Business transformation through IT?

Tuesday 28 July 2009

Business transformation through IT?

Can business transformation be delivered through IT?

Andrew Carr, Outsourcing and Managed Service Sales Director, looks at business tranformation through IT. Article originally published in the Butler Group Review, July 2009 -

Alastair Darling’s most recent budget drew attention to the need to maximise back office and IT efficiency opportunities and continue to work towards the recommendations put forward in Gershon’s review in 2004/5. I believe that IT is the single, common factor to enabling an organisation (in both the public and private sectors) to deliver transformation. However, is IT a catalyst in the initiative for change or a supporting function?

In light of Gershon’s review, IT outsourcing might become a necessity for the public sector if efficiency targets are to be met in a sustainable manner. Taken on its own and dependant upon the relative  maturity of your services, this is not particularly revolutionary as IT is historically a popular function to outsource. I think it is important to recognise that Gershon’s review not only focused on IT but on the wider elements of business. IT changes must be supported by parallel developments across other areas of the organisation and transformation must be organisation-wide. The outsourcing of functions must transcend IT and enter the realms of business process outsourcing because I believe that IT transformation can be even more beneficial to the organisation when taken in conjunction with a whole  business transformation.

The findings of the recent Operational Efficiency Programme demonstrated that there is scope for £15 billion worth of efficiency savings in the public sector. The areas identified for making savings include back office operations and IT, and as demonstrated by the savings delivered in 2007-08 following the recommendations of the Gershon review – £26.5 billion of savings were made against a target of £21.5 billion, there is plenty of scope for business transformation. We are already experiencing customers that are more willing to outsource more and more parts of their business because of the recognition that you can make services more efficient if you focus on the core of your business. However, the changes in the nature of outsourcing contracts together with the changing mood of the customer means that the outsourcing of business processes is becoming less of a daunting prospect to first-time customers and it is actually becoming the norm. Suppliers are now willing to offer short-term contracts and even pay-as-you-go style agreements or projects to reflect the need of organisations to make near-term savings.

IT typically runs through all elements of a business, from HR to finance and from the back office through to the front office, and so one of the most important ingredients for transformation is senior management buy-in. Organisations need strong leadership and an experienced partner that can act as more than simply a contractor to help drive change. I think that the purpose of IT in an organisation is to facilitate different and more efficient ways of working and at times this can mean acting as the catalyst for change. For example, to reduce the cost of having staff based permanently in the office requires an infrastructure that is location independent and provides a platform to allow for working behaviours to change.

IT will have to provide solutions which enable employees to access the organisation network remotely and at any time to maximise the benefits of having ‘agile’ or ‘mobile’ workers. IT underpins all of the required outcomes in that situation. However, IT can also support company-wide initiatives to more generally drive down cost, for example standardisation, introducing consumption-based services and reducing service demand.

In order to fit into the organisation’s agenda for change, IT must be tailored to support the direction that the organisation needs to move in. An IT partner, or business partner in fact, needs to be ready to move with not only the customer, but also market requirements. Customers are more technology savvy these days and want to ensure value for money when procuring services or, to put it bluntly, pay for a service based upon consumption. This means that your partners need to be mature enough to recognise that a proven delivery model today, may not necessarily be the optimal model in three, six or twelve months time. Therefore, a key requirement for partners these days is to have the flexibility to develop solutions that are fit for purpose and deliver known (and quantified) outcomes.

The US$64 million question is, how does IT outsourcing tie into the outsourcing of wider business processes? I think the supplier must reposition itself as more than just a contractor. They should be a partner and tailored IT solutions must underpin and support the transformation process. There is no doubt that making your IT more efficient can indeed save you money and help you home in on your core functions but in truth, organisational transformation requires more. The test of the maturity of an outsourcing partner is the ability to provide expertise across the board and most importantly, provide dynamic solutions that fit the  organisation in question.

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