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Creating a New Network Edge: The Next Stage of the Journey to Digital Transformation 2.0

October 11, 2018

According to IDC, to stay competitive, enterprises need to embrace the next phase of Digital Transformation - 2.0, which requires rethinking business processes.

 

Ghassan Abdo
Research Vice President

Rajesh Ghal
Research Director

This white paper makes the case that the enterprise edge is emerging as a new services hub for the collection and distribution of data and as a key enabler in the transformation to a digital-native enterprise. The "edge" is the outermost layer of the network consisting of a wide array of devices used by on-the-go employees, customers, and partners. As more data collection and analysis are pushed to the frontlines of business, the network edge is emerging as a new services hub.In shifting the nerve center of global ecommerce from core datacenters to the edge, enterprises empower edge employees to effectively interact with data and applications and, in essence, improve service capabilities, optimize investment returns, comply with data locality, and reduce application latency. By elevating the role of the edge, companies receive insight on how to best address evolving customer demand. A successful edge strategy depends on a comprehensive transformation of the enterprise network architecture that aligns all organization resources, including key assets at the edge, to deliver a richer experience to the customer and significantly higher economic rewards to the enterprise.

As a new business nerve center, the edge needs to transform to meet demands for quick decision making, unlimited and quick access to cloud applications, and stricter quality-of-service parameters. Transformation will require a new network architecture that integrates flexibility, reliability, and analytics, going beyond fast interconnectivity. This new architecture will be underpinned by software-defined and virtualized network services, hybrid connectivity, and increased reliance on broadband Ethernet for direct access to the cloud. Furthermore, technologies such as artificial intelligence (AI) are expanding the role of analytics to achieve the goal of an autonomous and self-configuring network. At IDC, we refer to this as the next phase of digital transformation — Digital Transformation 2.0 (DX 2.0).

A key focus of the next leg of the DX journey — the journey to DX 2.0 — is the notion of empowering employees at the frontlines of business — at the enterprise network edge. DX 2.0 relies on the recognition that quality, high-speed enterprise network performance is critical to employee empowerment. Providing employees with fast, high-quality, predictable connections to apps and information is critical to business performance and customer experience. Workers at the business edge who have always-on, high-speed access to apps and data to support their customer interactions feel highly empowered considering they now have the intelligence and flexibility to make smart, effective customer-facing decisions. They have more time to focus on productive tasks because the more mundane tasks are now automated. Automation of tasks such as data collection, storage, and analytics not only makes employees more productive but also feeds into the intelligence of the business, thereby creating an ever-increasing virtuous cycle for the enterprise.

SITUATION OVERVIEW


Enterprises Need a More Holistic Digital Strategy

Over the past few years, as enterprises have come to recognize that DX leads to improved efficiency, new revenue streams, and better customer engagement, it has become an urgent priority across the globe. To varying degrees, enterprises globally have embarked on initiatives to transform their business processes to make them digital native. Most of these first-generation digital transformation initiatives (which IDC calls DX 1.0 initiatives) were aimed at adding digital features to a business. While these initiatives did bring benefits to these enterprises, it has become clear that to reap significant benefits of DX, "digital" cannot be an add-on but must be a central part of a modern business strategy.

As businesses become more digital, it is also becoming abundantly clear that organizations need a strategy for the digital era rather than a digital strategy. Not surprisingly, making digital a central part of the enterprise strategy requires enterprises to undertake a journey — the journey to the next phase of digital transformation: DX 2.0, which is the continuous transformation and evolution of a company's digital initiatives. DX requires a radical rethinking of a business' strategy and processes: how it interacts with its customers, how it drives operational excellence, how it approaches innovation, and deciding which technologies to use as the foundation.

