Composable innovation: a study in stack modernisation

Technology modernisation is a perpetual priority for CIOs, who must tackle a range of challenges to deliver successful innovation. 

The impending SAP migration is a case study in modernisation. SAP is ending support for its on-premises enterprise resource planning (ERP) system. With the deadline fast approaching, CIOs are feeling pressured to migrate to SAP’s cloud-first, subscription-based ERP system, S/4HANA.

“Migrating to S/4 represents a considerable shift from multiple perspectives, including business impact, resource expertise and associated costs,” says Tim Bilali, chief application officer with Interpublic Group (IPG), a provider of marketing solutions.

SAP has promised that shifting to S/4 will help accelerate AI adoption, enhance scalability and better enable innovation. But the cost uncertainties brought by the subscription model are causing concern among many tech leaders.

Bilali, who steered IPG through its SAP migration, recommends adopting a clean core and conducting data cleansing ahead of the transition. CIOs must come to grips with cost changes: subscriptions must be renewed and that means costs will increase. “Perpetual licensing offered clarity, but the move to a subscription-based model introduces greater cost variability,” says Bilali.

Loss of customisations and data organisation, in particular, are causing concern among CIOs. For every story of an organisation embracing the future with S/4HANA, there are many others about CIOs struggling to make the business case for it or facing the loss of sometimes decades of organisational memory.

“Every customisation represents accumulated organisational wisdom. These decisions were made by people who understood context we’ve since forgotten.” That’s according to Sriram Krishnamurthy, the CIO at AG Jeans, a San Diego-based sustainable denim manufacturer and retailer.

It has been said that change is renewal. And legacy modernisation creates an opportunity for tech teams to adopt different kinds of technology. In the case of SAP, CIOs are reconsidering their options, with many choosing a multi-vendor composable ERP strategy, according to a recent survey by Rimini Street.

A composable approach is a modular approach that builds components from multiple providers for specific functionalities such as finance, HR, CRM or supply chain management. It’s a way to adopt technologies to suit organisational needs and timelines and avoid vendor lock-in. 

But following this approach also means trading the certainty of a single platform for the complexity of many parts. “Your ERP becomes less like a finished product and more like an ongoing practice, requiring clear thinking about what creates value and how the pieces fit together,” Krishnamurthy explains.

The value equation has also changed, with 78% of respondents to the Rimini Street survey expecting to use multiple vendors to innovate in and around ERP. “It used to be that consolidation and standardisation drove costs down and that’s been the case for the past 20 years. But in recent years that ecosystem has been breaking up,” says Joe Locandro, executive vice-president and global CIO at Rimini Street.

More than eight in 10 (83%) survey respondents believe composable approaches offer faster access to emerging technologies such as AI, while 94% say it’s the freedom to choose best‑fit solutions for each business need.

A former organisational information chief with several SAP migrations under his belt, Locandro advises other CIOs to be pragmatic with modernisation efforts, including for SAP. “Retain your perpetual licenses as strategic assets and avoid giving them up for subscription models, because you cannot revert once surrendered,” he says.

Instead of investing huge sums in entirely different platforms on the vendor’s timeline, he believes more value can be wrung from the existing application with the right approach. “Keep your ERP, but don’t get into any more lock-in right now. Just sweat the asset and build outside of it. That cost is going to give you greater value than trying to upgrade to get value,” he says.

CIOs must have a robust integration strategy to navigate this process. “Viability isn’t the issue; holding it together is,” says Krishnamurthy. Those who choose this path will typically engage external support. 

The path to innovation starts small, according to BIlali. This means getting some wins, facing some small, fruitless endeavours and learning and applying the lessons from each undertaking without betting the whole house. “CIOs should fund small proof-of-concept projects without affecting operational budgets, paving the way for larger investments if successful,” he says.

While modest experiments can bring valuable lessons, innovation must be tied to tangible outcomes that feed back into the business. The innovation dividend must deliver value by increasing speed, operational efficiency and solution flexibility, says BIlali.

Krishnamurthy adds that considerations about AI must now be factored into all new technologies, workflows and outcomes. “We’re not just building tools; we’re cultivating collaborators,” he says.

This represents a shift from automation to autonomy, logic to learning, executing instructions to interpreting intention. “We’re no longer asking whether this system can do what we ask. Instead, can it learn what we need before we know to ask?”

Given the rapid evolution of AI and other technologies, we may be past the point of one-off, large-scale upgrades and migrations, according to Locandro. He counsels CIOs against upgrading just to meet vendor expectations or for the sake of modernisation. Instead, innovating on top of existing platforms such as SAP will enable them to adopt new tools and technologies at will. “Do a slice of innovation here, then you can do a slice of innovation there,” he says.

CIOs must also pay attention to market investment that will bring new tools and capabilities they should look to adopt. Locandro says: “Focus your IT spend and strategic efforts on market trends and emerging technologies, especially AI, since the most significant innovation investment is happening there.”

A change in mindset goes along with a change in approach to innovation. Legacy technology was built to be predictable and permanent, but innovation today requires agility and embracing change as a constant. “We could fully specify it, then defend that specification for decades. The old mindset valued stability, but the new one requires adaptability,” says Krishnamurthy.

On a more granular level, organisations must provide resources and the right conditions for innovation, and that means establishing a workplace culture that offers safety for experimentation and permission to explore.

Krishnamurthy sums it up: “Think in platforms, not projects. Think in capabilities, not solutions. Technology is the easy part. Culture is the work.”

Technology modernisation is a perpetual priority for CIOs, who must tackle a range of challenges to deliver successful innovation. 

The impending SAP migration is a case study in modernisation. SAP is ending support for its on-premises enterprise resource planning (ERP) system. With the deadline fast approaching, CIOs are feeling pressured to migrate to SAP’s cloud-first, subscription-based ERP system, S/4HANA.

“Migrating to S/4 represents a considerable shift from multiple perspectives, including business impact, resource expertise and associated costs,” says Tim Bilali, chief application officer with Interpublic Group (IPG), a provider of marketing solutions.