Driving efficiencies and reducing costs through increasing standardization across the enterprise
The importance of strategic transformation
To begin taking advantage of the many benefits of shared services, companies must understand the challenges associated with transformation. It is important to validate that the strategy will provide business value and not introduce additional complexity. This requires a thorough understanding of the organization’s needs and the systems and processes necessary to implement them. There is no one-size-fits-all approach to shared services. By investing the necessary time upfront in developing an effective fact-based analysis, strategy and deployment plan, companies can avoid problems and ensure their transformation delivers the greatest possible business value.
Why choose a shared service model?
High decentralization and redundancies of operations within an organization can result in higher complexity, inefficiencies and the resultant higher cost and
disengaged employees. From higher levels of standardization to lower costs, most large companies can benefit from a more consolidated approach to business support. To understand why, it is important
to understand the challenges associated with decentralization and how these challenges continue to grow with the company.
What is a shared service center?
A shared service center (SSC) is an internal organization that offers services to business units within the company. Much like an external support business, it will often
offer its services with contractual agreements that enumerate the cost, timeline, and quality metrics of the service. This allows companies to focus on their core business while improving costs, operational strategies while taking advantages of labor arbitrage, outsourcing and
delivering best in class support tools.
Challenges of not using a shared service model
LOW LEVELS OF STANDARDIZATION
Standardization has often been cited as an enabler of continuous improvement. One of the greatest challenges associated with decentralized and dispersed services is low standardization across the enterprise. This can result in compliance issues, technical compatibility problems, ineffective IT spend and process inefficiencies not being adequately addressed.
The most obvious problem with low standardization is compliance. Large enterprises that must adhere to strict regulations often struggle to ensure that all business units are performing their duties according to internal
or external rules. By rolling these services into one shared service center (SSC), company leaders can better oversee these processes, reducing the potential for risk.
LOW LEVELS OF AUTOMATION
Decentralized and bespoke (non-standard) supporting technology inhibits companies from effectively taking advantage of automation enterprise-wide. Automation and cognitive computing are rapidly changing the way companies do business. By multiplying the productivity of workers, they allow companies to significantly reduce costs and increase efficiency, while giving employees
the freedom to focus on tasks that make full use of their abilities.
MEASURING OPERATIONAL PERFORMANCE
While organization measure and report back on business performance the effectiveness of operational functions are often only spoke of when things go wrong. When services are undocumented and different processes and tools used across
the organization a comparable benchmark is difficult to establish and the measures within the support functions are often limited. An SSC
eliminates these problems and offers a significantly more transparent way of delivering services to business units.
LACK OF ACCOUNTABILITY
In a shared service model, it is always clear where the problem lies when there is a mistake. Under more traditional, decentralized models, this is not always the case. When there is no formal, singular SSC for a service,
no one is fully responsible. This creates disincentive within the organization
to perform duties effectively.
Processes are generally well documented in shared service centers to provide both an effective handover tool and give clear guidance of what employees should be doing and when. Tasks that are not well documented often lead to confusion about how and when objectives should be accomplished.
Supporting dozens of dispersed back-office service delivery efforts is simply more costly and less efficient than operating an SSC. Companies with an SSC can better control their support units, deliver better service, and allow business units to focus
on their core goals. This ultimately drives higher profits and reduces inefficiency within the company.
Implementing a shared service strategy
Given the significant benefits of shared services, it may seem surprising
that many companies haven’t fully embraced the strategy. One of the primary reasons for this is the difficulty and perceived risks of
implementation. Creating an effective shared services strategy requires
a deep understanding of company needs and capabilities and the realities of the market. Without careful planning and the right guidance, many enterprises will be unable
to develop a strategy that allows them to transition while minimizing risk and maximizing efficiency.
Strategy and assessment
Implementing an effective shared service strategy starts with a solid foundation. This means working with leaders and end-users across the company to determine current service levels, needs, and goals for the future.
BUILD A TEAM
No successful transition will occur without a well-defined team made up of key stakeholders and technical experts from across the company.
The team should be structured, with a project manager and clear delegation of duties. It is also important to ensure that company leadership is fully onboard with the team’s goals and is available to provide guidance to the effort.
SITUATION ASSESSMENT AND OBJECTIVES ALIGNED
The first step in creating a shared services strategy is to complete an assessment of the company’s state of affairs. Once a situation assessment is complete the Functional senior leadership should review and align
on the objectives of establishing share services. While cost reduction may
be a primary driver other objective such as improving internal control, enhancing employee engagement (through better tools and processes) and building a talent pipeline should also be considered.
Areas to assess include:
Current support landscape including shared service centers, business unit support and third party service providers
Current technology – both ERP and supporting tools
Level of standardization of processes
The degree to which processes have been documented
Local statutory and language requirements
Degree of resistance of management or key stakeholders
Current pain points and opportunities
DEVELOP HIGH- LEVEL STRATEGY
Initially developing a high level end state that outlines what shared services can do for the company and what high-level steps need to be taken will help socialize the concept with senior executives. This should include a business strategy supported by baseline data along with a conceptual delivery design
and cost estimate. This accomplishes two things. First, it helps the company better formulate its ideas and forms a foundation for more concrete planning. Second, it is an elevator pitch to help build consensus for the transition across the organization.
DEFINE THE BUSINESS CASE
A business case is critical to gaining the support of business leaders and tracking the success of the initiative. It will help to outline the opportunities in the existing model and articulate the productivity improvements
that shared services can bring.
Design and build
After high-level strategic planning has been accomplished and a consensus about the general strategy to pursue has been reached, it is important
to begin developing more detailed plans for design and implementation. This means an articulation of what steps are necessary to get from the current state to a developed state.
This will include creating a strategy to re-engineer or develop standard processes, inentify the technology required to effectively run shared services, determining which locations will be responsible for what services,
allocating resources, and deciding how to deal with impacts on employees.
The documentation of standard best practice processes upfront help to clearly articulate:
The new organizational roles and points of handoff (through the swim lanes),
Highlight those required,
Required technology tools, and
Metrics to monitor and measure operations.
With existing services dispersed across multiple sites, companies should evaluate each site and potential greenfield sites for available talent, labor costs, legal and tax laws, technical infrastructure, risk factors,
language capabilities and other factors pertinent to the strategy. Following
this assessment a single or multi site location recommendation should be incorporated into the strategy.
A shared services human-resourcing strategy help determine the make up of the SSC’s human resources. The strategy should include which activities will be:
Owned by employees
Handled by Contractors:
Those requiring specialized skills at specific times
Seasonal and need resources to work flexible hours
Certain shared services jobs could be thought of as an opportunity to nurture high potential talent. These positions allow employees to gain a more detailed understanding of functional operations and line management and other skills that may not be developed effectively in the business unit.
The role of consultants to provide additional insights, thought leadership, new methodologies and to challenge the status quo could also be included in the resourcing strategy.
It is important to remember that not all jobs will be preserved in an effective shared services strategy.
Automation will begin to play an increasingly important role in
shared services. Roles earmarked for automation could be staffed by temporary employees. Further
redundancies and inefficiencies must be eliminated to guarantee success.
Technology is a critical component of implementing a shared services strategy. Effective IT solutions
help service centers deliver their support to business units more effectively and improve efficiency. When designing and documenting the processes, the transition team must include technologies required. This is useful as a supporting document for IT funding requests.
Although shared services may reduce risk in the organization overall, any change of this nature presents new risks the company must address. A detailed risk assessment and risk mitigation action plan is an important part of the SSC strategy. Risks may include (though are not limited to) the loss of data or a reduction in service availability, systems reliability and key staff losses. An ongoing
risk assessment processes should be implemented that control these risks during the life cycle of a SSC.
Good governance is a critical component of any shared services strategy, regardless of what sourcing strategy is used. Companies must have clear understanding of how shared service units will communicate with internal customers (business units
and corporate) and how they will communicate with and manage the performance of external supporting service providers. This clarifies roles and maintains alignment of strategies and goals across the enterprise.
At WGroup, we recommend a three-tier governance model:
1. Operational governance
For day to day operations, service centers should meet for weekly
or monthly reviews. These cover operational concerns, allows for solving of problems and implementing continuous improvement plans
with a granular understanding of the activities and impact at both the SSC and business unit.
2. Tactical governance
Meeting initially monthly and quarterly in the steady state, this level of governance reviews the performance of the operations and enables the continuous improvement activities and risk mitigation plans.
The team comprises leaders from the SSC, external service providers and business units.
3. Strategic governance
This team explores new trends and innovations and develops
forward-thinking strategies to drive future efficiencies. To maximize the effectiveness organizations should strive to leverage existing executive decision making processes to incorporate SSC strategy into the overall corporate business strategy.
Accounting for SSC costs is an important consideration. Many enterprises run their shared service centers as stand alone businesses that charge for the services they provide to business units. This allows costs to be spread across the business units based on a predetermined basis
that ideally reflects a proportional use of the service. Others have elected to manage the costs centrally thereby preventing individual business unit tradeoff being forced on the service centers or having
the service center negotiate annual budgets with multiple parties.
Implement and roll-in
After detailed plans and preparations have been made, it is time to begin implementation. If the past steps
have been done right, this should be relatively straightforward. However, it is still important to be mindful of potential risks and address problems that were missed in planning stages.
POPULATE DELIVERY CENTERS
Companies must begin doing the work of making new hires or transferring internally to populate the SSCs
with the necessary workforce.
The reorganization and training of staff should be completed prior to the transition to avoid any service interruptions. This process will be heavily influenced by whether the company is using an outsourcing or insourcing model. In most cases, service centers will be run with a hybrid of the two.
LAUNCH NEW PROCESSES
Once service centers have been populated, the company can begin rolling out new processes. These might include new services or improved functionality.
IMPLEMENT METRIC TRACKING
Improved metric tracking is one of the major benefits of implementing a shared services model. At this stage, companies can begin rolling out the systems that will track performance of
the service centers, allowing them to be run more efficiently and ensuring that they are delivering on business goals.
TRANSITION TO RUN MODE
Once the shared service centers are fully staffed and operational, companies can begin transitioning to run mode. At this stage, the transition team can take redundant services offline, closely monitoring for any problems and being
ready to address them rapidly.
The shared services plan shouldn’t end with implementation. It is critical that the company constantly work to improve, consolidate, and streamline services delivered to business units. This requires an ongoing monitoring of metrics and a willingness to rethink original processes and
tools. Two techniques for continual improvement can be useful here.