In the first phase of digital transformation (DX 1.0), the technology focus was on mobility, big data, social media, and internet ubiquity. DX 2.0 is about embracing the next wave of technologies, including AI and machine learning, augmented reality/virtual reality (AR/VR), predictive analytics, robotics, and making them a central part of the company's strategy (see Figure 1). The IT and network architecture must change to adopt these technologies. A key part of this journey to DX 2.0 is the buildout of an advanced network based on software-defined networking (SDN) principles — a network that is agile and flexible enough to allow an enterprise to host its apps and data across multiple clouds at the lowest cost and with superior performance. Building such a network is also the first step toward building a self-configuring, automated network that can react to network stimuli and reconfigure itself for optimal business outcomes.

FIGURE 1


The Enterprise Digital Transformation Journey

Digital_Transformation_Figure1

Source: IDC and Comcast, 2018

SDN Enables DX 2.0 and Measurable Business Benefits

IDC research suggests an empowered edge worker is more productive in meeting customer needs, which leads to improved customer satisfaction and, in turn, drives revenue growth. Empowering the edge worker with a new networking paradigm improves enterprise efficiency and enables success at meeting new customer demand. Indeed, according to IDC's 2018 Enterprise Networking Advantage Survey,companies using advanced data networks to embrace DX 2.0 gain measurable business advantages. As shown in Figure 2, they see a:

  • 38% improvement in customer satisfaction
  • 28% increase in revenue
  • 26% increase in employee productivity

IDC calls enterprises that are successful in empowering edge workers through the adoption of the latest software-defined technology "disruptive networkers."

FIGURE 2


Business KPIs of Companies in Different DX Levels

Q.Over the past two years, what has been your company's change in percentage for business KPIs?

Digital_Transformation_Figure2

n = 703
Base: IT respondents
Source: IDC's Enterprise Networking Advantage Survey,June 2018

The Digital Journey Index

IDC created a four-level index to characterize companies based on how successfully they leverage advanced data networks (e.g. SD-WAN) to obtain a business advantage on the spectrum of DX 2.0 (see Figure 3):

  • Legacy organizations have not committed to digital transformation. They are limited in their network access capabilities and WAN technologies, which in turn is limiting their ability to take advantage of cloud services.
  • Aspirationalnetworkers are aiming to take advantage of more DX opportunities. However, there is still more work to be done to pave the way, including adding networking capabilities and investing in networking technologies to include SD-WAN.
  • Opportunisticorganizations are committed to digital transformation. They have made the necessary investment in networking technologies to include SD-WAN. They have turned the corner and are investing in cloud services and hybrid networking solutions.
  • Disruptersare using the business goals facilitated by DX to drive networking strategy. They are heavily invested in all types of networking technologies but are moving to SD-WAN to capture the benefits of cloud services.

Disruptive networkers have six important characteristics. They:

  • Deploy hybrid technologies
  • Design flexible infrastructures
  • Focus on employee empowerment anywhere, not just in headquarters
  • Prioritize the edge
  • Perceive disruptive technology as a competitive advantage
  • Are on a digital transformation journey

FIGURE 3


Digital Journey Index Categories

Digital_Transformation_Figure3

n = 703
Base: IT respondents
Source: IDC's Enterprise Networking Advantage Survey,June 2018

The New Edge Demands Higher Network Performance

Increasing demand for cloud connectivity and access to rich multimedia applications, coupled with the emphasis on high availability, requires a new and more flexible architectural approach to WAN connectivity. The modern WAN needs to be cloud centric with direct connectivity from branch offices to the cloud. Traditional WANs, however, are optimized for corporate datacenter connectivity, underpinned by legacy connectivity, and are generally cumbersome to manage.

With increased investment in cloud connectivity to address the needs of the new edge, enterprises face several choices regarding topology, connectivity choices, and the implementation of software-defined architectures. IDC's 2018 Enterprise Networking Advantage Surveyindicates the following: 

  • Ethernet WAN is emerging as the preferred method for WAN connectivity (see Figure 4). It is cost effective and ubiquitous and provides high bandwidth.
  • SD-WAN adoption is increasing: 28% of respondents report using the technology currently and plan to increase use in the next 12 months, and 29% of respondents report using the technology and plan to maintain the same use over the next 12 months. Enterprises have high expectations of SD-WAN in terms of its ability to provide flexibility in the deployment of various connectivity options, to view and better manage application and network performance via centralized, automated controls.
  • Hybrid network topology is growing at the expense of hub and spoke (see Figure 5). Hybrid networking is an integrated fabric that enables a range of access options: EoC or DSL, cable, Ethernet over fiber, and 3G/4G wireless.

