Will ERP systems still even exist in a few years? In the future, will using software be like using electricity from an outlet in the wall? And how can artificial intelligence and the Internet of Things help us be more successful? In an interview with the IT magazine "IT Director", Uwe Bergmann, CEO of the COSMO CONSULT group, dares to consult his crystal ball: he sees a world in which companies assemble their own business solutions from individual building blocks like constructing something with Lego bricks. Learn why integration is perhaps the most important aspect of going digital, why the cloud is actually a real alternative, and what pitfalls cause people to falter on the path to digital transformation.
IT Director: Mr. Bergmann, can you help us understand the development of your company?
U. Bergmann: We started fresh in Berlin and Dresden in 2011 with 70 employees as a spin-off of Tectura, a Microsoft partner who had taken over "the old" Cosmo Consult in 2004. Relatively quickly the first branch office opened in southern Germany, and since then we have seen strong growth every year.
IT Director: Through further acquisitions?
U. Bergmann: Our first acquisition was a business intelligence company from Würzburg which we wanted to acquire to round out our ERP portfolio. In 2014 we had the opportunity to buy our former parent company, which was very interesting because we knew the products, the employees, the customers and the structures there very well. This first major acquisition added 150 more employees to our staff of 250. Measured by the growth that was already very strong, this was another real leap forward.
After we completed the bulk of the organization of this acquisition, three more companies were added in 2015, one in Germany, one in France and a large one in Spain.
In 2017, we then acquired two companies in Austria and two in Germany. In Austria, we became the largest Microsoft Dynamics Partner in the space of one year although starting from zero.
IT Director: Is internationalization one of the goals you are working on?
U. Bergmann: Internationalization is already a reality for us. Since 2014 we have been active in Sweden, France, Spain and Switzerland. Then we had to decide whether to invest in a larger way in Spain, which was a comparatively small country at the time, or to leave the country entirely. By making a further acquisition in Spain, we were also able to start being active in Latin America, where we are currently the second largest Microsoft partner.
IT Director: Does that also mean that you are consciously expanding your traditional customer base of medium-sized companies and going for internationally active users?
U. Bergmann: What counts as an SME is always a question of definition. Microsoft also includes companies with up to 5,000 employees. We do not go that far, but we are now on relatively broad footing in terms of the sizes of our customers: The range stretches from 50 to 20,000 employees.
On the one hand, we have a very regionally-focused structure with local branches and very direct customer service. On the other hand, there is the overall organization, which also serves large corporate groups and corporations.
And yes, we are deliberately addressing international companies. However, many of our medium-sized customers, even smaller ones with 200 or 300 employees, are already active internationally - some with two or three locations, others with ten or more.
IT Director: Are the respective country branches sufficient to be able to provide international support or are there dedicated teams within the overall organization?
Bergmann: Cosmo Consult International deals expressly with internationalization issues as a separate entity. This unit helps customers roll out their internationalization strategies. It implements the appropriate software solutions - Microsoft Dynamics and our own solutions - and also handles partner management. Because we cannot maintain offices of our own in every country, we work together with local Dynamics Partners. In the best scenario, we are already familiar with these partners from previous projects. If not, we find them through a selection process. Thus, users have an established contact person, as a general contractor, so to speak.
We also offer global support and global license management for Microsoft products. Some customers have purchased licenses in various countries at some point and, given their organic growth over time, they no longer have an overview of their inventory and licenses. We gather all the information and identify any possible volume discounts, which we negotiate with Microsoft.
IT Director: How does collaborating with Microsoft to develop new technologies and business solutions work?
Bergmann: Microsoft is showing incredible development speed in almost all areas right now. I cannot really think of any area where this is not the case.
IT Director: There is one area: mobile devices and operating systems.
Bergmann: That's right, but I think they just saw that they had lost that fight. And that's not a bad thing, because instead they decided to provide their own cloud services and applications on all devices, completely eliminating any dependence on particular devices. As far as the devices themselves are concerned, at some point you had to admit that that ship had already sailed. But everything concerning business solutions is moving forward extremely quickly.
IT Director: What do you mean in particular?
Bergmann: It starts with Office 365, which adds new features on a weekly basis. The same thing applies to the cloud platform Azure. In 2018 we will see the version 365 Tenerife for Dynamics; while for AX the standard package will also be constantly updated. Another example is Power BI.
