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I’ve discussed in several recent blogs software-defined operating platforms, which cause a dynamic, much more intimate relationship between a company’s tech stack and operations. The new world of these platforms is different from the old tech and operations relationships with ERP systems. In fact, this new dynamic relationship challenges the fundamental view of technology components. Question: Is the whole tech stack changing, or are companies just adding layer after layer on top of the tech stack’s existing foundation? In this blog, I explain why it is important to understand the answer to this question.

Companies dealt with the enormous change in the tech stack and operations relationship for many years with ERP systems. SAP claimed implementing its software would result in world-class processes in operations. Its marketing pitch was the best-run companies in the world use SAP. The mindset with ERP was to spend a lot of money and enjoy the benefits of that investment over time, and the organization would evolve to fully learn to use the technology.

Many CIOs sort of “died” on that ERP journey to a best-run company because companies exhausted themselves financially, logistically, and operationally as they went through enormous change to implement the new tech stack and operations model.

With ERP systems, companies talked about “target operating models” with the idea that they could design or get to a better state and then run a business in that better state.

That is no longer a reality. Why? Because companies are no longer trying to get to a better destination. Instead, they are on a continual, never-ending journey that evolves as the organization adapts and as the tech stack adapts to change.

ERP systems are loaded down, kind of like Christmas trees with lots of technology components hanging from them or having foundational pieces with other components built on top of them. Thus, they became more dynamic. As I’ve explained in several blogs, the new software-defined operating platforms cause a world where the tech stack and operations have a more dynamic relationship. So, how is it different from the dynamics of ERP, and why is that a problem now?

The Problem Today

The problem is that the tech stack in a software-defined operating platform changes much more rapidly than it did before in ERP systems. For operations to achieve its goals, a company needs to evolve its tech stack; and the more it evolves the tech stack, the more it must change its operations. This sets up a constant state of change in operations and in the tech stack.

The constant state of change challenges assumptions around how companies think about technology.

In software-defined operating platforms, it is clear that there is a layering component to the tech stack and that it needs to evolve from the foundation up.

This is one of the arguments for why digital transformation is predicated on moving to the cloud. Cloud gives the flexibility in the first layer to evolve and change.

ERP systems and other large software systems are slow to change. But with software-defined operating platforms, the tech stack needs to evolve much faster than the release cycle of ERP and other software.

What About The Evolving Flexibility Of SaaS?

At least in theory, software-as-a-service (SaaS) applications/platforms have the ability to continue to evolve at a much faster rate than the software release structure of ERP systems. That is potentially helpful – but only if the SaaS platform evolves along the trajectory that the customer needs.

The fact is SaaS platforms tend to evolve on their own trajectory. Once the SaaS vendor achieves market share, it tends to pull back on investing and just harvest its share.

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The result is a misalignment of potential interests between the SaaS owner and the SaaS user.

This is one of the complications that companies with software-defined operating platforms are starting to wrestle with as they face the need to evolve the components of their tech stack at a much faster rate than the vendor community is either comfortable or willing to invest in new directions.

Bottom line: SaaS gives a path to best-run processes, but it is not a complete path because it ends up with potentially misaligned objectives.

The need for the tech stack in a software-defined operating system to evolve more dynamically challenges some assumptions around whether a company can use packaged software or SaaS and SaaS extensions.

Often, SaaS vendors advise customers to wait before they implement their own next capability, saying the vendor will bring it out in the next release. There are two problems with following that advice:

  1. Companies with software-defined operating platforms do not have the time to wait if they want to achieve their objectives and key results (OKRs). They need to continually evolve the platform to move forward quickly.
  2. The way the vendor implements the new capability may not align with the way the customer developed the platform for its particular needs.

Focus On Interchangeability

When adopting SaaS, customers need to ensure they will have the interchangeable ability to unplug a component from their software-defined operating platform and plug another one in. As companies move forward in architecting their tech stacks, they need to give more attention to the ability to create interchangeable components, ensuring they are not overly dependent on one SaaS or a set of packages.

They must also design tech stacks with the certainty that they will need to evolve much faster than tech vendors’ product updates.

Therefore, I believe we will see companies adding a higher volume of bespoke or customized components to tech stacks in the future.

This situation potentially dramatically challenges the existing status quo of the large software houses such as Salesforce, Oracle, SAP, and SaaS providers that claim their customers’ future is secure because they will be operating in the best way possible by using their software.

If only it were true. But it is not true. Software-defined operating platform journeys are tremendously dynamic and are becoming more dynamic by the day.

Is There An Alternative?

Companies must reexamine their philosophy and preconceived notions about how to assemble and maintain a tech stack around software packages, SaaS platforms, and their interchangeability. They must design for more dynamic environments.

They also must recognize that SaaS vendors probably will not align their products against a customer’s vision.

An implication of this reality is that customers must ask themselves whether they should adopt the vendor’s components or use best-of-breed components.

Operating within the interchangeable theory, companies probably need to opt for best-of-breed vendors’ components to begin with and then be willing to at least consider the component changes later.

Of course, any change after a product is implemented into the tech stack is painful and expensive to replace. But it has a corresponding effect on operations as the users learn to use the new functionality.

Software-defined operating platforms create a continual back-and-forth wave of change between operations and the tech stack. In effect, it raises the stakes in making tech investments because of the need to view operations and tech stacks as one organizational component rather than two independent organizational components.

Learn about how to start planning for your organization’s future roadmap in our upcoming webinar, Key Issues for 2023: Rise Above Economic Uncertainty and Succeed, as we discuss the major concerns, expectations, and key trends expected to amplify in 2023.

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