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Innovation & Outcome: Making outsourcing work for the evolving organization of the future

Posted by: Pradipto Basu On April 22, 2015 03:39 PM

CIOs of the future aren’t limited to the ICT function within their organizations. They are business owners with a remit to make ICT work for the business top-line and bottom-line. Technology and consulting partners, system and service integrators, as well as the core organization by design, need to adapt to this changing portfolio of decision-making of the future CIO.

Service integrators, ICT consulting service providers and their partners have gone through an evolution in the last decade from task based and skill-based transactions to more engaging project based execution with defined outputs. The current decade since 2010 has seen organizations in Europe increasingly trying to create a seamless connect between business dynamics and responsive ICT, while navigating challenges posed by traditional organization design where ICT is inevitably a cost center at the receiving end of business decision making.

The future of ICT and consequently the role of the CIO, is within the business, either as a business-KPI enabler, or a business-case driven operations executor (and in some cases as a successful IT enabled innovator). As organizations work towards crafting such a core-business aligned modus operandi for ICT, this transformation fundamentally changes the way Technology companies and System Integrators engage.

The first transformation driver: Moving from a Cost orientation to a Quality orientation: As ICT moves from being a back-office cost center funded function to a business aligned enablement driver, quality of output and efficiency of execution is seen to be of paramount importance. ICT now closely impacts core business and hence needs to own up as well as deliver to dynamic business needs within prescribed timelines. This positions ICT and engaging Technology companies and system integrators in an ecosystem with the same market pressures that the business works with on a daily basis. This shift requires ICT departments (within organizations) and system integrators to merge way of working and align towards single streamlined governance. This also highlights the importance of excellence in quality.

The second transformation driver: Moving from an output mode to an outcome mode in engagement as well as execution: Earlier an ICT project would result in deliverables, but in this evolving world, ICT is now expected to enable key business drivers. Essentially, the theme is “an output is only as good as the business outcome it influences, in the market-forces-driven ecosystem”. This shift in perception, when translated to execution, means fundamental changes in governance, risk and enablement across ranks. The ICT departments across operational and management layers are now expected to take business-case based decisions. Governance shifts from a client-vendor model to a business-case or use-case led agile execution model. Risks resulting from failures, and gains realized from successes are significantly different and warrant a fundamentally different view towards engagement contracting. Risk-sharing and gain-sharing models gain prominence and risk-appetite as well as sophistication of governance and change management will determine the extent of successes either stakeholder has with the business model of the future.

The third transformation driver: Moving from a Capital expenditure based to an Operational expenditure based construct in all engagements (which is accelerated by availability and adoption of cloud enablement technologies): Most system integrators along with their partners are making this transformation already, however traditional software and technology product companies are still experimenting with hybrid models in the wake of the onslaught brought forth by new world cloud enabled XaaS models. For System integrators, mostly this means a change in the commercial engagement model and apportioning of risks differently.

The shift to outcome-based models is changing the priorities of engagement with a strong focus on innovation – both operational and business-model focused. Since ICT is now expected to deliver quantifiable benefits to the business, the typical engagement approach is changing to innovation-led, gain sharing constructs. Contracts increasingly look like joint-go-to-market approaches. Market leaders, Operations Leaders and R&D Innovation leaders of Businesses are moving closer to their ICT counterparts and consequently towards their respective System integrator partners. New roles are being defined to efficiently manage areas of significant spend like ICT in R&D, Digital marketing, Mobility enablement, Engineering, Product to Service Shifts, Technology-led forays into emerging markets, etc.

System integrators and technology companies are accordingly evolving into ideation partners. They are fostering concepts like open innovation to unleash creative thinking from existing knowledge and increasingly stepping into the realm of business strategy.

 Business Outcome shifts and Innovation focus as outlined above, aligns diverse stakeholders within organizations towards a common goal and ensures more ‘skin-in-the-game’ for system integrators and technology companies alike in their engagement models, while defining a fundamental shift in the role of the future CIO.

About Pradipto Basu

Pradipto Basu heads Tech Mahindra’s business in the BeNeLux region. He has more than a decade of experience of having worked for Indian and European System Integrators and having engaged with enterprises of various scale, maturity and complexity across multiple domains globally and in Europe..

Tags: Thought Leadership
 
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great post !!!

Posted by:mahashaikh | 4/29/2015 11:12:49 PM

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