The lean strategy is one of maximizing customer value while minimizing waste. This is highly suitable to shared services and empowers all parties
to improve processes every day.
SIX SIGMA STRATEGY
This strategy strives to use data to eliminate defects. Companies use metrics to identify obstacles and identify potential solutions. This allows leaders to define problems, measure results, analyze data, design new solutions, and verify that those solutions are effective. This gives the company the tools to constantly be building shared service strategies that are more effective than previous iterations.
Shared services are becoming a competitive necessity for larger companies. As a corporation grows and establishes many locations across several regions, the potential for redundant and inefficient support services grows. This leads to waste, compliance risks, and an inability
to adopt new technologies. Rival companies with the ability to innovate more freely and reduce cost may gain a competitive advantage.
Implementing shared services requires close alignment with stakeholders across the company to ensure that new service centers are implemented and run as efficiently as possible.
For many enterprises, gaining additional insight and experience from outside consultants who have successfully implemented shared services has paid dividends.
WGroup: IAOP’s 2017 World’s Best Outsourcing Advisor
WGroup has been working since 2004 to deliver effective technology management consulting to firms all over the world. Our data driven business first approach to outsourcing has allowed companies to reduce costs, increase productivity and maximize profitability. Our team’s extensive experience working in IT, business process management, and outsourcing allows us to offer a comprehensive view of the outsourcing landscape and provide our clients with the tools they need to succeed. This has fostered continued success in our organization as we have more than doubled in size in the past two years. Now, IAOP is recognizing WGroup’s commitment to better outsourcing by naming us the 2017 World’s Best Outsourcing Advisor.
Endorsed by clients worldwide
Many of WGroup’s top clients endorsed the firm in support of our nomination. They each shared their unique perspective and experiences of WGroup as an organization that has an unwavering commitment to help clients accelerate IT transformation and maximize business value from sourcing initiatives. For these achievements, IAOP gave us a star recognition in Customer References, meaning we achieved a 5-Star rating or higher in that category.
A commitment to excellence
WGroup prides itself on its team of highly skilled industry professionals with hands-on technical and management experience. That’s why we’ve earned several rigorous certifications, such as Six Sigma Black Belt, Certified Information Systems Security Professional (CISSP), and Project Management Professional (PMP). IAOP also recognized this achievement by awarding us the highest possible score in the “Certifications” category.
At WGroup, we have a longstanding commitment to providing insights and advice that allow our clients to capitalize on emerging trends and stay ahead of the competition. We believe that IT is moving faster than ever, and executives that don’t act quickly to understand and implement new technologies, strategies and solutions will get left behind. WGroup has an institutionalized program to ensure our consultants are up to date on new technologies and evolving service provider competencies. As a firm that guides clients toward industry-leading IT outsourcing solutions, it’s essential we are current on all capabilities. That’s why IAOP also awarded WGroup a star recognition for innovation, giving us a perfect score of 8 in that category.
Client exchange program
WGroup’s mission is to ensure that our clients are aware of industry best practices that align sourcing and business outcomes. We believe that new technologies like automation and analytics that measure service performance in business outcomes terms will be critical to future success. When developing best practices and guidelines, we find that the most effective way to share our knowledge is by facilitating conversations among clients with similar challenges, regardless of industry. The focus of these sessions is to share information on new innovations and sourcing operating models. These sessions provide insight, and foster relationships between IT and sourcing professionals that continue beyond our engagement.
Innovation center of excellence
WGroup has a dedicated innovation service where we teach clients how to innovate and grow on their own. We spend our time enabling teams to function as a strategic advisor inside of their company, just as we are an advisor to our clients. We believe innovation is a structured process, complete with metrics for measuring the function’s contribution to business performance. WGroup sets up “Innovation Centers of Excellence” (iCoEs) within IT and sourcing organizations, allowing companies to continue to be successful, even after we leave.
At WGroup, we’re honored to have received such a prestigious recognition from IAOP. We will continue to work hard and innovate to ensure our clients are equipped with the best knowledge and tools to succeed as technologies, processes, economies and trends change in the coming years.
Achieving Evergreen Innovation with Managed Services Providers
Mark Twain said, “to stand still is to fall behind,” and that witticism is more accurate than ever. In today’s ultra-competitive environment, no business can afford stagnation – especially in IT. Technology is the backbone of the digital business and the digital business demands continuous improvement and innovation. If you rely on managed services providers (MSPs) to deliver IT services, then they share this challenge with you. Yet, all too often these providers are not pulling their weight. We hear from IT leaders all the time, comments such as:
I get no innovation from my “strategic” suppliers
When I outsource I don’t get as much innovation as I would if I kept services in-house
Unless you hold a supplier’s feet to the fire, you’ll never get innovation!
Innovation and continuous improvement is a process that requires careful planning and active management. In the case of driving continuous improvement via an MSP, there is a formula WGroup leverages when supporting clients in building sustainable, high-value partnership. There are seven vital elements to this formula.
Competition creates efficiency. Splitting your work requirements among several suppliers, by tower, creates a healthy competition within your supplier community. Competition drives behavior that will drive down costsand create constant pressure to deliver higher quality services.
In a multi-supplier model, you’ll need to incorporate two critical elements to create a cooperative, while still competitive, environment. First, you’ll need to establish shared KPIs (key performance indicators) when suppliers are jointly responsible for delivering business outcomes-based results. Second, it’s beneficial to set performance thresholds and predefined bundles of work that can be shifted from supplier to supplier based on predefined, agreed, and transparent performance achievements (or lack thereof).
Continuous improvements do not need to be revolutionary. Evolutionary gains are acceptable and often preferred. Evolution KPIs – such as the reduction in application code complexity, the percentage of automation, or the elimination of legacy technology – create a model for measuring gains. In addition, value can be derived by measuring progress against a defined future blueprint architecture, or capturing the quantity and impact of ideas from vendors via an innovation program.
Innovation is the early funnel of ideas that feed continuous improvement, and your supplier should be submitting ideas and recommendations just like your employees. It’s difficult to expect innovation from suppliers if your business does not have an innovation culture or an innovation process to capture and act on ideas. An innovation program should include participation of employees and vendors. The program should capture new ideas, objectively vet them, and have authority to act.
In fostering an innovation environment, sharing the benefits from new ideas is a vital incentive. As part of contract development, establish a model to share gains from ideas that deliver results, either cost savings or revenue improvements. Gain-share agreements incentivize continuous new thinking.
Stagnation yields complacency. Setting shorter-term contracts with vendors as well as negotiating no fees for termination keeps your vendors in a state of repeatedly earning your business. Don’t include auto-renewals in contracts and take the services to market every few years to get a new perspective.
World-Class Vendor Management
All of this requires that you take responsibility to drive suppliers to deliver greater value. This is the principal function of a world-class vendor management office (VMO). The old thinking that vendor management is solely about contract management has passed. Vendor management today is about driving improvements and innovation. It’s about value management. This process requires that you tier your vendors by value. For those that are strategic, you treat them as true partners and provide full transparency to priorities and strategies. In return, suppliers continuously share their roadmaps and their ideas, and they are included in your planning processes. A world-class VMO is the linchpin of supplier value, and, in our view, it’s the most strategic competency in the technology group.
Utilizing outside managed service partners is smart business. Unfortunately, unlike pitchman Ron Popeil’s Showtime Rotisserie, you can’t simply “set it and forget it.” Transforming your supplier relationships from static services to active value-add requires the right levers, the right contract, the right processes, and the right management to succeed. Don’t settle for stale services (or a stale sourcing advisor).
Four New Sourcing Strategies: Overcoming Regulatory Limitations
As the costs of foreign labor and political pressure against offshoring increase, many companies are seeing declining benefits to labor arbitrage. New regulatory pressures are also making it more difficult to hire foreign workers to work locally. H1-B visa expediting is being halted and it is likely that there will be a lowering of the cap on total H1-B visas issued. These two factors are leading to a rapid increase in competition with many companies looking for new opportunities to control costs and deliver better products and services to their customers.
In order to be successful in this new regulatory environment, companies must look to strategies that allow them to source the labor and services they need while controlling costs and increasing productivity.
1. Increase flexibility
Old sourcing models often lock companies into long commitments that aren’t adaptable to changing environments. An uncertain future for sourcing means that these commitments are no longer feasible. Avoid agreeing to price increase clauses that allow outsourcers to raise the price for service rendered in the event that their costs increase. Contracts should also allow companies to shift the work delivery location and terminate services if the deal becomes uneconomical.
2. Invest in recruiting
Local recruiting will become increasingly important as regulatory pressure grows. There is a coming war for talent, and companies that haven’t invested the necessary time and resources into developing a comprehensive talent acquisition system will be left behind. Forming relationships with US based staffing firms and developing strong recruitment programs is a critical component of future success.
3. Diversify vendor mix
Sourcing models that exclusively leverage offshore labor have an elevated risk profile. In many cases, it makes sense to use a mix of onshore and offshore labor to attain the optimal level of risk vs. profit. In many cases, it may be possible to leverage multi-shore service providers that allow companies to take advantage of multiple locales through a single vendor.
4. Emphasize automation
As the value of labor arbitrage declines there is increased opportunity to reduce the need for offshore labor by increasing the productivity of the existing workplace through automation. Repetitive, highly standardized tasks with high turnover make ideal targets for automation. Although some automation technologies have the potential to replace human workers, their greatest power is their ability to optimize and accelerate functionality. Virtual assistants, predictive analytics, language translation, data entry and dynamic upsell recommendations are all areas where automation solutions excel. In many cases these solutions surpass the capabilities of human workers, allowing for increased productivity while reducing costs.
Will automation be taxed?
Many experts are speculating that as automation increasingly replaces a human workforce, governments will begin taxing these automation systems to make up for losses in revenue from income tax. Although this is certainly possible, and perhaps even likely on a long enough timescale, it is not something that companies should overly concern themselves with right now. By the time an automation tax is put in place, it is likely that technology will have progressed to the point that gains in efficiency will far outweigh any tax that could reasonably be placed on the technology. Regardless of what future policy holds, investing in automation today is almost certainly a sound strategy.
Labor arbitrage can no longer be relied on as a viable business model. With increased regulatory pressure and rising wages abroad, offshoring work is becoming increasingly risky. In order to survive, companies must make increasing use of onshore labor augmented by automation. By implementing these strategies, companies can continue to enjoy the cost and productivity benefits of outsourcing while still maintaining low costs.
See the related slide deck, as presented at the Philadelphia IAOP meeting, by clicking here or visiting https://www.slideshare.net/ThinkWGroup/strategies-to-address-regulation-in-sourcing.
