IT modernization isn’t optional and – at its core – that modernization depends upon IT’s ability to transform its technology and capabilities while aligning its investments more directly to the activities of the business. In fact, the latest IT spend research from Gartner indicates that the percentage of IT spend allocated to capital expenses has decreased—and the corresponding increase in operational expenditures signals a movement towards investment that more directly aligns to business activities and operations.
This increased focus on operational spend is being paired with a new approach to designing and building solutions using agile ways of working. DevOps deployment, continuous testing, and service-oriented architecture combine to enable greater responsiveness and more flexible collaboration with business teams. Increased operational spend and new ways of working often accompany a movement away from a project focus and towards a product focus. Capitalization methods matter, and the shift to continuous delivery in a product-focused model places a premium on getting it right. Unfortunately, the guiding bodies of the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) provide the interpretation of capitalization laws, which were developed long before the emergence of agile. The key point for IT professionals shifting from project to product-based continuous delivery is that it is time to partner with finance. The old, proven ways don’t work anymore. As IT organizations shift their funding model, there are a few key activities they can consider prioritizing:
- Engage with finance to define clear rules of demarcation between pre-planning phases that focus on “what we will build” and into the “how we will build it” work related to designing and building software.
- Establish rules for determining whether all or part of a development effort can be capitalized by classifying and tracking different types of work such as regression testing of bugs in a previously released product vs. time spent in new feature development.
- Articulate the business contribution—the why behind the effort—to shape the decision around whether to capitalize or expense an effort.
Making sense of microservices on the path to IT modernization
Microservices are single purpose components that are designed to deliver a specific capability. Lacking the overhead and constraints of a user interface, microservices have the ability to combine data and business logic from many different internal and external systems to deliver a specific element of a customer or user experience. This approach to producing ‘headless’ applications, an application without a user interface, allows development teams to deliver capabilities based on precise business needs.
Whether it be accessed through a user interface, designed as a “single page application” or invoked through an API from another application, microservices are an essential element of modern IT design by making frictionless interaction of systems possible. Delivering new capabilities without the overhead associated with an underlying technical architecture can be a game changer. Take, for example, a banking service that could quickly scale to be served up across multiple channels, including chatbots, wearables, and mobile. Small, modular microservices make this possible. Modern IT design is delivering business capabilities, as a composition of services, implemented through microservices.
On the opposite end of the spectrum, traditional UI and monolithic application-centric design drives fragmentation and duplication, creating bottlenecks when disparate systems are built around the concept of an end to end process, with the UI as a central design element. When the need to integrate and interact emerges, it is difficult and time consuming to develop the same banking service with traditional approaches to application design and waterfall delivery, which can take up to a year to develop—if not more. Microservices, in contrast, are focused on capabilities rather than appearances or how capabilities deliver an end-to-end experience, and so can be delivered in a fraction of the time. Microservices drive teams to take a new approach to thinking about, designing, and building solutions. The shift in mindset from “built to last” toward “built to change” is a fundamental element of any digital transformation journey. In bringing these solutions to life, microservices allow for many parallel teams to iterate quickly and deploy without impacts or dependencies on one another.
But the move toward Microservices is not about just the capabilities that service-oriented technology provides. Microservices are effective only when we combine this approach with a better alignment with the business. Leaders across the business must understand how business capabilities are a shared asset and collaborate to plan and design, and to uniformly understand and deliver, business capabilities across the enterprise. In this context, microservices are a critical tool for modernizing IT and innovating the business. More specifically, how can microservices help leaders advance their IT modernization journeys?
- Domain-Driven Design (DDD): Microservices represent a departure from legacy architecture towards cloud-enabled, platform-based systems. But in reality, this sort of IT modernization won’t happen overnight. DDD provides firms with a design and delivery strategy for modernizing key components of their legacy, aging systems, without having to take on the risk of wholesale replacement.
- Drive innovation: Infrastructure itself holds little value. Rather, value is embedded in the way that systems can interact and exchange data—via API—to meet customer demands. Against this backdrop, the move to asset-less IT is well underway. In fact, Gartner IT spend data shows that hardware as a percentage of overall IT spending sits at 14 percent, down from 17 percent in 2012. Microservices ecosystems built to interact and exchange data through APIs give way to more modular and scalable systems that can more rapidly flex to shifting customer demands. Imagine an IT strategy built on an asset-less infrastructure!
- Create a better approach to agile delivery: Modular microservices and agile ways of working go hand-in-hand. Microservices are the next step toward building components that can be combined in an infinite variety of ways to deliver capabilities to different lines of business or even industries, utilizing internal and external data sources, disparate coding languages, and asynchronous development timeframes. A microservices-led modernization strategy enables teams to more quickly develop and deliver course-corrected functionality, making incremental changes at the speed of the business.
The future vision of IT is coming into focus, rapidly being defined by new strategic priorities, modes of collaboration, and budgets of IT leaders. Microservices–with modularity and incrementality at the core—is a complementary requisite for any modern IT leader seeking opportunities to unlock the value of new, more agile ways of working and enable more frictionless innovation.