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Andrew Bartolini, Chief Research Officer Matthew York, Research Analyst Ardent Partners November 2016

The CPO and CIO’s

New Approach to Evaluating

Enterprise Technology

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© 2015 Ardent Partners Ltd.

2015 2 © 2016 Ardent Partners Ltd. 2

The CPO and CIO’s New Approach to Evaluating Enterprise Technology

REPORT SPONSORSHIP

The views and opinions in this report represent those of Ardent Partners at the time of

publication. Sponsoring companies have had no measurable influence on the content and

research in this report. The contents of this research report are the exclusive property of

Ardent Partners. Please direct any comments or questions regarding our research

sponsorship policy to Ardent’s Chief Research Officer, Andrew Bartolini, at

[email protected] and/or 617.752.1620.

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The CPO and CIO’s New Approach to Evaluating

Enterprise Technology

The age of innovation has arrived at the doorstep of enterprise software and the Chief

Information Officer (“CIO”) and Chief Procurement Officer (“CPO”) are well-poised to take a

leadership role. Recent advances in enterprise technology have made the solutions generally

more robust, usable, and accessible; they have also changed the way that leading teams

evaluate, deploy, and optimize them. Business leaders must now move beyond basic feature

functionality comparisons in selecting technology and hone in on what matters most – results.

This report will serve as a guidebook for a new results-focused approach for CPOs and CIOs

alike to investigate, evaluate, and ultimately, select the best-fit solutions for their

requirements and budgets.

Over the past decade, industry research has consistently shown that a majority of enterprise

technology deployments run over budget and/or beyond schedule, and that failing to achieve

expected business results is quite common. Additionally, a 2016 Ardent Partners survey of

nearly 350 business leaders highlighted the inability of enterprises to drive business value out

of their technology investments. There are many reasons why IT projects fail, but one obvious

place to start looking is at the beginning, during the solution selection process. Simply put,

businesses today need to learn from the recent past and rethink and overhaul the traditional

approaches to technology selection or else they will be doomed to repeat those IT failures.

As the executives in charge of the two groups tasked with leading these technology projects,

the CIO and the CPO must join together to lead a new, more collaborative approach to

evaluating enterprise technology. The roles of the CIO and the CPO were each designed as

executive leaders of strategic, value-added organizations that are focused on leveraging their

expertise across the entire enterprise. Yet, despite the recent individual successes of their

departments, most CIOs and CPOs (and their organizations) remain less collaborative on

technology selection projects than they might otherwise be. Instead, these groups evaluate

enterprise technology differently and in ways that reflect their unique perspectives and

individual departmental goals and objectives. This has to change – these leaders must take

the opportunity to become more collaborative with each other and with the business process

owners who fund these projects. They must also begin to take a more results-focused

approach to their evaluations.

The good news for CIOs and CPOs, as well as line-of-business end-user groups, is that major




industry shifts in how enterprise solutions are packaged and delivered have opened up

opportunities for more effective collaboration between the groups in the selection and

deployment of technology.

Tech Innovations Enabling Business Change

Major market forces, like innovation, globalization, and the speed of business, have

heightened competition and pushed enterprises to pursue broad and systemic agility as a

way to grow, or at least maintain, market share. In this environment, an enterprise’s talent,

systems, and operations must be well-integrated, highly-collaborative, and laser-focused. On

the technology front, several large, overarching trends have taken hold across the

marketplace that help to better align many of today’s solutions with the fast-evolving needs

of the modern business.

At the core of these changes has been the introduction of cloud computing (often referred to

as “Software-as-a-Service”), which stands in contrast to the legacy approach of installing

software solutions behind the firewall on enterprise-owned hardware. With cloud-based

solutions, IT departments no longer have to maintain, secure, store, upgrade, or troubleshoot

these solutions for their end-users – all of these duties are essentially outsourced to the cloud

solution provider. Cloud-based technology deployment times and up-front costs can be

significantly lower than those seen with installed solutions. The impact on internal IT

resources during deployment and after the launch are generally lower as well.

And, with the benefits of cloud technology innovations becoming better understood, it is no

surprise that in a 2016 Ardent Partners survey of more than 330 CPOs and other business

leaders, the deployment of a cloud-based solution was identified as the top technology trend,

with 55% of all enterprises deploying this type of solution in the last 24 months.

