The innovation layer is where one must be able to rapidly make changes, like furniture and décor in a building. Investment is low initially – one should be able to trial it first to see if it works: suck it and see. Potentially, it can be thrown away. On other hand, it might work, becoming part of the other layers.
There will always be a requirement for these three layers and organisations need to develop this layered application strategy to keep up with the rate of change in applications and underlying business processes. The key is that each layer must stay separate to allow changes to be made rapidly without affecting the core base layer.
Cloud – The great enabler
What really is driving innovation AND making it possible is the advent of cloud computing, virtualisation, software as a service and platform as a service. CRM applications, cloud, Big Data, and mobile are fundamentally changing the way companies view the world and conduct business.
These new technology themes fully support and validate the Pace Layering model, enabling companies to make better use of their existing technology while controlling IT spending and freeing up a greater proportion of their IT budgets for innovation. They also enable experimentation without large investment: Trial a technology as a service – if it doesn’t work for your organisation – ditch it.
Two big implications
The implication of Pace Layering for the customer, and I speak from my company’s experience, is that it is changing the way we think about how we consume software and how we relate to the vendor. In the past at MSI, we would have selected and then insourced a vendor solution in an attempt to integrate everything and fix a problem "once and for all" – a ‘big’ technology approach. However, these packages are often too integrated, with their data, differentiation and innovation layers to allow further or sufficient change. Now, we look for suitable ‘small’ technology to meet our needs and if these don’t exist we’ll communicate our needs to a forward thinking vendor and challenge them to a relevant solution.
Driven by globalisation, BYOD and mobile, MSI has introduced Huddle, the external sharepoint in the cloud. Pairing this simple application with a BYOD e-mail application has released senior managers from the constraints of laptops, paper and the office and the associated mind shift is beginning to drive the appetite for ‘small’ technology all over the business. Meeting this appetite represents both the biggest challenge and greatest opportunity for a responsive vendor to build agile applications based on our needs.
The implication of Pace Layering for the technology vendor is that it takes the emphasis away from offering systems that purport to do everything. Vendors need to make huge shifts in their product offerings, demonstrating the ability to be agile. Some, like Agencyport Software, a provider of software and services to the global insurance and reinsurance industries, recognise this is the way the market is going. Agencyport is leading the way amongst insurance technology providers in rethinking how it develops products, understanding that offering all things in a single platform is no longer beneficial in an agile marketplace.
Innovation and dependability
Returning to Gartner’s Worldwide Enterprise IT Spending Forecast, the year ahead and beyond looks set to be an innovative period for the insurance industry. Having significantly cut discretionary IT spending growth over the past several years, most enterprises have little room to reduce IT spending further over the long run. Enterprises overall are forecast to increase IT spending in 2013 by 2.5% from the projected 2012 spending. For the insurance sector, spending is expected to rise more than 4% in 2013.
With a tumultuous couple of years behind us, CIOs – and more frequently, boards — recognise that cost-cutting alone is insufficient, because while times are tight, they also keep changing. There is a shift of mindset from a focus on solely reducing costs to a focus on agility, with the knowledge that one will have to keep changing and innovating to stay competitive. It is now more important than ever to think laterally and spend strategically. Investments need to add shareholder value but also enhance the firm’s ability to adapt and compete in an environment where business needs, platforms and technologies all change constantly. The IT budget of 2013 will be challenged to address both innovation and dependability.
Richard Williams is CIO of MSI's London and European operations.