The ideas, theories and concepts developed in this post are part of my recent book – CLOUD COMPUTING – Advanced Business and IT Strategies to Extract Tangible Value – The eBook Edition. [I Highly Recommend it]. Copyright © 2014 by Philippe A. Abdoulaye.
This is an interactive post. You will be asked to put yourself in the role of a CIO facing the concerns and dissatisfaction of business folks; despite the company’s shift to cloud 18 months ago, they continue to complain about the irrelevant (that’s their word) value they get from the IT department.
The post is organized in two parts, in Part I, Context & Problems, you will be asked how you would handle the situation. Think through your options and decide on the best course of action. In Part II, Reinventing The IT Department, The Workshop , you will be given the key notions and principles to understand as well as the immediate actions fellow CIOs took to turn business folks into allies and gain the right to sit at their table.
The scenarios, solutions, concepts, and models described in this post are derived from the recent transition of a global wireless operator to cloud. They are part of my recent book: Cloud Computing: Advanced Business and IT Strategies to Extract Tangible Value [Click to read its executive summary]. Ready? Let’s Go!
CONTEXT & PROBLEMS
Apple Business Services (ABS) is a global wireless operator. It is present in 30 countries worldwide, and helps companies collaborate more efficiently and engage better with their customers by connecting their people, sites, and machines securely and reliably. In addition to the standard mobile telephony services, it provides customer contact, mobility management, and conferencing solutions.
In 2012, 4G Services Inc. entered the mobile market, pursued a low cost strategy that unprecedentedly disrupted the mobile market forcing established firms to review all aspects of their product-market strategy including value propositions, pricing, and services.
ABS, one of the largest wireless operator in Europe, posted a revenue of $58bn in 2011 including $21bn nationwide. The company was losing ground and seeing its market share eroding, a severe drop from 63% to 59% in 18 months, and above all, it was impotently seeing its revenue dropped by 17% in 18 months.
Some time ago, in a circumstance like that, ABS would have cut cost to increase net profit or accelerate cross-selling and upselling activities to increase customer value. This time these short-term strategies did not work; the VP Strategic Marketing commissioned a report from a well-known consulting firm to diagnose and understand the situation.
Following the recommendations of the CIO Advisory Group of the well-known consulting firm, ABS migrated its Customer Relationship Management (CRM) capability to cloud. According to the CIO Advisory Group, that initiative would result in dramatic IT spending cost that would increase net profit, IT service quality would improve and increase business folks satisfaction, and above all, time-to-market would accelerate and would happily surprise business folks.
18 months later, although time-to-market remained stable, substantial benefits were observed, IT spending have dropped by 23.7% and according to an internal survey, 89.7% of business users were satisfied with the cloud-enabled services.
In fact, the outstanding performance ABS from the cost, service, and time-to-market perspectives did not bring any single solution to the company’s senior management. ABS competitiveness did not improve; market shares and revenues continued to erode while 4G Services Inc. posted a dramatic $1,08bn over Q2 2013.
Tensions between business folks and the CIO were tangible, and the following remark of ABS CIO did not improve the relationships: “Any tools, technologies, and solutions which help to make business people and processes effective and then lead to business efficiency, cost savings and compliance are ones that must be followed, considered, and used. The cloud helped us achieve our objectives. There is nothing more we can do to improve these marketing hypes … competitiveness!” The CIO was in another world; he did not understand the business, he was highly skilled in technology but did not have an IT strategy for the business.
The decision of the business folks to commission once again the well-known consulting firm to diagnose and understand the situation and make reliable recommendations helps the CIO understand his job was in danger.
HOW WOULD YOU HANDLE THE SITUATION?
What was funny during the meeting that brought together the business folks, experts from the consulting firm’s CIO Advisory Group, and the CIO is, the perspectives, approaches, and solutions discussed swung between a strong desire for change and the lack of boldness as to how to leverage cloud to increase ABS competitiveness. The CIO Advisory Group had a conservative perspective and proved unable to transcend the traditional cost saving, productivity gains and accelerated time-to-market issues (the lack of boldness) while ABS business folks was convinced that the cloud brought up a new IT paradigm more focused on pure business concerns (the desire for change).
The CIO Advisory Group and ABS Disagreed over Why the Shift to Cloud Did Not Help to Keep Market Shares and Increase Revenue. You, the Reader, What is Your Thought?
An issue that created confusion among the participants and that resulted in deep disagreements between the business folks and the CIO Advisory Group was “Why, 18 months, after the company’s transition to cloud we’re still losing market shares and money?”
According to the CIO Advisory Group experts, “the deployed cloud services weren’t correctly attuned to the business people requirements”. Further analysis was needed. The insisting position of the business folks was, the benefits of cloud services were remarkable but to effectively outperform 4G Services Inc., ABS had to move upmarket.
You, the reader, what is your thought?
The Business Folks Raised the Issue of Focusing ABS on Innovation and on Its Core Competency. You, the Reader, Do You Think Business Folks Were Right?
Finally, the business folks convinced the CIO Advisory Group experts, it is ironic, that going upmarket, focus on innovation and core competencies might be worth exploring. Embarassed, the CIO Advisory Group experts approved that business-focused perspective of cloud computing.
You, the reader, do you agree with the business folks’ perspective? What is your thought?
The Agreed at Least on One Thing: Transforming the IT Operating Model Was Necessary; It Requires Proven Model and Approaches. You, the Reader, What Do You Think?
The discussion move forward and a consensus was reached upon the fact that transforming the IT operating model to adjust ABS people, processes, structures and IT services to a potential innovation strategy was necessary.
According to the CIO Advisory Group, the problem was, transforming the IT operating model was a risky operation, expensive time and money wise. “That’s the last thing we would recommend” added one of the experts.
You, the reader, what do you think? What is your thought?