Global enterprises of all kinds continue to migrate toward digital business models and adopt recurring revenue strategies. These were among the primary conclusions from a recent IDC Market Analysis Perspective* examining worldwide digital business models and monetization trends.

The analyst firm’s survey of CEOs found that the world’s business leaders see digital models as a means to operating with greater efficiency, driving customer satisfaction to higher levels, increasing employee productivity, and generating greater levels of revenue – all of which are among their highest priorities for the management team and their respective boards.

Organizational leaders see digital and recurring business models as a path to generating more predictable revenue streams driven by the selling of higher-margin services delivered via flexible, consumption-based pricing models. Software companies alone are projected to continue moving to subscription models at a clip of 17.9 percent by 2026.*

And while these trends are pervasive, they are particularly pronounced for traditional B2B companies seeking to sell more services via digital channels.

Deploying a successful recurring revenue dynamic is dependent on many high-performing functions across the organization interacting and integrating in a smart and seamless fashion. This includes all components of the monetization life cycle, with the billing system perhaps the most critical of all. And herein lies the challenge faced by enterprises with digital aspirations.

Traditional businesses seeking to digitize service delivery and pricing simply do not have the technology or flexible billing and monetization systems needed to track and analyze usage and find value metrics, according to IDC. They continue to rely on error-prone manual processes or custom solutions that cannot scale. Companies that do have some form of a consumption billing capability have often found their solution to be inadequate for their future needs.

As a result, enterprises that correctly see the billing platform as the linchpin to digital and recurring revenue success are seeking to enhance their billing, subscription management, and price optimization capabilities.

IDC identifies some of the common requirements of a billing platform, both for today and in the coming years. Among them is the ability to easily integrate with and operate alongside existing systems while supporting new and potentially non-traditional partnerships. Billing platforms must offer intelligent and automated workflows as well as price optimization. Finally, vendors must be prepared to provide a hands-on approach to helping customers manage change and implement a strategy and model that will ultimately drive a measurable return on the investment made in an enhanced billing platform.

The IDC report predicts that digital and recurring revenue models will become dominant in more industries, resulting in an increased urgency for enterprises to adopt a best-in-class, modern billing solution.

Watch our on-demand webinar on Monetization trends in Enterprise Businesses to learn more.

* Worldwide Software Business Model (Subscription and License) Forecast, 2022–2026 (IDC #US49344622, July 2022).

As communications service providers (CSPs) confront the reality that consumer connectivity alone can no longer be the sole driver of business growth, they are pursuing digital strategies and expanding their ecosystem of partnerships to develop and deliver new value-added services to subscribers and enterprises. M1, one of the largest mobile operators in Singapore, is ahead of the curve in that it has transformed its business amid the commoditization of basic voice and data services and stiffening competition from new market entrants.

During a lunch briefing co-sponsored by Aria Systems and Salesforce at this year’s Digital Transformation World, Nathan Bell, M1’s former Chief Transformation Officer, detailed the lessons learned from M1’s efforts to digitize, modernize, and position itself to compete and thrive in a new and evolving telecommunications marketplace.

For M1, a provider of consumer and B2B services across both mobile and broadband, there were no half-measures in its approach to digital transformation.

From the outset, the company pursued a holistic, all-in approach to shifting to an entirely digital business, replacing all inflexible legacy systems with cloud-native options, and establishing an in-house digital office to manage it all. Opting for a best-of-breed strategy, M1 selected individual point solutions providers, including Aria, which enabled the company to build a more flexible business architecture capable of easily supporting evolving business requirements.

Despite the challenges and restrictions posed by the global pandemic, M1 successfully deployed a minimally viable product just nine months after project inception, and launched the digitized consumer-focused business in just under three years. As Bell put it, the team “built a brand-new house next to the existing house.”

As a result of this digital transformation, M1 consumer subscribers now have the freedom to build their own mobile plans, choosing from any combination of pricing packages, usage models and billing options. Equally significant, customers can select and procure their plans without the need to engage a customer service representative, as all customer care activities now take place online. This has resulted in a significant reduction in call center volume and costs.