IT can always use more money to build better systems, increase reliability, improve speed and deliver new features. However, many companies see IT as a major cost center and many IT leaders don’t do enough to prove the business value of their work. This creates a dynamic in which getting approval for the IT budget becomes extremely challenging. Some CFOs will balk at any increase in budget and look for every way to cut costs, even at the expense of system reliability and performance. This is a dysfunctional way of operating and IT leaders must do more to ensure that the relationship between business and IT is strong.
Build a better relationship
IT leaders shouldn’t only go to the CFO when they want something. Instead, they should be constantly working with other business executives to develop strategies that use IT to drive business goals, improve efficiency and meet the demands of end users. When the CFO has an active working relationship with IT, they will better understand why they are asking for resources and be more likely to grant the request. The CFO will also likely have insight into how to improve efficiency within the IT organization and optimize the resources given to them. The most effective relationships should be mutually beneficial.
Make the business case
No CFO will grant a budget increase unless they can see a clear business case for doing so. It is the IT leader’s job to gather data and develop arguments that convince the CFO in terms they can understand. This means that IT should be collecting data on performance and reliability, user satisfaction, costs and revenue and other key business points. This helps show why getting money for transformation and improving performance is critical to driving business goals. Every request should be framed not just in terms of the technical outcome, but in terms of the outcomes for the business and end users.
Stress the importance of innovation
Not every CFO understands that IT is the driver of innovation and competitive advantage in the modern enterprise. That’s why it’s critical that the CIO show them how innovation and transformation can dramatically change the way a company does business. Technologies can allow companies to offer new products, capture new markets and lower costs. In many cases, this can mean the difference between a company surviving or being overtaken by a more nimble competitor. IT leaders need to make sure that the CFO understands that not investing in IT is incredibly risky and will likely cost the company many times more in lost revenue.
IT leaders must understand that they are an integral component of the business and all of their activities should be directed towards driving business goals. If they approach budgeting with this mindset, they will be in a much better position to negotiate with the CFO and prove to them that their requests are reasonable and necessary. By developing strong working relationships with business leaders and framing their requests in terms of how they help the business, IT can get the resources it needs to improve service and innovate. This direct approach enables IT to react swiftly when the budget is approved so they can begin to implement changes with speed throughout the enterprise. In the end, IT’s transformational initiatives benefit the entire organization’s bottom line by enabling the company to stay at the forefront of technological innovation in its respective industry.
For an in-depth exploration of the changing dynamics between IT, the CFO, and all of the business leaders, download IT’s Role in the Survival of the Enterprise by clicking here.
Digital Twins: What they are and why every IT leader should know about them
As IoT, digital modeling and data analytics become increasingly powerful, more companies are using digital twin technology to improve the efficiency, reliability and functionality of processes and systems. The technology is becoming one of the most popular new trends of 2017, named one of Gartner’s top 10 strategic technologies of the new year. Used for prediction, quality analysis, design and maintenance, these solutions have had a major impact on the way companies do business. The solutions are so effective, even organizations like NASA are using it to design, build and test mission critical equipment for spaceflight. By allowing them to work on expensive equipment in a digital environment, digital twins help to cut costs and improve reliability and safety. But what are digital twins and how can you use them to make the business more effective?
What is a digital twin?
A digital twin is a digital representation of a physical process, system or service. The term was coined by GE to describe a new line of products, however the category has grown to include a wide range of digital blueprint technologies. By using IoT sensors, physics data and advanced modeling, it is possible to analyze a physical object digitally, predict potential problems, find ways to improve efficiency, and test how it will respond to changing real world conditions. They represent the next evolution in modeling, allowing technicians, process managers, and other skilled professionals to work on systems, even when they aren’t physically present.
How can I use them to drive business goals?
Digital twin technology represents a major leap from traditional monitoring, modeling and analytics capabilities. The ability to fully model a physical thing digitally can have many implications for the real world, allowing organizations to design better solutions, operate more efficiently and work collaboratively.
Improved collaboration – In the past, each group would have its own data set and lack the ability to coordinate on problems effectively. With digital twins, people all across the organization can have the same access to a realistic digital model at every stage of the product life cycle. This allows companies to harness the full power of their resources to solve problems and create innovative solutions.
Improve system reliability – With unprecedented access to system conditions and
predictive modelling, technicians can identify problems before they occur. This makes systems and processes more reliable than ever.
Foster innovation – Digital twins allow product and systems designer to explore various scenarios, tweak variables and test conditions with the click of a button. This allows for unprecedented innovation and the ability to test new ideas while lowering product development costs.
More data is more insight – Digital twins allow companies to fully exploit the data they collect from IoT sensors. Every new minute of operational data will provide greater insight into the model and allow users to more effectively design, test and monitor physical assets in digital space.
Digital twins represent a revolution in system and process monitoring, design and collaborative work. With the technology’s ability to allow users across the organization to accurately model the inner workings of physical things, it is possible to dramatically reduce costs and create new, better solutions in areas that before were impossible. This is one of the most significant implications of the IoT revolution and will likely continue to grow in importance in the coming years.
Better Business Relationship Management –
Reconfiguring a Multi-Billion Dollar Pharmaceutical Company’s BRM Function to Drive Business Value
WGroup was recently contracted to help a major pharmaceutical company re-engineer its business relationship management (BRM) function. The role was originally designed to be strategic in nature, where the BRMs and the business would collaborate to use technology to generate revenue, but instead the BRMs were reduced to a role of order takers for IT. As a result, the business did not see any real value created by the BRMs, and did not view them as technology leaders or peers.
Through our engagement, the client reorganized the group from a 30 person BRM team to a 10 person team of BRM professionals with much more experience. The new team was able to gain the trust of business leaders to deliver on their strategic needs, and were actually viewed as peers of the business unit presidents. This, coupled with a better governance approach created a BRM unit that was better aligned with business goals and delivered real value to the company.
The problem with traditional BRM
In order to understand how we at WGroup were able to successfully re-engineer our client’s BRM unit, it is important to understand the many problems with traditional BRM. Too often, BRM professionals fall into the trap of order taking versus advising and not serving as strategic minded ambassadors between IT and the business, but as redundant order fulfillers. These kinds of BRM professionals are constantly running back and forth between business units and IT, trying to satisfy demands while only giving limited thought to how to improve processes or drive business goals. This way of doing BRM often creates more work for the overly taxed IT department without adding more value to the business.
What effective BRM looks like
The right people for BRM roles don’t just do paperwork and take IT requests from business units. They should be constantly thinking of new ways to leverage IT to drive business results. This helps develop trusted relationships between the business and IT while improving efficiency and lowering costs.
It is not always necessary to assemble a new team of BRMs. Retraining is possible with your existing resources if you have business minded technologists who can be peers to business leadership.
In order to gain credibility as an advisor to the business, BRM leaders have to completely understand business needs. IT is ultimately about delivering the tools and solutions that the business units need to generate more revenue and lower costs, and BRM professionals should be the ones to connect the dots and work with both parties to develop effective solutions using technology.
BRM is an invaluable function in the modern enterprise. Unfortunately, many companies aren’t doing it right. By not placing enough emphasis on business goals and hiring people without strategic forces, neither the IT group nor the business’s needs are met. They’re left with BRM units that don’t deliver value. If you get it right, BRM can go a long way to improving communication between IT and the business and driving better business results.
In order to optimize the speed of IT transformation, it is important to first understand the obstacles that keep things slow. By identifying problem areas and taking steps to address them, companies can more successfully implement changes that improve the speed at which IT operates.
Lack of foresight – Perhaps the greatest obstacle of speed in IT is simply a lack of foresight. When leaders within IT and the company do not have the will to look beyond today, they are unable to plan for the future and keep their company at the cutting edge. This can manifest itself in several ways, including under-budgeting initiatives, failing to implement new ideas, and improperly allocating resources. It is extremely important that all stakeholders understand the importance of looking to the future and are willing to invest the necessary resources to properly implement changes.
Poor communication – Rapid IT requires organized communication among a wide range of individuals. Failing to ensure that all key players are on the same page and that there are predefined channels over which to communicate during the project will inevitably lead to problems. It is critical that IT leaders take steps to communicate their plans and ensure that everyone understands what the goals are, what needs to be done, and what everyone’s role is.
No buy-in from business – Some businesses don’t recognize the value of emerging IT developments. They believe that if it works now, it should keep working for the future. Unfortunately, this is simply not true and those companies that aren’t constantly working to improve their technology will fall behind. Lack of buy-in from business leaders can result in under-funded projects and many other problems down the road.
Technical debt – Ignoring technical debt today will only lead to major headaches later. Problems with outdated systems and software can cause security concerns, reliability issues, and many other difficulties. The longer the organization waits to address these problems, the more difficult it will be to do so and the more they will contribute to inefficiency and loss.
Security – Companies should not prioritize speed above security concerns. However, there are ways to transition rapidly without exposing systems and data to excessive risk. By ensuring that systems are up-to-date and implementing a structured transition plan that puts security first, companies can avoid issues while optimizing the speed to transition.
Physical Infrastructure – Although IT deals in digital information, it ultimately relies on real-world infrastructure to function, and that infrastructure takes a set amount of time to build out. This can be a major roadblock to rapidly rolling out new features and services.
In a future article, we’ll make recommendations for overcoming these obstacles. In the meantime, download the comprehensive white paper, Operate IT at the Speed of Business to learn more about the relationship between speed and transformation.
As companies continue to increase their strategic reliance on vendors, outsourced services and collaborative alliances, business leaders should “rethink” Vendor Management. In fact, the sheer number of vendors engaged in organizations of all sizes is projected to grow substantially, making it more difficult for traditional procurement organizations to manage. Thus it should be an important strategic imperative to establish a vendor management discipline through a best-in-class Vendor Management Office (VMO).
High-performing VMO’s are increasingly demonstrating their value in Fortune 100 companies as well as smaller organizations. Each is scaled in accordance with the organization’s objectives and needs, but the results are growing every day. Regardless of size, there are common objectives and measures to drive VMO effectiveness and best practices. They are:
Revenue enhancement / Increased margins
Optimized vendor performance & leverage
Reduction of run-rate expenses and budgeted capital expenditures
Governance Model ensuring: strategic alignment, value realization, portfolio management, Sponsorship and accountability, Risk management, VMO Process and Policy adoption
Achieving a successful VMO implementation requires a comprehensive approach and methodology engaging hundreds of processes, responsibilities, policies and tools and technologies, threaded together with newly collaborative vendor relationships. The degree of success is largely determined by the ability to bring all of this together in a best-in-class VMO that is tightly aligned with the company’s strategic and tactical business objectives.