Microsoft has incredible drive. That demands a lot from partners. You always have to keep up to date - that keeps a whole bunch of employees busy constantly. We try to offer the whole spectrum now and not “just” ERP, which used to be our focus. We want to integrate the associated processes and work areas. That starts with Azure and goes all the way to the modern workplace.
Big data and analytics, where we have made some acquisitions, are also becoming more important for us. Our acquisitions included Maxcon Data Science, which specializes in Artificial Intelligence (AI) - a field that is growing immensely.
IT Director: But the ERP system is still the heart of a company’s IT?
Bergmann: From the point of view of all these activities, the ERP system is the central area of trust and the core where all important business processes take place and where everything comes together. That's why the topic of analytics, for example, is best kept there, in our opinion.
We have a dedicated team to develop IoT solutions that produce a wealth of data themselves. Processing that data is done in our process structure in the ERP system. Our vision is to provide customers with complete orchestration of their IT landscapes from a single source with the ERP system as the foundation.
IT Director: What questions do customers have for you on the basis of the idea that the ERP system is the core for further digital transformation issues?
Bergmann: We engage in dialogue with users and have built prototypes for specific fields, which we present at events. For example, pumps equipped with sensors, including connected IoT hubs. We also present analytics scenarios with Power BI, where you can quickly get different reports by adjusting the parameters.
There are many ways to approach the issue of digital transformation. Accordingly, we have developed strategies with which users can optimally move towards their concrete goals. It is then no longer a question of implementing a CRM system as it used to be, but of finding out which goals you actually want to achieve with the introduction of CRM and which results can be produced. It is about increasing efficiency and improving the ability to forecast market development.
Another example is the use of Hololens virtual reality glasses. Our customers are increasingly complaining about the growing shortage of skilled labor. Thanks to these glasses, it is now possible for the engineers in the office to assist the technicians at the customer's site during ongoing repairs by sharing expertise. Through their glasses, engineers see on their computer screen what the technician is seeing in the field. The entire communication is voice-based, so that the technician can have both hands free.
This shows that the way we use technology is undergoing big changes. It's about more than the ERP system. Gartner talks about post-modern ERP, which can be composed of a whole range of other components, which also do not always have to come from a partner company. For example, we also provide services for clients who use SAP and other ERP systems because we do not need the ERP system for field service, analytics or sales.
IT Director: Do these non-Microsoft clients come especially to you?
Bergmann: There are such cases. Especially when big companies and corporations want to go digital, they cannot work with just one partner. How can one partner have enough capacity?
IT Director: That's one thing. But isn’t compatibility also an issue?
Bergmann: It is. But openness is now extremely important. Now, system decisions - except, of course, ERP - are no longer necessarily being made at the corporate headquarters, but perhaps even by regional sales managers. If, for example, an old, rigid CRM system is slowing down the sales organization and the goals can be achieved much better with a modern, leaner system, then those systems are being replaced. Feeding the data into the respective core system is no longer rocket science.
IT Director: But interfaces still have to be created?
Bergmann: There are now a number of consistently maintained standard APIs, but it is true that integration is an issue. Gartner predicts that 50 percent of future IT expenditures will go towards maintaining the integration of the various systems. Not only integration for the internal systems, but also for connecting external platforms, e.g. for direct communication with customers, suppliers and partners. Digital transformation does not stop at company boundaries.
IT Director: Going digital and digital transformation are very overworked terms. And the trend didn’t start yesterday.
Bergmann: Yes, but both terms are not synonymous. When I talk about going digital or digitalization, I mean first and foremost the replacement of analogue processes with digital ones; it is primarily a question of optimizing and increasing the efficiency of existing processes.
The term digital transformation, on the other hand, goes much further. It's about questioning your processes and maybe even your entire business model. The focus is on the question of how you can reorganize your company with the help of the opportunities presented by going digital. That might mean additional digital distribution channels, approaching customers in a more targeted way via digital channels or research and development with virtual reality.
When car companies today define themselves as service companies that deliver mobility, that represents a whole new way of thinking. With strategies like Car2Go, you might think that they would be torpedoing their own business model.
IT Director: Similar to Microsoft, where the cloud is replacing the traditional licensing business.
