CIO Archives - Page 2 Of 9

The Tyranny of Service Providers’ Global Rate Cards | Sherpas in Blue Shirts

November 13, 2017

As their enterprise clients move to digital business models, which are clearly superior in productivity, business alignment and speed, legacy service providers seek to shift their offerings to the new digital world too. Seems like a great match, right? So, what’s the problem? The problem is the service providers are accustomed to a very profitable offshore factory delivery model. Inconveniently, the new digital business models don’t align well with this old tried-and-true mainstay. Even more disturbing for the service providers is that the new delivery models look to be less profitable than the mature offshore talent factories. I foresee increasing pressures on margins and some potentially unrecognized consequences that will impact clients.

Two reasons for the margin paradox

As the services industry rotates from the old labor arbitrage model to digital business models, service providers expect to achieve higher margins than their typical 40 percent gross margins. Why? Because the digital models deliver a higher level of value. They are better aligned against clients’ business results and are delivered at a faster rate. So, why are providers shifting to digital not getting even close to maintaining the margins they enjoyed in the labor arbitrage space?

One reason is the price of digital talent. The skillsets for the disruptive technologies are rare and command a higher price. Plus, there is a scarcity of talent with skills and experience in implementing the new models.

A second factor is the difference in teams doing the work. The digital world requires persistent teams that remain over time and are located onshore; the arbitrage world depends on low-cost labor in offshore teams that churn over time.

Digital Transformation’s Impact on IT Shared Services | Sherpas In Blue Shirts

November 3, 2017

Enterprises realized value in IT shared services organizations for the past three decades. Over the past two years, I’ve delved into the nuances of capturing the promise of digital transformation. As I think about the impact of digital transformation on shared services, it becomes clear that shared services are in for substantial changes.

I blogged before about SaaS and SaaS-like products driving the collapse of the IT technology stack (server, operating system, middleware, applications, etc.). For those of you who have not read or can’t remember what I wrote, the following is a quick recap. Much of the innovation in technology over the last few years has been aimed at integrating and automating the IT stack. For example, SaaS combines the infrastructure middle layer of the database and applications layer into a single consumable product. In doing this, it automates and integrates many otherwise automatous components, resulting in lower TCO and tighter alignment with business functions. It may be less clear that this same collapsing IT stack will inevitably set in motion other significant changes in both the enterprise IT organization and it business model.

Related: Learn more about Everest Group’s Shared Services Center capabilities

Enterprises created IT shared services organizations to centralize IT functions, professionalize services and sell high-quality services back to the enterprise at lower prices. The concept worked well improving the reliability and performance of IT, lowering unit cost of IT components and creating a professional team of technology experts for the wider organization to rely on. These enterprise IT functions naturally aligned around the technologies they supported broadly organized by infrastructure, middle ware, application maintained, application development, security, project management and so forth. Each functional team organizes around creating high quality functional services which are then resold to the broader organization. All of this makes a great deal of sense until we consider the collapsing stack which now integrates and automates much of what the functional teams currently do.

Browse all my blogs at peterbendorsamuel.com

Google Touts Programmers 10 Times More Productive | Sherpas in Blue Shirts

October 25, 2017

Are you looking to increase productivity at your company? Google believes that its engineers are 10 times more productive than a typical engineer or programmer. On its surface, that sounds astounding. Yet, Google believes this to be the case. Is it that the people Google hires are 10 times smarter? That doesn’t make sense. We know the distribution curve of IQ means there is no such thing as someone 10 times smarter. So, something else is going on here. What is it?

Let’s take Google’s claims at face value. Here’s how they make their claim a reality. Google hires smart people and then puts them into an environment with accelerators (such as cloud, automation, integration tools and agile product disciplines) that enable them to be 10 times more productive. The results are astounding both in impact and cost to operate.

Let’s compare this this impact to the other most important factor that shaped the market for the last 20 years: labor arbitrage. If you can move work offshore to a third-party service provider, they can pay workers between 20-60 percent of what is paid to onshore workers. After taking into consideration service provider profit margins and overhead, on an hourly cost comparison, this realizes savings of 20-30 percent. If we just compare the cost savings to Google’s claim of 10 times greater productivity, the benefits dwarf those of the arbitrage model.

Why a Hackathon May not be a Good Strategy for Your Company | Sherpas in Blue Shirts

June 1, 2017

Hackathons, or hackfests, are getting a lot of buzz for being a collaborative, crowdsourced way of generating new product or service ideas. Sometimes they’re even touted for ideas that drive change and create a competitive advantage. But if that’s what you have in mind for a hackathon at your company, prepare for a letdown.

The buzz isn’t all hype. Entirely new companies (such as GroupMe, which was acquired by Skype) have been birthed from hackathons. And Facebook’s “like” button originated in an internal hackathon at Facebook. Some hackathons resulted in government entities capturing new ideas on how to improve government services. And an increasing number of companies find hackathons to be an effective strategy for improving employee engagement.