From an operational perspective, the entire business architecture has been significantly reduced to the point where it can be managed by M1’s in-house team, and new products can be launched into the market in a matter of weeks, rather than months.

Bell highlighted several key learnings the M1 team took from their successful digital transformation and evolution. Most important is the need to ensure alignment across the business from the CEO’s office on down. Ditching legacy services and processes can be a difficult proposition necessitating tough conversations. A degree of resistance is inevitable. Ensuring that all stakeholders, from IT and marketing to finance and customer service, understand how new processes will work, business practices and revenue recognition will change, and how the newly digitized operation will impact individual roles and responsibilities, is critical.

Secondly, Bell stressed the importance of building cohesive, trusted partnerships with system vendors to ensure all parties are working together for a common outcome. Convening regular governance meetings and collective discussions among vendors, data analysts, engineers, and software developers will enable the organization to fully access and leverage all available expertise.

Finally, Bell implored CSPs to heed lessons from other industries that have embraced cloud technologies and software-defined networks. The benefits are clear and are transferable to the telecommunications industry.

M1 is now gearing up to initiate a similar effort on the B2B side of the business.

Watch the full presentation here

Digital Transformation World 2022, held in Copenhagen last month, brought together an enthusiastic telecommunications community with many attendees simply happy to be returning to an in-person event following the long Covid hiatus. Operators, motivated to develop new business models supported by more flexible and autonomous software systems and architectures, arrived eager to engage and apply guidance from TM Forum as well as learnings from successful peer strategies. Aria Systems was an active participant in the event, with a show floor exhibition booth and demo, a winning Catalyst presentation, and a lunchtime case study with Salesforce that showcased the successful digital transformation of M1 Singapore. Here are the top three themes from the event:

1. ODA Gains Momentum

With DTW serving as the first significant in-person gathering of TM Forum operators, service providers and vendors since the Open Digital Architecture (ODA) was introduced two years ago, the event served as a barometer for industry attitudes toward the new standard. There was no shortage of enthusiasm for the ODA and its accompanying themes of automation and open integration, with operators benchmarking the efforts they have made to move toward compliance, and vendors eager to showcase their adoption and ability to fit within next-generation agile architectures and networks. From the exhibits and demos on the show floor to the Catalyst presentations, momentum around ODA was palpable, defined by a general openness to explore new opportunities and apply best practices. While the ODA remains in its early days, DTW underscored the industry’s eagerness to support this major TM Forum shift.

2. Confidence in the Cloud Increases

The first-time presence of the major cloud vendors Azure, Google, and Amazon at this year’s event highlighted the increased momentum around movement to the cloud. Operators are demonstrating more confidence in the cloud and software-defined networks for all aspects of their businesses as they pursue greater agility, expanded partner ecosystems, and the generation of revenue streams from new industry verticals. DISH, for example, showcased their “all-in” approach to the cloud for everything from infrastructure to new service delivery. While some companies remain cautious, and others have more urgent problems at hand, DTW chatter demonstrated the continued belief among a growing number of businesses in the maturity, reliability, and transformative capabilities of pursuing a cloud strategy.

3. Securing Talent Remains a Challenge

With so much transformation on display at DTW, not to mention the innovation taking place daily across the industry, the recruitment and retention of the right talent has become a top priority for CSPs. The effort to move beyond basic connectivity to offering new services that drive additional revenue requires people with skills and knowledge outside the traditional telco space. Existing operator workforces may be well versed in selling mobile services and wide area networks, but they don’t have expertise in the vertical markets telcos are now pursuing, nor do they know how to market to these new end users. Adding to the challenge, telcos are now competing with major technology companies for the technical talent needed to drive innovation, propel transformation, and build the digital, open, and software-defined telco industry of the future. The ability to secure new talent will go a long way in determining future business outcomes for today’s CSPs.

