Although “retrofit” does not have a literal translation, the term can be understood as “updating” or “modernization” when replacing obsolete systems and implementing more modern technologies, reducing operational and maintenance costs, in addition to reducing the environmental impact.
*By Edenize Maron
If you've never heard of Retrofit, this is the name of the process for restoring old buildings in order to preserve the original architecture, and also adapt them to the current legislation, involving a broad action in the update and modernization of the facilities.
The objective of the retrofit is to improve the comfort of the users, reduce operating and maintenance costs, as well as lower environmental impact of the building without detracting from the original architectural concept… Sound familiar?
This concept originated in the United States and Europe, when impediments emerged linked to local legislation that prohibited some buildings from being demolished since they were part of a rich architectural heritage from previous times.
But when we talk about technology, will the IT area have to wait for a law or demand from CEOs and investors to review investments in new technologies and focus on innovations that really make a difference and modernize the most important processes?
The IT area is constantly evolving, in Brazil and around the world, and the technology investment options here are similar to those in the rest of the world. According to research “2023 CIO and Technology Executive Agenda: A Brazil Perspective” from Gartner, digital programs in Brazil often lack the degree of focus and discipline needed to be carried out across the enterprise, and more: technology and talent are not performing as well as they could, leading IT organizations to struggle to deliver the expected results.
However, in that same study, Gartner points out that Brazilian CIOs are ready to catch up with the most advanced countries, with 89% of respondents declaring that the distributed cloud is one of the technologies most likely to be implemented by 2025 in their companies. But when it comes to investment in the sector, a big part of the challenge is explaining the need to invest in new solutions to shareholder boards or C-Levels.
About this subject, Antônio Bulcão, Principal at SPX Capital, opines that “the knowledge of the boards and executives about technology was gaining relevance in the discussions from 2015 onwards, and the Technology team began to understand the responsibility that comes with increasing the budget. Being able to make decisions and share the results is a challenge for IT professionals and for boards as well, as they need to learn how to measure the result of all this”. Perspective shared by Fábio Quintão, Senior Director of Alvarez & Marsal, “IT needs to teach. It is the tech person's responsibility to put in facts and data so that decisions are made. no brainer“.
DSAG and the Cloud Migration
The scenario in Brazil is not so different from cases like the one seen in Europe, with the dissatisfaction caused by SAP due to its effort to migrate the vital ERP systems of several companies to the cloud. DSAG member companies, SAP customers located in Germany, Switzerland and Austria, have demanded that SAP's S/4 on premise software version receive all the new features available for cloud ERP, which makes sense, as this model continues to meet the needs of customers and, therefore, their change is not a priority.
DSAG itself did a survey in 2022 that found that only 8% of its associates had joined S/4 in the cloud, while a significant group of 32% use S/4 on premise. In practice, around 75% of customers are still on versions prior to S/4, which shows the size of the problem that manufacturers have on their hands by making flexibility impossible and putting pressure on migration to the cloud.
The fact is that many customers' investments are in the tens or hundreds of millions in on-premise versions since the launch of ERP in the 1990s. But even so, the great focus of manufacturers has been to launch products available only in the cloud. And this is precisely the criticism of DSAG, the user group in Germany, in which 27% of its members and 3% of ASUG members expressed extremely or relatively negative opinions towards the cloud service. The counterpoint is that companies that choose to run SAP S/4HANA on premise do so because of data protection and information security requirements, the ability to control the hardware, and of course the significant investments that have already been made in the existing infrastructure. . The main question from the user group is that product launches and innovation should be available in both versions: cloud and on-premise – so that the end customer can exercise their power of choice and so that they do not feel pressured to invest in something that doesn't make sense for the business. Precisely because IT is the guardian and executor of budgets of high values and today CIOs need to seek the balance between investing in the maintenance of the operation or in strategic projects of differentiation and innovation.
The future is modernization
Orchestrating the business ecosystem, modernizing it and putting it in tune with legacy software, in a fully integrated way is the way to modernize the IT roadmap and, at the same time, to implement new solutions. This is what we call Composable Architecture, or combinable architecture, which refers to adopting a flexible architecture, either through APIs or compatible technologies, with connected, integrated systems, forming an ecosystem that unites several tools, platforms and solutions.
Composable's greatest strength is its flexibility, which allows infinite changes, additions and alterations, without impacting the operation. Contrary to what many think, and some manufacturers insist on saying, investing in technological improvements does not mean leaving aside legacy systems, a reflection of intellectual property accumulated over years, which received heavy financial investments and which has significant value for organizations. Fabio Yoshitome, Partner and Head of Brazil at AT Kearney, points out that “the challenge is to understand how we are going to configure the architecture and complexity of new platforms and systems. More and more we should be moving towards Composable Business and Composable ERP. Everyone is going to have to reinvent themselves in that sense.”
Legacy should never be seen as a burden, but as a differentiator and a competitive advantage in the market, where other players operate with systems entirely in the cloud, but do not have a consolidated track record to help them direct their business.
It is essential to have specialized and agnostic partners to help them in this new path of adopting solutions that make the IT roadmap totally flexible, scalable, adaptable and agile. Change is the only constant in our market and adapting is the solution. It's time to keep that in mind.
*Edenize Maron, CEO of Rimini Street for South America
Notice: The opinion presented in this article is the responsibility of its author and not of ABES - Brazilian Association of Software Companies
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