A Fundamental Flaw in Approaching Digital Transformation | Sherpas in Blue Shirts

May 16, 2017

What makes digital technologies so different and disruptive is their potential to enable very substantial business benefits. “Enable” is the key word. Too often, executives see the power of a technology and reason to themselves, “This technology will create significant benefits, so we need to implement it and learn how to use it to our advantage.” The problem is this is a fundamental flaw in approach that almost always ends up in a digital transformation failure.

Technology does not drive change; creating substantial business value requires changing the business model. And a business model change requires many changes in operations, not just new technology. Yes, those changes are cross-functional, usually end to end, and always disruptive. But without changing other operational aspects than technology, the transformation initiative will fail to deliver the anticipated outcome.

CEO Mandate is not Enough for Success in Digital Transformation | Sherpas in Blue Shirts

May 11, 2017

If you’re a CIO or other executive tasked with leading a digital transformation project, chances are high that you’re left-brained oriented — you’re a logical thinker and are very good at solving problems. But be careful when you develop the approach to the transformation. Inevitably you’ll be asked “What’s the solution?” and “What does the road map look like?” Speaking for myself here, we folks with dominant left-brain characteristics are often “stupid” enough to answer those questions. Unfortunately, thinking we are bright enough to know the answers is a mistake that usually motivates passive-resistance to change and can even lead to a failed initiative.

Some leaders driving transformation initiatives have a natural tendency to go right to the problem, figure out the solution and start working on it. This is especially the case in organizations where there is a mandate from the CEO to make the transformation happen. Everyone understands they must get on board with the mandated change.

Is Blockchain Technology Secure for Your Company’s Transactions? | Sherpas in Blue Shirts

May 4, 2017

Blockchain technology is hard to ignore as practically everybody’s talking about it. That’s understandable because it’s predicted to disrupt the value flows that underpin business transactions and economies as well as create new business models. It has enormous power to solve business problems. But is a blockchain “distributed ledger” secure?

Blockchain is still in its infancy, so company leaders are naturally concerned about whether it can be manipulated. Organizations worldwide are seeking to take advantage of the new opportunities and disruptive power of blockchain — organizations that understand the magnitude of potential security issues. It has been rigorously tested in pilots and at scale by many governments, institutions and companies that have found the technology is incredibly secure.

How Blockchain Technology Applies to Your Company | Sherpas in Blue Shirts

May 3, 2017

Blockchain technology is a red-hot topic in the news these days and in many C-suite discussions. It has wide applicability to many industries and most companies. Like any emerging technology, companies that aren’t first movers tend to look for proven use cases and often wait for the technology to mature. But that may not be your best strategy with blockchain. Adoption has accelerated, and new use cases occur almost daily showing blockchain’s potential for revolutionizing a business as well as creating new markets. I believe every organization needs to consider how it might apply to their business. Let’s look at what the technology is and several examples of how your company could benefit from it.

What is blockchain?

Blockchain is a decentralized digital distributed ledger shared by a peer-to-peer network of computers. It’s a mechanism that brings efficiencies, transparency, security, auditability and trust into shared business processes at a very broad level. The business process could be internal to an organization, or it could be among different external parties. The transactions are verified and recorded in the ledger almost instantly.

The Disruption and Promise of Artificial Intelligence | Sherpas in Blue Shirts

April 21, 2017

There’s no shortage of books, news articles and comments in social media about how artificial intelligence (A.I.) is shaping our future. Although it’s still blazing a trail, we’re on the brink of A.I. disruption that will change all industries and society at a very deep and fundamental level. I believe it will be one of the next great wealth generators.

My optimism about A.I.’s growing potential arises from many successful use case examples as clear evidence that A.I. is now getting the scale, maturity and the ecosystem in which it can be effective. Although A.I. has been developing for 20 to 30 years, it’s gaining enough elements necessary for a supporting ecosystem.

How a CIO Shifted IT’s Role to Enable Growth through Digital Innovation | Sherpas in Blue Shirts

April 19, 2017

Imagine you’re the new CIO at a global vehicle manufacturing company (with industry-leading products) that now faces stiff competition from new players in its market. The CEO brought you in to lead the company transformation to enable dramatic growth quickly. The management committee had already developed a vision of its future state and developed broad, ambitious goals including doubling top-line revenues by 2020 while reducing working-capital requirements.

But the true level of commitment to the vision was not certain, and there was no clarity on what it would take to achieve the goals. The only known factors were (a) growth opportunities would be in digital innovation, especially in the Internet of Things (IoT) and (b) the IT group would need to change from being “order takers” and missing service-level targets to becoming a business enabler and driving the pace of change. How would you go about leading this challenging transformation?

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