Enterprises are under more competitive pressure than ever to throw out the legacy and transform the way they do business. This is a seminal time in the history of technology in Australia and worldwide, and an increasing number of organisations are thriving by using innovative digital technologies to change the way their industries operate and serve customers.
These were key themes at this year’s AWS Sydney Summit, which was attended by more than 8,000 IT architects, developers and other technology executives. Attendees at the Summit learned why their organisations need to embrace digital transformation or risk being left behind.
Recent Gartner research shows many IT chiefs across Australia and New Zealand are ahead of the global average with their investment in digital technologies. They expect to spend 32 per cent of their budget on digital initiatives compared to a global average of 28 per cent.
For a growing number of enterprises across industries such as finance, education, manufacturing, media and IT – moving their core systems and applications to public cloud environments is a key pillar for digital transformation success.
One of these organisations is Westpac, which celebrated their 200th birthday earlier in April and is now Australia’s oldest organisation. Brian Hartzer, group CEO at the bank told an audience in Sydney that the bank has lasted 200 years because its capacity to innovate is deep in their DNA.
“We like to think of ourselves as the original 200-year-old startup. Part of this is about how we use new technology because the ‘adapting gene’ is about staying committed to your core purpose while adapting to a new reality, using new technology, and being willing to change your business model when circumstances change,” says Hartzer.
Westpac’s first purpose was to help NSW’s fledgling economy to thrive, issuing the first banknote at a time when there was no paper currency. When the Gold Rush hit in the 1850s, the bank went out into the goldfields and started serving customers in a calico tent, knee deep in mud, weighing nuggets of gold on old-fashioned scales.
Before long, the bank had built smelting rooms with the latest technology to melt down gold nuggets and turn them into gold bars. Fast forward, more than 100 years to 1972 and Westpac employed its first female bank teller, and in 2008, its first female CEO, Gail Kelly.
“Each of these things seems obvious today but they were a big deal at the time and reflected that society was changing and if we were going to keep up with the expectations of society and our customers, then we needed to lead by adapting,” Hartzer tells the audience.
Technological innovation the key to success
As Westpac enters its third century of business, the need to adapt has never been more acute and the key to the bank’s innovative success has been a focus on what customers are trying to do and how the bank can solve their problems, says Hartzer.
“It’s a philosophy that has served us well over time. It led us to installing Australian banking’s first computer, its first ATM, and we were the first to launch internet banking in 1995,” he says.
These days, technologies like Westpac Keyboard are part of a transformation journey that has changed the way the bank interacts with customers and delivers services. Westpac Keyboard is a feature of Westpac Live that allows customers with the iPhone mobile banking app to complete banking tasks directly from selected messaging apps.
Westpac CIO Dave Curran, says more and more, the bank is leveraging cloud-based technologies to be more flexible and adaptable.
“When fingerprint security came out, that took us less than three months to get up and going with Amazon. It’s now used in excess of 1.5 billion times a day. That just becomes the norm,” Curran says.
Working with public cloud service providers like Amazon Web Services (AWS) has helped Westpac to think outside the box and become more agile. The bank is leveraging a lot of cloud technology and using analytics as it looks to drive a full agile methodology across the organisation.
“At this point, we are constrained by the regulations we work in so we are working very much towards the concept of private cloud, off-premise. How do we take the things that are deeply regulated in our core around PCI and those types of things and bring that forward is one of our great challenges over the next few years,” Curran says.
Building an organisation for the long-term
Scott Farquhar, co-founder at Australian IT success story, Atlassian, echoes Westpac’s sentiments about the urgent need for today’s organisations to be adaptable. He says companies today are not optimised for the current environment they operate in and when change happens, as it inevitably does, they simply can’t adapt.
“I think about this a lot – it’s not the largest company today, it’s not the most successful, it’s not the strongest companies that are going to survive, it’s the most adaptable companies that are going to survive,” he says.
Farquhar and his co-founder Mike Cannon-Brookes want to build a 100-year company, which he admits is a difficult task for most organisations.
He highlights the fact that only 50 per cent of Fortune 500 companies have survived since 2000 – these were not small businesses, they were enterprises with tens of thousands of staff, he says. What’s worse is only one company that was part of the original Fortune 500 when it was first created in 1955 is still in existence today.
“Seven out of eight companies [in the original Fortune 500] in just over half a decade have failed to adapt to the conditions,” he says.
Farquhar says the ‘asteroid that hit the technology industry’ 15 years ago was the internet. This gave birth to Atlassian but also ‘killed off many of the dinosaurs’ such as Rational Software, which never managed gained supremacy in this new world.
Why is long-term business survival so hard? It’s because everything people do inside their organisations is related to the current market and competitive landscape, he says.
“Your boss comes in and says, ‘how much profit do we have, how efficient are you in your job, not ‘how adaptable are you, how are you thinking about the environment changing in the future?’”
A cloud-driven transformation
Atlassian is transforming its business, moving global IT operations from being run internally to being hosted in the cloud. The organisation ships software to its server customers so that they can download and run on-premise while also selling solutions that are delivered through a cloud service. This has paved the way for innovation across the organisation.
“We are acutely aware of the differences in the adaptation that teams need to go through to go from shipping server software to shipping in the cloud. [For Atlassian] the technology was relatively simple but the team change that happened was very profound.”
“We needed to change the way we developed, shipped, and supported our software in the cloud and that’s a huge change for your teams to go through beyond the technology,” he says.
Atlassian sees three major benefits to using the public cloud. Firstly, the organisation can re-deploy staff that are building data centres around the world.
“We have a whole team who go around the world and set up air conditioning and networking and rack up servers and we can now re-deploy those people to high value activities.”
Secondly, the organisation can ‘light up’ data centres around the world faster and cheaper than it could previously.