By establishing and evolving an effective VMO, organizations can drive significant value from vendor relationships and serve a key role in the execution of business objectives. Additionally, VMOs with the components of a world-class vendor management function are able to help organizations achieve targeted business outcomes over the long-term.
Maintaining Your IT Edge in 2017:The Importance of the PMO and Good Governance
As the first quarter of 2017 ends, many CIOs and senior IT leaders are already shaking their heads, wondering how they’ll meet the demands of their customers, retain their staff and maintain their edge. Although innovation, rapid development and forward thinking strategies are all critically important, the foundation of IT success is and always will be good governance. Your PMO, vendor relationships and governance model are some of the most important vehicles providing the structure and processes to effectively navigate and manage the world in which we work.
Roadmap to better governance
For the average IT organization, one in six projects goes so badly it threatens to affect corporate stability. One of the primary reasons this is such a common occurrence is that companies don’t devote enough time and resources to ensuring their PMO and governance strategies are mature and effective.
Establish and mature the PMO – First and foremost, a well-functioning PMO supports a robust demand management process capable of assessing the demand, risk and capacity of the proposed and ongoing efforts. Without a mature PMO making fact based decisions becomes an art rather than a science. When a significant part of your company’s budget is on the line, this is simply unacceptable. By working to streamline processes and implementing more rigorous, fact-based decision making strategies, companies can improve their project success rate, reduce costs and foster innovation.
Implement project behavioral coaching – Project behavioral coaching helps companies improve their success rate by targeting the underlying foundation of a successful project: people. By coaching the humans behind the project to think more analytically and encourage behaviors that promote success, companies can reduce risk and improve outcomes.
Leverage project analytics – Decisions should be made objectively and supported by hard data whenever possible. A critical step in ensuring that the PMO is equipped with the tools it needs to lead projects effectively, the company needs to implement systems to capture and analyze data. This means employing new innovations like IoT and predictive analytics.
Formalize the governance process – IT leaders must identify all governance objectives, procedures and challenges from the top down in order to ensure that the team is working cohesively. It is extremely important that business leaders understand and contribute to project planning and governance to make sure the project is aligned with business goals. By considering all key stakeholders and documenting clear governance processes, companies can better organize their operations and decision making.
Vendor management is critical – Governance can mean many things, but one of the most important components is good vendor and relationship management. In today’s highly decentralized IT world, effectively managing technology often means managing vendors. Harnessing the value and innovation of your delivery partners is a key win of a vendor management office. Understanding how to be a good service provider and integrator to your business partners provides the foundation for meeting expectations at a minimum and opening the door to exceed expectations.
The IT department’s role in the modern workplace is rapidly changing. Technical skills and infrastructure are not as important as they once were. Instead, IT leaders that want to be able to deliver the service their customers need and maintain their edge in the coming years need to develop stronger systems of project management, governance and vendor management. By implementing strategies that allow them to make decisions more effectively, respond to challenges more rapidly and develop better relationships with vendors, companies will stay competitive and be prepared for the future.
Interested in learning more? Check out our strategy briefs and white papers.
The very foundation of IT is constantly evolving, forcing rapid development of infrastructure and services. If an organization does not act quickly to capitalize on new innovations, it will quickly fall behind the curve, lose potential revenue, and waste resources. Having a nimble IT department that can quickly implement new technologies helps keep the company competitive, improves efficiency, and creates a more effective support system for the business.
Technology is moving faster than ever
As we progress through 2017, technology is progressing at a faster rate than at any point in history. This means that companies that don’t keep up with the pace of progress will be left behind. As IT becomes an even more important part of practically every business, it becomes increasingly critical that companies devote the resources necessary to support the business. This means both improving existing services and infrastructure and investing in new ideas that are the future of IT, such as automation and IoT. CIOs must constantly look forward and act quickly in order to drive business goals and support the company.
Fast IT is cost effective
About 45 percent of IT projects experience cost overruns.1 This is due in large part to projects running over schedule or being otherwise poorly planned. This also does not take into account opportunity costs of projects that aren’t finished rapidly. IT projects that save money and make the company more efficient should be implemented as soon as possible to maximize their benefits. Every day of lost cost savings is money that can never be recovered. Projects that are streamlined and brought to market faster drain fewer resources and cost less overall. Implementing complex new solutions takes significant resources; companies should strive to make the process as efficient as possible.
Stay ahead of competitors
Building a fast IT organization isn’t just about keeping up, it’s also about getting ahead and staying ahead. Forward-thinking organizations that act quickly have a significant competitive advantage over companies that are still using yesterday’s technology. New watershed technologies like IoT and automation haven’t even begun to be fully exploited, even by the most advanced companies.
The fate of a company can rest on the next disruptive innovation. The CIO plays an extremely important role in ensuring that new technologies and information systems allow the organization to race ahead of the competition. By taking steps to maximize the speed of IT transformation, IT leaders can better prepare their companies for the future.
1 Michael Bloch, Sven Blumberg and Jürgen Laartz, Delivering large-scale IT projects on time, on budget, and on value, McKinsey & Company Insights, April 2012.
Contracts are the bedrock of good vendor relationships. They provide the basis for collaboration, dispute resolution, payment and many other critical components of vendor management. This makes developing, managing and reviewing contracts one of the most important roles of the vendor management office. In order to optimize VMO and get more from your vendors, it is important to develop effective strategies for contract administration.
In order to optimize your contract management strategy, it is important to first understand potential challenges. Mismanaged contracts can cost a company dearly, and the VMO must stay proactive in order to secure the best agreements for the organization.
Postponing contract renewal preparation – More time means more leverage for contract renewals. Many companies don’t give themselves enough leeway to prepare for RFPs, negotiations and other aspects of contract renewal because they are disorganized and don’t have a workflow system in place. This can often leads to staying in suboptimal agreements with incumbent providers.
Not regularly reviewing contracts – Contracts should be regularly reviewed to ensure vendors are delivering on promises and that the terms are matched to real business results. By consistently reviewing contracts, companies will be better prepared to get what they need when it’s time for contract renewal.
Incomplete or disorganized documentation – Documentation forms the legal and practical basis for a contract. Companies that don’t keep their documents in readily available and organized forms will have little leverage when vendors renege on their agreements.
Optimizing your contract administration strategy
Create secure contract repository – Accessing, reviewing and referencing contracts should be simple and secure. Many companies store contracts in multiple locations, don’t have access control and don’t offer a way to view contracts remotely. This creates several problems. First, it is insecure. Contracts could get deleted or leak. It also creates problems when stakeholders need to access the documentation to review contract terms or conduct negotiations with vendors. A centralized repository with access control eliminates these problems and ensures contract documentation is always accessible to those who need it.
Proactively manage contracts – By staying one step ahead, the VMO can gain leverage over vendors and negotiate better agreements. Contract management systems can integrate workflow and help companies anticipate milestones. This makes the process of contract administration more organized, better preparing the company for contract events and renewals.
Tie analytics to contracts – Analytics are a critical for ensuring vendors are delivering on their agreements. By implementing metrics that measure the performance of vendors, both in a technical sense and in terms of how well they drive business goals, companies can make sure that their agreements are optimized.
Contract administration is one of the most important functions of the VMO, and companies that don’t implement strong contract management systems and processes will inevitably end up paying more for sub-par service. By integrating organized systems to store and retrieve documentation, measure analytics and proactively manage contract events, the organization will be better prepared to negotiate effectively and meet the needs of the business.
Attrition is Expensive – How to Make the Right Hire the First Time
When an employee leaves a company, it not just time consuming and burdensome, but it is also expensive. Consider the costs associated with the departure of a team member. First and foremost, there are time, effort, and resources dedicated to recruiting and backfilling the vacancy. This includes costs associated with advertising the position on Linkedin, recruiting and interviewing candidates, and subsequently onboarding and training a new hire. There are costs associated with lost productivity, not to mention the cost of the knowledge and experience that walk out the door. Colleagues may need to step in and temporarily backfill the role, which has costs associated with reduced productivity across the organization. Finally, it can take a new hire months to get fully up to speed and productive in his role. In a study conducted by the Center for American Progress, the cost of losing an employee may be up to 213% of the salary for a highly-trained position. For example, if an executive is making $120,000 a year at your organization, your true loss could be upwards of $250,000. Clearly, it is critical to make the right hire the first time.
How can organizations make the best hire? In working across leading Fortune 1000 organizations, I have come across some key factors that trend in organizations with reduced attrition rates.
Write an honest job description. I have found two trends in job descriptions. One is the overly generic posting. The other is the “pie in the sky” posting. It is not benefiting you, your recruiters, or your candidates to operate off a three-bullet-point job description that provides little insight into day to day responsibilities, team structure, and organizational culture and challenges. A detailed job description will help your HR team better tailor their searches and improve the overall quality of results by arming them with enough information to ask the right questions. On the flip side, do not be unrealistic, expecting to find a unicorn for every role. Focus on the key responsibilities, communicate the critical skills required for success, and ensure that your job descriptions are thorough, but also realistic.
Use unconventional interview practices. Everyone can reiterate their resume verbatim and talk about specific examples of triumph and despair in their career. Everyone has researched “What are the toughest interview questions?” and read up on the smartest and most creative ways to respond. You need more information than this to be able to make the right decision. One successful tactic is to bring in a panel and have the candidate give an executive presentation that they have had time to prepare in advance. Ask them to role play a scenario so you can witness them in action. Give them a problem and ask them to whiteboard how they would approach the solution. We have all been trained how to tackle interviews and respond to canned questions. Bringing candidates out of the typical interview “comfort zone” and evaluating how they respond will provide a better overall picture of how effective they may be when forced to think on their feet.
If you want it done right, sometimes you should not do it yourself. A critical summation is that you need to find the right talent, which is why you should consider working with high quality recruiters who have very specific industry knowledge. This is extremely important in technology, where specialized knowledge is critical to verify that candidates have the skills and experience necessary to succeed. By partnering with specialized firms, you reduce the burden of lengthy internal recruiting cycles and eliminate the risks of failed hires and attrition.
upGrow — an affiliate of WGroup — staffs with higher standards. upGrow’s experience in working with Fortune 1000 companies has taught us to recognize the challenges among many organizations to stay competitive while building a responsive and agile technology team. To stay ahead of the curve, organizations must find the right people who can lead, support and optimize IT initiatives. Click here to discover the upGrow difference!