Read about Aria’s Award-Winning Catalyst

Enterprises commonly pursue M&A as a strategy for driving growth and accelerating shareholder value as it enables enterprises to expedite entry into new markets and geographics, expand product and service portfolios with greater speed, and acquire talent and new capabilities virtually overnight. While the velocity and volume of M&A deals ebb and flow in concert with macroeconomic trends, M&A consistently remains a favored approach among growth-oriented enterprises spanning a range of industries.

But M&A is not easy.

One of the greatest of these challenges is the integration of technology systems. Managing or consolidating multiple and disparate technology systems across finance and business operations remains one of the key post-M&A obstacles. The ability to integrate IT systems can be the difference between a successful transaction and a disaster.

In the effort to integrate companies and systems seamlessly and smoothly, the billing system becomes a critical component that rises to the forefront.

In today’s business environment, where products and services are delivered via subscription and usage-based billing models with greater frequency, the billing system has become a critical key to the realization of revenue and ultimately the customer experience. M&A often brings together companies with disparate business units operating different monetization models with varying levels of pricing model complexity. In most M&A scenarios, the existing billing systems and financial applications are inflexible and lack agility, ultimately creating substantial obstacles for those leading the post-integration effort.

A pure public cloud billing and monetization platform is ideal for companies engaged in M&A activity, particularly those with multiple business units or offering many varieties of B2C, B2B, and B2B2X products and services. Cloud billing platforms can be deployed across a range of monetization models and geographies to handle any level of pricing complexity, enabling the organization to realize the benefits of the M&A business case with greater speed.

The flexible nature of a cloud billing solution enables organizations to consolidate billing functions more easily in the post-merger environment, as the platform can more easily connect to and operate alongside any number of IT functions within an organization’s Lead-to-Revenue technology stack and as part of a best-of-breed strategy. Additionally, the platform can be configured at either the business unit level, providing autonomy over business models and processes, or established at the corporate level to ensure cross-business consistency.

According to the Harvard Business Review, 70–90% of mergers and acquisitions fail due to the multiple challenges that arise once the deal is consummated. CFOs say the greatest pain point when engaging in a merger or an acquisition is the meshing of business systems and technology. The presence of a cloud billing platform can help to mitigate these integration challenges, facilitate service and product convergence, and process rationalization, ultimately leading to post-integration success.

In the telecommunications industry, basic voice and data connectivity is quickly becoming commoditized. Service providers recognize this and are seeking to introduce digital products and services that will generate new recurring revenue streams and deepen relationships with consumer and enterprise customers. As they do so, they are dramatically expanding their universe of partners, teaming with nontraditional service providers to leverage 5G and bringing a range of these new services to customers.

CSPs going down this road have been confronted by a significant impediment – their billing systems. Legacy BSS architectures, built to support the voice and data service that primarily drove revenue previously, simply do not have the ability to support new services, complex pricing models, or the rapidly expanding ecosystem of partners. The inflexibility of these expensive, on-premises systems was not meant to deliver the automated billing, partner reconciliation, and collection capabilities required by today’s modernizing, digitally transforming service provider. And they cannot be adequately retrofitted to meet the task at hand.

Leading analyst firm IDC sees the embedded billing system as a pervasive obstacle for CSPs with ambitions of digitizing their business models. In a recent Market Note, IDC analyst Karl Whitelock underscored the requirement for digitally evolving CSPs to adopt a “new type of charging and billing capabilities.”

Whitelock goes on to say, “Business model enablement, partner interactions, network operability, and ultimately customer satisfaction are limited if traditional charging and billing solutions are expected to meet the level of business change that today’s new network technology environment brings to light.” The note highlights Aria as a cloud billing vendor capable of delivering the agile, flexible, and modern billing solution required by a modernizing, digitizing CSP.

This is essentially a warning to CSPs that have not already discovered the inherent limitations of their existing BSS systems. Public Cloud-Native solutions are clearly the antidote that will enable CSPs to pursue new business models, maximize 5G investments, and ultimately realize their digital goals. In addition to providing enhanced interactive and automated billing capabilities and support for complex usage-based pricing models, cloud billing solutions like Aria deliver the critical partner management, revenue collection, and reconciliation support that become vital as partner ecosystems continue to grow and expand.

