Today more than ever companies need to reduce cycle time, leverage technology innovation, and become more nimble in respond to customer needs. The pace of change continues to accelerate. As successful companies mature they need to ask themselves whether extending their past strategies and activities are always going to secure sustained market share going forward. The answer isn’t always a resounding “yes.” To respond to this opportunity many companies have refocused towards their core competencies and increased reliance on external partners / vendors for:
Software applications maintenance management and development
IT infrastructure management
Professional services, telecommunications, and network services
Business process management
To increase efficiency and decrease costs, business process outsourcing (BPO) as well as IT applications and infrastructure outsourcing continue to grow. To ensure that outsourcing efforts support the organization both today and in the future, executives need to not only maintain favorable relationships, but also update and enhance partnerships with outsourcing vendors over time.
The problem this poses for many business leaders is that although vendors constantly refresh their product offerings as they acquire or sell off product lines, it is a common practice for vendors to have multiple account managers who sell products and services to individual business units with independent pricing, terms and conditions. A business’ lack of centralized visibility to total vendor spend further inhibits the opportunity to discuss innovation with vendors.
As a response to this issue, leading organizations establish a Vendor Management Organization (VMO) in order to drive value and reduce risk. VMOs coordinate outsourcing deals through their respective lifecycles to ensure that business terms, legal terms, information security and risk compliance requirements, vendor performance measures, and optimized pricing are maintained.
VMO personnel become trusted advisors and partners with both IT and Business leaders to develop Vendor Strategies aligned with organizational objectives. VMOs monitor vendor performance, lead dispute resolution, and follow up on remediation plans.
VMOs help leverage corporate buying power and reduce the risk associated with individuals signing contracts without proper due diligence. But most importantly, VMOs ensure innovation is delivered into the ongoing relationship with the vendor.
The closer the VMO works with the IT and Business organizations the greater their ability to drive value. Driving economic value, reducing business risk and increasing communications across multiple business units are some of the reasons why Vendor Management Organizations are being deployed today.
Enterprise architecture (EA) refers to the activity of designing IT strategy, systems, processes, and organizations to directly align to business unit strategy and goals in response to disruptive forces. EA delivers value by allowing business and IT leaders to have a recipe for adjusting policies and projects to achieve business outcomes in response to disruptions.
As a CIO how can you use Enterprise Architecture to transform the way that your business runs? You need to examine your approach to EA. Here are six questions you should ask to help you do that:
Does your EA team focus on standards and the enforcement of standards? If so, loosen the standards and create frameworks instead. The framework components should be coupled to elements of the business strategic plan and roadmap. Key questions that the EA team should be asking about the EA components:
Does it support the potential for new markets?
Does it support the displacement or elimination of competition?
Will it move customer’s business into new markets?
Will it reduce the cost of on-going operations (keeping the lights on)?
Does it support the growth within existing markets?
Is your EA team comprised of mostly IT people? It’s essential to get out of the “ivory tower” and make sure there are at least equal number of business representatives on the EA team as there are IT representatives.
Does your EA governance and decision making focus on standards and the adoption of standards? If so, enable governance in a way that promotes innovation and driving the business instead of critiquing the solution against the standards.
Do you measure success and the performance of the EA team by how they manage standards and adherence to standards? If so, change the way you measure success. Measure performance in terms of how closely EA supports the strategic business outcomes (such as improved customer support, better product quality, less defects, growth in market share, etc.) and how well EA delivers on improving business technology (i.e. cheaper, better, faster).
Is your EA team focused on tools that don’t add value and support the points above? If so, be willing to give up the tools in place today and either get new tools or start over. Be sure to understand the business requirements before focusing on a tool or set of tools.
Do your teams believe that implementation equates to done? If so, change the belief that implementation means completion. It’s a journey not a destination.
Whatever you do and how you approach EA it is important to ensure EA reflects the ambitions of the business and accepts being driven by the stakeholders. Without buy in and active participation from the business, EA may as well stay locked up in the “ivory tower” with its tools and adherence to standards. If you choose to ignore Enterprise Architecture and its power to transform you will miss the opportunity to make a positive mark on the company’s performance.
An effective shared services operation is customer-focused. To keep that focus when building or rebuilding a shared services operation try following these seven steps:
Identify the customer community – Classify customers by respective roles across the entire organization, not just the business units that the shared services directly supports
Assess requirements and expectations – Ask the customer community for specificity around their business needs and confirm their service expectations
Implement analysis measures – Analyze the stakeholder community, by role, and utilize input to establish and maintain metrics to help evaluate effectiveness
Align service functions – Set operational standards for the alignment of shared service functions to the customer business functions and leverage synergies
Measure and Improve – Plan and measure customer satisfaction of the shared services, not just through standard SLAs, but also through outcomes (productivity improvements) and customer satisfaction surveys
Create line of sight – Define, measure and report service levels on a global, regional and market level basis. This promotes customers visibility into the value brought by shared services
Incent behavior – Empower and motivate shared services employees to provide world-class customer service
These are the basics of a customer focused shared service organization, but ultimately in order to advance the organization further, there has to be a cultural evolution to adopt a problem solving mentality, that is aligned with the business needs they support.
When embarking on a shared services strategy and assessment initiative, organizations should consider a range of topics to ensure they reduce risk, quantify cost savings opportunities, safeguard current initiatives, design effective solutions and incorporate best practices. In order to help guide your shared service initiative consider the following points:
Take the time to complete a proper fact-based analysis and business case then use this to aid in decision-making and consensus.
Align the shared services strategy to support growth not just cost reduction and optimization.
Align the shared services strategy with your company’s goals and objectives.
Identify and leverage new delivery models and technology such as cloud and as-a-service.
Do not look at shared services in a silo but consider all the options for an integrated delivery model inclusive of shared services, outsourcing and offshoring.
Design and implement a strong governance framework.
Plan initiatives to achieve on-going process optimization and standardization from the start.
Ensure the strategy and implementation align with ongoing company initiatives (e.g., major ERP implementation.)
Design and manage a focused risk management program to help you stay on track.
Build a customer-focused shared services and customer service mentality.
Incorporate effective internal communications and change management programs.
Consider your company culture when designing solutions and the implementation strategy.
Understand how to leverage the benefits of sourcing and next generation outsourcing.
When these considerations are addressed your shared services strategy will help to reduce costs, improve service, flexibility and agility and allow for process innovation. Shared Services, when properly implemented, helps the business focus more on delivering against strategic goals and objectives and less on managing non-core support services and technology.