The IT sourcing lifecycle is rapidly evolving. Traditionally, sourcing a new service could take over a year after requirements were outlined, an RFP was made, contractors responded and negotiations took place. Today, this is no longer a viable process. As the pace of technology dramatically quickens, companies must adapt by shortening their sourcing lifecycle, focusing on outcomes based transactions and streamlining their processes. This will allow them to meet new challenges faster and more effectively.
Problems with the old sourcing cycle
In the past, most IT sourcing has been reactive, ad hoc and excessively drawn out. This ultimately leads to solutions that are outdated, overpriced and don’t sufficiently meet business needs. In order to do better, organizations must identify their problem areas and work to address them.
Vendors kept at arm’s length – Many companies simply don’t put the necessary time and effort into building good relationships with their vendors. This can make it difficult to work with them effectively when new solutions are needed.
The RFP process takes too long – The only right speed for IT is faster. Companies live and die by innovation and optimization. Taking over a year to source a new service or work out better terms is simply not acceptable anymore. Quicker and more nimble competitors will rapidly eat up market share if your RFP process is outdated.
Vendor sets requirements – Many IT leaders that go into negotiations unprepared will allow the vendor to tell them what they need. Given that the vendor is working in their own interests and not those of the client, this is not an optimal situation. An organization without the necessary resources devoted to defining requirements and negotiating with vendors will get services that are overpriced and underperforming.
Better sourcing methods
In order to more effectively source IT services, companies need to rework their sourcing cycle from the ground up. This means devoting the necessary resources to defining requirements, building relationships with vendors and standardizing processes. This will help ensure that services delivered to business units meet strategic goals.
Build better vendor relationships – Having strong working relationships with vendors can benefit the organization in several ways. First, a vendor that understands its clients needs and knows its people will be better able to craft an effective solution. Working relationships can also help organizations source a good solution faster, as vendors already understand the company’s systems and requirements.
Speed the sourcing cycle – Increasing speed-to-value has become one of the core goals of every effective VMO. Companies that roll out new services or upgrades faster will immediately begin taking advantage of benefits and improving their efficiency, profitability and competitiveness. In today’s fast paced marketplace, this can mean the difference between obsolescence and survival. In order to speed the sourcing cycle, companies should have a strong VMO team with working relationships with trusted vendors. They should also streamline the process by creating templates for RFPs, demand requirements and other key components.
Focus transactions on outcomes – The VMO should redefine metrics not just to focus on technical specifications, but rather on tangible business outcomes. This can help prevent the “Watermelon effect” when vendors appear to be hitting their requirements, but end users are still unhappy. IT leaders should talk to stakeholders across the company to see what they really need from the solution. They should then use those requirements to negotiate with vendors.
Sourcing is one of the most important functions of the VMO. A company’s ability to innovate, increase profitability and stay competitive depends on their ability to negotiate with vendors and bring new functionality to production faster. This means that the VMO must strive to improve its competitive sourcing lifecycle by implementing standardized processes that speed the sourcing cycle and deliver business focused outcomes.
This is the third in a five part series about optimizing VMO for modern IT organizations. Part 1 can be seen here. Part 2 can be seen here.
One of the best reasons to integrate third party cloud services into your overall IT strategy is their flexibility. Using vendor infrastructure, platforms or services allows the IT organization to rapidly meet rising demand and scale back as needed. This can have significant positive effects on cost efficiency and quality of service. However, without effective demand management strategies, the IT organization will be unable to deliver the services business units need to be effective.
The importance of demand management
The VMO must be able to understand and forecast the needs of the business and use that information to work with third parties to more effectively deliver services. Companies must have dedicated demand management staff using best practices to track and organize demands. This can help eliminate the growth of shadow IT groups that rise to meet needs not being delivered by a centralized IT organization. A successful VMO will be a singular stop for IT within the business, prioritizing and delivering on the requests of business units and ensuring that the company has more beneficial and organized relationships with vendors.
Optimizing Your Demand Management Strategy
In order to deliver better service and have more effective relationships with vendors, the VMO must actively work to predict, prioritize and act on the demands of business units. This requires a set of specialized skills and frameworks focused on these tasks.
Understand your company – A better demand management strategy for your VMO starts with a deep understanding of the company and its needs. IT leaders must make an effort to build relationships with other key stakeholders and understand how the services they provide are actually used on a day to day basis. This will help them better prepare for new demands and deliver service that actually meets the business units’ needs.
Create demand channels – In order to prevent business units from engaging in shadow IT, the main IT organization needs to create easy to use channels for people within the company to request functionality or new services quickly. These requests should be well documented and traceable to ensure all stakeholders are on the same page.
Organized demands – The VMO should have a software system in place to track, manage and prioritize business unit demands and IT initiatives. This allows all
Manage Maverick Spending – Maverick IT spending, whether in or outside of the IT organization, is a major challenge for IT leaders. It can decentralize IT, create redundancies and waste limited resources. The VMO must recognize that it will never be able to eliminate maverick spending, but it can reduce and manage it. By having an approach to incorporate maverick IT initiatives into the overall IT strategy and management framework, IT leaders can better control the course of IT in the company to serve overall strategic goals. Properly forecasting demand and having channels for requests can also prevent maverick spending from occurring in the first place.
Meeting business unit demand through contracting of third party services is the core objective of the VMO. IT leaders must make understanding business needs and building systems to track, manage, prioritize and fulfill demands top priorities in order to meet their objectives. This will help companies reduce and manage maverick spending, deliver better service to business units and negotiate more effectively with vendors.
Business is all about timing; and in our current high paced technology world, IT needs to be faster than ever. In order to deliver the best value to business units, IT must fundamentally shift its model, focusing not on optimizing and building new solutions at the pace of years, but at months, weeks or even less. Companies need greater flexibility and new innovations to ensure the business is fully supported by the latest efficiencies, features and services available. This helps the business work faster, deliver better service and reduce costs. To stay competitive, IT leaders must work with key stakeholders and build an organization that can implement new initiatives rapidly. Today, there’s only one right speed for IT: Faster.
Customers demand innovation
The driving force of the need for rapid IT is the end customer. Consumers and clients are constantly making a value judgement about which company to give their business. The player who gets to market with a good product solution service first often emerges as the market leader. Sometimes it doesn’t even matter if a superior solution comes out later. If a company has already captured a large segment of the service or product category, it can be very challenging for new competitors to take that away.
Speed drives business value
Every new feature, service or system that the IT team rolls out should drive business value (meaning increased revenue and decreased cost). The faster the company can begin benefiting from that value, the more savings or profits the company can achieve. The time spent implementing a new initiative represents a opportunity cost loss that may never be recovered. In order to maximize their speed-to-value, companies must constantly be looking for ways to optimize their project process and get solutions to market faster. Today’s competition dynamic demands it.
Vendors should be speed oriented
One of the primary goals of outsourcing should be to deliver great business value quicker. However, many companies are still stuck in overextended procurement cycles that last a year or more. In today’s competitive world, that simply doesn’t work. The operating model that your partners use has to be foundationally designed with speed in mind in the same way IT seeks to operate faster. The IT department needs to stop thinking about the procurement cycle as a long process, but as a means to develop, optimize and solve problems faster.
Long RFP processes also inhibit flexibility. Because goals, requirements and challenges can change incredibly quickly, the organization may need a different solution, operating model or service provider mix in the near future. It can take over a year to build a relationship with a new vendor, In order to be effective in today’s climate, sourcing strategies need to put speed at the forefront.
How WGroup can help
At WGroup, we believe every IT organization can dramatically increase their speed and that sourcing can get done without the bloated RFP cycles of the past. Our team is made up of veteran IT advisors and consultants with decades in the industry who can help you leverage speed driving technologies like automation and match your needs to the right vendors in a matter of weeks, not years.
If you’d like to learn more about how WGroup can help your company reduce sourcing cycles and increase speed in IT, visit us online today at thinkwgroup.com
This is the second in a five-part series about optimizing VMO for modern IT organizations. To read Part 1, click here. Part 3 may be read by clicking here.
The VMO’s role is to ensure that vendors are delivering the best business value. Unfortunately, many either don’t collect and analyze vendor data or do so in an unorganized and ineffective way. This ultimately leads to a situation in which organizations are using providers inefficiently without maximizing their real business value. To build a more effective IT organization and get the most value from vendors, it is critical that the VMO develop more effective analytic strategies.
Why better vendor analytics are critical
The foundation of good vendor management is the ability to measure vendor performance and how it relates to business goals. Without this ability, IT leaders will be unable to make the best decisions about IT service sourcing. Analytics allow the organization to find the most cost effective options that support business unit needs. Without effective vendor analytics, companies will be making decisions blindly and vendors will overcharge and under-deliver.
Optimizing Your Vendor Analytics Strategy
Given the importance of effective vendor analytics, it is critical that companies work to optimize their data gathering and analysis process so that it better helps meet business goals. This means building dedicated vendor analytics teams that can look at data across the entire company and advise IT leaders.
Create a vendor analytics initiative – The first step of developing a more effective vendor analytics strategy is to create a well-funded initiative to gather data and analyze it. Many companies simply don’t devote the necessary resources to collect data and use it to extract information to make better decisions. The success of the initiative will depend on buy-in from other business and IT leaders. It is important to help them understand that data based decision making will allow them to reduce costs and improve efficiency within the organization. Those companies that aren’t actively performing analytics are already behind.
Tie metrics to business goals – Many companies that already have a vendor analytics system in place simply measure SLA performance without connecting those metrics to business goals. This creates a common problem where vendors are meeting their predefined targets but business units aren’t getting the performance they need. To prevent this, metrics must be tied to concrete business goals. Vendors shouldn’t just be delivering service at certain technical specifications, they must be delivering service that offers strategic value.
Perform cross-vendor analytics – In today’s highly cloud oriented IT environment, many vendors must work together to deliver the complete set of services that business units require. To account for this, the VMO should both be able to look at vendors individually and across the entire company. Cross-vendor analytics can help form a more complete picture of vendor performance and where problem areas lie. These metrics shouldn’t be tied to any one vendor, but rather to the end service or function. This also helps tie metrics to results rather than unproductive technical specifications. VMO staff should have a consolidated vendor database with access to metrics for every provider across the company. It is important to strive to move analytics away from operational staff and into a centralized system to form a more cohesive image of the company’s IT operations.
