How is an earthquake triggered in Silicon Valley turning your company into a software vendor?

A movement that began in Silicon Valley, is starting to have profound impacts on corporations throughout the world that are far from obvious but critical to your success and maybe even your company’s survival. This is a massive shift that all CIOs need to start preparing for - a seismic shift that is documented in my latest report released to clients this week. 

As we enter the age of the customer we are leveraging cloud, mobile and big data technologies to build better and more complete experiences with our customers. In doing so we are creating new digital experiences, radically different interactions, and redefining what our companies do and how they should be viewed. Nike’s FuelBand is both a device and a collaboration solution (that’s why Under Armour bought MapMyFitness). Siemens Medical’s MRI machines are both a camera (of sorts) and a content management system  Heck, even a Citibank credit card is both a payment tool and an online financial application. Any company that is embracing the age of the customer is quickly learning that you can’t do that without software. 

This new class of software we are building follows the teachings in Forrester analyst James McQuivey’s book Digital Disruption  It’s built fast and cheap using cloud technologies and modern application architectures  It's iterated frequently using continuous integration methods and taps online services (like Facebook single sign-on, Google Maps or Zuara payment engines) for any shared capability or pre-existing function that can help us get new value propositions to market more easily. These Systems of Engagement applications are radically different than the traditional enterprise applications that we’ve built for years. 

Traditional enterprise applications like enterprise resource planning, financials, logistics, plant management and data warehouses are large complex entities with lots of custom modules and significant stickiness. It’s in these Systems of Record that we store transactional data, protect customer identities, and store and archive patient interactions. As such these systems are slower to iterate both due to complexity but also based on the importance (and compliance) of the data and the processes they have helped solidify.

You might think that the radical, chaotic and disruptive nature of the new Systems of Engagement wouldn’t have an impact on the solid, stable part of the business but you would be wrong - and such a conclusion might just be very dangerous. Because Systems of Engagement aren’t fully divorced from your traditional business — they are extensions of it. And as such they are increasingly needing to connect back to these Systems of Record. What’s the value of a health engagement solution that doesn’t know your past history? Would you trust the reports in Mint if it couldn’t talk to your banks?

The reality is that Systems of Record applications have to prepare for an onslaught of requests from modern Systems of Engagement applications. And the way you have exposed your services and allowed integrations in the past simply won’t work in the new model. New digitally disrupting applications speak a different language (REST), can come to you from multiple locations (web, mobile, device, third party services) and go from 5 requests per second to 5 million without forewarning. This doesn’t mean you have to radically rethink your Systems of Record or that you have to redesign them in modern architecture, but you do have to start turning them into more modern, consumable services — and that’s the radical change. 

While your Systems of Engagement may or may not become discrete software services that your customers tap directly, your Systems of Record will be software that the Engagement layer consumes. And if these capabilities can’t be integrated easily or speak the right language your developers, who are driven by agility and the need to deliver business value by any means possible, may build their own back-end services, or leverage third party services which create integration and records reconciliation nightmares. 

Don’t let this happen inside your walls. The sooner you can acknowledge the ground is shifting beneath your company, the sooner you can prepare your systems of record to handle the effects. My new report, “The Seismic Shift in Application Portfolios,” details the emerging best practices that are helping the leading companies in The Age of the Customer deal with this change. It’s not radical but its new and necessary.