Resource-challenged midsize enterprise CIOs should focus on these three outcomes to improve their sourcing and procurement strategies.
Although 43% of midsize enterprise (MSE) CIOs in North America say procurement and contract management resources are not a part of their internal IT organizations, in practice they are frequently managing a wide range of sourcing and purchasing decisions. MSE CIOs are constantly deciding between legacy and new systems, insource or outsource, or hybrid solutions as well as handling budgeting issues. Further complicating the issue are IT necessities, such as funding a service desk. Funds might need to come from a variety of budgets in order to staff, train and supply employees with the correct software.
67% of MSE CIOs are tasked with optimizing enterprise operations
The realities of being a CIO at an MSE mean a lack of dedicated sourcing, procurement and relationship management resources. The goal should be to match projects with business goals. These CIOs must carefully implement a pragmatic approach to align all sourcing with business priorities.
“The way a project is funded depends on the business value, type, size and complexity of each sourcing solution. It is important to make this determination early in the process and align spending with intent and value to the business, as it may significantly impact both IT and business operations,” says William Maurer, research vice president at Gartner.
CIOs must align their sourcing strategy with three fundamental, achievable outcomes:
Though the outcomes may overlap, CIOs should not lose sight of the main purpose of the project.
With small (and shrinking) IT budgets at MSEs, most efficiency solutions are those that control costs and provide incremental efficiency improvements. This should be the focus for projects that seek to eliminate low-value but labor-intensive tasks or those that focus on consolidation. For example, procurement of commodity hardware or commercial off-the-shelf software.
Sixty-seven percent of MSE CIOs are tasked with optimizing enterprise operations, so they must be able to identify opportunities to adopt enhancement solutions. Money spent on enhancement solutions should improve enterprise operations using IT budget.
Enhancement solutions work well for process improvement initiatives that are directly related to the business requirements or those that compare the current state to the future state.
Transformational solutions are those that seek to increase revenue, profit, market share or enter into new markets; those led by the C-suite; and those that are collaborative in nature. Although 40% of MSE CIOs are in charge of leading innovation in their organizations and 42% are in charge of digital transformation, only 7% indicate actively experimenting with leading-edge technology.
It’s vital that MSE CIOs look to transformational solutions as part of their sourcing strategies, as these are the ones that significantly change the dynamics of the business. This means regularly bringing new, potentially transformative technologies to the attention of the C-suite. These solutions are the ones that will differentiate how the enterprise represents itself in the marketplace.
Gartner clients can learn more about midsize spending in the full report Creating a Sustainable Strategy for Sourcing at Midsize Enterprises with William Maurer.
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