It’s no secret that we’re doing business in a fast-paced, disruptive environment. To keep pace with rapid change, IT is becoming more strategic, and expectations are growing. And the CEO and other business execs are turning to the CIO to lead digital transformation, engage and win new customers, and ultimately drive revenue.
CIOs are feeling the weight of these new responsibilities, and they believe that it’s more important than ever to closely align IT with business imperatives. In a recent study by the Society for Information Management (SIM), 42 percent of participants cited alignment with business as their top priority (SIM International, “Taking the Pulse of IT,” 2017).
But balancing traditional IT responsibilities with today’s new transformational challenges isn’t easy. Let’s take a closer look at three key drivers to help you support your company’s business objectives.
1. A Highly Available Business Platform Is Fundamental
A solid, secure core business platform with at least a ten-year horizon is table stakes for running your business. Your ERP system is the foundation for your operations; it has to support every critical business function and must be dependable and available nonstop — at all of your locations worldwide. If an issue does occur, you need to have responsive support in place to mitigate it.
For example, one of our clients, Color Spot Nurseries, a $300 million wholesale grower that supplies plants to big-box stores, has been running its SAP system since 2000 to support its core business operations. However, its support costs through SAP had been steadily growing for years. SAP does not support the company’s customizations, and the support packs and major upgrades the IT organization was required to install to remain in compliance with the maintenance and support contract were expensive and delivered no perceived value to its business.
To get the support it required to keep its most important business processes running smoothly, Color Spot partnered with us, and cut its overall maintenance and support costs by more than half. This support solution helps ensure that Color Spot’s business platform consistently delivers the highest performance and availability and includes support for Color Spot’s customizations — something SAP didn’t offer.
2. IT Must Support Innovation
Driving fast innovation is top of mind in an environment of digital disruptors. If you can’t capitalize on new opportunities and get your new ideas to market, your competitor almost certainly will. In the SIM International study, innovation agility occupied three of the top five most important IT management concerns.
To innovate at light speed, IT needs to support business stakeholders through new business models, analytics, IoT and other digital transformation technologies. Teams are exploring new infrastructure models that can power the innovation their business stakeholders need.
For instance, we’re hearing a lot of buzz about the potential of hybrid IT — running existing, non-cloud IT infrastructure alongside new public cloud innovative solutions — then gradually migrating high-value, engagement systems to the public cloud over time. Your ERP business platform is the foundation of a hybrid IT strategy as the “system of record” with cloud “systems of engagement” rapidly deployed as needed to support business initiatives.
“Not everything can or should be cloud,” explains Lydia Leong at Gartner. “Customers have plenty of applications that they probably will never move to the cloud — or at least will not move to the cloud in any kind of reasonable timeframe.”
For systems where there is no pressing need to move onto a cloud infrastructure, it makes more sense to avoid the expense of migrating until it is necessary. If a major event occurs, such as the need to completely replace an aging data center or a major business process or organizational change, organizations might be pushed into moving to the cloud.
According to Leong, organizations shouldn’t start by deciding on the computing infrastructure they will use, but on what type of IT will best meet the needs of different parts of the business.
Gartner identifies two speeds of IT for business. The first is geared around traditional IT, focusing on efficiency and safety, approval-based governance and price for performance. The second is targeted at agile IT, focusing on innovation, rapid delivery, continuous governance and delivering value to the business.
As you examine your business priorities, consider which mode of IT will suit which part of the business before choosing an infrastructure approach. According to Leong, the flexibility and scalability of cloud services make them well suited to the agile IT mode and driving innovation — especially when used in conjunction with proven ERP systems that keep the business functioning smoothly. But how can you fund this innovation?
3. Optimize Costs to Fund Business Initiatives
IT cost optimization is a third key focus area for companies that want to power business growth. Taking control of costs is vital for funding key business imperatives — not only for cost savings alone but to drive the vital innovation discussed earlier.
IT organizations should free up funds for growth and innovation by eliminating waste, improving efficiency and prioritizing initiatives.
Infrastructure and operations (I&O) makes up two-thirds of overall run IT costs, so targeting the costs required to “keep the lights on” is a good place to start.
Gartner predicts that by the end of 2018, at least 75 percent of enterprises can reduce annual I&O run costs by 25 percent or more. The firm suggests three key principles to keep in mind to drive cost reduction, including:
- Economies of scale, where the cost per unit decreases as the number of units rises
- Modernization, in which the latest generations of technology deliver superior cost and performance over earlier versions
- Staff productivity, where the number of devices a staff member can handle increases with the number of employees, units or time
Gartner and other industry analyst firms recommend enterprise software support as a potentially ripe category for cost savings. For example, outdated vendor support models may drive your total cost of maintenance to at least twice the price of your vendor annual support fees.
The challenge is to balance modernization with the best possible utilization of tried-and-true systems that work fine. You would never purchase a brand-new automobile simply because the current one needed an oil change, and there’s no need to rip and replace large portions of your infrastructure simply to support a minor initiative.
Making IT costs as transparent as possible should be a top priority, according to Gartner. Benchmark how your organization compares to your peers and consider how you can better standardize, consolidate and rationalize costs.
With the right approach, you’ll be able to optimize the costs required to run and maintain your core ERP systems and free up additional funds to grow your business and stay ahead of competitors.
Dave Rowe, Senior Vice President and CMO, Rimini Street
Image Credit: Paul Bence / Unspalsh