The Agile manifesto, created 20 years ago, radically changed the software development process, introducing new principles and emphasizing breaking tasks down into bite-sized pieces to achieve more innovation and greater productivity. Although some companies improve productivity by 100-200% in a year in application development and maintenance, most still complain that their IT teams do not operate quickly enough and fail to meet business needs. What makes the difference? An essential factor that must be in place in Agile methods to improve productivity is product management, but it has not been introduced into most companies’ IT departments.
It may seem at times that the IT and procurement departments can be on different planets when it comes to IT sourcing services spend. But it doesn’t have to be “us” versus “them.” Read on to learn how to counteract differences in communication styles and behavior patterns, so your entire organization wins.
For a complimentary analysis of your IT sourcing practices, take our IT Sourcing Pinnacle Model® survey to see how you compare against best-in-class or IT sourcing Pinnacle Enterprises™ across leading global organizations.
Anyone who has set up a new procurement department at a firm with large volumes of untracked indirect spend knows they first need to target the IT department and get involved in their sourcing projects. The reasons are simple – IT has large volumes of spend, generally adopts procurement practices the earliest, and can become the greatest support system in the long-term. The CIO’s office consists of the visionaries who are willing to take high risks of trying something new and are the least process-sensitive of all business units. Often, IT category managers end up closely collaborating with their functional leads, and certain organizations centralize procurement departments in IT. Further, as early adopters, IT prefers to rely on their own intuition and vision and also are willing to serve as highly visible references to other adopter groups in the population (i.e., other business units). Thus, IT is the stepping stone for procurement if they want to establish their foothold in the organization and increase spend under their influence, which is still abysmally low. The typical procurement team is not involved in nearly half of their company’s services spend, as can be seen in the exhibit below.
Procurement influence across indirect spend in Pinnacle Enterprises™ (best-in-class organizations that lead the services sourcing journey) and other enterprises Source: Services Sourcing Organizational Maturity | Pinnacle Model® Analysis (Everest Group 2020)
However, at the same time, the IT function can be highly demanding. IT is always in upheaval, beset on one side by users and the other by budgets. As in any relationship, IT and procurement tackle multiple such chasms, but their problems range across the same old partnership concerns that exist in modern-day relationships – stonewalling, unsolicited criticism, and the atypical “you never listen to me!” argument. Multiple examples can help prove this analogy: IT and procurement do not have regular meetings (in most organizations, they do not even meet monthly), do not involve each other across stages in sourcing engagements (IT is known to invite procurement late in the sourcing journey, whereas procurement is known to keep IT out of negotiations), and still treat each other as separate entities, instead of working towards a shared goal.
If the two could solve a couple of key issues in this troubled relationship, the IT-procurement partnership can create great profitability for the firm in the long haul. Here are five ways to help strengthen the bonds between these crucial areas:
Support each other’s growth and development: The basic rule of a relationship is that when one is growing at a rapid pace, the other needs to ramp up to provide support. Organizations are being driven to rapidly undertake digital transformation by recent market trends such as migration to cloud services, servitization, and cybersecurity measures becoming the new norm. IT spend is spearheading the growth of an organization, with IT spending worldwide expected to reach about US$4.2 trillion in 2021, an 8.6% increase in growth compared to 2020. Specifically, the IT services market (that encompasses a range of offerings that assist enterprises in implementing, managing, and operating a wide variety of systems, software, and equipment that are used in modern IT environments) accounted for over US$152 billion spend in 2020 and is one of the fastest-growing segments in the overarching IT industry, trailing only enterprise software in terms of year-over-year growth. This increase in IT services spend requires procurement to rewire their own agendas from being cost-focused towards becoming more value-focused, and also reshaping outsourcing contracts to ensure long-term success in today’s changed outsourcing environment
Growth in IT spend from 2016-2022, including hardware, software, and services spend (2021 and 2022 spend values are estimates) Source: Statista (2021)
At this point of rapid growth, it is imperative for procurement to up its IT sourcing game by becoming more agile and reducing sourcing turnaround time, gaining more category intelligence in emerging technology areas such as blockchain and cybersecurity, getting used to negotiating complex licensing agreements, and adjusting contracts to incorporate recent rate increases requested by suppliers due to the current scramble for IT talent.
