Supplier collaboration in ICT a poor shadow of its brick & mortar cousin!

One school of thought recommends that when advice comes free (the connotation of free advice here and through the rest of this write-up is advice volunteered and not explicitly called for, not a monetary view of free), think twice before you take it. Well, that’s what all of us were taught and that’s what most of us do. Now here is something to chew on - taking free advice is obviously not the same as implementing it blindfolded. Then what is the cost of taking free advice? It is the time you take to understand it and the time you take to evaluate it. If someone finds that far too expensive, it might be prudent to ask what they think they ought to be doing with their time.

None of us can think of an occasion when we had some funds to put aside in our personal lives and did not agree to meet up with someone who had an idea or two on where we should invest those funds to find the best returns. The more ideas, views and options, the merrier. Inexplicably, we do not wear the investor hat when carrying out business.

Just ask the people who invest on ideas if they would find the time spent listening to, digesting and evaluating an idea, worth its while. In this era of carrying out business collaboratively across multiple partner ecosystems, ideation and innovation cannot be carried out in silos. There is nothing new about that thought given that stuff like CPFR (supply chain collaboration) has been in existence for eternity and supplier (read partner) collaboration is fast catching on, right?

Yes and no! The very folks that have made collaboration a reality within business ecosystems by providing the platform and tools to make it work, and I mean the IT community, is where you would find the least partnership in ideation. I know there are a few organizations that have used their partner ecosystems in information and communication technology effectively to maximize ideation and manage their techno-commercial investments towards realization of their business goals, but these are few and far between.

In fact, there are few planned, systematic, voluntary and periodic interactions in the ICT supply chain, where ideas are sought from ICT partners on the basis of business data, challenges, issues and problems that are shared with them. Even where it exists, more often than not, this isn’t initiated where it ought to be. Even where it is, the focus is on the TCO theme and very little, if at all, focuses on the CVC (Contribution to Value Creation) theme. The appetite and intent to ideate, contribute and make a difference is there. And on either side of the stream. It’s time 'the partners' crossed the stream. It’s time they collaborated.

The cost of ideation, to the consumer of the idea, is inconsequentially disproportionate to the potential value to be derived from it! Partner collaboration provides a unique opportunity for the ICT community to drive business behavior and set examples, for a change, than just being the passive enabler. This could well be the long due impetus required in the business outcome alignment roadmap that is imperative for the next era of ICT growth.

You may also find some interesting perspectives on this theme in

http://www.pwc.com/en_GX/gx/operations-consulting-services/pdf/outsourcingcomesofage.pdf

http://isbm.smeal.psu.edu/library/articles/general-interest-articles/Supplier-Customer-Success-Stories.pdf

Note: The views expressed here and in any of my posts are my personal views and not to be construed as being shared by any organization or group that I am or have been associated with presently or in the past.

Time for burial – the TCO play has run its life – enter CVC

The dominant theme of the past two decades in IT and operations services spend has been to bring down the Total Cost of Ownership. The businesses were riddled by a plethora of operational inefficiencies ranging from sub-optimal business processes and automation to an ineffective and localized human capital supply chain. While the early adopters spotted and fixed this, largely within the last decade of the 20^th century itself, the bulk of the folks got onto the bandwagon between the mid-90s to the middle of the last decade.

While there were a range of new products, services and solutions that came into the market, few focused beyond the TCO and cost optimization themes. Almost every large enterprise had their time, effort and money spent in implementation of ERP products, embarking on collaborative B2B and B2C commerce, et al. And all the while, as an aside, the cost of implementation was also being driven down through optimal sourcing leveraging the benefits of cost and labor arbitrage. Every conceivable component of ‘cost of ownership’ from people to infrastructure to application underlying the business process was optimized to achieve maximum TCO reduction. Make no mistake, this yielded some fantastic business results with actual annual budgets for many of these enterprise cost elements coming down anywhere between 10-30% and the cost of implementation anywhere between 20-50% depending on where each company was on the operational efficiency curve. Even the latest technology or service management trends being adopted like the cloud and shared services et al, merely redistribute the pie within the service providers and optimize the TCO for the buyers. Check the services spend numbers as a percentage of sales for organizations and as a percentage of GDP for the larger economy and you would know where this play is headed.

The TCO play, stark as it sounds, has run its life. It is, in fact, on life-support! The incremental benefits of this play and the effort and costs required to realize them, soon shall make no economic sense.

So what is in store? I deliberately used the preposition ‘few’ instead of ‘none’ when I referred to where, buyers and sellers alike, were focusing in the recent past. There are quite a few areas, for that matter, where technology or process investments have pushed boundaries for the business to be able to expand beyond its current boundaries. The ability to service a global consumer base 24x7 on voice or data is an example. The advent of the web as an alternative channel to take products and service to market is another. The ability to slice and dice enterprise-wide data and carry out data analysis and analytics hitherto not possible, is yet another. These are the areas where technology and operations spend has effectively ‘Contributed to Value Creation (CVC)’ for an enterprise, organization, and at a different magnitude of generalization, the world.

Again, be warned that this is a much tougher route to take. Not just because it is not a much trodden path, but also because the number of experiments and ideas that would actually translate into a viable business proposition would be dramatically lesser than the TCO play that everyone has been used to. Also, measuring CVC is not likely to be straightforward. This would mean, exactly determining the contribution of IT or process driven initiatives, to the business benefits and realized returns-on-investment by broadening the business horizon, will be much tougher than the TCO regime.

Yet, this is inevitable. This is what, in the next decade or more that unfolds, will deliver quantum benefits to the business, revive/sustain/grow business interest and investment mindshare in technology and process services. But most importantly, this will take the CIO and COO agenda of enterprises beyond budget and TCO management to the realm of driving business direction and creating business value, and the outsourcing players back to the heady days of hefty double-digit percentage growth.

Note: The views expressed here and in any of my posts are my personal views and not to be construed as being shared by any organization or group that I am or have been associated with presently or in the past.