Jason Miller, Partner, A.T. Kearney’s Strategic IT Practice
Many CTOs and CIOs resist switching IT infrastructure service providers even when they know suppliers charge them too much, perform poorly, or mismanage the relationship. They fear taking on such a huge transformation. They fear the unknown obstacles that may come up, or the complex organizational support that must be gathered to make such a bold move happen. They fear the outgoing supplier may jeopardize the transformation, or that the new supplier may not be up to the task. Succumbing to fear carries its own risk—of missing the boat on the significant benefit to reduce cost, improve performance, and improve quality and user experience.
Fear is a strong driver for IT leaders to stand pat—even when the situation has deteriorated for years—because the transformation is a complicated effort involving thousands of business systems and machines in hundreds of locations around the world. Such a change impacts activities and business operations throughout the company across the globe. To switch suppliers and embark on an effort to transform the company’s large-scale IT infrastructure, leaders must first boldly overcome their fears.
One of the world’s fore most consumer goods and retail brands recently faced these challenges and overcame them. The company made the decision to migrate and completely transform its IT infrastructure technology and operations.
Achieving Benefits of Transformation
Although the decision to switch suppliers came with trepidation, the leadership team knew the benefits of successfully executing this change were worth the risk. The company sought the advantages that could be gained and believed it could achieve them.
" Any company contemplating a large-scale technology transformation should seek to meet most of these conditions "
And with successful execution, the benefits realized were great. They included significant cost reduction by leveraging more efficient providers operating at similar service levels, advanced technology to deliver more computing power at lower costs, more flexible global and cloud-based delivery models, and higher transparency of costs. In addition, the company has seen improved service levels from quick resolution to support tickets and from higher levels of network and system availability.
The results of the IT transformation are hugely successful and will be long lasting. In many respects, the company has rebuilt its technology foundation, which can serve as a new platform that enables growth in digital and other technology investments. And along the way, new leaders were born.
Overcoming Five Primary Fears
These results underscore the importance of overcoming the fears and challenges that prevent many CTOs and CIOs from making the decision to transform their IT infrastructure environments. It’s understandable that many C-level IT executives in the industry fear making the transition. The complexity of such a change, from the communication challenges to operational difficulties, can be daunting. These fears are
consistent across firms that consider such a large transformation. Common reservations include:
We won’t achieve the benefits. Will this effort pay off? What are the benefits and costs, and how might they fluctuate? What if unexpected costs arise?
We may choose the wrong partner. Will we select the right vendor? Do we know a fair price for each service? Can we negotiate the deal? Do we know fair market terms and conditions?
We will get blindsided. Do we know this environment well enough to transition it without the incumbent that has been in place for years? How complicated will this be?
We don’t have leadership support. Who will lead the transition effort? How will we manage Board interactions? Will we have senior stakeholder support throughout the company?
Our supplier will undermine the effort. Will the outgoing supplier let operations languish because it is being replaced? Will it shift key staff off the account? Will it support the transition to a new supplier?
In this example, the company feared its supplier might use its strong position to prevent the transformation, as other suppliers in similar positions have demonstrated such power in unsavory ways. The company’s provider did owe some of its strong power to its size and senior-level relationships. But it owed most of its power to high levels of supplier lock-in, which resulted from the potential cost, complexity, and operating risk of transitioning to a new provider.
Making a Challenging Decision
The call made by IT leadership was a big one, full of risk. With it came recognition the decision was a career-defining moment where success was not assured.
After serious deliberation, analysis, and risk assessment, the company chose to move away from its entrenched IT service supplier and to switch to a new provider to transform its massive IT infrastructure. Before embarking on the journey, they carefully assessed whether or not the conditions within the company were right to move forward. The following conditions were considered:
• A sound business case exists, with a clearly positive financial return on investment
• The right IT leader is in place, and is empowered with senior leadership support for change management
• A market standard service structure exists, with a fair view of market price levels for the various IT components and for fair contract terms and conditions
• Awareness of key emerging technologies exist, as do linkages to IT and business strategy and potential positive implications to the business
• The right culture exists for the transformation—a culture in which the company, outgoing supplier, and incoming supplier all are jointly accountable for success
• An ecosystem of support at senior levels with key technology and services partners is present to ensure issue resolution and executive focus
• A robust view of the team structure exists, showing the roles, responsibilities, and accountabilities of team members from the company, the outgoing supplier, and the incoming supplier—even as the tasks change throughout the transition
• The transition plan is sufficiently detailed—potential risks and issues have been identified and their implications to the overall plan are known
Any company contemplating a large-scale technology transformation should seek to meet most of these conditions. They offer fact-based decision criteria, which reduce the fear and doubt that may exist when considering large transformations. A strong and empowered leader supported with a powerful fact base is a requirement to determine the technology investment bets that should be made versus those that should not be made. But beyond the leader, the team must be ready and able to take on the challenge, as such monumental changes can be a defining team legacy.