Stay involved throughout the journey: At the onset of any relationship lies trust, and both parties must build trust and loop each other in all aspects related to the sourcing journey. IT can implement this by undertaking steps such as including procurement at the requirements gathering phase in a sourcing engagement, keeping them abreast about business requirements that can drive supplier capabilities, giving a transparent picture about supplier performance in oral presentations, and ensuring procurement is involved in all conversations about sourcing selection. This deal goes both ways. It is essential for procurement to keep IT onboard for actual negotiation talks and decisions, help price and right-size contracts for deals, and bring category and sourcing intelligence from past successful deals and supplier partnerships
Back each other in times of crisis: While risk management has become key in today’s day and age, occasionally, there are crises that no one can predict. Smart strategies help in such scenarios, for instance, during the coronavirus crisis, many IT and procurement leaders worked together to keep their small- and medium-sized suppliers afloat with early payments and by identifying new areas of cost optimization (e.g., creating negotiation opportunities through internal demand management without harming suppliers)
Listen to each other: Regular communication is key as each party brings in specific skillsets and typically, IT and procurement should have a monthly cadence at the minimum. The results of proper communication can be seen through an example in sourcing risk mitigation – IT brings a better understanding of the contractual risks, such as the possibility of software license audits, while procurement has the experience within contract risk management to ensure suppliers establish appropriate controls and provide contingency plans. In this scenario, IT and procurement can leverage each other’s skillsets to ensure end-to-end risk coverage
Finally, act as partners, and not as boss-subordinates: Traditionally, procurement treats category departments as their end customer and becomes driven towards serving all their needs. However, it is crucial to treat this relationship as a partnership over a boss-subordinate model (where IT is the client and procurement is the department serving them). Procurement should confidently bring in their expertise from strategic sourcing and spend analysis to contracting, benchmarking, and spend management to deliver value within IT. Procurement also should provide constructive criticism towards IT decisions, even if it involves redesigning their buying process
This point is key – but it involves a fundamental shift in the way these two departments view themselves. In my last role in procurement consulting driving value in the IT category at a US-based consumer packaged goods firm, I observed that while procurement worked closely with the IT team (with the procurement team even sitting within the IT office), they were often at loggerheads. Being the subordinate department in this case, procurement frequently had to go the extra mile to ensure the IT department did not make destructive moves, such as revealing the baseline to the supplier at an early stage, or unconsciously leaking to selected suppliers that they would definitely be awarded the contract (and thereby sabotaging procurement’s negotiation strategy in the engagement). Being on the procurement side, I did not understand how IT was suffering due to procurement’s clear invasion into their territory. I can imagine that the IT audience reading this blog can talk in detail about procurement’s insufferable demeanor and uninvited settlement on their home ground. By better understanding their differences, IT and procurement can find common ground and realize they can effectively operate in the same universe after all.
Take our survey to get a complimentary analysis of your IT sourcing practices and learn how you compare against best-in-class or IT sourcing Pinnacle Enterprises™ across leading global organizations.
For further details on how we can support sourcing and vendor management leaders, contact Bhanushee Malhotra, Practice Director, at [email protected]
The engineering services market is now disrupting the IT services marketplace. The move to technology platforms and the requisite number of engineers causes a dilemma for CIOs. The need for engineering skills is growing faster than IT skills, and companies are investing more in the engineering function, somewhat at the expense of IT. CIOs cannot ignore this phenomenon. Should a CIO create an engineering organization that runs parallel to the IT organization, or should engineers be part of the IT organization and perform some IT functions?
Cloud as a concept and then as a reality swept through businesses over the past ten years, and most companies moved a lot of their applications to public cloud platforms. AWS, Google Cloud Platform, and Microsoft’s Azure (the hyperscale service providers) are now powerful influencers in business today. They turned IT into a commodity and then put an as-a-service layer on it, thus influencing business thinking as well as IT. But companies are now competing in a different way.
Nearly every company is increasing its investment in technology and attempting to create new competitive advantage by assembling technology into platforms that transform how they serve their customers, service their employees, and coordinate their supply chains. Platforms automate existing activities and functions, fundamentally changing how leaders run an organization. Platforms cut across traditional organizational boundaries, incorporating many departmental functions, thus forcing a restructuring of process, organization, and technology. That creates a real challenge for organizations.
