Digital transformation has become a buzzword over the last few years, as organizations seek to reinvent their business models to come out ahead of the competition, according to Manik Narayan, CIO for SAP in Asia Pacific and Japan.

In a world increasingly dependant on cloud computing and emerging technologies such as the Internet of Things (IoT) and artificial intelligence (AI), Narayan spoke to DCD about the factors driving digital transformation in the APAC region, suggesting how data center providers can more effectively meet the needs of modern enterprises.

Understanding digital transformation

Despite the hype around digital transformation, there are real differences in how organizations approach the adoption of new technologies, Narayan said. Organizations that began early are already reaping the benefits, while others may be mid-way through the journey and could expect to see results soon. Yet others are still grappling with and trying to make sense of the changes involved.

“Digital transformation is the ability to use a lot of the latest technologies out there to change how the company is working. How you are servicing your customers, how you are doing business, your internal processes, the whole nine yards,” he explained, noting that the way that businesses are interacting with their customers are changing dramatically.

“Take marketing as an example. It was broadly based on advertising and marketing campaigns in the past, with no way to understand the end-interactions with the customers. [Today] you can really go down on an individual basis to understand what a customer is thinking about, and the best way to sell to them.”

The rising cloud

There is no question that cloud computing has contributed to a paradigm shift that favors digital transformation, by opening the door to much faster and greatly simplified IT deployments. This frees the IT department from having to spend time on mundane tasks such as infrastructure maintenance, to focus on projects that contribute to the bottom-line, Narayan said.

And the increased agility of the cloud is enticing mature enterprises, too: “What I can really see out there is a lot of companies coming to the point where they have to renew their infrastructure, they are having very strong [internal] conversations on the merits of running their own infrastructure or buying it off the cloud.”

Don’t expect the cloud to completely replace all on-premises deployments anytime soon though. While startups are likely to build their systems directly in the cloud, mature enterprises will probably adopt an intermediate approach, due to the presence of existing investments. “There is an investment in their on-premises that had been made over the years. For some of them, [hybrid cloud deployments] will remain for the foreseeable future,” he said.

The role of IoT

IoT and AI are often described as emerging technologies, but Narayan said the former is a reality in many organizations. Hardware and software are already monitoring and managing physical devices and systems within the enterprise, and are commonly found within manufacturing organizations.

“The distinction between what used to be called information technology (IT) and operational technology (OT) has become blurred. In the past, you had a different department taking care of the technology on the shop floor, and IT in charge of corporate systems. [Today], the machines on the shop floor are getting much more connected.”

“This has allowed many companies to become agile and fast in how they are managing quality, defects and manufacturing. [These companies] have come to the point where they have understood that the latest technology can really help them; and are trying to figure out their own roadmaps to come out ahead. And this will continue for the next couple of years.”

Elsewhere, Narayan pointed to the installation of smart meters at two of SAP’s data centers in Germany. The deployment of 500 IoT devices gave the organization an extremely accurate picture of electricity consumption within the facility, and opened the door to the use of machine learning to optimize power use.

Moving the industry forward

But how can colocation providers maintain their relevance and continue delivering value as their traditional turf is encroached upon by the public cloud, and further complicated by technologies such as the IoT? Narayan sees a combination of factors, starting from whether a facility has been upgraded with modern and energy-efficient equipment.

“Data centers have moved forward incredibly fast in the last 10 to 15 years in terms of cooling and other advances. Are you modernizing your facility fast enough?” he asked. And there is ample justification for an upgrade, as enterprises looking to hybrid cloud deployments, and providers delivering SaaS or PaaS services to businesses, will only increase demand.

Indeed, Narayan says that “a large majority” of the 44 SAP data centers around the globe are with colocation providers. He said: “There is a high demand for more compute, more data to be stored, more things to be done digitally. There is a very significant opportunity for colocation providers looking ahead in the next three to five years.”

No data center is an island, and connectivity with network providers and other data centers does matter, according to Narayan. “[Connectivity’s] becoming a topic of discussion as well. I’m not going to have all my applications and services in one location and is most likely going to have it fairly distributed.”

Finally, sustainability in the data center is also important for a rising number of enterprises, due to the simple fact that data center energy consumption makes up a huge chunk of their corporate energy use. This means data center operators that can provide a high degree of efficiency will find it easy to attract new customers.