Vendor analytics form the backbone of an effective vendor management office. It provides the insight necessary to make better, more informed decisions about sourcing issues. IT leaders must work to build a centralized analytics team, dedicated to ensuring that providers are delivering business value and performing as efficiently as possible. This helps drive strategic goals by reducing costs and delivering better service to end users. Data is a major component of effective modern IT operations and companies can no longer afford to not invest the necessary time and resources into consolidated, comprehensive analytics.
This is the first in a five part series about optimizing VMO for modern IT organizations. To see Part 2, you can click here. To see Part 3, click here.
Vendor management is increasingly becoming the primary role of IT. As the cost effectiveness, reliability and flexibility of third party services increase, more applications, infrastructure and platforms are moving from in-house to the cloud. This is driving a fundamental restructuring of IT with a greater focus on building relationships with providers and working with them to deliver IT services to support the business. As this transformation takes place, IT leaders need to optimize their VMO and implement initiatives for better strategic vendor management.
Why better IT governance is critical
Today, IT services are increasingly being fulfilled across a wide network of providers. In order to ensure that these providers can effectively perform their functions, IT organizations must make certain their providers are transparent, coordinated, reliable and consistently delivering business value. This means that the IT organization must implement a framework for quick and efficient decision making that optimizes IT service delivery across all operating units and maximizes the business value of IT investments.
Optimizing Your Strategic Vendor Management Strategy
In order to better manage vendors in the modern IT era, it is important for your organization to understand what an optimal strategy is and the roadmap to get there. The organizations at lower maturity levels will need to fundamentally restructure their approach to vendor management and build new teams and initiatives to ensure that providers are delivering the best business value.
Initial stage – Those IT organizations that do not actively manage vendors and instead leave oversight to operational staff will suffer from inefficient and uncoordinated IT services. Performance management will be purely ad hoc and reactive, rather than strategic and according to an overall business strategy. Organizations at this stage must immediately begin building teams and systems to consolidate vendor management and gather coordinated performance metrics.
Managed Stage – At this stage, IT has a VMO staff that actively manages vendors and measures performance in a range of metrics. This represents a major leap from the initial maturity level but is limited in multiple ways. In order to further optimize VMO, organizations must expand their performance metrics beyond simply measuring contract SLAs and move towards more business goal oriented metrics. Organizations must also be expanding the scope of VMO and further consolidating vendor management from operational staff.
Defined – The core characteristic of this stage will be the definition of more concrete vendor engagement plans to drive business goals. At this point, VMO staff will be matrixed to strategic vendors and performance metrics will be focused on continuous improvement.
Optimized – This represents a high maturity level with VMO staff dedicated to strategic vendors. Performance metrics will be linked to other vendors and tied directly to business goals. This provides a means of comparing vendors, finding problem areas and ensuring that they are delivering real business value. VMO staff should be continuously looking for ways to optimize vendor relationships and deliver better service and value to the business. This means regularly reviewing vendor performance and ensuring that there is always a rationalization for their service. These decisions must be supported with real facts and data collected rigorously by the VMO staff.
The future of strategic vendor management lies in a comprehensive business oriented approach to sourcing and vendor relationships. The VMO must consolidate vendor management away from operational staff and integrate cross-vendor, business driven metrics to replace those tied only to cost or SLAs. This will help ensure that services from a wide range of providers are better coordinated and better support business goals.
Looking for more insight into vendor management? Request a copy of the white paper, The Top 9 Trends in Vendor Management by clicking here.
Common Pitfalls in Project Portfolio Management — Part 2
This is part 2 of a two-part series on the common pitfalls in project portfolio management (PPM). To see Part 1, click here.
Project portfolio analytics
Project portfolio analytics are the tools, algorithms, and heuristics necessary to evaluate project-related data for use in PPM decision-making. This data includes elements of resource capacity, ROI, portfolio impact, value, risk, and other elements important to the organization.
In numerous instances we have seen organizations fall into one of the following traps.
Purchasing and implementing a PPM tool before the process is defined and accepted: PPM tools (Planview, Clarity, etc.) are expensive and, in most instances, should be purchased after the company has accepted the PPM function.
Poor expectation setting: Not every PPM tool is capable of performing all analytical needs. Some of the most well-known PPM tools don’t even include the most basic algorithms to conduct “what if” analysis for use in understanding impact to the current project portfolio. The Gartner “golden quadrant” tools do not have all the capabilities many PPM functions need. Make sure to complete a thorough tool evaluation that’s based on clear requirements.
Underleveraged: We’d like to see PPM tools used for more than time tracking against projects, but they are often underleveraged for only this use. PPM tools are fully leveraged when governance teams require PPM analytics for decision making; resource managers are using the tool proactively as a means to better manage their resources; and team members are seeing the value, often when decisions that impact them can be sourced from the PPM tool and improve their work-life balance and make a positive impact on the company
The previous two pitfalls can become root causes for underleveraged PPM tools. When PPM Tools are purchased and implemented before the process is defined and accepted, this opens the door for the tool to become an unneeded expense if the function is not adopted. Similarly, when incorrect expectations are set for the tool and not reached, staff will reject its use.
Poor integration with the corporate finance function: PPM tools traditionally integrate with financial systems and/or act as a repository for project and program financials. From time to time, we see PMO’s that fail to plan to integrate with the finance organization as a key stakeholder.
This will more often than not lead to a disgruntled and powerful stakeholder who also is an influencer in supporting new functions. When you consider that project scope often changes (along with project financials), having a strong influencer from finance will be critical in creating a smooth change-management process.
Corporate strategy and culture
The processes that drive the direction of the company and identify markets/businesses in which the company competes are the linchpin to successful PPM and project success rates.
While we have touched on aligning decision-making criteria and creating a level of formalization, it should be clear that the ability to align with a strategy is dependent upon the clarity of the corporate strategy. Its corresponding objectives must be formally defined and measured.
For organizations that have full-time corporate strategists and may be advanced to a level of strategy management, such as balanced scorecard or others, a key factor in successful PPM is in place. For organizations that are informally managing strategy, we recommend you take steps to formalize the process before getting too far down the path on PPM. A formal strategy-management process drives the organization to provide clarity and prioritization of corporate- and division-level objectives that are already aligned to the strategy.
Many times with the bottom-up approach to PPM, clients attempt to build strategy as a part of the PPM/governance function. This can work for some organizations, but can also lead to confusion and frustration because projects that turn out to be out of strategic alignment have already left the station.
There are several other common pitfalls.
Confusing project-selection criteria with product-selection criteria: We sometimes see project governance teams filling the gap for product assessment. Projects to implement products should be initiated after the product assessment is completed.
Lumping project prioritization in with project sequencing: Project prioritization is the act of weighing one project against decision criteria and other projects to determine their level of priority for execution. Project sequencing is the process of determining the optimal fit for the project in the current portfolio. In other words, just because the project is priority one does not necessarily mean it gets done first when there are other projects in the portfolio.
Unintended consequences may occur if the opposite is true, including increased costs and potential staffing issues. A portfolio impact assessment should be completed in advance to guide executive decision-making regarding the sequence of the project.
Failing to evaluate strategic risk: In many instances, obvious elements such as demand management and capacity come into play in the management of project risks, but strategic risk is often over looked. Strategic risk can take the form of brand tarnishing, negative impact to core products and services, or loss of market share. Considering the number of “black swan” projects, strategic risk should be a significant element in management of the project portfolio.
No formalized plan to manage culture and behaviors: Technology and process don’t solve project failures. People do. Some clients step their toes into the water as a substitute for a concrete plan to change behaviors in the organization. We advise our clients to recognize that their people are being reinforced a certain way (either purposely or accidentally) to perform the “current state” of their job.
Performance expectations are commonly missed when PPM is introduced into the organization because it is seen as somebody else’s job. The fallacy of this view is seen in the fact that project work is people work. The staff members have a stake in the project’s outcomes and commonly work in a matrixed environment across different departments. Therefore, PPM is everybody’s job. Yet it is easy to see how many would want to pass PPM over the fence as it involves complex and mature practices (demand management, resource management, etc.) and requires staff to adopt new skills and types of work.
Failing to plan to change behaviors guarantees at minimum a difficult transition and at most failure to adopt PPM long term.
Failing to “chunk” the project work: Whether it be the use of Scrum or Waterfall, breaking projects down into manageable chunks has been proven to increase project success rates, but it is a challenge for many clients. Behaviors have been ingrained in executives over the years to be “pleasers” and that often results in the executive sponsor reporting out a project finish date before a project assessment has even been completed. Consider a whole portfolio of projects with end dates established in this manner and you have a very inaccurate portfolio.
Conditioning away from this behavior to a set of deliberate PPM steps, to include finish date estimates on phases of the project work is difficult and should be considered a strategic activity for the organization. Why? Companies that improve project delivery (or better yet, project productivity) create a sustainable competitive advantage over companies that do not. Improving project success rates not only makes a company more competitive, it improves the company’s bottom line.
How WGroup can help
WGroup has helped many clients design, build, and manage the discipline of project portfolio management. While our approach is robust in implementation, it is also pragmatic and anticipates the common pitfalls we have seen in our extensive experience.
For clients with a PPM function in place we can help by evaluating the client’s strategy and project governance model, project analytics, culture, and behaviors to build the roadmap to optimize PPM benefits and ROI. And for clients just starting out, we can help by building the strategy and roadmap for PPM implementation specific to your company.
We employ our deep expertise in constructing sophisticated financial models and bring up-to-date insights about industry best practices and potential vendor tools to drive tangible business results.
We provide our clients with comprehensive advice down to the design and implementation of detailed PPM processes. We leverage the rich experience in hands-on portfolio optimization from our pool of senior consultants who are all former CIOs, IT managers, and business leaders.
Ultimately, we drive business value, which is above and beyond establishing resource allocation or prioritization processes.
Common Pitfalls in Project Portfolio Management – Part 1
This is the first of two parts of this article on PPM pitfalls. Part 2 may be seen here
One in six projects is a ‘black swan’, or a project that goes so badly it threatens corporate financial stability. Now more than ever, companies must critically examine their project portfolio management (PPM) processes for optimizing success.
Organizations are continually asked to do more with less. The temptation to short cut project governance processes that are perceived as unneeded or a waste of time increases with every additional project added to the company’s workload. Ironically, it is usually short cutting the process that leads to manifested risks, increased costs, and additional workload.
It is our experience that the problem is typically not the governance process itself. It’s the perception that the process is too complex or too time consuming. Unfortunately, this leads to common pitfalls that are not accounted for as the corporate governance system is designed or modified.
