Organizations buy services from a wide variety of service providers — ranging from managed services for IT applications and infrastructure, contingent labor to supplement gaps in skills and availability, cloud services, business process services, and more. We at Everest Group looked at the administration of these contractual relationships and discovered that most organizations leave tens of millions of dollars on the table. Why does this happen and what is the answer to this dilemma?
Companies today hold all business functions to a mandate for innovation. Innovation should create business value (a better experience for employees, customers, and partners). It should create agility and speed. It should make business functions more easily adaptable, easier to change. And it should also lower the cost of the functions over time. The benefits are clear and obvious. But the truth is innovation is illusive and hard to get.
Companies undertaking digital transformation seek to improve customer, employee and partner experiences. They build digital platforms to deliver the desired experience. My observation from working with many companies undergoing this endeavor is they often overlook the key factor necessary building an effective digital platform.
Companies’ investments in digital platforms are becoming pervasive, thus moving businesses into a new era. They first moved from a functional orientation to a process orientation and are now fundamentally shifting to a platform orientation. Digital platforms are already changing companies, whether they recognize it or not. The implications of platform thinking are very deep. Data are the lifeblood of a digital platform. But the implications of what companies must do to be able to apply their data in a timely way is significant.
The IT modernization movement is moving beyond the initial euphoria around the potential of digital technologies. Companies taking steps to modernize their IT are recognizing that it’s a very substantial endeavor and will take years to accomplish. In committing to the long haul of the modernization journey, several situations are becoming apparent, causing companies to take a more mature, measured approach in how they evolve their technology.
Businesses have conducted change management programs for 20-30 years. Even so, change management programs are systematically ineffective in delivering results. Unfortunately, the ineffectiveness is much worse today.
That’s because companies are engaged in digital transformation, where the degree of change is much greater than in the past. What causes the ineffectiveness, and what is the remedy?
The Infosys board of directors recently received a whistleblower’s letter making a set of claims. The substantive claim is that Infosys may be inappropriately recognizing revenue in some of its large deals. The whistleblower’s accusation is causing a fair amount of excitement in the press. I want to put this situation in context and explain the implications for Infosys’ customers, employees, and shareholders.
It’s getting harder and harder to do business with third parties because of complications arising from security, data privacy, GDPR, and other regulations. The complications are running headlong into the need to be agile and operate at high velocity. To do that, companies need to be able to move quickly and make things simple. But these regulatory requirements are making that complicated; they take time, thus creating real friction in trying to conduct transactions. This is particularly the case with trying to do business with third-party services. The consequences create a formidable barrier in trying to select the best providers/vendors.
The story we tell ourselves as executives is that we make decisions based on facts, on data. We want our organizations to be data-driven organizations with decisions based on “institutional conviction.” In reality, making well-informed decisions and getting others to support those decisions is a factor of how deep and well supported the convictions are and leaders’ ability to persuade others of those convictions. However, without data and facts, people typically believe the executives’ underlying assumptions are wrong or incomplete.
“Software is eating the world,” wrote Marc Andreessen, co-founder and general partner of venture capital firm Andreessen Horowitz, in an essay published in The Wall Street Journal in 2011. But today, it’s clear that services are eating software. The implications of this trend are very significant for companies. The advantages are clear, but it’s also clear that there are challenges. Most companies today are not set up to deal with a services world. I believe they need a new set of management and operating models that allow companies to get clarity on what they are doing with services and allow them to stay in control.