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How to Start a Digital Business on an Old IT Infrastructure

Author: Ilya Letunov
Most enterprises base their IT infrastructure on systems developed 10 or even 15 years ago. Ilya Letunov, head of the Tarantool platform and VK Cloud Solutions, explains how it affects the technological development of the business and how to launch new digital services using an outdated infrastructure.

For a long time, the market had been developing in highly comfortable conditions. There was a practical product, a monetization model, and a client that we saw and understood. But the year 2021 undermined the existing models of consumer behavior. Now customers choose digital services and expect the best possible experience with them.

The IT infrastructure of many companies was not ready for the traffic surge that followed the transition to remote work. Businesses need to process hundreds of thousands of orders at once, ensure fast and accurate logistics and delivery, store personalized customer profiles, and rely on the omnichannel strategy. Previously, all this gave the business a competitive edge, but now it is a necessity.

Another change I see is the growth of business data. According to IDC estimates, the total global volume of data generated by companies in 2020 was 59 zettabytes. By 2025, it will be as much as 173 zettabytes, which is three times more. Even the IT systems of the market leaders are no longer able to cope with such loads.

The base layer of corporate IT systems is really outdated and not designed for modern workloads. The number of requests to IT systems is growing, but the speed of their processing is not.

Most top managers see the negative effect right away, they don't even have to enter the technical maze.

Due to a low data transfer rate, an online service customer can put an out-of-stock item in the shopping cart. The result is disappointing: no purchase, no consumer satisfaction, and no company profit. On the other hand, rapid information transfer between the user-side service and the infrastructure improves customer experience, increases loyalty, and, most importantly, directly affects sales growth.

There is a contradiction here. Outdated and legacy IT systems prevent the development of digital services. But they cannot be completely thrown away. In a large business, this can lead to a restructuring of such a scale that it would be easier to create a new company from scratch.

What do we do with this?

A Three-Speed IT Infrastructure

You can speed up your legacy systems without getting rid of them, using the concept of three-speed IT. This method is gaining popularity around the world and allows accelerating digital services without global IT restructuring. The acceleration is achieved by developing an intermediate layer of IT services. It connects the top level of user and business applications with the company's critical root systems (OSS, BSS, billing, BI, ERP, CRM).

Usually, those critical systems were developed 10-15 years ago, and their code is outdated. Making changes to them requires a lot of effort, time, and money.

The top IT layer includes mobile applications, personal accounts, online stores, call center integration, real-time analytics, etc. These are all the trendy IT solutions that we have witnessed developing in recent years. The update speed requirements at the top IT level are measured in days and if a new service is launched, even in hours.

The intermediate layer creates a balance between the slow legacy systems and the speed-demanding user services. Hence the name — three-speed IT.

Most digital transformation projects are stalled by fear of tampering with what already works. Top managers have a point here: with the current speed of change and the fiercest competition, business processes cannot be stopped even for a minute. They must be improved and accelerated on the fly. Additionally, there is always the risk of implementing an expensive ITВ solution that will be quickly replaced by a new one, X times more efficient.

The three IT layers concept removes the risks and offers evolutionary development instead of erratic veering between new solutions. Thus, it gives more room to maneuver and experiment.

I will now explain how three-speed IT works. My first example will be the retail business. Retail is where major players have been actively launching new sales channels and testing digital business models for several years.

Example 1. Retail

In terms of IT infrastructure, many large retailers have been focused on offline customers for a long time. IT had only a supporting role. But as soon as online commerce and express delivery services began to grow rapidly, retailers had to master new sales channels and monetization models. This determined the vector of IT development in traditional offline retail.

In the late summer of 2020, Magnit decided to launch its express delivery of groceries through the Delivery Club service. It means "delivery to your door in 30 minutes or less" for most grocery store items. The difficulty was that Magnit's corporate IT systems, containing the data on what's in stock, technically had no integration point with the express delivery service.

The company faced the choice: either completely rebuild its IT infrastructure towards the new direction or create an intermediate layer connecting the upper, user-facing IT level with the lower, business-critical one.

As a result, the company created an integration layer. It helped accelerate and organize two streams of information — one regarding products from the central storage and the other about the stock balances of each store.

With traditional methods, integration usually takes up to six months, but the new IT tool reduced the time approximately threefold. The intermediate IT layer allowed launching a new business model while eliminating the costs of rebuilding, adapting, and configuring the infrastructure.

Example 2. Banks

The banking industry is highly developed technologically, especially in Russia. Nevertheless, banks have faced and continue to deal with a serious challenge — the many times increased burden on their IT systems. The growing popularity of mobile applications and remote banking services contributes to the situation.

An increase in customer service requests prompted Gazprombank to look for an accelerator for its IT systems. The bank implemented an intermediate IT layer, which connected critical systems with business applications operated by contact center employees, in-office workers, and remote staff. The new solution made it possible to load client data into RAM and have them instantly displayed in business applications. As a result, the rate of data transfer from the lower layer to the functional services increased by 50 times at once.

Example 3. Telecommunications

Telecommunications is a spectacular example of a dynamic competitive environment. At MegaFon, with 80 million active users, new projects required improving the digital ecosystem and creating a technological base. You can imagine how large the IT landscape of a major telecom operator is.

Therefore, MegaFon took the evolutionary path of IT infrastructure development, where new systems did not replace but supplemented the existing ones. Such a move alleviated the burden on the underlying platforms, increased the availability of services, and reduced time to market.

After transferring the load to a fast data storage "add-on," MegaFon launched more than 25 services in just a few months. Those services now work for 80 million subscribers in 10 time zones without delays or downtime.

The Future of the Three-Speed Model

I believe that the speed of change and adaptation to new conditions are crucial factors for a modern enterprise to achieve success. The technical limitations of legacy IT systems devalue promising ideas and business models. At the same time, the costs of rebuilding the IT infrastructure and the losses due to interrupted business processes are many times greater than the potential benefits of a full revamp.

The development of the IT infrastructure should be approached carefully, iteratively. In this case, it will bring additional value to the company instead of becoming an item of expenditure. The concept of three-speed IT creates an environment for a smooth evolutionary development of the infrastructure. This is probably one of the most effective ways for a business to go digital today.

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Discussion (2)

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surhidamatya profile image
Surhid Amatya

It's really Insightful

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salehmubashar profile image
Saleh Mubashar

i must say, very informative
is there any integration with react?
btw, please follow me on hubpages too :)]
thanks