How can companies ensure that their project portfolio management system is used effectively and reaps the expected benefits? To explore this, let’s examine the major components of an effective PPM system. In this first part, we’ll cover corporate project and program governance. In Part 2, we’ll look at project analytics and corporate strategy and culture. We’ll examine the problems typically encountered and make recommendations that could prevent or solve these problems.
Corporate project and program governance
Demand management can result from numerous sources, including corporate strategy (transformed into objectives and projects), balancing or aligning the current portfolio of projects as a result of change or new directives, and the “raw demand” of needs that result from daily operations and often take the form of ad-hoc requests from individual contributors, teams, and others.
Organizations will often take the “crawl before you run” approach to project governance for reasons that make sense during the period of transition to a new method of governance but many times lead to a number of problems later on.
Developing governance bodies asynchronously: Governance bodies should be set in tandem at the division and corporate levels. Launching a corporate-level body without a corresponding division-level body will result in a lack of confidence by division-level managers and below in the corporate-level body. Doubts will arise that the group has all the information it needs to make educated decisions in forming and adjusting the project portfolio while accounting for stakeholder needs. Similarly, corporate-level management will often doubt decision making at the division level. As division-level management feels the pressure to deliver “everything,” corporate-level management will begin to question priorities and financial decisions as the portfolio is filled to capacity (and beyond) due to the division level manager’s fear of saying “no.”
Failing to fully leverage project analytics and establish formal decision-making criteria: While there are hundreds of portfolio management tools on the market today, all of them are useless in performing project portfolio analytics without guidance from governance bodies. The two must go hand in hand.
We often see decision-making criteria that are not aligned with corporate strategy. This leads to a disjointed, complex, and (sometimes) agenda-driven approach that may benefit certain divisions, while not necessarily delivering on corporate strategy. Decision-making criteria should be aligned with corporate strategy goals, documented, and reviewed regularly with governance teams.
Many governance bodies do not plan for their own decision-making process, seemingly expecting executives and directors (who have their own agendas and objectives) to make collaborative decisions in a fact-based and objective manner. Failure to achieve governance level goals often happens because new behaviors were not defined or planned for. Additionally, decision-making criteria are often focused solely on demand intake, and not portfolio balancing. Corporations that are mature in portfolio decision-making will have often adopted decision-making tools to assist in the process. Many have even established strategy-aligned attributes or questionnaires for evaluation in project charters, SOWs, or other project artifacts to streamline the evaluation and portfolio balancing process through the formal governance channel.
In addition to supporting demand intake, PPM analytics should be provided (no matter the maturity level of the tool or process) to include, at a minimum, some level of understanding of impact to the current portfolio of projects. We often hear clients make statements such as “we’re not good at forecasting” or “we are immature at capacity planning,” yet they conduct these activities informally each day. We have seen clients successfully use spreadsheets at the initiation of project portfolio management to gauge staffing bottlenecks. Using common sense and basic understanding of the resources available, they begin changing behaviors and focus on a more objective and fact-based approach that aligns with corporate strategy. By doing so, clients are far more successful in growing into enterprise-level project portfolio tools because the decision-making criteria and decision-making process have been established.
Failing to formalize the governance process: Formalization means a number of things when it comes to project portfolio management. Chief among them is the need to clearly identify from the top down all project governance objectives, procedures and desired outcomes. We sometimes see clients attempt to launch project governance bodies in a bottom up manner or with little support from the C- Suite. Simply put, organizations that sidestep this critical item are doomed to fail.
Governance comes with a significant set of changes related to people, process, and technology (PPM tools, Help Desk tools, etc.). Without a plan to understand current behaviors and required future behaviors, and without consistent, visible support from senior management, the probability of success in this endeavor will be very low.
Plan to have as a major sponsor for your initiative a significant C-Level influencer who is visible at all corporate-level governance meetings and appears at division-level meetings from time to time. Additionally, have a plan to reinforce new decision-making behaviors that will initially challenge the organization. Formalization will lead to documented staffing plans, business cases, and dependency mapping across projects; change management addenda; and more. These may be new to the organization, but they are required to perform adequate, fact-based PPM.
Companies that are mature in formalizing the PPM governance process typically employ business-relationship management to ensure a focus on IT-business alignment. By working with a focus on each corporate line of business from a centralized unit, demand can be reviewed in one “source of the truth” (typically a combination of request management and PPM tools) to gain further efficiency in the governance process.
How many times a day are you told by your business leaders and CEO that the IT department needs to move faster? I would bet that one of your first thoughts is “Let’s transform service delivery.” If you think that’s a silver bullet to solve the agility and speed to solution problem, you’re in for a surprise.
When asked by CIOs how to approach service delivery transformation, WGroup contends it’s more about the people and the process, including governance versus the technology that will drive a successful service delivery transformation. While technology plays a very large supporting role, the people and processes make it work. Taking a page from our Digital DNA strategy brief, transforming service delivery means a real mindset change in the IT organization and an openness to embracing automation, exceptional customer and user experiences coupled with appropriate security and risk management.
Part of the journey for transformation service delivery is to change the orientation of your organization from one that is a builder of solutions to one that is an integrator of solutions. It’s an evolution and not a revolution. It won’t change overnight, but building a transformation roadmap which defines the key organizational attributes, relationship management, governance and outcomes desired will allow the IT leadership to enable the necessary changes.
There are a number of prime candidates to start your service delivery transformation: End user services, DEV/Test infrastructure provisioning and management, and self-service catalog. If these services are outsourced, you’ll need to engage your service provider and delivery executives. If your agreement is coming due, it’s time to take a step back and think about the next generation of outsourcing (see outsourcing blog “Give Yourself the Best Chance for Business Improvement When Outsourcing IT Services”) and the outcomes you will need to be successful. By the way, outcomes do not necessarily mean more SLAs!
Today, start your journey by reviewing the outcomes your business leaders and CEO demand against your organization’s capabilities. Be honest. Evaluate those capabilities on the basis of: Build versus buy and integrate, speed of adoption, total cost of ownership (including technical debt), and adherence to standards and risk posture.
Measuring your progress and ROI is an important aspect of your communication plan. Service delivery transformation may include the use of unestablished technology or radical process changes. As such, calculating the ROI is not straightforward. Consider the following:
When there is a lack of clarity of ROI, let the investment pay for itself. Not only the initial CapEX but the ongoing OpEX.
When there is some clarity of ROI, consider managing like a venture capital investment. In this scenario there needs to be a platform for rapid iteration of ideas and allowing for quick failures.
If a venture capital investment style is not suitable for your organization or culture, implement pilots to gain additional experience and data to support the business case and projected ROI. Make adjustments as necessary during the pilot.
Question: For those people who are not necessarily in the anti-money laundering (AML) or fraud detection business, what scenarios seem like a good fit for somebody evaluating Pneuron? How would you identify that?
Tom Fountain: There’s a wealth of use cases. I’ll cite two examples. In the supply chain arena, more and more of its components have been outsourced. There’s very distributed components of that chain, including warehousing, distribution centers, and so on. One of the pilots that we did literally in one day was to bring together information from across a supply chain and give it the visibility that the owner ultimately wanted. Another example is with call centers. If you think similar in terms of a money laundering alert, a customer calls into a call center. When the help desk picks up the phone, ideally you’d want all the relevant information associated with serving that customer account right at your fingertips; and you want to quickly respond to inquiries that customer makes. Having a very fast and flexible way to access a breadth of systems, to bring that information to bear in the serving process, is something that pneurons can be configured to achieve.
Question: “How do you select projects for rapid prototyping?”
Jeff Vail: If you want to know how to measure value, there’s only two ways: 1) “How much more revenue will it produce?”, and 2) “How much will it lower our costs?”
I believe that there’s a space that needs to be filled by innovation labs in large enterprises that don’t follow traditional metrics for success and failure. It’s a good idea to have a lab that’s testing technologies at all times that don’t have any traditional measures associated with them to allow you to experiment and to find out how they could have a value for your business. You need to experiment with things that don’t follow traditional measures to determine how they could affect your business.
Tom Fountain: Project selection has always been a challenge. I categorize those different types of opportunities almost to an equivalent of basic research versus applied research. To your point, a lab experimenting with very new things versus a much more targeted value-intended experiment. In short, addressing a very specific live problem where there’s real money up for grabs.
I think the value and ease of execution is a very appropriate way to present a very simple framework. What we talk about with customers is that ease of execution piece, our story is that we’re trying to dramatically shift where the dividing line is on that ease of execution axis between fast, low cost, less complex; versus longer, higher cost, more complex. In the traditional way, a lot more of your sample projects or possibilities fall into that bad end of the continuum.
With an approach like Pneuron, a lot more of those potential projects move much further left or to the easier end of that ease of execution, so we’re trying to open the envelope of good sound candidates that can be executed still within that same framework. When I was running IT organizations, everything we did had a purpose. That purpose was: revenue up, cost down, safety up, environmental impact down.
Frankly, something that would teach us and enable us in a platform kind of thinking way (or a foundational way to do future things better) because there are some things that need to be done that don’t immediately produce better revenue, better cost and so forth, but they’re critical enablers, and if you categorize those, you can’t do all, just those types of projects, nor should you only do just the ones that drive cost down. Having a good mix in a conscious way gives you the kind of balance that really can pay dividends.
Question: How do you advise on dealing with this issue of friction between upper management (the business leaders) and IT control?
Tom Fountain: At the end of the day, the credibility of the IT organization is paramount. I always had a simple equation. I said, “Alignment plus execution equals credibility”. If you’ve established credibility with your business customer, you get the latitude to try things, and you get the willingness to partner.
When there isn’t that connection, then there’s a huge temptation for the business to go off and try things on their own, and do it in the shadows. There has to be a candid assessment of the degree of credibility and engagement that your IT organization has with the business, get to the heart of why it is, where it is, and if it’s not where it needs to be, do some concerted actions to establish that. Start with small steps.
This is not an overnight change, but by simply connecting with the business leaders that are the more influential, that have the most resources to share with you, to work with you, and helping them see that your vested interest is making them successful, I’ve seen tremendous things come from that, but the only way to deal with that friction is to take it head on. You can’t do it in isolation.
Jeff Vail: I would add that in the spirit of creating co-innovation together with the business, there’s a number of cases where I’ve seen the business and IT partner on achieving innovations to try to get to the outcome that they’re after and doing that collaboratively and together.
