December 15, 2017 | Agenda 2018

IT Trends to Watch in 2018

A range of technology trends—from AI to platform-based business models to process automation—will have a profound effect on business in 2018.

By Michael Becker and Jörg Schmidl

Ever-increasing amounts of data continue to roll over society, so-called exponential technologies promise groundbreaking disruptions, and everything-as-a-service applications make the latest developments available across the world in a heartbeat. Simultaneously, the expectations of users towards digital interaction with companies are constantly rising. As a direct consequence, any modern IT organization must provide flexibility, agility, and innovation on top of the conventional requirements such as efficiency and reliability. In the Digital age, IT has turned into a direct driver of business success.

This will only continue in the coming year, as several technological developments enter the forefront. Which trends should Chief Information Officers be watching in 2018?

The Era of Artificial Intelligence

Artificial intelligence (AI) is one of the main topics for 2018 and beyond. Although the foundations were laid decades ago, only now is the available technological environment ready for AI to truly deliver added value for companies. 

The fuel for artificial intelligence is data, and today it is produced constantly and in abundance, both by end users through their intensive, ubiquitous use of smart devices, and starting recently also by machines themselves, especially in the Internet of Things. At the same time, the cost of computing power has continued to decline dramatically, while the cloud and its virtually unlimited capacity have become the norm.

In the long term, it is fair to assume that AI will increase efficiency and insights in virtually every aspect of a company’s business—including strategic issues.

Robotic Process Automation

Even the “simplest” manual-digital back-office processes are being taken over by “digital robots.” In many cases, robotic process automation (RPA) brings cost savings of as much as 80 percent — while guaranteeing almost 100 percent accuracy. A typical use case example: a paper invoice is read by OCR software, interpreted by a trained machine learning system, and the extracted data then further processed by an RPA robot in the company’s standard process.

In more complex scenarios, previous human interactions are taken over by “intelligent supporters”, such as the increasingly popular chatbots that can process and respond to customer requests without waiting time through speech recognition and artificial intelligence.

Insider Tip: Revamping Operations Research

Operations research is hardly new and rarely a top priority on today’s CIO agenda. But with more data available and greater computing power at lower prices, the analytics that go into it are more relevant than ever before. Optimization of comprehensive processes taking into account all steps – end-to-end – no longer takes weeks but is fast enough to be introduced into operational processes. This allows complex logistics and production networks to be brought to a mathematically proven optimum in near real-time.

A few companies are already taking advantage of the massive efficiency gains now available, and more will follow in the coming years. 

IT Architectures: Breaking down monoliths

Integration and flexibility are key building blocks of IT architectures today. Companies increasingly follow “everything-as-a-service” concepts and open up previously monolithic core systems via services provided through application programming interfaces (APIs). This allows them to rapidly and easily incorporate new technologies to optimize their business. Numerous offers that are continuously expanded and improved already exist in the market, such as Microsoft Azure, IBM Watson, Google API.AI and Amazon AI to name a few.

How is this playing out? Marketing is becoming more targeted based on data analysis of customers and their behavior, production is growing more efficient through predictive maintenance applications – and all of this is possible by leveraging external services without the need for significant in-house research and development.

The Increasing Weight of Legacy Systems

“Cleaning up” seems to be a never-ending issue for CIOs, but its relevance is increasing and puts it among a CIO’s top agenda items. The question is: how to transform your IT infrastructure to allow winning in Digital without increasing costs? Legacy systems often take up more than 70 percent of available resources.

A stepwise refinement is often too slow and in total too complex. We call our approach to address this important issue “Fix the legacy and transform to Digital”. We do not only look into changing an inflexible technical architecture, but simultaneously examine how to develop new digital revenue sources to finance the transformation.

IT organizations need to find the right set up

Complexity is driven by much more than just technology alone and revolves around the internal setup of the IT organization. While we’ve seen various attempts at solutions in recent years—outsourced digital labs for more agile and digital topics, “two-speed IT” that separates “old” and “new” IT topics—they have not yet proven themselves. At this point, we consider integrated solution teams with end-to-end responsibility and stronger implementation of DevOps practices the best approach.

The Rise of Platforms

Even in traditional industries, the corporate environment is becoming increasingly dynamic. Digital solutions, often developed by young and agile companies, are becoming attractive alternatives and barriers for change are decreasing – also in the business customer segment. Furthermore, business customers across industries today are seeking a single platform—the business equivalent of Amazon.com—that can meet multiple demands in just one channel. Next to products, logistics services, financial offers and quality checks should be offered at the same interaction point. And most of the time, the customer does not care if the platform itself is offering this service or if it is just mediating a third party’s services.

Many companies are wondering whether platforms can cushion the loss of business from new competitors while also representing a new business area. We are seeing this trend across all industries. The rather conservative metal industry’s value chain is transforming, producing companies broker partial outsourcing deals and global traders of food and data/information intermediaries think about how to use platforms. Management entrusts IT with uncovering the best path forward.

This article was adapted from “Die Zukunft der IT—KI, Robotics und Plattformen,” which was published on the German language website CIO.de on December 7, 2017.