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17 Nov 2016

Third wave of digital transformation


I am not trying to throw new jargons by calling third wave of digital transformation. Today digital transformation has become a new buzzword, mostly used and abused by service providers who provide digital transformation.

Let me explain what I mean by third wave of digital transformation. Lets go back to the first wave of digital transformation, the first time some process was converted into a software, removing or reducing human effort. We do not call it digital transformation but in true sense it was the first digital transformation.

That era also started the IT revolution, when people realized it was faster and cheaper to use softwares than humans for basic functions like bookkeeping, record maintenance and basic workflows. This lead to rise of software companies to write softwares for mostly converting stuffs exactly the way it was done in manual world to software versions. Since introduction of internet and computers made things already a order of magnitude faster, it was not needed or seemed necessary to even bother looking into process optimization.

This era possibly helped create most of the multi billion dollar software companies, some of them were selling services, some of them were selling platforms or softwares like databases, application servers etc. Eventually the whole ecosystem was geared towards mostly converting huge enterprise companies relying on manual process to move to the digital era.

While this worked very well for some of the companies, it mostly left out smaller and medium sized companies who could not afford huge data centers, million dollar payroll softwares or ERPs.

Eventually with the advent of cloud infrastructure and players like amazon, it was possible to remove the dependency of high cost datacenter. This allowed software developers to convert their softwares to allow multi tenancy and host it on cloud. Since the cost of development and hosting was shared across whole lots of customer, it was much cheaper and easier for smaller and medium size businesses to jump on the digital transformation bandwagon. This was the second wave of digital transformation , we also know this as rise of cloud computing, SaaS and few other names.

This era helped create new generation of entrepreneurs, who were much different from earlier counterparts. These guys did not wear suits and did not have board meetings. The whole way of doing business changed, earlier it was mostly contacts and may be playing golf which helped get the deal. In SaaS era it was all about digital marketing, SEO, Social media.

Lets talk about third wave of digital transformation, the first two waves focussed literally on digitizing manual processes and did not see much of intelligent softwares.

Before you jump on me about AI, Gaming etc, let me make this clear, I am still talking about mostly mainstream commercial IT industry. Let me give you some examples to explain my point. Most of the enterprise softwares like task management, project management, employee management, CRM, ERP, Expense management and numerous other softwares are mostly glorified spreadsheets. Some guy at the bottom of the food chain fills in a form, while the guy at the top wants to see some pretty charts, which is essentially a reporting software.

The third wave of digital transformation is about intelligent softwares, softwares which give you information which you do not know. For example, if I use a project management software, it should tell me if I am going to complete my project on schedule for end of this year or not. Dont tell me that I am not on schedule right now, I already know it and I do not need a million dollar software to tell me that I am running behind schedule. Give me predictive analysis, corrective actions, what if scenarios. If I am using a employee management software, tell me if my employee is going to quit or not and how much risk does my business due to employee satisfaction or dissatisfaction.

Recently we have seen rise in number of softwares addressing parts or some of the pieces of this and in future, I am fairly certain that the big bloated softwares of the first generation should die out to make way for the new age intelligence. For companies still stuck in first wave and second wave, I would recommend some introspection and some future planning. Trust me you dont want to be another Kodak.

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