Disruption causes disruption: IT and Vendor strategy in a post-Corvid-19 world

By Richard Eichen

With most organizations at a standstill, it only makes sense that IT follows suit, for both vendors and customers.  Where working from home was optional or even prohibited, it is now the norm, posing obvious burdens on IT in the short term for bandwidth, remote equipment, and collaboration platforms.  However, going forward, multiple strategic trends will emerge or continue to accelerate. This post examines several.

 

IT becomes a strategic operating area, even where it was previously a ‘necessary evil’

Before Shelter in Place, many organizations, be they healthcare, manufacturing, or services, considered IT to be a necessary evil, an internal utility much like electricity and water, noticeable only in its absence. Partly this was self-inflicted as IT and many consulting organizations have an abysmal record of overpromising and then missing budgets and delivery dates.  Case in point is the massive overruns for EMR and ERP implementations, often occurring because IT fails to properly herd its internal cats for specifications, testing scripts, training, and rollouts.  Business and Operating ELT now sees the potential contributions from IT, empowering remote work, and collaboration during this crisis.  They realize, probably for the first time, that without IT, their operations would either fold or barely eke along.

It is incumbent on IT to capitalize on this goodwill and become more sophisticated in customer management, thinking not like an internal department, but as a captive vendor, with a product roadmap, eyes over the horizon view of technology, and tight implementation processes. It also must distribute the Enterprise Architecture from the internal ivory tower to embeds in business units, incorporating Business Architecture and local development and testing.

Vendors will have to adjust their sales and support processes from the holders of functional knowledge such as multi-state taxation, to that of knowledge transfer via automation (see below) or through added education.

 

Self-reliance and taking back essential IT functions

Supply chain disruption and the risks with over-outsourcing /offshoring has become evident on the business side, and now with India locked down, we can see it coming on the Support and Development functions within IT. Much like we have done with manufacturing, we have weakened out internal capabilities, including the most critical development requirement – deep contextual understanding and institutional memory.  It made economic sense but introduced significant business continuity risk. CIOs will have to begin pushing back when told by the ELT to cut costs once again, stressing agility and sustainability during a crisis.

Many IT managers will have to move from vendor relationship managers to technology services delivery leaders.  Establishing a series of business unit led IT Steering Committees to hear user views firsthand will help IT become more aligned. The CIOs role will be strategist and translator of business goals into deliverables and service levels. Here too, business skills and context will be more critical than uber-tech leadership. The CIO will have a foot in both camps, where new CIOs will probably start their careers in the business and then move to the CIO role, making sure the user community feels ‘one of their own’ is leading this crucial and costly function.

Vendors will have to adapt their model from taking over Support or development to that of a hybrid, long-lived joint workforce with clients.

 

Intelligent automation for both cost take-out, and now, business continuity

Robotic Process Automation and Intelligent Automation will accelerate, not just for cost take-out and transactional scalability at low cost, but to provide a means to carry on business operations during employee disruptions. Look for increased short-term use of ‘swivel chair automation’ (user emulation) and the accelerated use of AI to take over processing of 90% or more of all recurring transactions, including those requiring judgment calls, leaving employees to resolve exceptions.

There will be a market opportunity for a vendor to supply the necessary algorithms and rules for various business processes, rather than each company developing their own.  SaaS application vendors will be able to offer this, and Intelligent Automation as part of their differentiation and cost justification.  Marketing will have to be adjusted to help, for example, a Finance leader to subscribe to a product knowing half or more of their employees will become redundant, and where the size of a department translates to internal political power.

 

Vendors must manage their cash; IT must work with HR on employee engagement

Vendors must be ready to operate with no new revenue for months to come, adjusting their burn rates accordingly.  We still do not know PE and VC appetites for funding continued losses, but we did see the stock market reject overvalued money-losing tech IPOs before the crisis began. We can only expect this to increase.  A near existential crisis like this virus brings everyone back to reality, and a company that does not make money, or can’t figure out how to do so, is no longer attractive. Successful technology vendors will have to debate how much of the product roadmap is strategically necessary vs. how much is affordable in the near-term. Customers must understand their vendor’s viability under stress.

Companies have a natural mindset to furlough many employees in a downturn, which makes economic sense. The downside is it resets the internal social contract from a place to contribute and think long-term, to a form on in-house gig relationship.  IT must work with HR on employee engagement, and once this crisis passes and companies decide to increase in-house IT staff, employee retention. Since employees are now much more comfortable with remote work (and their managers now trust this operating model), aggressively hiring companies can poach employees nationwide from low-engagement employers.  The very human nature of this crisis and the shelter in place orders nationwide means personal and organizational relationships are ever more critical, so throwing money thinking it will retain employees will most likely be cynical and not work.

 

Disruptions cause disruptions and maintaining IT in its current form is no longer viable.  A tighter link, and integration into, business strategy is necessary as the Covid-19 virus is the first of many upcoming unplanned events.  Standing still is no longer an option. A case in point is General Motors engineers getting hold of an early Tesla Model S, and instead of seeing how they had to adapt to the future, compiled a lengthy report on how many GM internal rules Tesla had violated.  When you think of an EV, what name first comes to mind? Who has a higher valuation? The technology world, internal and vendor, is now at a similar point of disruption.