As part of Quest’s 2019 Cloud Webinar Series – ERP Cloud Day, Oracle’s own Joyce Boland and Steve Cox spoke about the business risk and cost of technology obsolescence. The pair spoke addressed why companies that delay the adoption of Cloud and emerging technology risk losing ground to competitors and new entrants. Recent research from MIT Technology Review’s Insights team and examples from Oracle customers supplemented the presentation.

Business Risk and Cost of Technology Obsolescence

The risk of technology obsolescence means that a process, product, or technology used or produced by a company for profit will become obsolete, and thus no longer competitive in the marketplace. This would reduce the profitability of the company. Budgeting for the risk of technology obsolescence is challenging because it is difficult to predict obsolescence and the exact rate of technological innovation.

A startling study revealed that 60 percent of productivity-boosting opportunities during the next decade will be digital, but currently the economies of Europe and the United States are running at less than 20 percent of their “digital potential.” Many are being hindered by legacy technologies. They seek to maintain the status quo with an “If it’s not broken, why fix it?” mindset. Meanwhile, competing companies that have bought in new, emerging technologies leapfrog them. Therefore, laggard companies are seeing disruption or damage by avoiding technology shifts.

While the concept of technology obsolescence risk is not new, the pace at which change occurs and the extent to which it affects business has increased dramatically. Waiting to update to new technologies involves high risk in today’s world.

As the employees of an organization use multiple vendor clouds throughout the workday, the company becomes vulnerable to data accessibility, fragmentation, and integration. There are also issues of cyber-security, fragmented innovation, and a front office versus back-office hypertension. Moreover, the company is at risk for reduced resiliency to geo- and economic factors.

Stalling Cloud adoption pushes employees to create a sort of Cloud hairball that involves data in multiple vendor Clouds and data silos. The result is a disconnected enterprise with an accidental architecture, not a strategic one.

Why Customers Are Hesitating

There have been a number of seismic changes in business and technology that have led to these risks. As shown in the image below, the changes are coming faster and having more impact than ever before.

With greater change to come, Oracle wanted to find out why customers have not prepared for the inevitable. They surveyed customers who have not moved to the Cloud about their inhibiting factors. The No. 1 reason behind why organizations have not adopted Cloud was budget and funding. Ironically, cost differentials of moving to the latest technologies are great. Cloud ERP, for instance, has an ROI of 3.2 times that of on-premise. Additionally, the total cost of ownership is more than 52 percent cheaper – meaning budget is not an argument against moving to the Cloud; it is an argument in favor of it.

Studies prove that the digital divide is widening. Today’s superstar firms have 1.6 times more economic profits than 20 years ago. Laggard firms, on the other hand, have an average economic loss of 1.5 times more loss.

Avoiding Technology Obsolescence with Cloud

Boland and Cox pointed out one idea that they feel is important to the digital horizon – having one Cloud for your enterprise. This provides you with the world’s most complete Cloud applications suite.

Within the suite, human capital management (HCM) will help you hire and retain the best employees. Customer experience (CX) helps you deliver the best customer experience in terms of service, sales, and marketing. Supply chain management (SCM) makes sure your customers are satisfied with on-time and good-condition arrivals. Enterprise resource planning (ERP) takes care of your entire finance operation. Enterprise performance management (EPM) business intelligence enables you to do what-if analysis on the fly. One Cloud will help you to become future-ready and outpace change with new business models, M&A and spin-offs, workforce evolution, and geographic expansion.

Special features allow you to automate smarter with pre-populated workflows, touchless transactions, and improved user experiences. You can work smarter with recommended actions, policy and compliance, and anomalies and fraud. Further, you can optimize smarter. For example, the world’s best companies achieve period-close in 4.8 days, but it can get faster by applying continuous closes, optimized working capital, and increased strategic focus.

Conclusion

The time to be future-ready is now. Close the productivity gap with frontier firms. Enterprises that shift to Cloud services have a sustained gain in productivity rather than a one-time bump. Your company will radically improve productivity by accelerating the diffusion of new best practices that are emerging around technologies like blockchain, artificial intelligence, and machine learning. Your move will allow for the cross-pollination of best practices from high-productivity to low-productivity organizations. You will also be able to leverage a potent force for addressing inequality.

It is critical that gains from information technology and new innovations spread out from the frontier firms and industries to the rest of the economy so that nobody gets left behind. When evaluating Cloud investments, organizations should go beyond the typical business case, which encompasses the use of Cloud services to reduce IT-related costs. Depending on their competitive situation, enterprises in any industry that stick with legacy non-Cloud systems may find their margins squeezed or growth slowed. Consider the use of Cloud services to accelerate business transformation via new technologies that are designed for optimal use in the Cloud.

For more information, check out the MIT Technology Review report and additional resources attached below.