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The Impact of Digital Transformation is Way Bigger Than You Think

02/10/2016 04:09 pm ET | Updated Feb 10, 2016

As a technologist, I have always discounted marketing hype. Frequently, I hear about "helping enterprises with digital transformation." However, every time I hear those words I start to wonder: what exactly is digital transformation? Isn't the entire IT spend already all about digital?

A discussion of "two-speed IT" helps clear this up. In this context, digital is about new user experiences--mobile, the IoT--basically new forms of interactions with enterprise systems. This, however, is still not measurable enough. What does digital really mean? To answer this question, let's start with something we all understand: mobile commerce.

The new digital retail

E-commerce reached its prime during the late 1990s. Since then, it has gone mainstream. Recent estimates of retail e-commerce put it at about $1.4 trillion, or about 22% of overall retail commerce. By 2019, this is going to be about $2.4 trillion, or about 33% of the overall retail commerce. E-commerce was "digital" for the 2000s. But m-commerce (mobile commerce) is digital for 2015. It's not just a new modality--it's a whole new experience. Enabling this experience requires a lot of new infrastructure: APIs, BaaS, big data analytics. This is the digital transformation our retailer customers talk to us about.

But something else is happening in this retail digital transformation. The channels (physical, web, and mobile) are blurring. Who has not seen the "Buy online and pick up in store" option in your favorite retailer's mobile app? This is omnichannel, and it's also the new digital.

Enabling this experience of course requires the APIs, BaaS, and big data we mentioned above to power every channel. In addition, it requires a consistency of experience through common APIs, and new business and data logic to sit in or near the API layer.

So mobile commerce + omni-channel = the new digital of retail, right?

Not quite. There's more. Retailers need to form new business partnerships. Rewards, points. Social. Payments. Photos. Name a physical function or a physical partnership, and it needs to become digital. This is all the new digital of retail.

So mobile commerce + omnichannel + new partnerships = the new digital of retail, right?

Almost. There is one aspect of retail that is the same as every other industry: IT. In order to deliver these new experiences, over time, backend systems need to transform. More DevOps, more microservices. This is the new digital backend, in support of new experiences in the front.

So in retail, mobile commerce + omnichannel + new partnerships + new services = the new digital of retail.

APIs: the key to all interactions

Guess what? The only constant in these four elements is APIs. They're the underpinning of all system-to-people, system-to-system, and business-to-business interactions. That's it. One common factor.

How big is this? Mobile commerce is supposed to be $2 trillion by 2019. So APIs will drive at least $2 trillion of commerce. With omnichannel, this number could easily be $4 trillion (all of e-commerce). Or even larger, if physical commerce gets transformed.

APIs are that big.

Now look at travel. When was the last time you walked into an airline booking center and booked a ticket? Or walked up to a hotel lobby and booked a room? It's all digital now, and, increasingly, mobile. Mobile travel bookings are growing at 3x the rate of web travel bookings, easily surpassing the latter to be at least $1.5 trillion by 2019. All mobile bookings, ratings, and browsing happen through APIs, so it follows that at least $1.5 trillion of travel sales (out of an industry total of $6 trillion) will happen through APIs.

APIs are that big.

Take financial services. Or health. Or media. Or real-estate. Or any industry (ok, not mining perhaps). A shift to digital. A shift to mobile. Trillions of dollars of activity through new digital. All powered by APIs.

The new digital is that big. APIs are that big.

And then look at the trend of microservices. How are the services talking to each other? Through APIs, of course!

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