Organisations across a range of sectors are undertaking digital transformation projects, replacing old technology and manual process with new technology and digital processes. The possibilities in a typical business environment range from adopting a paperless billing system to more significant changes like transitioning an entire back-office operation online. Innovative developments in like artificial intelligence, cloud computing, blockchain and e-signatures are encouraging an exploration of new ways to modernise and improve business practices. External factors like the arrival of disruptive service providers, Brexit and Covid-19 have also accelerated the move to digital.
Digital transformation projects can deliver a number of benefits, such as:
- On-going cost savings and efficiencies
- Streamlined business operations and improved client relationships
- Faster and easier access to, and distribution of, information
- For businesses that are eco-minded, a reduction in its carbon footprint
Like any change, a digital transformation project is not without its challenges. Often, fear of the unknown and competing priorities for company expenditure mean organisations are reluctant to fully realise their digital transformation ambitions. Identifying the potential challenges as early as possible and coming up with ways to address them is key to ensuring that the transition is as seamless as possible. Some of the most important things to consider at the outset are:
Choosing an appropriate contracting model
There is an increasing level of interest in agile contracts from digital transformation suppliers. The agile model offers greater flexibility than the traditional “waterfall” development model that most IT contracts use. Agile promotes an adaptive and continuous improvement approach which focuses on the broad objectives of the business rather than on a fixed set of requirements. However, the nature of the agile methodology means that the project proceeds with greater uncertainty as to the final outcome and timing, and the parties may even disagree on whether or not the project has been completed. Agile's emphasis on collaboration means that it is more resource-intensive for the customer as it will require greater customer involvement and technically skilled staff to be available throughout the project.
Complex projects may involve a number of suppliers. At the outset, effective multiple-supplier management requires an initial analysis of the role that each supplier will play and the establishment of contractual provisions setting out the extent of each supplier's duties, responsibilities and liabilities to the customer and any other suppliers.
Migration of data
Digital transformation projects typically involve the migration of large volumes of data relating to both customers and internal business operations. There is a risk data could be lost in the migration process. Organisations should plan to execute the migration in order of priority, factoring in size, type and complexity of data. There are tools available that monitor and report on the progress of data migration, which can quickly flag any problems so that they can be dealt with promptly. Due diligence on the supplier should confirm that it employs secure systems and software that are sufficiently robust to prevent data loss. The supplier should also be required to perform regular back-ups during the project.
It is vital that organisations using digital data comply with the privacy and security requirements under data protection laws, such as ensuring that systems are sufficiently secure and confidential, steps are taken to prevent breaches, and breaches are reported if they arise. Organisations may also find themselves liable to new obligations if they contract with other entities to process personal data on the organisation's behalf.
Getting regulation right
Specific regulations may apply to organisations in certain sectors undertaking a digital transformation project, particularly if the sector is heavily regulated. For example, there is specific European guidance on cloud outsourcing for financial services firms. Before starting the project, an organisation should assess the effect any regulation is likely to have on the project and consider whether it requires a regulator to provide prior approval of any aspect of the proposed arrangement.
It is important to choose a pricing model that is appropriate for the proposed services. Customers will prefer a fixed price, with mechanisms built in to the contract to facilitate an increase or decrease in price if significant changes arise as the project matures. Pay-per-use pricing models can also be attractive as the customer only pays for services it actually uses. However, this model may prove difficult to budget for and it may result in higher bills during frequent use periods.
As the project may involve a complex integration of systems, difficulties can arise with regards to exiting the arrangement. Organisations need to have in place an appropriate exit strategy that reflects the complexity of the arrangement. They should anticipate the various instances where there may be a need to exit, and prepare for how that exit will happen, who will be involved, and over what period of time.
Planning a digital transformation project
It is crucial that the relevant stakeholders in an organisation prepare an appropriate plan of action before tendering or approaching a supplier. The plan should consider issues like:
- Determine an overall goal and how change can be effected in a manner that best serves the business and customers
- What is the overall budget available and cost estimate for each phase?
- What systems and delivery method will best serve the business? What are the options in terms of available software and hardware from various suppliers?
- Has the vendor undertaken similar projects for other customers?
- How long will the transition period last? How will the business will operate during the transition period and will the customer experience be affected?
- Will new staff with relevant expertise be required to manage any new technology and processes or will existing employees require training?
- Will new standards and policies be required to regulate how the new platform is will operate?
- Have the various challenges noted above been considered?
Undertaking a digital transformation project is not easy. It requires an understanding of a broad range of technical, commercial and legal issues and careful planning and execution. However, if the right stakeholders work collaboratively, organisations and their customers can reap many benefits like on-going cost efficiencies and streamlined business operations.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.