Bergmann: Exactly. You have to consider whether you want to embrace a new way of thinking or you want to stick with an old business model, which means taking the risk that competitors blaze new paths and gain market share. In my eyes, this new way of thinking is what digital transformation is. It does not always have to be radical, and it does not have to affect the entire company. Nevertheless, it is a good idea to ask yourself whether your own business model will still be able to be successful in five years time.
If in the future personal relationships with vendors may be even less important and sales are moved increasingly online, a digital option needs to be available. The younger generation now asks first if there is a digital alternative to doing things by hand. And if there is, they use the digital way. An example is photographing and sending of insurance invoices via app, which used to be done via the postal service. If a company does not offer this service, potential customers quickly move to a digitally oriented competitor. This creates completely new expectations, also with regard to new services in the business field - such as the much talked about predictive maintenance.
IT Director: Predictive maintenance is often mentioned as the entry point for IoT, for which usually only running time is monitored. Wouldn’t it be more effective to also know, for example, how many tonnes an elevator has transported?
Bergmann: Today's sensors can already measure many different parameters, such as vibrations. What counts are the relevant aspects: If the weight is relevant, you record that, too.
It's a question of constantly monitoring the actual wear and tear and the actual condition of the object. Maybe regular, manual maintenance, which is in principle retrospective, will eventually become obsolete. Of course, repairs still have to be done manually, but there would be no need for service technicians to prophylactically check once a year to see if the elevator is in order.
IT Director: In the context of IoT, it is particularly interesting to have information about aggregate states such as pressure, temperature and startup speed that let machines produce the best results. Couldn’t system vendors sell this data to users?
Bergmann: That's exactly what our data science team is doing. The goal is to find the right balance of cost, use of material and quality. The decisive factor is finding the optimal setting for the machines, which is why they are constantly monitoring themselves and automatically making readjustments if needed.
Max-Con Data Science has developed a product for the retail sector - not really our core industry - that determines the right time for price reductions. For example, you can monitor price movements of an item on the internet. To prevent someone from trying on a shoe in the store and then buying it online for ten percent less, the algorithm can then calculate at what price the customer would probably buy the shoe right away. There is a lot of leverage in that.
Many things are still in the testing phase, but the possibility of adapting to customers individually definitely offers new opportunities that we want to show to our clients. We want to do so through consulting on the one hand, and on the other with a broad product range and expertise in all areas.
Of course, we cannot start explaining a customer’s business model to them, and we do not want to. However, we do want to show them how to launch innovation processes - for example, design thinking. Thinking in a new way sounds easy, but throwing overboard a business model that has worked well for years is anything but easy. There are transitional and test phases. There are iterations. Ultimately, projects can fail.
IT Director: How do you communicate to your customers that in this approach some things can fail in the context of digital transformation?
Bergmann: We can present the new technologies. We can offer to orchestrate these technologies. And we can provide assistance on new issues. But the customer has to come to the recognition and have the will. For customers who do not think the new approaches are the right ones, we are continuing to run traditional ERP systems. But I believe that in the long term it will not be possible to escape the transformation happening in business and society. We are also going through digital transformation ourselves. It is by far our biggest internal project. But we do not want to miss the right moment for renewal.
From coach drivers to the steam locomotive to the textile industry, there are plenty of examples of far-reaching revolutions in industrial history. The digital disruption is just moving much faster. It is taking place much earlier in some sectors than in others.
In the industrial and manufacturing sectors, it probably will not take over first. However, data-driven businesses like insurance companies and banks should be thinking now about what they can do better than potential insurance providers from the digital world, like Amazon with access to the data of millions of consumers. Amazon could probably offer liability insurance for half the price because there are no commissions to be paid to insurance agents. Buyers would simply put the insurance in their shopping carts with their other purchases.
For Cosmo Consult it is not only about selling any old software to take care of our employees, but rather, given the situation that we have now, ensuring that our customers emerge as the winners of the digital revolution. If our customers miss the boat, no matter how well we have our house in order, we'll be stranded with them. If they are successful, we will be successful, too.
IT Director: In connection with digital transformation, people often talk about big data, but massive amounts of data alone are of little use.
Bergmann: That’s true. We take the data from the sensors and put it into our BI software - usually Power BI -, then run the appropriate algorithms on it, then we in turn pass the data on to the ERP system and generate recommendations for action.