“We know that speed makes a big difference for our customers so we now have data centres in local areas. That makes a big difference to the user perceived speed of our products,” says Farquhar.
Lastly, the organisation can take advantage of higher order services – content delivery networks and artificial intelligence solutions – things that Atlassian would previously have to build itself.
“Now we can get our teams focused on the higher order things that need to get done,” he says.
Farquhar said he expects his customers to increasingly adopt cloud in their own organisations, and he’s right. In Australia, the public cloud services market is forecast to reach A$6.5 billion in 2017 – up 15 per cent from last year, according to Gartner.
The highest growth will come from cloud application services (SaaS), which is projected to grow 25.9 per cent in 2017 to reach A$1.85 billion. Cloud system infrastructure services (IaaS) is expected to grow 14.4 per cent to reach A$476 million.
Farquhar believes that a move towards a cloud-centric digital world promises significant opportunity for Australia, a country historically saddled by the ‘tyranny of distance.’
“Australia for a long time had nothing to ship back to England. We came here and we couldn’t ship wood back because it was too heavy,” Farquhar says. “We didn’t have a spice trade to send back.”
He says that it was only when we discovered wool from sheep was small, light and valuable enough to ship back to England that Australia was then able to deliver goods and services to be sold overseas. This was the making of Australia.
“The tyranny of distance has been a big part of Australia. Car manufacturers are a long way from the market they want to serve. And if you think we can move to a digital world where software is weightless and instant it can go round the world to every country from Australia.”
“It is an opportunity for us to finally escape this tyranny of distance. I look at technology as a way for Australia to be a lead provider (and it doesn’t matter whether you are in Australia or any country in the world), but you are now on a level playing field.”
A heavy reliance on scale
Seven West Media is another organisation that is undergoing massive digital change. Its journey to the cloud and creating a more agile environment is already proving successful and one that relies heavily on scale.
The past year has been frenetic for the media organisation, which has provided broadcast and streaming services for The Australian Open and Melbourne Cup, as well as the re-launch of The West Australian website, and 30 other websites under the Pacific Magazine stable of products.
Head of digital, Dan Sinton, says events like the Australian Open, run over 14 days, require scalable cloud infrastructure that support a digital audience.
“For the final between Federer and Nadal, we had 200,000 concurrent live streams, which is big for Australian standards and it went off without a hitch.”
Sinton says the real challenge and opportunity comes from making content available to consumers wherever they are.
“In addition to that, we are also giving consumers more choice around the content that they consume. The distribution of content in the past was far more controlled and tightly scheduled,” he says.
“AWS facilitates that. Just the ability to scale up and deal with an audience of that size is important. But also just the infrastructure costs of being able to do that are quite substantial. AWS is allowing us to be able to offer a wealth of content and to give the consumer that amount of choice is a big difference these days from two years ago.”
Accounting software-as-a-service provider Xero is also ahead of the innovation curve. Last November, the organisation completed a shift to the public cloud in what it claimed was one of the largest migrations of its kind to be attempted in Australia and New Zealand.
“When we saw what was happening with public cloud [uptake], we knew we had to move,” says Xero’s CEO, Rod Drury.
“We were in a battle against much bigger competitors who can spend much more money on marketing. For us it was about speed and features and our guys were telling me that we had to take somewhere between 18 months and two-and-a-half years to completely re-platform our product while still building out the basic functionality,” he says.
Around 3PB of data is now stored on more than 4800 servers in the public cloud. Xero’s platform is used to pay about 800,000 Australians each month.
“Because we are a 24×7 business, this [transition] is like flying a passenger jet and changing the engines. This is how we thought about it – we were trying to keep all of our customers up and running while we moved a complete environment.”
“It was a massive project, about two-and-a-half years from start to finish but we are through it and now in that optimisation phase where we are using all of the new tools,” he says.
“We are thinking about how we use all these new services to drive competitive advantage. The cool thing is if our competitors haven’t moved, then we’ve got a two to three year [head start] and they are asking themselves ‘are we going to go and make this massive change?’”
“The mission we have is ‘how do we empower our advisors all around the world, how do we get them to grow as consultants so we create jobs and give people their first opportunity in work?’ Large businesses are scaling down using technology so we have to make sure that we create jobs in the small business space,” he says.
Innovation will never end
The industrial revolution of the early 20th century occurred over a single generation, which enabled government and societies to adapt.
“Today we are seeing entire industries being disrupted on a time scale of five to ten years. Things are going to have to change,” says AWS chief architect Glenn Gore.
“With cloud, pay-as-you-go and elasticity, you can now take your ideas and experiment. If [a project] fails, you’ve learnt something and you may pivot and go in a different direction.”
This is what is driving a new wave of innovation across the global industry.
People working at forward-thinking organisations are no longer afraid to try or make mistakes. Failing fast leads to opportunities; it enables organisations to learn and grow at a faster rate than ever before.
“Innovation is not a goal, it’s an ongoing process. It’s the constant iterative approach that is driving change. It’s why cloud is so powerful; it drives API-driven, fast development and fast organisations,” says Gore.
Now is a pivotal time in the history of technological and business innovation. Enterprises that are replacing old structures and cultures with more flexible and collaborative workplace that undo old ways of working will flourish in this new fast-paced, digitally-driven world.
As AWS’ Werner Vogels said in a recent article on his weblog, All Things Distributed: “Striving alone is not enough. You have to strive faster than the rest. And while there’s nothing wrong with perfection, in today’s digital world, you can no longer want until your products are near perfection before offering them to your customers. If so, you will fall behind in your market.
“So if you can’t wait for perfection, what should you do instead? I believe the answer is to experiment aggressively with your product development, accepting the possibility that some of your experiments will fail.”
Enterprises would do well to take heed of his advice.