Many companies now experience dramatic improvements in productivity – measured by the effectiveness and efficiency of work. They achieve these improvements because of implementing the new operating models and agile methodologies. However, companies still looking to achieve productivity improvements find a fundamental dilemma in trying to implement necessary changes associated with the new operating models.
The European market has been slower than other areas of the world in adopting digital transformation, but that’s changing. With new regulations opening up the digital marketplace for fair competition, sizeable strategic partnerships, and providers embracing the latest cloud, automation, and Artificial Intelligence (AI) capabilities, Europe is poised to seize a leadership position in the tech landscape. But the region needs to act quickly and grasp the right opportunities to prevail. Read on to learn more about Europe’s road to digitalization by 2030.
COVID-19 accelerated the worldwide movement that has been underway for years by businesses to adopt digital initiatives. Amid the pandemic, digitalization was pushed into the spotlight as a means for businesses to survive by finding innovative ways to deliver services through digital media.
The European market, however, felt the impact because it has historically shown a slower rate of digital adoption in some segments and also bore the early onslaught of the global pandemic (starting with the outbreak in Italy).
Coupled with slowing macroeconomic growth and looming Brexit, enterprises in Europe have been facing significant challenges. The changes fueled by the pandemic have now pushed Europe to rethink its business models and talent and embrace accelerated digital transformation.
Gearing up for change
Combined with this market context, Europe’s dependence on global technology companies (versus homegrown firms) has increased. Various reasons exist for Europe’s perceived decline as the home of Big Tech companies, including a stricter tax regime, more active regulatory/legal frameworks, and a smaller homogeneous addressable market. Despite this, Europe outperforms the world in many pockets of innovation, such as financial technology (FinTech), blockchain, payments, creative agencies, and cybersecurity.
Now, new expectations that developed from the pandemic have led European organizations to gear up to fully embrace digital business models. According to an Everest Group key issues survey, customer experience is the most critical priority for enterprises and service providers over the coming few years, followed by operational efficiency, then launching new products and services. The image below illustrates Europe’s priorities in business model changes and areas of innovation.
To improve the customer experience, European enterprises are offering digital solutions for conducting simple interactions without physically going to a location or speaking directly to a customer service agent and delivering more personalized experiences for language support, channels, and availability.
Europe’s transition to digital by 2030
Against this backdrop, Europe also is ramping up technology sovereignty efforts. Recently, the European Commission set the course towards a digitally empowered Europe by 2030. European governments and regulators are rethinking the enabling frameworks and legal structures to foster innovation and digital leadership.
The goal is to achieve digital sovereignty in an open and interconnected world and to develop digital policies that will enable businesses to adopt and seize a human-centered, sustainable, and more prosperous digital future.
Among the European Commission’s targets are ensuring 80 percent of all adults have basic digital skills, three-quarters of companies use cloud services, all public services are available online, and all households have gigabit connectivity.
To achieve these ambitious expectations, Europe will need to move fast.
The pathway to digitalization
To pave the way towards digital success, Europe has set in motion initiatives such as the Digital Markets Act (DMA), the Digital Services Act (DSA), and GAIA-X, a project to develop common requirements for a European data infrastructure supported by representatives of business, science, and administration.
With data security, privacy, and technology sovereignty becoming key issues for the region, Europe is setting up the following sanctions to protect companies and ensure a competitive market:
DMA: Ensures a higher degree of competition in European digital markets by stipulating large online platforms behave reasonably, creating a fairer business environment that encourages new emerging players to enter the market, and gives consumers more choice at competitive pricing
DSA: Protects all users, no matter where they live in Europe, by guaranteeing a safe and accountable online environment and opening up new opportunities to provide digital services across borders
GAIA-X: Strives to develop common requirements for European data infrastructure and to establish an interoperable data exchange where businesses can share data under the protection of European laws
With these new seminal regulations potentially changing the enabling framework of doing business across Europe, the market is at a juncture where it can take back the reigns of the technology landscape. But its success at capturing the next wave of digital transformation will hinge on how the region, its businesses, and regulators react to the current situation.