For more on the BSS challenge confronting today’s global telecoms providers and a deeper understanding of how Aria is best suited to help a CSP transition to a modernized and enhanced billing capability, we invite you to dive into IDC’s report: “5G Operational Readiness – Aria Enables Open Partner Ecosystems in the Evolving 5G Communications Industry.”

The telecommunications industry remains in the throes of a significant digital transformation.

Connectivity remains the bedrock, powering all things digital and enabling operators to expand and diversify their services. But operators understand the requirement to move beyond basic connectivity. They have lost ground to nascent internet businesses that have brought dynamic products to market, underpinned by fantastic customer experience, with greater speed and agility. Then there are the billions that have been invested in 5G infrastructure, producing massive pressure to begin monetizing sooner than later.

On the path to digitization, CSPs find themselves confronted by several hurdles. Some stem from the inherent culture and nature of the business. After all, these are businesses that have been around forever with employees who have an embedded way of thinking and resistance to change.

Then there are the operational hurdles. Most, if not all, CSPs have on-premise systems for billing and managing subscriber accounts that are expensive and inflexible. Significant costs and resources have been sunk into these systems over the years, and they are deeply woven into the fabric of the organizations. They are admittedly critical for continuing to support existing lines of business, so likely to continue serving as the primary source of revenue as the newer digital business comes online.

While these behemoths may still be doing the job for which they were commissioned, operators are quickly realizing they are not capable of supporting the evolving digital business and a new world where they are hosting products created and owned by partners, co-curated with disparate business units, or enterprise customers themselves.

CIOs and CTOs are aware of the need to modernize and adopt cloud-native and flexible IT solutions. But they are left with questions and faced with trust issues as they move away from the old guard whose business models are based on selling as many services as possible to the operator. Deeply existential questions are being asked:

• Should the existing system be replaced entirely with something new and modern?
• Can I (or should I) get a separate billing platform to handle only the new product lines we intend to launch and support?
• Should we continue to pursue an on-premise approach, or look to the cloud?
• If I look at the cloud, am I limited to only Private Cloud platforms or are there viable Public Cloud solutions out there?
• My current on-premise vendor says they are “moving to the cloud”. What does that mean and can I believe them?

We humbly offer our perspective on the questions above and advise CSPs to take caution.

You see, providers of older-school telco billing systems have proudly proclaimed their move to the cloud to appear modernized and capable of servicing CSPs in this new era when everyone wants to be in the cloud – or thinks they should be. But not all cloud solutions are the same. Not even close.

CSPs engaging in digital transformation projects need to understand the distinction between these offerings and true cloud-native SaaS platforms. From every conceivable perspective – culturally, operationally, commercially, architecturally, etc. – everything about how a SaaS public-cloud system is designed is different from legacy systems. The advantages are numerous:

• They were designed to serve multiple customers at once, so all customers get access to new features and product upgrades at the same time, eliminating both custom code (moves to no-code configuration instead) and the expensive and slow change request culture in telco that impairs speed to market.
• They can be configured by business users, eschewing the need to retain and pay expensive IT and system analysis teams.
• They offer a lower total cost of ownership than on-premises or the cloud solutions legacy providers are marketing, in some estimates by as much as 80%.
• They are designed to be open and API driven from the start so you are free to integrate new cost-efficient and best-of-breed cloud technologies, from AI engines to customer engagement bots, to enhance the way you serve your business and market.
• They make the best available use of all global cloud services, freeing the service provider from a potentially expensive long-term commitment to one cloud provider or the other.
• They offer backward compatibility, ensuring that older features and applications continue to operate as they should amid platform upgrades.
• All incremental fees typically assessed for enhancements, infrastructure, and system administration are baked into the total price, eliminating costs related to infrastructure management, security, scalability, and performance.

The cautionary note for CSP decision-makers is this: Not everything that says cloud is cloud. Simply moving software that was once deployed onsite into a cloud environment won’t deliver the full range of benefits, flexibility, security, and scalability operators need as they evolve to become a modern, digital enterprise.

