Report highlights need for robust digital core in AI era

A recent report by Accenture, 'Reinventing with a Digital Core', has highlighted the imperative need for organisations to build a robust digital foundation to harness emerging technologies such as generative AI.

The study concludes that companies which possess an advanced digital core, coupled with strategic innovation investments and a balanced management of technical debt, have recorded a 60% higher revenue growth rate and 40% higher profits.

The pace of technological change necessitates continuous reinvention as a fundamental strategy for businesses.

Matt Coates, Technology Lead at Accenture ANZ, said: "Continuous reinvention is now the default strategy because of the pace of change. Organisations are trying to figure out how technology impacts their business operations, especially amid new advancements like generative AI."

"Capturing value from disruptive technologies with an industry-leading digital core is more than a critical success factor, it's a survival factor. A strong digital core is essential to be ready for reinvention and rapidly seize every new opportunity."

The report is based on data derived from 1,500 technology executives across 19 industries in 10 countries. Accenture's analysis points out that an advanced digital core, characterised by a cloud-first infrastructure, data and AI integration, next-generation experiences, optimised operations, and comprehensive security, is crucial for sustained business transformation and growth.

One of the key factors contributing to the management of technical debt, which encompasses the costs and efforts associated with maintaining IT systems up-to-date, is the role of AI. The study shows that 41% of executives identified AI as one of the top three contributors to technical debt, primarily due to the prioritisation of speed over long-term maintainability. However, AI also holds potential in mitigating this technical debt by facilitating new ways of system design.

The research outlines three primary tenets that businesses need to adopt concurrently to achieve a reinvention-ready digital core. The first tenet involves building an advanced digital core tailored to specific industry needs. The findings suggest that improving one capability, such as data handling, can lead to automatic enhancements in other areas, creating a cycle of continuous improvement.

The second tenet is the strategic investment in innovation. Companies are encouraged to increase their IT budget for innovation by at least 6% annually. This funding should prioritise redesigning business processes, launching new products and entering new markets.

"The more immediate focus should be to re-engineer systems for machine (AI) operations," Coates added.

The third tenet addresses the balance between managing technical debt and future investments. Accenture recommends that about 15% of IT budgets should be allocated for technical debt remediation. This balance ensures that inefficiencies are reduced without hampering future growth investments. Programmatic and autonomous methods, such as version control systems, can provide a flexible and integrated approach to maintaining evergreen IT capabilities.

The report suggests that companies proficient in these three areas are better positioned to identify and mitigate risks across multiple technologies. They are also equipped to enable non-IT employees to create customised solutions using low-code/no-code tools.

Accenture's comprehensive data analysis indicates that an industry-leading digital core can significantly enhance a company's ability to adapt and thrive amid technological disruptions. The findings stress the importance of strategic innovation and effective technical debt management in achieving sustainable growth and profitability.