Enterprises Invest in Innovation | Market Insights™
February 14, 2017
Enterprises’ technology investment priorities largely focused on innovation
Enterprises’ technology investment priorities largely focused on innovation
Enterprises must adopt a new prism through which they view and evaluate digital services in order to realize the full value of their investments
Moving work from an enterprise data center to the cloud is not a lift-and-shift transaction. Cloud moves involve reengineering processes. The good news is that providers are emerging with innovative solutions for deploying to the cloud. We’re watching their progress, as we believe they will disrupt the traditional players in the services market.
I blogged before about CSS Corp Cloud Services’ solution for cloud migration. Redwood Software and its RunMyJobs platform is another proven automated cloud migration solution. Redwood’s solution includes automation consultants who are skilled in reengineering high-value processes and packaging them for cloud migration through Redwood’s RunMyJobs platform. The solution is especially effective for problematic legacy applications.
Meeting enterprise needs
Both of these specialist firms provide interesting capabilities for moving production opportunities to the cloud with ease. They have a demonstrated and growing track record of successfully deploying applications into the cloud in a way that meets the robust security compliance, performance and resilience requirements of sophisticated large enterprises.
The impending disruptive nature of RunMyJobs and other such automated cloud migration technologies raises some hard questions about traditional service providers’ capabilities.
Have you ever spoken to a “digital transformation” enthusiast? The first thing you will notice is the person cannot exactly define digital in any meaningful way. The second thing is that the discussion will invariably include citation of popular consumer mobile apps, portals, and other things such as Facebook, Google Glass, the Internet of Things, PayPal, Pinterest, TripAdvisor, and Uber.
The third, and perhaps the most intriguing, is their obsession with customer engagement. The focus is so extreme that it pretty much excludes anything that is perceived not to be glaringly customer-related. This fixation, which means a sole focus on the front-end sales and marketing engine, fails to take into account that a digital strategy must pervade the entire value chain – customer engagement, business processes, technology operations, and organizational policies – and that a success requisite is transformation of the less attractive, unseen back-end.
Unfortunately, buyers have limited spending appetite and budget, and CIOs coming under intense pressure to add business value are vigorously channelizing these budgets into development of front-end-centric digital initiatives. I believe this myopic strategy is flawed, and will show its glaring weakness in the coming years.
Consider the impact of a sole focus on front-end digital initiatives without augmenting business process or technology operations. For example, a bank’s mobile sales force can open a customer account in 10 minutes or sell financial products using a banking mobile app, However, as the back-end operations and other business processes needed to make the account functional are still the same, the customer does not get the true benefits of this banking mobility. Or, when an online retailer develops a mobile app where customers can place orders, but the back-end processes and technology operations are same as customers placing an order through the online portal, the availability of one more access point for customers does not fundamentally impact the business.
Enterprises need to go full hog to leverage the disruptive power of digital services. A piecemeal approach will eventually hit a wall, and business leaders’ frustration will grow. To ease this, business leaders must understand and collaborate with the operations department, and push the operations manager to introduce digital transformation within the core technology operations and business processes.
Customers have always been at the center of the universe for successful companies, and digital transformation will not change that. However, extreme customer-centricity without suitable investment in back-end operations or business processes that drive customer delight will result in a grand failure. Enterprise buyers need to judiciously invest in technology solutions across their business and internal processes to create a vibrant “digitally aware” organization that understands the impact of this transformation. The impact should be pervasive and touch upon each aspect of the business.
Digitization of business processes across an organization presents a tremendous opportunity to leap ahead of the competition. But make no mistake…it’s a high investment, high risk, and high return game. Organizations that have the required mettle to make technology pervasive in their front-, middle-, and back-end operations will not only survive, but thrive.
Here’s a blatant truth: Any company looking to procure outsourced services can get into a similar situation as the government faced with its healthcare.gov website before it switched the work to Accenture to fix the debacle. That’s because the RFP process is a breeding ground for “gotchas” that eventually can evaporate a deal’s ROI or, at best, result in a deal that yields just so-so outcomes. I’ve studied the RFP process in my 30 years in this business and observed insanity — that is, companies doing the same thing again and again but expecting different results. I think it’s time to resequence the RFP process.
The foundational error in the RFP process
Typically in a services procurement process the buyer first defines its objectives and then goes to the market to understand which providers are well positioned to meet those objectives. After some consultation, the buyer codifies those requirements into a request for proposal and works the RFP scope through a series of design workshops to truly understand the providers’ responses and help them better shape their proposals to address the buyer’s needs. The result is a number of very similar offers, competing on little more than price as well as terms and conditions.
So it’s no surprise that this RFP process sequence means the provider-selection decision is actually based on price. Despite best intentions, and even documents that say price isn’t the buyer’s biggest driver and it’s positioned at #4 or #5 on the selection-criteria list, the RFP process makes price the most powerful determinant.
A proposal for resequencing the RFP process
Perhaps what we need to do is to change the process to first define the problem and allow providers to build different, not the same, solutions around their strengths. This switches the process from an apples-to-apples perspective to an apples-to-oranges view with evaluation based on total cost and total effectiveness rather than price.
At this point the buyer would thoroughly examine and weigh the capability of the best-and-final two providers to deliver the offered service. This is different from getting client references, which often are manipulated.
Industry angst
Will the industry seize the chance to operate from this new level of thinking in the RFP process, or will it display angst? I perceive substantial pushback from both the procurement community as well as the provider/vendor community. The procurement community is happy to compete on price, and the provider/vendor community doesn’t want to unnecessarily spend scarce resources on bidding and legal fees before assurance of a high probability of a win.
Notwithstanding initial angst and pushback to my proposal, I certainly believe the RFP process needs to change.
Photo credit: Ahmillar
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