IT Director: Based on the market position achieved, to what extent do users with other core ERP systems ask about Power BI and Azure to run IoT evaluations?
Bergmann: This happens often. Of course, there are various different BI systems, for example, we also have Qlik in our portfolio, which has big strengths. But Power BI is a very powerful visualization tool by comparison, and as a cloud platform Azure offers a enormous range of features: much of the intelligence is delivered via Azure.
Azure's growth is huge worldwide, also as a platform for integration. This last point is crucial for us in order to process the data in a common data model. I would not recommend an on-premise solution for data-intensive systems to any customer these days. Especially when you consider the fact that the volume of data will increase significantly in the coming years.
IT Director: As long as the basic prerequisites such as security and privacy are in order ...
Bergmann: On this issue, I think Microsoft is doing a lot. I also do not believe that you can run your IT in the company's own basement more securely than Microsoft can run it. If the intelligence agencies want to look at your data, you will hardly be able to stop them. If they can even spy on the Chancellor, they are also going to get at the data of medium-sized companies.
IT Director: That's a pretty fatalistic approach.
Bergmann: But that is the way it is. When you install an alarm system, every alarm system salesmen has to admit that real professionals will still be able to get into the house. Is that fatalistic or just realistic?
Some people also assume that every major company has been hacked, but only about 20 percent of them know about it. It has been proven that intruders have remained undetected n some corporate networks for more than 20 years. With that in mind, I believe the cloud is safer than any of the alternatives.
IT Director: What other factors are in play when you say that there is no alternative to the cloud?
Bergmann: Nowadays, simplicity is usually the most important factor when it comes to setting up new technologies. In the cloud, you can quickly set up and reconfigure systems at any time, and you can add components and then switch them off. The lengthy ordering process is eliminated, and you do not have to worry about reliability. IT is increasingly something that is just available like the electricity that comes out of the outlet in the wall.
When all companies have moved into the cloud at some point in the future, this market might have to be regulated in a similar way to the electricity market, because it is a question of security of supply and systemic importance. Because if parts of the cloud were to fail, the production of the entire economy would be crippled.
IT Director: The original, exclusively online version of Dynamics 365 was also made available as an on-premise solution as the result of the intervention of Microsoft’s German partners. Is that just an interlude? Or are ERP systems also being moved to the cloud?
Bergmann: Yes, from my point of view it is, although the hybrid variants in the ERP area will prevail in the end. Many of our manufacturing customers are not located at major Internet hubs, so policymakers need to make sure that the infrastructure is improved. If one hundred percent reliability were a given, you would not even need hybrid infrastructures.
Anyone who wants to be part of the digital transformation will eventually automatically end up in the cloud. It may still be possible to postpone that now, but in five years that will not be an issue. Intelligence will be kept in the cloud, not locally. Companies will enjoy great advantages from being in the cloud, as will those who run their ERP system there
IT Director: When did you become convinced of this?
Bergmann: It hasn’t been that long. One year ago we were in intensive discussions with Microsoft about whether the chosen path was the right one, but today we get virtually no requests for local installations. Customers are now ready to go into the cloud, or maybe they are even already operating various systems in the cloud. Of course, there are security concerns, but the reality is that they also send designs via unencrypted e-mails. If you send an email from an iPhone to an Android device, all the data is saved in the Apple cloud and the Google cloud. So you're in the cloud anyway. The cloud is simply a part of reality.
IT Director: You just addressed the role of policymakers. Is the IT industry in contact with legislators about such transformative issues?
Bergmann: Definitely. Policymakers urgently need to move faster, because the pace of innovation has accelerated greatly. Legislative procedures that are just five or six years old are completely out of date. Policymakers must maintain their ability to act and create structures that allow them to react adequately to such dynamic developments.
It should not be just the tech giants who establish the rules. That should be in the hands of society as a whole. Although I am not a fan of regulation, humanism and ethics are important factors. Today, we are dealing with global upheavals. Digital revolution is never just local. You therefore can’t get anywhere if you think small. We should at least find European rules that uphold the interests of all parties.
Read complete interview here (German only): www.it-zoom.de/it-director/e/digitalisierung-fordert-neues-denken-19105/