A bright future there for the taking
Europe has always had a broad range of innovative companies and countries with strong start-up and entrepreneurial cultures. Large partnerships over the past nine months that point to scaling digital transformation are also on the rise in Europe. These include deals like Wipro joining with Telefonica and METRO AG, Infosys with Daimler, and TCS with Deutsche Bank and Prudential Financial. For more details, please see our webinar, Why Europe is Poised to be a Major Factor in Digital Transformation Strategies, from earlier this year.
With increased digitalization accelerated by COVID-19, European organizations are moving forward with top digital capability priorities like cloud, cybersecurity, and analytics alongside automation and advanced automation AI.
Europe also provides attractive options to meet the need to shift to digital with different constituent countries offering local language and cultural context, and easier intra-region mobility (Brexit notwithstanding). For instance, vibrant technology ecosystems are developing in different clusters such as Germany for hi-tech and automotive, Eastern Europe for product engineering, and the UK and Ireland for financial services, to name a few.
Poised to be one of the main drivers of digital adoption, Europe will retain its central place in the world’s technology economy. However, spotting the right opportunities and actions to grasp will be crucial over the next few years.
Europe must take advantage of current changes in the market by:
Adopting a design-led workforce strategy that enables it to leverage specific digital talent pools and re-skilling or upskilling current employees with needed digital skills
Increasing the numbers of global service providers and product vendors focusing on investments in Europe as an attractive location closer to clients or to reduce risks from hyper-competitive markets. This includes the diverse opportunity Europe offers across different regional clusters
Accelerating efforts by European governments and regulators to rethink frameworks and legal structures to foster innovation and digital leadership
Our recent research shows that European enterprises plan not just to recover but exceed projected financial goals. With the end of the pandemic in sight and the reopening of business throughout the continent, digital innovation and opportunities to scale will be ripe for Europe’s taking.
How do you view the European digital transformation opportunity? Share your thoughts by emailing [email protected].
Digital transformation is accelerating as we come out of the COVID-19 pandemic, with more and more companies starting to achieve tangible and meaningful business results. Companies are also undertaking the grand adventure of implementing new operating models that offer better competitive positioning and a lower cost to serve. In addition, we now face an acute talent shortage, and companies must shift their focus away from controlling or cutting costs to instead focus on building an assured supply of the necessary talent. As a result, increasingly, focusing on risk is more important than focusing on profits.
Low-code platforms are here to stay because of the rapid application development and speed to market it enables. But why is no one taking the same “life cycle” view for low-code applications and workflows as typical software development? A new model of Low-code Development Life Cycle (LCLC or LC2) is needed for enterprises to realize the potential benefits and manage risks. Read on to deep dive into these issues in this latest blog continuing our coverage of low-code.
Our market interactions suggest enterprises adopting low-code platforms to build simpler workflows or enterprise-grade applications are not thinking about life cycle principles. Though enterprises for ages have adopted Software Development Life Cycle (SDLC) to build applications, it is surprising no such initiatives exist for low-code applications.
Given its staying power in the market, it’s time to consider Low-code Development Life Cycle (LCLC or LC2).
Here are some recommendations on how LCLC can be structured and managed:
Rethink low-code engineering principles: Enterprises that have long relied on SDLC concepts will need to build newer engineering and operations principles for low-code applications. Enterprises generally take long-term bets on their architecture preferences, Agile methodologies, developer collaboration platform, DevOps pipeline, release management, and quality engineering.
Introducing a low-code platform changes most of this, and some of the typical SDLC may not be needed. For example, these platforms do not generally provide an Integrated Development Environment (IDE) and rely on “designing” rather than “building” applications. In SDLC, different developers can build their own code using their IDE, programming language, databases, and infrastructure of choice. They can check in their code, run smoke tests, integrate, and push to their Continuous Integration/Continuous Delivery pipeline.
However, for most low-code platforms, the entire process has to run on a single platform, making it nearly impossible to collaborate across two low-code platforms. Moreover, enterprises might be exposed to performance, compliance, and risk issues if these applications and workflows are built by citizen developers who are unaware of enterprise standards of coding. This also might increase the costs for quality assurance beyond budgeted amounts.
