The competition between established ‘legacy’ enterprises and the new ‘cloud native’ firms is one of the most interesting business narratives of the digital era.
On the one hand, we have companies constrained by years of attachment to less-flexible on-premise technology but striving to increase their agility through cloud. On the other, we have fast-moving start-ups looking to challenge the incumbents through a DevOps mentality, using software and data to act, react and innovate at speed. So, which group is best set for success?
Initially, you’d favour the cloud-natives. In May last year, Capgemini research showed that a small group of ‘leader’ organisations, committed to cloud-native applications, agile development and highly integrated DevOps teams were almost twice as likely to report increases in organisational revenue attributable to cloud-native applications.
Betsey Gage, Senior Manager for Cloud Services at Capgemini, believes “The whole mentality really changes how you do things as it lends itself to the idea of keep iterating, keep getting better, and keep feeding back into your process. This leads to a ‘fail fast mentality’ that fosters innovation, which creates real value.”
The established enterprises don’t have this advantage. They are tied to existing technologies and can be too rigid in their processes, engineering both in a way that restricts creativity.
“A lot of companies have invested a lot of money in their current applications” says Kees Birkhoff, Capgemini Cloud and Cybersecurity Leader for Europe, “and when they did it was a good investment, but now with time, there are better or cheaper solutions.”
Shifting from these legacy applications doesn’t just take more investment, but also the grit to recognise that their time is over and that it's time to move on to new platforms and new methodologies.
Yet cloud-native organisations have their weaknesses, too. Often, they must move fast in the early stages, staying focused on their core technologies without having the time to think key processes and logistics through. They are making technology decisions and business decisions simultaneously, and while they’re not tied down with legacy platforms or ideas, this can lead to problems as the company scales.
“I think that’s where legacy companies have a leg up in terms of having their processes figured out,” says Gage. “They know what they need to do to maintain applications. It might not be the same kind of development and it might not be the same architectures, but they know more about what they need to do in the day-to-day.”
Birkhoff concurs. “It’s easier to change the technology setup for a start-up than a legacy company, but on the other hand the legacy companies pretty much know what their core business is.”
Both groups, then, have different problems, but are the solutions so widely different?
Gage says, “Being able to move quickly with new ideas and new ways of working in your company is important and being able to have that mix of doing new things but also know where you’ve come from.
If you can make that balance between the two of them, then it really allows you to take advantage of new technologies and create this improved way of working.”
Whether you are a start-up or an established organisation, leadership is crucial in unlocking innovation, insist Birkhoff and Gage. “Technology is so disruptive with cloud that it can determine your business,” says Birkhoff, arguing that the organisation’s CEO, CFO and business stakeholders have to understand the potential of cloud and be involved in its deployment. “It really is strategic,” he says, insisting that organisations have to look at shareholder value, people, processes, and even partners and clients in making their decisions.
For Gage, this requirement strengthens, rather than diminishes, the role of the CIO. She believes, “Organisations need thought leadership and strong sense direction about the company’s goals and how to get there. It’s not just about technology, but about changing the ways of work, and that’s where the CIO can be really influential.”
Legacy or start up, each type of business can learn from the other, with the established business building in more flexibility, and the cloud natives building in more process. Doing so takes a challenging mix of thought leadership, training and education, but it’s that balance that enables innovation for a long-term future.
Want to know more?
- Download The automation advantage report that shows how cloud automation is enabling companies to accelerate their delivery of applications.
- Read the Cloud native comes of age report to find out how cloud-native applications are enabling business agility and innovation.
- Listen to the Capgemini cloud automation podcasts