Winning at digital transformation and cloud through hybrid by design

The rise of virtual work, artificial technology and the digitization of many processes creates organizational complexities. In addition, what companies do and what they sell are increasingly becoming digitized. 

An IBM Institute for Business Value study found that the largest 2,000 organizations globally will generate 40% of total revenue through digital products, services and experiences by 2026. This leads many organizations to embrace digital transformation. And yet too few of these initiatives have thus far produced dividends. A 2022 IBM study found that 23% of organizations’ tech budgets are spent on efforts that drive business income.

In addition, another IBM report found that 84% of executives indicated that their company experienced difficulty in removing operational silos. To meet this opportunity, senior leadership teams must drive an appetite for change and technical leadership teams must rethink the architecture required to succeed in a fast-moving environment, which can create a series of cascading challenges. To succeed, simplicity must be the goal.  

Technology strategy is too important to remain an internal IT department issue. It must become a collaborative initiative championed by senior leadership with a clear mission shared throughout the organization. It requires the right methodology: hybrid by design.

Many enterprises recognize that their IT environments will be diverse in the long run. But most have optimized their environments separately. This creates a hybrid-by-default approach that leads to a lack of strategic IT foundation where the elements required to manage the cloud remain in silos, as Deloitte described it.

Hybrid by design puts interoperability at its core through intelligent and intentional vertical and horizontal integration of technology components. Hybrid by design centers on a platforming approach that enables common innovation and operation practices. It significantly reduces the complexity of managing the hybrid environment while improving the gains from it.

Further, enterprises have increased adoption of technology approaches such as platform engineering, which uses self-service capabilities and automated infrastructure operations to improve developer experience and productivity. Platform engineering is often a response to the ever-growing complexity of modern software architectures and hybrid cloud environments. 

Business innovation requires organizations to deploy technology wherever the business operates and needs it, such as a cloud, a data center, an edge location or a device. It requires tight coordination between technical architecture, operations, teams and culture to succeed. 

Hybrid by design prevents deployment heterogeneity that turns into technical and operational heterogeneity that we often see in hybrid by default. 

The reality is that running across multiple environments creates a complexity that spans data centers, multiple clouds, existing tech stacks and teams. But migrating to the public cloud, specifically, without improving and streamlining the platform that manages those environments is also a recipe for inefficiency and spiraled costs. 

Hybrid by default’s siloed environments do nothing to reduce the complexity of the cloud. What businesses do get are rising costs and a minimizing of any positive impact the cloud might have on the organization. It is the equivalent of a hotel setting up security cameras everywhere but not establishing a control center where someone can monitor them all at once.

Hybrid by design is the correct methodology for every organization considering the importance of digital transformation, the increasing dependency on the cloud and the looming opportunity inherent in artificial intelligence.

It’s why hybrid by design was used in IBM CIO transformation as client-zero, which led to significant decreases in hosting costs and platform operations headcount required. It resulted in 90% savings in hosting cost, 55% decrease in platform operations headcount and $200M in savings by using Apptio’s integrated suite.

An IBM Consulting analysis of more than 50 clients found that those who incorporated hybrid-by-design principles had three times higher ROI from IT programs over five years, primarily driven by consistency across platforms, processes and people. This number is further expected to be amplified by extensive use of generative AI.

Already generative AI has demonstrated several valuable use cases in driving code efficiency, customer service data analysis and more. 

Almost every software company is adding generative AI to its feature set. We’re on a path for generative AI to generate trillions of dollars of value, according to McKinsey.

It’s clear that generative AI influences the daily workflows of every knowledge worker. Companies that view this as a mission-critical technology are increasingly interested in diversifying the generative AI vendors they work with. 

The average company uses at least three foundation models in their AI stacks, according to Menlo Ventures. The increasing maturation of domain-specific vertical models will only add to companies’ stacks. We see no sign of that slowing down or changing. To take advantage of the multimodel generative AI movement, companies must embrace hybrid by design.

Some companies are already ahead of their competitors in incorporating hybrid by design. About 68% of hybrid cloud adopters have already established formal, organization-wide policies to direct their approach to generative AI, according to the IBM Institute for Business Value.

Significant technological and operational change can only occur when the organization moves as one. Executive leadership must understand the hybrid-by-design approach and endorse the alterations to organizational strategy and roles and responsibilities before any meaningful work can commence. 

No individual organization’s journey is alike because every organization starts at a different place. Baselining the starting point by conducting due diligence regarding what technologies the organization uses and what policies are in place help move the process along. This evaluation should include on-premises infrastructure, cloud services, legacy systems and emerging technologies. Mapping of the existing architecture and its capabilities helps identify holes in the system that need correcting.

Hybrid by design requires forethought and deep strategic thinking to work well. The CIO with the business stakeholders must articulate a clear vision for the future state of the hybrid environment. All of which should align with broader business objectives, scalability, security, cost-efficiency and agility.

A winning hybrid-by-design methodology improves security, boosts efficiency and reduces costs. It governs not only what changes the organization needs to make to its existing stack and personnel but also future investments in resources.

The best way to start is to accomplish a quick win to demonstrate the value to the rest of the business. The first successful project can help the organization to further visualize what success looks like and how a sweeping move to hybrid by design can produce significant dividends.

Now that we’ve established the importance of hybrid by design to take advantage of generative AI and other digital enhancements, here’s why organizations need to rethink how they work with other organizations to execute it successfully.

The technology providers that you choose to work with are key partners in your quest to unlock the cloud. Focus on who understands your business, can bring value and will work with you, not for you, on creating the right solutions. This is too important to revert to the old mentality of picking which vendor can provide the lowest-cost solution that works well.

Treat those companies as partners, not vendors. Integrate them into your teams and collaborate on tamping down the complexity in the environment. If they are treated just as solutions providers, that’s all they provide. If treated as ecosystem partners, they work side by side to solve problems, not create new ones.

One simple way to establish a true partnership is to combine service-level agreements (SLAs) with shared objectives and key results (OKRs) that transcend maintaining uptime. Doing so creates a shared vantage of incentives around true business transformation. Any partner who is only concerned about providing uptime or refuses accountability for actual business goals is not the right partner for this important project.

The key to hybrid by design is through open source technology. IBM has long been a proponent of the power of open source, which is why we acquired pioneer Red Hat® in 2019. Open source produces several key advantages to managing the hybrid environment while encouraging flexibility, scalability and innovation. Open source creates a common framework that fosters collaboration across distributed teams, driving faster development cycles. 

The hybrid-by-design methodology of IBM Consulting® helps organizations achieve accelerated, low-risk migration, modernization and innovation, while driving business value, productivity and cost reduction across the cloud. Our advanced practice and methodology help enterprises in their hybrid by design journey and serve as a cure for spiraling cloud costs because it makes cloud management more efficient and effective.