Since 1991, ETIS has been gathering Europe’s largest telecommunications providers in a forum where knowledge is shared, best practices are learned, problems begin to be solved, and operators can better position themselves for continued success in their respective regions.

This is a critical time for the telco industry. Operators continue to digitally transform their business models seeking to monetize 5G and fiber opportunities and deepen relationships with customers by delivering new subscription-based product and service offerings. At the same time, they are eager to decrease their reliance on commoditized services like data, voice, and messaging, which have long been their primary sources of revenue.

Transformative operators have quickly come to realize their existing BSS systems, intractable systems designed solely to support old-school telco business models, do not have the flexibility or capabilities to support the new service offerings they crave. With this recognition, Aria was invited to join ETIS and participate in the organization’s most recent Community Gathering, held in Rome in early June.

Speaking to business and IT executives representing telecommunications operations from 19 European countries, Aria Chief Innovation Officer Brendan O’Brien identified the three core characteristics that transforming operators must embrace in their billing practices for success: Diversity, Adaptability, and Automation.

Operators are highly motivated to diversify their service offerings and deliver more than just connectivity and rigid, network-centric data products. Following billions of dollars of investment in 5G, the proliferation of open APIs, and more, the opportunity to incorporate any number of services, from home automation to automotive and media services, now exists. These new service offerings will drive technical changes within their businesses. As they do, billing and monetization practices will need to evolve and become far more multi-industry in nature.

New and diverse services and software-defined networks (SDN) that are adaptable for market segments, applications, and partners will certainly lead to increased billing complexity, requiring operators to embrace new levels of monetization adaptability. B2B2X, wholesale network-as-a-service, and enterprise partnership business models mean new partners, new commercial structures, and the requirement to adopt a vertical market-centric sales approach. Customers on both the B2B and B2C sides will want personalized services, dynamic pricing approaches, and, ultimately, a monetization experience that develops trust and growth.

As subscribers begin buying more stuff and adding on new services along the way, the historical nature of telco billing will forever be changed. Customers will want to pay for new services as they procure them and not just at the end of the month when the possibility of bill shock – still an ongoing challenge for carriers – exponentially increases. Simply put, billing in telco can no longer be a linear process. Automation will be required, along with a monetization system that can scale in real time, to power ongoing customer interactions.

Europe’s largest telco operators are in different phases and stages of their respective digital transformations. Many have already embraced true cloud systems for CRM – so why not billing?

Aria’s presentation intended to provide all with an understanding as to how a multi-industry-oriented view of monetization combined with the power of a true public cloud SaaS billing and monetization system can drive digital transformation success. No matter the prowess of a carrier’s legacy BSS systems, the ability to generate new revenue streams and move away from static connectivity services will be dependent on the presence of a modern, modular, flexible billing system.

Aria will continue to engage with the ETIS community on an ongoing basis and cultivate new relationships with European telco operators as a contributor to both the Smart Charging and Payments and Digital Telco Strategy working groups.

Last month, Aria gathered customers and partners in Copenhagen for Recur, the company’s user conference series. IDC Research Director Mark Thomason took the stage to share the firm’s most recent research capturing attitudes, perceptions, trends, and best practices gleaned from vendors and enterprises across multiple industries on a range of topics related to digital transformation, monetization, and pricing strategies. These are some of the highlights and key takeaways from Mark’s presentation:

Transformation Ongoing

Companies across a wide swath of industries continue to engage in efforts to digitally transform their businesses. With greater frequency, they are turning to SaaS software solutions for automation of ERP, CRM, Quote-to-Cash, and other business, operational, and financial functions. That said, in many cases, those same companies are still using spreadsheets, manual processes, and outdated technology for several activities. For example, 56 percent of IDC vendor respondents said their customers had been using spreadsheets for price optimization, and 49 percent were using a manual or custom application for subscription management¹. While much progress has been made in automating monetization process in the past 10 years, penetration remains rather low, and companies in the early stages of their transformation should not feel left behind.

