IT leaders must recognise business realities in re-setting their plans.
Since the credit crunch took hold, few UK firms have sustained a growth-led agenda. Shrivelling demand, evaporating credit, and overall negative sentiment took care of that. But lately the mood has begun to shift. Management teams start to move emphasis from cost control and stabilisation to exploiting growth. In turn, IT leaders must weigh up the implications for their own plans. And sourcing strategy will need a thorough review as part of the larger picture.
Your firm’s business status will dictate your strategy.
Crucially, not all companies are equal when it comes to planning for growth. Just consider the contrast between Vauxhall and Tesco. Vauxhall only narrowly survived recent turmoil at GM, and now faces grave uncertainty as its new owners establish control. Tesco, by contrast, has maintained both revenue and profitability growth through the recession, and its leaders continue bullish geographical expansion.
Does your company - like Tesco - combine strong financial status with sound leadership strategy? If so, then you will likely face a period of confident new investment and an ambitious drive for growth. But if your business has a weakness either on the financial or strategy dimension, this will inhibit confidence and hinder growth plans. And if - as with Vauxhall - both financials and strategy look shaky, then staying alive may be ambition enough – at least until economic clouds lift further.
Linking IT sourcing strategy to business reality
So what does this view of business context mean for your plans for IT sourcing? Here are some tips to consider, based on four possible scenarios that may fit your business.
Strong financials and sound leadership strategy. Like Tesco, your firm has a strong basis to capitalise on the upturn to come. For IT sourcing strategy, you need to consider the steps required to prepare for growth. Can your suppliers scale as you grow – for example by extending services into new geographies? Can they fund expansion in the wake of two years of disruption? What new products, skills or resources will you need from suppliers to support business growth? By asking such questions, you can establish the basis of a growth-oriented plan.
Strong financials but muddy or weak leadership. In this situation your first priority is personal: reinforcing your alliances with the business stakeholders who influence IT funding and strategy decisions. Your firm will likely face wrenching political battles and shifts in priorities – so you need all the support you can get to stabilise the position of IT. In terms of sourcing, look for opportunities coming out of the crisis – like using continuing economic challenges as a lever to gain better compliance with preferred supplier policies. After all the CFO and CEO will be your allies like never before – and you can call on their help to crack down on islands of non-compliance across the firm.
Weak financials combined with clear and consistent leadership. Firms facing this scenario often experience a period of consolidation that can involve steps like business divestments and market retrenchment. Your business stakeholders will have highly differentiated expectations of IT, as some drive for growth while others continue to headline cost control. Plan with suppliers to differentiate their support to these different elements of the business. And you will likely need to review the metrics and incentives for your sourcing staff as some work mostly on cost reduction while others become more directly involved in areas of expansion.
Financial and strategy weakness combined. Survival is the watchword for firms in this boat. You will need all the help you can get from your suppliers on an ongoing basis – like lower rates, and help with restructuring. Focus your planning on the creative ways you can encourage this support from – for example – your outsourcing partners, like offering them access to new business in future in return for favourable short term treatment.
For a deeper discussion of these and a wide range of other IT sourcing issues, look no further than IT leaders must recognise business realities in re-setting their plans.
Since the credit crunch took hold, few UK firms have sustained a growth-led agenda. Shrivelling demand, evaporating credit, and overall negative sentiment took care of that. But lately the mood has begun to shift. Management teams start to move emphasis from cost control and stabilisation to exploiting growth. In turn, IT leaders must weigh up the implications for their own plans. And sourcing strategy will need a thorough review as part of the larger picture.
Your firm’s business status will dictate your strategy.
Crucially, not all companies are equal when it comes to planning for growth. Just consider the contrast between Vauxhall and Tesco. Vauxhall only narrowly survived recent turmoil at GM, and now faces grave uncertainty as its new owners establish control. Tesco, by contrast, has maintained both revenue and profitability growth through the recession, and its leaders continue bullish geographical expansion.
Does your company - like Tesco - combine strong financial status with sound leadership strategy? If so, then you will likely face a period of confident new investment and an ambitious drive for growth. But if your business has a weakness either on the financial or strategy dimension, this will inhibit confidence and hinder growth plans. And if - as with Vauxhall - both financials and strategy look shaky, then staying alive may be ambition enough – at least until economic clouds lift further.
Linking IT sourcing strategy to business reality
So what does this view of business context mean for your plans for IT sourcing? Here are some tips to consider, based on four possible scenarios that may fit your business.
Strong financials and sound leadership strategy. Like Tesco, your firm has a strong basis to capitalise on the upturn to come. For IT sourcing strategy, you need to consider the steps required to prepare for growth. Can your suppliers scale as you grow – for example by extending services into new geographies? Can they fund expansion in the wake of two years of disruption? What new products, skills or resources will you need from suppliers to support business growth? By asking such questions, you can establish the basis of a growth-oriented plan.
Strong financials but muddy or weak leadership. In this situation your first priority is personal: reinforcing your alliances with the business stakeholders who influence IT funding and strategy decisions. Your firm will likely face wrenching political battles and shifts in priorities – so you need all the support you can get to stabilise the position of IT. In terms of sourcing, look for opportunities coming out of the crisis – like using continuing economic challenges as a lever to gain better compliance with preferred supplier policies. After all the CFO and CEO will be your allies like never before – and you can call on their help to crack down on islands of non-compliance across the firm.
Weak financials combined with clear and consistent leadership. Firms facing this scenario often experience a period of consolidation that can involve steps like business divestments and market retrenchment. Your business stakeholders will have highly differentiated expectations of IT, as some drive for growth while others continue to headline cost control. Plan with suppliers to differentiate their support to these different elements of the business. And you will likely need to review the metrics and incentives for your sourcing staff as some work mostly on cost reduction while others become more directly involved in areas of expansion.
Financial and strategy weakness combined. Survival is the watchword for firms in this boat. You will need all the help you can get from your suppliers on an ongoing basis – like lower rates, and help with restructuring. Focus your planning on the creative ways you can encourage this support from – for example – your outsourcing partners, like offering them access to new business in future in return for favourable short term treatment.
For a deeper discussion of these and a wide range of other IT sourcing issues, look no further than Forrester’s upcoming Services & Sourcing Forum, to be held 22-23 October, in London.
Andrew Parker is a vice president and principal analyst at Forrester Research, where he serves Sourcing & Vendor Management professionals.
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