Tom Fountain: Exactly, because when IT goes off in the corner and says, “We’re looking at stuff”, the business loses visibility to that, they feel like they’re not involved, they don’t know what’s coming when, and they feel like, “If anything’s going to happen to IT, I’ll go do it myself”. Make them a part of it. Invite them into the process and have them contribute their expertise which is critical. You don’t have time to wander around, hoping you find an oasis. It’s a lot better to know that the vector is east because the business person is there helping you understand what direction innovation is really going to pay off.
Question: How to effectively enable change management and get people to think and work differently for the types of changes we are talking about here.
Jeff Vail: To encourage change in your organization, go back to tried and true methods: leaders communicating why change is necessary; developing the organizational skills that would support the change; reinforcing or setting up reinforcement mechanisms and incentives that would enable people to be incentivized to adopt and accept the change. Lastly, that the actions of the leaders in an enterprise is the number one driver of culture – I’d say 80% of the driver of culture. If you want to achieve a change, the actions and the role models that the leaders are conveying to the organization is very important.
Tom Fountain: Incenting people to try new and different things is not an easy proposition in many cases. It really comes down to the tone that is set from the top. How you establish the right balance, how you reward people who take intelligent risks. You got to have the word “intelligent” in that. You can start this on a very small scale, and be a leader to achieve that level of innovation that everyone needs. Try those practices, germinate those good ideas, continue to build out that sphere of influence, and promote those kinds of practices.
Question: Technology is very dependent on infrastructure; anytime something changes, then the technology that sits on top is affected. How does Pneuron respond to changes that happen to the infrastructure beneath it over time?
Tom Fountain: To make a distinction, when I think of robotics, I think about presentation layer integration. Other people define robotic as just simply an automated process. The definition doesn’t matter, but all of those elements are in the mix here. The response to change is a crucial component of innovation, of just serving your customer well as an IT organization.
From the ground up, Pneuron is built to have the agility to respond to different types of change very effectively. For example, our container runs in a virtual or physical machine. The pneurons don’t know or care about what’s underneath. So if all of a sudden you want to move the hosting out to a cloud environment, it’s a straightforward process.
We’ve engineered this so that each component of the workflow can be very rapidly configured or reconfigured to respond to the changes from underneath or from above, and allow you in a very rapid, incremental fashion to deal with what hits you every day. The individual aspects of the workflow can be in a very targeted way matched to that change and without impact on the rest of the workflow.
In the coming years, retailers will face a nearly unprecedented amount of technology disruption and consumer intelligence. If they haven’t developed IT principles to embrace these forces they are falling behind. With innovative new retailers like Amazon that see themselves as technology companies first, traditional retailers need to act quickly and plan effectively to stay ahead of the curve. They will need a roadmap to address the introduction of disruptive change into their business. But changing all areas of IT at the same rate is not optimal, leading to ineffective allocation of resources and losses of access to effective systems. In order to stay competitive, IT must learn to develop dynamically.
Establish your Plan
At one time, it was common for retail IT shops to operate around a unified, monolithic platform of systems. As IT becomes a foundational component of every retail business, this can no longer be the case. Today, organizations need to innovate while still providing access to legacy systems. By organizing transformation efforts by business specific processes based on needs of the business, retailers can begin to embrace the technology disruptions while continuing to provide reliable business critical services.
Although each retailer’s needs may be different depending on their goals and business model, they must start the journey to a more agile organization than what many retailers have today. They need to drive their business in real time. In order to facilitate this change, retailers must adjust their planning to focus on multiple key service and application groups, each being implemented at independent speeds to maximize growth, reliability, and efficiency.
Group 1: Support the Core – This group involves systems which are stable and require minimum support. These systems often form the core of a retailer’s shared IT services. Upgrades to these systems are infrequent and generally well planned. Any large-scale changes to these systems should focus on development around the affected business process and reintegration into the remaining systems through the implementation of micro services. These systems should also be subject to a high degree of governance to ensure that they meet internal and external requirements. These projects can also benefit from DevOps techniques to increase flexibility and development speeds.
Group 2: Optimize your Change – Many retailers have or are planning to implement comprehensive omnichannel retailing programs. These will typically include integrations of merchandising, distribution, store operations and customer relationship management systems. These integrations will almost always include an electronic commerce channel. This provides a perfect opportunity to optimize those systems closest to your environment by learning from some of the largest electronic commerce retailers. Implementing these applications using cloud capabilities, micro services, big data, deep learning, real time data analytics and other emerging systems will provide critical and timely customer insights, predict future buying behavior and allow for instantaneous changes to maximize the profitability of each channel. They will position the retailer for the agility to respond to all future competitive pressures and market opportunities. These systems require a significant investment – one which should be deployed against a solution set with staying power and great value.
Group 3: Innovate or Die – This group provides the testbed for items in both above groups and includes cutting edge IT services, including emerging technologies, process disruption and service innovation. This area should be leveraged by not only the IT organization but also by other constituencies throughout the enterprise. Successful innovations are then moved into the enterprise via the appropriate group function. This group is subject to a reduced degree of governance and can benefit from a very rapid development schedule using Agile and DevOps.
Disruptive technologies leave nothing unchanged. Introduction of these functions will require a series of organizational changes to maximize the value delivered. It may also change the retailer’s approach to internal versus external application management. Roles and responsibilities will require reevaluation and adjustments. The software acquisition process might need to be modified. The impact of these changes makes it imperative to develop a thoughtful and complete approach to disruption.
The primary concern that retailers should have is not whether or not to innovate, but by how much and in what order. By planning and prioritizing against specific targets, measuring progress and adjusting where necessary, the organization can better optimize its resources and roll out new services according to their value to the business.
For more in-depth discussion of innovation in information technology in retail, request a copy of the white paper, The Evolution of Retail IT by clicking here or visiting http://www2.thinkwgroup.com/The-Evolution-of-Retail-IT.
Look To the Future With ERP: Choosing and Implementing an ERP Environment
Today, practically every company is going through some sort of digital transformation. Whether it is a service delivery transformation, operational improvement using ITSM as a framework, or other change, companies need to be proactive and look to the future to stay competitive. Enterprise Resource Planning (ERP) software is a core component of this digital revolution, allowing companies to collect, store, manage, and analyze data across a wide range of business functions to drive business goals. However, choosing and implementing an effective ERP environment can be challenging. To succeed, the organization must carefully identify their needs and build a roadmap for ERP success.
Choosing and Implementing an ERP solution
When choosing an ERP solution, it is important to remain agnostic and work with vendors that can meet your unique business and technology challenges. By Identifying unique needs, companies can better map out their path and compare capabilities of individual ERPs.
Understand business goals – The right ERP solution will be matched to business goals. Whether your company wants to achieve market expansion, category growth, brand presence, or expanded market penetration, it is important to build an ERP strategy that aligns with long term objectives. This means working with vendors and effectively communicating goals.
Identify needed functionality – Start with a deep understanding of the business processes that must be enabled, transitioned or delivered by the ERP environment. By listing all the current ERP systems that will be consolidated and identifying core business functionality the environment will need to encompass, you can better choose a solution that meets your needs. It is important to understand the application footprint you currently have as well as the current state of IT infrastructure and technical architecture.
Avoid customization – Tweaking and configuring an ERP environment to your company’s needs is a necessity, but in depth customization can add significant time, risk and cost to the project. It is best to find as close to a turnkey solution as possible.
Choose cloud or on-site solutions – Depending on your existing architecture, scalability needs, and budget, it may make sense to go with an outsourced cloud based ERP solution, at least for certain functionality. This can take the strain off your in-house IT infrastructure and allow the project to get up and running more quickly.
Train and build knowledge – Understand the user community and the level of experience that they may have with current ERP systems. This will inform the training and change management component of the process.
Focus on innovation
Although implementing an ERP that can deliver core business functionality may be alright for today, it won’t keep your business competitive tomorrow. Perhaps the most important component of choosing and implementing an ERP solution is to look to the future. Don’t just focus on current requirements. Think about the company in five or ten years and try to identify future needs. Consider other functionality that could impact customer experience, supplier experience and internal operations.
Think about the scalability and flexibility of the architecture to accommodate automation, predictive analytics, IoT, and other upcoming technologies. How is the solution and architectural framework going to deliver what is needed from a business perspective and how will it scale to meet the future challenges of tomorrow? Answering these questions and finding a solution that meets your needs will allow your company to maximize the potential of ERP to drive business goals.
Learn more about ERP planning and implementation by reading our earlier article,
WGroup is excited to announce that we are co-hosting a webcast with Pneuron on December 1st at 3:00 PM ET entitled “Better Insight. Automated Action. Despite Technical Debt”. WGroup’s COO, Jeff Vail will be joined by Pneuron’s CTO, Tom Fountain, who was also the former CIO of global agribusinesss Bunge, Ltd. and VP & CIO at Honeywell Specialty Materials.
The discussion will be centered around how to innovate with IT, and will dive into actionable steps companies can take to accelerate transformation. The session will include an in-depth dialogue on how to overcome legacy and costly software and data integration problems that organizations face when merging or engineering large and complex enterprise projects.
“Technology is both the great enabler and the great destroyer. Innovation, transformation, modernization are the keys to staying ahead of competitors,” says Fountain. “But how do we overcome legacy technology and technical debt? If speed is essential, how do we address the challenge to ‘get fast’?”
How to balance constraints with actionable new ideas
How enterprises solve complex business problems while bypassing costly integration projects
How to get started without massive investment, without a technology overhaul, and without the need for dramatic organizational change.
About the speakers:
Tom Fountain is Chief Technology Officer for Pneuron, bringing more than 20 years of experience in senior leadership roles with proven expertise at improving business through programs that integrate IT, organizational development, and process improvement techniques. He was previously CIO at global agribusiness Bunge, Ltd. He’s held senior CIO roles at Honeywell and GE as well as product management, intelligence officer, and engineering positions with Dell, the Central Intelligence Agency, HP, and Martin-Marietta. He holds a degree in electrical engineering from Massachusetts Institute of Technology, an MS degree from Duke, and an MBA from Duke’s Fuqua School of Business.
Jeff Vail, Chief Operating Officer, WGroup. Based in Radnor, PA, WGroup provides strategy, management and execution services “to optimize business performance, minimize cost and create value.” Prior to joining WGroup, Jeff was Chief Commercial Officer of Quintiq, a supply chain and planning software company, acquired by Dassault Systemes. Before that, he was SVP of Global Corporate Marketing at Unify (formerly Siemens Enterprise Communications), VP of Enterprise Marketing at SAP Americas, and General Manager of Infrastructure Solutions at Unisys. Jeff holds a bachelor’s degree in business administration from Stetson University.