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.