Covid Survival

Throughout the pandemic, conventional wisdom suggested that consumers would scale back subscriptions to curtail discretionary spending. In the final analysis, however, subscription companies fared well in making it through the pandemic in good standing. Success can be attributed to the flexibility subscription companies were able to offer customers, including the option to delay and defer payment or pause subscriptions. Subscription companies successfully prioritized customer retention and churn management, and it paid off. Covid also impacted digital transformation efforts, with 47 percent of enterprises accelerating their digitization roadmap once the pandemic hit.²

Monetization Trends

With IoT and 5G as the primary drivers, new connectivity offerings continue to flood the market, many with highly specified vertical applications. More than 35 percent of traditional enterprises have now adopted recurring models³. Enterprises are motivated to pursue new monetization strategies to differentiate themselves, disrupt the market, and deliver an enhanced customer experience. Hardware companies continue to seek new and innovative ways to add software and sell a unique service offering on a subscription basis. Monetization models continue to evolve with increasing complexity, with the adoption of consumption and usage-based models growing. But in some corners, enterprises and consumers alike still opt for more static, predictable, and consistent monthly billing.

Data and Connectivity

Traditional enterprises pursuing recurring revenue models and procuring disparate software platforms to support these ambitions crave easier integrations with existing and neighboring business systems along with fast access to data. Getting data into systems and enterprise data lakes and then extracting that data faster for conversion into useful and actionable insights that enable teams to “do things better” remains a pervasive challenge. Enterprises adopting new SaaS solutions want a degree of interconnectivity that enables systems to speak to one another and share data seamlessly.

Price Optimization

As companies move to consumption-based models, they need help establishing price. In the near term, linking price paid to value received, then measuring and iterating, is essential – which is why the flexibility of an agile monetization platform is key. Price Optimization and Management tools are available and most effective where the business model is a physical good or a service, like plane or train tickets, or where high volumes of simple transactions or high volumes of customers are involved. Recurring revenue models and subscription-based businesses, on the other hand, are typically more complex with significantly lower data volumes. However, as AI and machine learning technologies improve at utilizing sparse amounts of data, expect these price optimization tools to evolve and become both available and of great value to recurring revenue businesses as well.

To watch the entire presentation, please check out the on-demand recording of “Monetization Trends in Enterprise Businesses”.

1: Source: IDC Survey of Monetization SaaS Vendors, May 2021
2: Source: Future Enterprise Resiliency & Spending Survey Wave 7, IDC, August 2021
3: Source: Future Enterprise Resiliency & Spending Survey -Wave 9, IDC, October 2021

Digitization and 5G connectivity are among the factors spurring enterprises across a wide range of industries to pursue recurring revenue business strategies. Companies embarking on digital transformation initiatives seeking to bring new products and services to market need to stay on top of a range of issues related to monetization, billing complexity, pricing, and more.

With these themes as the backdrop, Aria hosted an exclusive gathering of nearly 50 regional customers, partners, and guest speakers at the Recur user conference on Thursday, May 18^th in Copenhagen.

In addition to arming attendees with education and insights around monetization trends, the event was also designed to provide a forum where peers and colleagues, some from the same industry and all from the same geographic region, could finally get together – without the use of Zoom, Teams, or Meets – and interact on an interpersonal level.

The half-day session opened with a comprehensive review of the current features and capabilities of the Aria billing and monetization platform and a preview of the roadmap for future product evolutions and enhancements. Aria partner, Dimaps, followed with a case study showcasing how its logistics software meshed with Aria to help Danish media company, Berlingske Media, successfully manage billing, subscriptions, and distribution of its digital and print products as part of its digital transformation project.

In the area of thought leadership, Aria assembled a lively panel discussion featuring speakers from data monetization specialist, Digital Route, and two Aria users. Together with Aria Marketing Director, Akil Chomoko, the panelists discussed a wide range of topics including the varying levels of complexity between B2C and B2B customer subscription engagements, the importance of shoring up collections during these challenging economic times, and the far-reaching implications of 5G connectivity for every business no matter the industry. Panelists offered predictions and explained how these issues directly impacted their respective businesses today.

