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IT Innovation, Oracle News | April 13, 2016

Irresistible Forces Drive Legacy IT to the Cloud

By: Rob Preston

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Enterprise migration to the cloud is a not-so-classic case of several irresistible forces meeting a movable object, Oracle CEO Mark Hurd told attendees at the company’s Oracle Industry Connect conference in Orlando on April 12.

The movable object? Legacy IT applications and infrastructure, much of the stuff more than 20 years old. And the forces that will pressure CEOs into finally replacing those systems in favor of less expensive, modern, but secure cloud services? Paltry revenue growth, demographic shifts, and business model disruption.

Against the backdrop of a slide showing that S&P 500 companies have posted near-flat revenue growth over the past eight years, Hurd noted that CEOs everywhere are under intense pressure to cut expenses, including IT expenses, to boost earnings—and save their jobs.

But there’s only so much companies saddled with lots of legacy systems can do to cut their IT expenses, because more than 80% of their tech spending must go to keeping those brittle, outdated systems running and secure and regulatory compliant. By moving to cloud services, however, companies can offload much of that expensive technology heavy lifting to efficient third-party providers, in turn allowing them to spend more of their IT dollars on innovations to grow their businesses (or letting them pocket some of those savings to help boost profits short-term).

Meantime, demographic shifts also are pressuring companies to move to the cloud, Hurd said. Millennials will constitute half of the global workforce by 2020, he noted. And if employers continue to force them to use IT systems installed during the premobile, presocial, presearch days of yore, those employees won’t be nearly as productive as they otherwise could be. “I don’t like to make generalizations about millennials,” he said, “but what we do see is their [IT] expectations are dramatically different.”

And then there’s the irresistible force of companies adopting brand-new, digitally inspired business models. Take just the one trend of companies hiring less and turning to freelancers and contractors more. More than 160,000 people drive for Uber, for example, but the company has only about 4,000 full-time employees. What are the implications for IT?

As things go now, new hires at companies with complex processes built on legacy, nonintuitive IT systems can lean on their fellow employees to walk them through the morass. But that kind of tribal-knowledge culture doesn’t translate to a part-time-economy model, in which companies must find and get people onboard much faster.

“They don’t have time for word of mouth,” Hurd said. “They have to get people moving quickly. This will have huge implications on the way processes and the automation of those processes work.”

Rob Preston is editorial director in Oracle's Content Central organization, where he provides insights and analysis on a range of issues important to CIOs and other business technology executives. Rob was previously editor in chief of InformationWeek. You can follow Rob on Twitter at @robpreston.

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