Lessons in low-cost digital transformation

A low-cost, low-risk digital transformation is eminently doable, if businesses can seize the right opportunities

A young man using a laptop while working in a server room

What’s the worst digital transformation of all time? TSB’s maybe, which cut off customers for five days after the building society migrated to a new core. Regulators hit TSB with a £48m fine for that disaster. 

Of course, the launch of Universal Credit was possibly even worse. The government’s all-in-one benefits programme arrived five years late and £3bn over budget.

Digital transformations are notorious for spiralling costs and terrible outcomes. But does it have to be this way?

Not necessarily. Low-cost, low-risk ideas are in vogue. Companies are increasingly adopting laser-targeted upgrades, which deliver huge returns on investment for none of the peril.

How open-source software can cut transformation costs

Take the switch to open-source software. There’s a fortune to be saved by migrating from costly licensed software to their fee-free, open-source rivals. If you’re splashing out on Microsoft Office, for instance, LibreOffice is a near like-for-like replacement at zero cost. 

The company behind AI writing tool Grammarly, which reached a $13bn (£10bn) valuation during fundraising, managed to cut its overheads tenfold in one part of its tech stack by going open source. The company wanted to upgrade its observability and monitoring service, which had originally been put together in 2014. It chose to implement an open-source product from VictoriaMetrics, a database and performance measurement provider that was founded in Ukraine and is now US headquartered. The product is free, as VictoriaMetrics makes its money by providing additional services – a common model in the open-source world.

The upgrade went smoothly. VictoriaMetrics is a mature provider – sufficiently robust to be used by Open Cosmos, a maker of low-Earth-orbit satellites. Grammarly’s Dmytro Shevchuk reports: “When it came to building a custom solution for our needs, it was hard to match the increased flexibility of open-source software.” 

He adds: “Overall, the migration has been a resounding success because of the cost savings, the huge performance improvements, and the enhanced developer experience with our new system.” 

The increased efficiency of the new setup meant that Grammarly’s bill with Amazon Web Services for storage and computing power fell by 90%.

“It’s always at least a bit nerve-racking to do these major infrastructure migrations, but this was honestly one of the smoothest transitions in Grammarly’s history,” Shevchuk concludes.

Rebuild the front end with low-code and no-code software

Using pre-made kit in this way is a common theme in low-cost, low-risk projects. Why spend a fortune building your own software when there’s something ready to go? 

Shawbrook Bank took this view when rejigging the customer experience for applying for unsecured loans. Shawbrook is a specialist savings and loans bank, founded in 2011. It wanted a system which took customers through the application process as fast as possible, but was easy to modify. 

Rather than hiring a team of developers and consultants, Shawbrook opted for the easy route by implementing a low-code front end provided by Pegasystems. The platform is well-known in the banking industry; Pegasystems is a company with a global client base. And the software bolted onto Shawbrook’s existing tech stack, with a few modifications.

Russ Thornton, CTO at Shawbrook, explains: “Our strategy is all about combining the best in technology with deep human expertise. Pega was easily integrated into our existing technology stack, streamlining and automating the journey.”

As a result, Shawbrook is operating a system which it reports is 75% faster at processing unsecured personal loans, yet also cuts maintenance and operating hours by 1,500 each month. Another advantage, common with cloud-based software-as-a-service products, is the benefit of enjoying ongoing upgrades. There’s no need to employ a large in-house development team, leaving Shawbrook to focus on what it does best. 

Low-cost transformations can help in warehouses, too

Of course, many businesses operate in the physical world too. Logistics and warehousing is a massive industry, also in need of low-cost, low-risk upgrades. 

DCK Group is one of the world’s biggest jewellery designers and manufacturers a year, shipping 20 million products a year and working with the likes of Asos, River Island and Next. Its big digital transformation challenge was to improve the digital processes in its warehouse. The old processes involved a predominantly paper-based system. 

It’s hard to match the increased flexibility of open-source software

The decision was taken to allow employees to use their personal smartphones to scan product labels. The software was provided by Scandit, a specialist in data capture.

It wasn’t an easy sell. Employees were reluctant to install company apps on their phones, but after a bit of convincing, they ultimately appreciated the efficiency of no more paper or form-filling.

“Introducing a ‘bring your own device’ policy transformed us pretty quickly, bringing us much closer to our remote teams in the field,” says Oliver Simons, operations development director at DCK. “It allowed us to start adopting new technology and new ways of working, which had been much further down our initial roadmap. But it became possible very quickly because we had this transformation in place.”

Time taken to process products is down 50%. Manual errors have been largely eliminated. And the cost of the Scandit system? Just £50,000, implemented start to finish in eight weeks.

Digital transformation in the public sector

The ethos of low-cost, low-risk, then, is gathering momentum in digital transformation. And the same is true at government level. The Baltic state of Estonia runs an open-source platform called X-Road to provide its citizens with a unified experience across 600 digital services, with a single login. The technology is cloud native and extraordinarily efficient. The total IT bill for the nation is less than 200m euros a year. That’s less, according to Estonia’s CTO Kristo Vaher, than a Netflix subscription for each user.

Now, more than 20 nations are adopting Estonia’s X-Road platform, including Finland, Iceland and Colombia. 

The UK is yet to engage. The government’s philosophy is to build afresh each time: high-risk, high-cost. The logic is proving ever harder to sustain.