I’m part of a team called “sourcing and vendor management” (SVM). Forrester organizes its research teams by individual client roles, so my teammates and I all focus on helping clients who are sourcing and vendor management professionals. Wait a moment. Should that read “helping clients who are sourcing or vendor management professionals”? Aren’t they separate functions within a client’s organization? This is a frequent question from our clients, and one that causes a lot of internal debate within our team.
My view, formed from witnessing the experience of hundreds of enterprises, is that, at least in the software category, sourcing and supplier management should be very closely linked, but not via org structure and reporting lines. This is because:
· It is impossible to manage software suppliers effectively unless you can influence sourcing. The major players are so big and powerful that they usually have the upper hand in discussions about maintenance renewals and service levels. Even small software providers can build immovable, entrenched positions in their chosen niches. To have sufficient negotiation leverage to do a good job, the supplier manager must be able to credibly threaten to negatively impact the supplier’s ability to win future business.
· Sourcing is infrequent but intensive, whereas supplier management is continual. The former consumes huge amounts of time and effort for a relatively small period, which risks dropping the ball on monitoring while you’re immersed in a big negotiation, or missing opportunities on the sourcing side due to distractions from the ‘day job’. You therefore need different people handling each side, but collaborating closely with each other.
On August 6, 2013, the Indian rupee plunged to a record low of INR61.80 to 1USD. In fact, since January 2013, the Indian rupee has depreciated by 10% against USD and is expected to slide further as India is challenged by political gridlock, serious infrastructure bottlenecks, and decreased investor confidence, all of which are contributing to a slowdown in economic growth. The declining rupee leads directly to increases in the cost of doing business, which has risen by 8-10% over the past year.
The difficult economic landscape has forced Indian firms to look for new and innovative ways to grow their businesses, create efficiencies, and improve responsiveness. This is driving changes in how Indian business leaders view technology – with many increasingly viewing technology as a far more critical means to differentiate their organizations and drive business growth. The pressure is now firmly on CIOs to deliver technology-led business outcomes for their organizations. To exploit this opportunity, CIOs should do the following:
- Develop a ‘business outcomes’ matrix and map existing and planned technology projects against it to build credibility with business leaders: ROI templates are generally developed to gain approvals and are typically limited to cost savings, but very few CIOs actually link their IT spending to clearly defined business outcomes. Define what business outcome means to your organization (e.g., increase in sales, revenue, customer acquisition, customer satisfaction to name few) and map each of your projects against the matrix to prioritize those with greatest business outcomes. This will help CIOs win buy-in from business stakeholders on project funding and priorities, while ensuring that IT is viewed as an equal and capable business partner.
Our research shows that 70% of Indian CIOs or top IT executives will report to CEOs or the senior-most executives in their organizations by the end of 2016. As the boundary between IT and business further blurs, successful CEOs must get more directly involved in business-led technology discussions as a means to differentiate their organization, drive business growth and measure technology success by the business outcomes it delivers. This is driving a fundamental shift in the CIO role as it moves from classic "plan, build, run" cycle management to a business outcome oriented, customer obsessed leadership position. With this backdrop, Forrester holds its second series of CIO summit across Asia Pacific in August and September; the India summit is scheduled for September 3 in Mumbai and the theme of the summit is “Mastering Tomorrow’s Business Outcomes”.
We have an action-packed agenda for the India summit with great mix of Forrester analysts (Dane Anderson, Nigel Fenwick, Bobby Cameron, and Duncan Jones) and industry keynote speakers (Arun Gupta,Chief Information Officer, Cipla; Ram Medury,Vice President, Head of IT, ICICI Lombard; Rajeev Seoni, Chief Information Officer, Ernst & Young). Throughout the day, we will have interactive discussions on how digitally-empowered customers are creating urgency for change by redefining how business is won and what role CIOs can master to digitally disrupt their markets by applying technology to deliver targeted customer value faster, better, and cheaper for potential business outcomes.
What typically happens when one approaches 40? Major mid-life crisis? Life transformation? Yeah, something like that...
Well, apparently tech vendors are no different. Back in 2010 with 40 rapidly approaching, SAP undertook a broad new innovation strategy with an executive mandate for intellectual renewal. The goal was to transform the company through innovation – innovation that would reach billions of new users and humanize the brand through consumer app development. What?! SAP, a consumer app company. Yes, observing market trends of consumerization and the rise of “shadow IT” (technology purchases outside of the IT department), SAP recognized the need to expand its audience and improve its user experience.
They began with three questions:
How can we create applications that can potentially reach millions of users?
How can we design, build, and release these apps in 90 days?
How can we scale this to successfully deliver large volumes of these apps?
I attended Google’s annual atmosphere road show recently, an event aimed at presenting solutions for business customers. The main points I took away were:
Google’s “mosaic” approach to portfolio development offers tremendous potential. Google has comprehensive offerings covering communications and collaboration solutions (Gmail, Google Plus), contextualized services (Maps, Compute Engine), application development (App Engine), discovery and archiving (Search, Vault), and access tools to information and entertainment (Nexus range, Chromebook/Chromebox).