Mark Thomason, IDC analyst responsible for Digital Business Models and Monetization practice, took to the stage to share his perspectives on monetization trends and price optimization. Aria customers learned about new analytical tools available to help companies establish the right price for a new product and service and properly introduce that price to their customer audiences. Mark also underscored the critical role billing data can and should play in combination with other data sources to generate predictive analytics and actionable customer insights, without adding yet another intelligence solution.

In addition to the main events on the agenda, the conference featured six Knowledge Hub pop-up stands. During refreshment breaks and networking times, attendees could engage more directly to learn about specific Aria capabilities, partner solutions, and how they interact with one another.

Ultimately, Recur provided Aria customers and partners a much-welcomed opportunity to physically get in a room together and learn, not only from the presenters and speakers but from one another as well. Based on the success of the Copenhagen event, Aria is planning to conduct additional regional user conferences with the next one slated to take place in San Francisco later this year.

Enterprises of all shapes and sizes, in industries and geographies far and wide, continue to invest copious amounts of capital and resources to digitally transform their businesses. Research analyst firm IDC tells us that 70% of companies either have a transformation effort in place or are working on one. Spend on these transformation initiatives is predicted to exceed $2 trillion – with a “T” – by 2023.

The motivations for launching digital transformation initiatives vary from one company and industry to the next. At the end of the day, it’s about finding new monetization and revenue opportunities and delivering the modernized products and services that meet the demands and expectations of today’s digitally connected B2C and B2B customers.

For some enterprises, particularly those getting a late start, the perceived pressure to digitize can lead to mistakes that can undermine the effort and diminish prospects for success. We’ve seen our share of missteps and false starts and have identified how companies can royally screw up their digital transformation projects in five all-too-easy steps:

Step #1: Prioritize Technology Transformation Over Business Transformation

Before transformation initiatives begin, those leading the charge must first consider how processes, people, and thinking will need to change within the organization. In all likelihood, existing systems such as on-premises, capitalized assets will have to be replaced with newer, modernized ones capable of supporting the new business. Finance needs to understand the implications of these changes and adjust the way it looks at the cost of goods sold and profit margins as the business shifts. Expectations must be considered and established at the outset of the process.

Step #2: Neglect to Achieve Consensus from Key Stakeholders

In addition to incorporating finance teams into the process, transformation leaders must be sure to secure buy-in from leadership at the highest ranks and ensure they understand how every facet of the business will change, from the way products and services are delivered to the way revenue is recognized and so on. For example, if you are an automotive company and, instead of selling cars in a one-time transaction, you are now selling the right to use a vehicle and billing for usage over time, the way you recognize revenue and assess the performance of the business will change dramatically. Ensure that the C-suite and board members truly understand how success metrics and KPIs will change as the business changes.

Step #3: Immediately Jettison the Past

Most companies cannot afford to simply turn off their legacy business while building the new digitally enabled one. Some of your customers may be perfectly happy to continue receiving services from you via the existing model. Simply flipping a switch as you endeavor to digitize could ruffle feathers and needlessly cannibalize revenue. As part of the planning process, transformation leaders must build a bridge that, at least for a period, accommodates the legacy business and the revenue it continues to generate while establishing a migration path for existing customers and employees.

Step #4: Start By Buying Technology

For sure, the new digitized organization will need new and modernized technology systems capable of supporting new services, usage-based billing arrangements, and recurring revenue streams. However, technology procurement should come toward the back end of the process once business goals have been established and the aforementioned buy-in from stakeholders has been secured. Ultimately, technology must support the organizational digital transformation effort, not drive it.

Step #5: Take an Inconsistent Approach to Technology Procurement

Before any technology sourcing or evaluations begin, transformation leaders must first determine the strategy route they will pursue to acquire the systems that underpin the newly digitized enterprise. A best-of-breed approach means procuring the most capable and effective solutions from multiple specialist vendors. A suite provider may not have the best individual solutions but offers “one throat to choke” and a single source for integration or for addressing any problems that may arise. Comparing and contrasting suite and point solution providers is an apples-to-oranges proposition. Leaders must consider organizational culture, size, and structure to determine which approach is best.