CIOs and IT cannot do it all themselves. They must go beyond the basics, to leveraging strategic partnerships and IT capabilities for direct business benefit. This entails cultivating relationships with partners that are able to work closely with IT and LOBs on growth and innovation initiatives.
Table of Contents
- Executive Summary
- Table 1. Definition
To support business value and innovation-focused initiatives, CIOs are expanding their use of partnerships as they conduct traditional run-the-business activities. The increased complexities inherent in these partnerships, which generate high business value, cannot be effectively managed using legacy management principles and skills. CIOs who create successful strategic partnerships will deliver competitive differentiation to the enterprise.
This report addresses the question , How should CIOs identify and establish strategic partnerships for maximum business benefit?
“Managing Strategic Partnerships” was written by members of the CIO & executive leadership research group, led by Partha Iyengar (vice president and Distinguished Analyst), assisted by Heather Colella (research director) and William Snyder (vice president).
We would like to thank the many organizations and individuals that generously contributed their insights and experiences to the research, including:
The contributors to our interviews and case studies: Edward Capaldi, Al Nisr Publishing (United Arab Emirates); Doug Rutledge, Apria Healthcare Group (U.S.); Debra Jensen, Charlotte Russe (U.S.); Stéphane Rassart, Ethias (Belgium); Waleed Sharaf, ICW Group (U.S.); Shreekant Mokashi, Tata Steel (India); and Umesh Jain, YES BANK (India).
Other Gartner colleagues: Barry Blake, Kris Doering, Axel Jacobs, Mark McDonald and Helen Huntley.
Other members of the CIO & executive leadership research group.
CIOs need to invest in identifying and cultivating their strategic partnerships. Enterprises then need to marshal their limited resources to focus greater attention on these partnerships, since they deliver high business value. Managing strategic partnerships effectively requires a high level of effort, skills and competencies. CIOs and enterprises that master the complexities of strategic partnership management will gain a significant competitive edge.
CIOs have long used vendors and even strategic vendors to support various IT activities. Now they are looking to increase the direct business value of IT by developing core business skills internally—augmented by deep strategic partnerships (SPs) that go beyond just engaging with a vendor. SPs are being established to support the entire range of business initiatives, including growth and transformation. Moreover, new technology paradigms such as the cloud are accelerating the need for SPs and further complicating their evolution.
As SPs become more critical to enterprise success, CIOs are realizing they do not have the competencies, governance models and leadership capabilities internally to manage the increasingly complex strategic partnership management (SPM) environment. This report is designed to give them insight into how they can identify, establish and evolve SPs that provide a new level of business value, driving enterprise growth and profitability. We also highlight the internal skill and competency gaps that need to be bridged, and we provide a maturity model to track a CIO’s progress in creating an effective SPM program.
To show the practical value of developing insight into SPs, we present nine case studies on CIOs working in disparate industries around the world, including specialty retail, healthcare, insurance, utilities, banking, publishing and steel manufacturing.
CIOs have to leverage SPs to fulfill the increasing business demand for internal IT to focus on core enterprise competencies—business processes, drivers of customer acquisition and retention, industry and competitor knowledge—and related initiatives. The resultant need to leverage external providers in mission-critical areas of enterprise support (e.g., business platform operation, customer loyalty projects, deploying a new revenue-generating mobile platform) drives the establishment of SPs. Yet as the definition of a strategic partnership (see box below) and the state of changed risk responsibility (see figure on page 6) suggest, enterprises must accept and manage the reality that their destiny now rests partly in the hands of strategic partners. An partnership’s failure to deliver will lead directly to business risk for the enterprise.
Source: Source: Gartner.
The pressure on CIOs to support, and in many cases drive, business agility has never been greater. It is difficult or even impossible for most CIOs to do so with the competencies and skill sets currently available internally or through vendors. As the Al Nisr Publishing case study illustrates (see the Appendix), well-established SPs can help a CIO support and enhance enterprise agility. Ed Capaldi, CIO at Al Nisr, established an SP specifically to strategize moving the company’s publishing business onto a new digital platform.
With SPs established to handle mission-critical enterprise needs reliably, IT can focus on driving competitive differentiation. This hinges on moving from a siloed departmental outlook to one that progressively takes in the enterprise, external customers and even the industry in which the enterprise operates.
The CIO’s personal and professional growth are also enhanced as internal IT becomes more business-focused through the leveraging of SPs. Aside from highlighting the business credentials and capabilities of the CIO, this transition goes a long way toward establishing the CIO’s credibility as a business leader. According to Gartner research, an increasing number of CEOs expect their CIOs to have this credibility. Building visible SPs that strongly impact the enterprise or industry in turn raises the visibility of CIOs and can contribute to a reputation for visionary leadership.
Establishing and managing SPs is a very different proposition from the traditional or legacy strategic vendor management (SVM) in place at many enterprises. Though proficiency in SVM is no guarantee of success in SPM, CIOs can use SVM expertise as a baseline, adding the skills, competencies, organizational behavior and leadership attributes required for successful SPM.
Strategic partners help drive a level of capability, delivery and business results very different from that of legacy strategic vendors. Likewise, the skills and competencies required for SPM are very different from those required for traditional SVM, and an SP’s specific skill and competency differences—both internally (at the enterprise) and externally (at the vendor)—dictate further mind-set and behavioral changes. SPs require, moreover, that IT and other business management functions think and act in new ways. For example, IT’s interaction and collaboration with these functions must be refined and adapted to allow the integration of SPs into a single collaborative framework.
The figure below shows how an enterprise evolves from “simple” vendor management to SVM, and finally to high-order SPM—a new level of strategic relationship management, and the focus of this report.
Bear in mind that legacy management approaches applied to SPs actually introduce business risk, since SPs need to drive business results directly. In addition, SPs cannot be effectively managed using the quantitative metrics and SLAs that legacy management approaches rely on so heavily. SPs demand measures of management that are more subjective. These are hard to establish up front and harder to measure quantitatively.
Because the entire business ecosystem, including IT, has to evolve to a higher level of collaboration and mutual decision making that now involves SPs, enterprises should approach the setting up of SPs as a process, not a discrete event. The true effectiveness of SPs will be achieved only through the mutual development of complementary skills and a teaming approach with strategic partners that is alien to most enterprises.
As a prerequisite to establishing strategic partners, CIOs should create a collaborative ecosystem encompassing line-of-business stakeholders, senior management and IT. One part of the ecosystem is a process whereby the rest of the business evaluates and accepts the strategic nature of the vendors IT identifies. In some cases, the business will identify strategic partners directly.
Establishing SPs involves significant skill and competency changes and additions within the enterprise. Consequently, as each SP is established, the overall skill and competency map will change internally and externally. CIOs should therefore try to ensure that the right mutual capabilities are in place at all times, for the SPM program as a whole and for individual SPs.
To be truly strategic, SPs must impact business effectiveness. Forging partnerships that extend to the highest levels of the enterprise and the partner make this possible. The enterprise must share its future strategic direction with the partner, and together the partner and enterprise must find mutually profitable ways to move beyond a license-revenue-based relationship.
CIOs will succeed by going beyond the basics and truly leveraging the best aspects of SPs and IT for direct business benefit, including enterprise revenue growth and innovation. This means building trust with strategic partners that have the skills, capabilities and competencies to work closely with IT and the rest of the business to deliver on initiatives. With superior SPs, CIOs and internal IT can concentrate on business strategy and objectives, and on delivering business outcomes to the enterprise.