Google’s approach to innovation sets an industry benchmark. Google is going for 10x innovation, rather than the typical industry approach of pursuing 10% incremental improvements. Compared with its peers, this “moonshot” approach is unorthodox. However, moonshot innovation constitutes a cornerstone of Google’s competitive advantage. It requires Google’s team to think outside established norms. One part of its innovation drive encourages staff to spend 20% of their work time outside their day-to-day tasks. Google is a rare species of company in that it does not see failure if experiments don’t work out. Google cuts the losses, looks at the lessons learned — and employees move on to new projects.
As businesses work to differentiate their products or services, grow the bottom line, and expand globally, they need to think seriously about the important role that their employees play in helping the business achieve successful outcomes. Businesses must invest in processes and technology to recruit and onboard the best people, address performance gaps with key learning activities, provide career development plans, and align pay with performance. Activities like human resource management (HRM) deployment in the cloud and the use of mobile and social technologies for HRM processes catapult HR to the cutting edge of innovation.
Ten days ago, three of us traveled to Japan for a Fujitsu analyst day held in conjunction with the firm’s huge customer event – the Fujitsu Forum. The analyst day was a follow-on from the firm’s European event last fall. At the two events, the management team, led by Masami Yamamoto, president and representative director, and Rod Vawdrey, the president of Fujitsu’s International Business, talked about the organization’s vision and key imperatives:
Creating a common vision around “Human-Centric Intelligent Society.” Management highlighted publishing the firm’s global vision document. Speakers repeatedly pointed toward Fujitsu’s new “human-centric” vision for how information technology improves business, personal, and societal outcomes. Fujitsu is positioning itself as a provider of solutions aimed at facilitating the activities of consumers and businesses, combining elements of its hardware, software, and services portfolio.
It’s (long past) time to put the era of One Size Fits All enterprise computing behind us. Providing workers with Standard Issue™ devices and software represents an antiquated paradigm. Instead, segmenting your workforce into different classes of workers – honoring the needs of each type of worker – can help you:
Save money. Overinvesting in computing power by giving a worker “too much machine” and over-investing in software licenses for applications that won’t be used are common implications of One Size Fits All enterprise computing. You can save money by provisioning appropriate hardware and software to various classes of workers.
Preempt BYO. While IT departments are coming around to the virtues and values of BYO, managing excessively diverse BYO comes with management costs. You can preempt some types of BYO by providing the right tool to the right worker at the right time… obviating the need for them to bring their own.
Drive worker productivity and innovation. Innovations like tablets and Chromebooks can empower certain classes of workers to achieve new levels of productivity. Providing the right worker – for example, a traveling salesperson – with a tablet can enable new scenarios and create tangible returns.
The continued economic viability of software development in India, whether by independent software vendors (ISVs) or “captive” business units, depends less on pure labor arbitrage and more on delivering time-to-market advantage for clients. The pressure of meeting business expectations demands that software firms harness creative capability wherever they can find it. The increased focus on Business Technology innovation and customer experience over mere cost savings presents both a threat and an opportunity to software configuration and development business units (BUs) in India.This is the key finding from my just-published report.
Forrester developed its software innovation assessment workbook to assess software innovation capability of firms. We provided this tool to members of NASSCOM (the industry association for the IT BPO sector in India), comprising both ISVs and captive development BUs in India, and surveyed them to assess the most important process, organizational, cultural, geographical, and staffing practices that promote software innovation. We also interviewed a dozen selected respondents in greater depth to better understand how innovation capability contributes to business success in India. We found evidence of widespread adoption of the practices correlated with software innovation capability, helping to drive a rapidly changing role for Indian business in the global software supply chain.
Innovators in India that were engaged in software development and configuration received high scores for many of the practices that drive effective innovation. They demonstrated strength in:
Listening to the voice of the customer
Making the development process more iterative and responsive
Organizations in growth markets across Asia have not traditionally been heavy consumers of outsourcing services. Having lots of on-premises hardware still carries some prestige for local CIOs, particularly in China and India. The availability of relatively inexpensive IT staff in local markets has also helped them deliver acceptable service levels to the business. Until now, that is. The combination of quickly rising IT salaries, increased competition from regional and even global expansion, and growing demands among business stakeholders to more effectively engage customers has put pressure on CIOs to increase the performance of their organizations.
More and more CIOs I speak with are struggling with how best to effectively transform their IT capabilities and meet fast-changing business requirements. In particular, whether to embark on this transformation journey alone or leverage outsourcing partners. In a recent report, I profiled organizations in Asia that are leveraging external service providers to accelerate their IT maturation. One example is a manufacturer with 10,000 employees and operations across Asia that outsourced its entire IT infrastructure environment to improve and homogenize service levels. Another is a large Indian bank that outsourced its entire IT department to a service provider and improved its maturity level from a 3 (on a scale from 1 to 10) to a 6 in less than a year.