Even professional developers, who are well aware of enterprise standards while building code in an existing manner, may not know how to manage their LCLC. Many low-code platforms allow SDLC steps within their platform, such as requirement management. Therefore, all the collaboration will have to happen on the low-code platform. This creates a challenging situation requiring enterprises to have different collaboration platforms for low-code applications separate from the other standard tooling they have invested in (such as Teams, Slack, and other agile planning tools) – unless they are integrated through APIs, adding overhead and cost.
Also complicating issues is the desire by some developers to have the developer portal of these low-code platforms extend to their IDE. Most platforms prefer their own CI/CD pipelines, although they can also integrate with third-party tools enterprises have invested in. A different mindset is needed to manage this increased technological complexity. Because low-code applications are difficult to scale for large data sets, some of the scaling imperatives enterprises have built for years will need to be rethought.
Manage lock-in: Most low-code platform vendors have a specific scripting language that generates the application and the workflow. Developers who are trained on Java, .net, Python, and similar languages do not plan to reskill to learn proprietary languages for so many different platforms. While enterprises are accustomed to multiple programming languages in their environment, they normally have selected some primary languages. Though low-code platforms do not extensively rely on developers coding applications, enterprises generally would want to know “under the hood” aspects around architecture, data models, integration layer, and other system elements.
Build governance: We previously covered how low-code platform proliferation will choke organizations that are blindly prioritizing the speed of software delivery. Therefore, governance is needed not only in the development life cycle but also to manage the proliferation of platforms within enterprises. Enterprises will need to closely watch the low-code spend from subscription and software perspectives. As low-code platforms support native API-based access to external platforms, enterprises will need to govern that spend, risk, and compliance (for example, looking at such issues as whether some third-party platforms are on the blacklist).
What should enterprises know?
Low-code platforms can provide enterprises with a potent platform. But, if not managed well, it can be risky. To manage the potential risks, enterprises need to be aware of these three considerations:
Understand vendor solutions and their history: Different vendors can have different views and visions around low-code based on their history around being led by API, Business Process Management (BPM), BigTech platform, or process automation. Most will need their run time engine/platform to be deployed to execute the application/low-code. Others may allow code to be run outside of their platform. Moreover, their capabilities around supporting aspects such as forms, process models, simple-data integration, application templates, and library components can significantly vary. CIOs need to understand these nuances
Require business and CIO collaboration: Businesses love low-code platforms as it allows rapid application development and shortens time to market. However, as the adoption scales, businesses will realize they cannot manage this low-code ecosystem on their own. Whether CIOs like it or not, the businesses will punt over their responsibility to the CIO organization. Therefore, CIOs need to proactively address this requirement. They will need a strong discovery model to take inventory of their low-code adoption, workflow, and applications that they are supporting
Assess the applications and workflows the low-code platform can support: Vendors normally claim they can build “complex” applications through their low-code platforms. However, this definition is not consistent and may not be as complex as vendors say. Enterprise-class applications need code standardization, libraries, documentation, security, recovery, and audit trails. Most of these platforms provide out-of-the-box or custom integration with other enterprise applications, project management, and other SDLC tools. CIOs need to evaluate the cost, performance, maintainability, and security aspect of these multi-point integrations
Expect M&A activity
Enterprises’ desires to drive digital transformation will make low-code proliferation a reality. Currently, most low-code vendors derive a small $100-500K revenue per client, indicating the focus is mostly on Small and Medium Business (SMB) segments or small line of business buying. As a result, we expect consolidation in this market with large vendors such as Salesforce, ServiceNow, and Microsoft furthering eating into small vendor’s share. Enterprises should keep a close watch on this M&A activity as it can completely change their low-code strategy, processes, and the business value they derive out of strategic investment into a low-code platform.
What has your low-code journey been like, and how are you using life cycle concepts? Please reach out to share your story with me at [email protected]
Every company wants to create new value for competitive advantage. One component of value is hyperproductivity. In the past, I blogged about eight levers that help achieve hyperproductivity; and I have observed more than one company achieve a 350% productivity improvement in a year using these levers. I now want to focus on one of those companies and key strategies the CIO used to produce the outcome.