation (Ops)

IoE: Internet of Everything

IoT: Internet of Things

Legacy: Legacy systems

Machine Learning: Automated learning

Middleware: Logic of information exchange between applications

Multicloud: Cloud comprising more than one cloud service, provided by more than one public or private cloud provider

77 SOURCES & GLOSSARY

MVP: Minimum Viable Product

NFV: Network Functions Virtualisation

NLP: Natural Language Processing

NPS: Net Promoter Score

On premises systems: Systems installed in local environments

OTT: Over-The-Top

RPA: Robotic Process Automation

SDDC: Software Defi ned Data Centre

SDN: Software Defi ned Networking

SDS: Software Defi ned Storage

SecOps: Collaboration between IT security and IT operations to mitigate risk

SOA: Service Oriented Architecture

Vendor lock-in: Dependence on one vendor—no others can be used without change costs

78 About the authors:

BORJA GARCÍA ASSOCIATE DIRECTOR at ALTRAN CONSULTING [email protected]

CARLINA ROJAS BUSINESS ANALYST AT ALTRAN CONSULTING [email protected]

LUCÍA HERRERA BUSINESS ANALYST AT ALTRAN CONSULTING [email protected]

EULOGIO NAZ SENIOR ADVISOR TO THE TELECOMMUNICATIONS, MEDIA AND SERVICES DIVISION AT ALTRAN SPAIN EXPERT ON THE TELECOMMUNICATIONS, MEDIA AND SERVICES INDUSTRY

As a full lifecycle partner, Altran Consulting supports leading fi rms and public organizations in their entire journey, refi ning innovation strategies, ideating on new products and solutions, transforming their operations and laying the groundwork for new solution and product architectures. Our professionals help business leaders attack today’s business and technology challenges by leveraging their deep domain expertise coupled with extensive Industry understanding and core capabilities in innovation, operations and technology, all grounded with an engineering mindset.

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