These aforementioned new architectural choices allow enterprises to transform to digital native and embark on a journey toward a more intelligent, automated, and flexible network that allows an enterprise to react quickly and effectively to a changing business environment or accommodates new business models in response to emerging business opportunities.

FIGURE 4


Use of WAN Technologies: Today and Over the Next 12 Months

Q.Please indicate your organization's use of these access types today and over the next 12 months.

Digital_Transformation_Figure4

n = 703
Base: IT respondents
Source: IDC's Enterprise Networking Advantage Survey,June 2018

FIGURE 5


Use of Network Architectures: Today and Over the Next 12 Months

Q.Please indicate your organization's use of these types of network architectures today and over the next 12 months.

Digital_Transformation_Figure5

n = 703
Base: IT respondents
Source: IDC'sEnterprise Networking Advantage Survey,June 2018

The Business Edge Continues to Become Strategically More Important for the Enterprise

The "business edge" is where the enterprise's business gets done. It is the frontline for any business where most customer interactions occur. The concept of the edge has evolved over the past decade. It includes not just the traditional definition of the edge — the retail branch or the regional office — but also warehouses, distribution centers, the fleet of customer-facing vehicles, and increasingly the mobile worker not associated with a specific location. Workers at all these locations and of various personas are involved in driving the enterprise's business and collecting insights that drive the company's future growth and profitability. Figure 6 illustrates how business at the edge is continuing to become more strategically important.

Moreover, the adoption of emerging technologies as part of an enterprise's digital transformation journey is accelerating the evolution of the edge to become the new brain center of the enterprise. The edge needs to communicate directly with cloud applications, conduct global ecommerce, provide value-added content services to customers, and become an analytics hub for IoT data. Considering the strategic importance of the edge, it can be expected to experience a significant increase in network traffic with increased demand for low latency, high availability, and security. A software-defined edge network that leverages a high-performance underlay can not only deliver the bandwidth and latency performance but also provide the flexibility and agility that the enterprise edge requires to deliver superior customer experiences on an ongoing basis. Adopting advanced networking at the edge is key to driving employee productivity, customer satisfaction, and revenue growth.

FIGURE 6


Strategic Importance of Business Edge

Q.According to IDC, "The edge" denotes computing processing actions that are performed outside of the centralized IT datacenter. Please rate your agreement with the following statements.

Digital_Transformation_Figure6

n = 703
Base: IT respondents
Source: IDC'sEnterprise Networking Advantage Survey,June 2018

Empowering the Edge Worker Is Key in the Journey to DX 2.0

Successful enterprises (disruptive networkers) take steps to empower their edge for better customer and employee experiences and operational efficiency. They accomplish this by recognizing that enterprise network performance is critical to employee empowerment and providing employees with fast, high-quality, predictable connections to apps and information critical to performing the business, irrespective of the location of the apps and data — the cloud or the internal datacenter. Workers at the business edge who have always-on, high-speed access to apps and data to support their customer interactions are more empowered with the intelligence and flexibility to make smart, effective customer-facing decisions. They have more time to focus on productive tasks because the more repeatable tasks are now automated. Automation of tasks such as data collection, storage, and analytics not only makes employees more productive but also feeds into the intelligence of the business, thereby creating an ever-increasing virtuous cycle for the enterprise. It also means that employees at the edge are continuously taking insight-driven ever-smarter decisions while interacting with customers. This virtuous cycle drives enhanced employee productivity and satisfaction and better customer experiences and operational efficiency for the business. It enhances the competitive advantage of the enterprise by making the edge smarter, faster, flexible, and more efficient.

Figure 7 illustrates that disruptive networkers are more satisfied with network performance attributes than other segments.

FIGURE 7


Organizations' Satisfaction with Network Performance Attributes

Q.How satisfied are you with your organization's network performance on these attributes?

Digital_Transformation_Figure7

n = 703
Base: Respondents who indicated important aspects of enterprise WAN strategy
Source: IDC's Enterprise Networking Advantage Survey,June 2018

Comcast Business Has Built a Modern Foundation for Transformation at the Enterprise Edge to Achieve Business Success with DX 2.0

Having the right network and IT infrastructure in place — especially to empower the edges of a distributed enterprise — will play a key role in the journey to DX 2.0. Comcast Business has created a modern network services portfolio, featuring the ActiveCore SDN platform and SD-WAN combined with the nation's largest IP network, Ethernet, and fast, reliable Gig-Speed broadband. With Comcast Business, organizations can reimagine "what's possible," without retrofitting new opportunities onto legacy confines. The company's intrinsic network architecture, unencumbered by legacy technologies and built on intelligent, intent-based networking principles, presents an opportunity for businesses to rethink traditional WAN technologies as they rearchitect for the future. By anticipating digital-first business opportunities, Comcast Business is ready to help businesses take the next step in their digital transformation journey and drive better business outcomes.

CONCLUSION


Adopting Software-Defined Networking at the Edge Enables the Journey to a Digital-Native Enterprise (DX 2.0)

IDC believes that becoming digital native is mandatory to compete in today's business environment. Becoming digital native entails making "digital" a central part of an organization's business strategy. Making "digital" a central part of the enterprise strategy requires enterprises to undertake a journey — the journey to the next phase of digital transformation: DX 2.0. It requires a radical rethinking of an organization's business processes: how it interacts with its customers, how it drives operational excellence, how it approaches innovation, and deciding which technologies to use as the foundation.

The IT and network architecture must change to support this transformation journey. A key part of this journey to DX 2.0 is the buildout of an advanced network based on SDN principles — a network that is agile and flexible enough to allow an enterprise to host its apps and data across multiple clouds at the lowest cost and with superior performance. IDC calls organizations that are further along in this journey of adopting SDN to build such an intelligent, dynamic, flexible, and high-performance network "disruptive networkers." Wherever organizations are in the digital transformation journey, as they move closer to becoming a disruptive networker and a digital-native enterprise, they have an opportunity to improve their performance across all key performance indicators.

As more data collection and analysis are pushed to the frontlines of business, the network edge is emerging as the new nerve center of the enterprise. Indeed, IDC believes the network edge is where enterprises have the most to gain from adopting advanced networking capabilities and undertaking this journey to DX 2.0. IDC research suggests that workers at the business edge who have always-on, intelligent, high-speed access to apps and data to support their customer interactions are more productive and drive higher customer satisfaction and higher revenue growth for the business. Adopting advanced networking capabilities at the edge provides the fastest route to desired business outcomes sought by an enterprise in its journey to a digital-native enterprise (DX 2.0).

Methodology

To understand enterprise demand for advanced data networking, IDC conducted research with 703 IT/telecom professionals, director level and up, who had strategic insight/knowledge of their enterprise WAN and network resources, and 99 interviews with C-level respondents in a line-of-business (LOB) role. Respondents work at U.S. midsize and large companies (firms with 250+ employees) that have at least 10 locations. Respondents came from organizations that represent a mix of industries, with an emphasis on healthcare, retail, and banking. The research was conducted in April and May 2018.

About IDC

International Data Corporation (IDC) is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications and consumer technology markets. IDC helps IT professionals, business executives, and the investment community make fact-based decisions on technology purchases and business strategy. More than 1,100 IDC analysts provide global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries worldwide. For 50 years, IDC has provided strategic insights to help our clients achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology media, research, and events company.

To download this white paper click the following link: The Next Stage of the Journey to Digital Transformation 2.0

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