The second most popular technology trend in the survey is the push by enterprises to adopt

“solution suites” instead of a collection of standalone or one-off solutions. A full 40% of all

enterprises have taken a suite-based approach to new technology deployments over the last

two years. Suites offer modularity to meet the unique needs of each enterprise while also

providing uniformity in design, delivery, data management, and the end-user experience. A

true solution suite is a series of applications that are built using a single code base built upon

a single platform which makes it easier to upgrade and innovate. The value in managing a

single data model and unified process flows is makes it important for enterprises to discern a

true solution suite versus a collection of applications linked beneath a single user interface.




The two trends above are indicators of the broad-based transformation of the enterprise

technology market over the last decade. Figure 1 below provides additional examples of how

today’s business solutions have flown well beyond those of the not-too-distant past.

Figure 1: The Evolution of Enterprise Technology – Then and Now




Pivoting to a Results-Based Approach to Evaluating Technology

Today’s fast-changing business climate is one that prizes outcomes (and the innovations

needed to achieve them) above all else. This has, in turn, created new opportunities for IT

and procurement departments to rethink traditional approaches and jointly lead a shift

towards results-based evaluations of enterprise technology. In this new approach, standard

technology requirements must be placed in the context of desired business results or

outcomes. For many organizations this will mean a shift away from the concept of evaluating

and optimizing the cost and capabilities of a technology, and towards solutions that will help

generate the greatest business value. This does not mean that classic IT considerations like

internal governance, integration, and price should be bypassed. To the contrary, this new

approach builds upon the best practices of the past while creating a new total cost of

ownership (“TCO”) model that estimates expected results and favors the solutions most likely

to deliver them.

The TCO model is an evaluation methodology used to determine the value and cost of an

investment. It is frequently used by enterprises for their IT investments. The principle behind

a TCO analysis is to incorporate all of the direct and indirect costs associated with the

purchase and maintenance of the item or service over its lifecycle of usage to understand and

calculate a "total" cost. The model is also used to capture the full range of benefits that an

investment can generate to estimate a "total value." The TCO approach has become a

standard way for solution selection teams to evaluate supplier bids and award contracts and

has become a useful way to discern the different costs between cloud and installed software

contracts.

From a cost standpoint, it is important to incorporate all of the direct and indirect costs

generated by an IT investment into the model. These costs include, but are not limited to:

Set-up costs like standard installation and set-up fees (for cloud) or internal staff and

third-party systems integration and customization expenses, as well as supporting

hardware technology (e.g., servers, storage, security, etc.) for installed systems

Access costs like perpetual licenses and user subscription fees

Usage costs like transaction fees or other activity or volume-based fees

Ongoing maintenance costs (for installed) like help desks, software maintenance

fees, hardware upkeep, IT staff time, and all associated upgrade expenses




When comparing the TCO of a cloud solution to one that is installed, it is important to

understand that the cost inputs of the two methods are markedly different and that the

analysis is not “apples to apples.” At the core, installed software investments tend to be made

and accounted for as capital expenditures that are heavily front-loaded and coupled with

ongoing internal support costs. In comparison, cloud solution investments tend to be made

and accounted for as operating expenses that are more predictable over the entire

subscription period.

Performing a TCO analysis is also relevant when comparing the bids of competing cloud

solution providers because the types of fees charged (and the associated dollar amounts) for

comparable solutions can vary widely. Buyers cannot simply compare subscriber fees because

some cloud providers charge for configuration services and access to additional templates

and forms that other providers include at no charge. Additionally, subscriber fees charged by

some providers are tiered based upon user access or privileges while others offer a standard

fee per user. Finally some solution providers charge activity-based transaction fees to the

buyers and/or third-party users of the system while others do not.

On the value side of the TCO equation, teams should focus their analysis on the quantified

results that were used in the project’s approved business case. While a results-based

approach can, and probably should, vary based upon an enterprise’s industry, size, and

maturity, Ardent Partners has prepared an evaluation framework below that incorporates

the most common outcomes and the factors most likely to enable them.

Adoption: The value created by solutions is directly tied to how frequently and how

well they are used. Solutions that highlight usability and speed of deployment drive

greater activity and impact.

Growth (Customers, Sales, Community, etc.): Solutions that can attract and engage

their target audience with a better experience and/or improve the delivery of

business’ products and services can yield faster growth.

Process Efficiencies: Solutions that can link, streamline, and automate processes to

make them highly repeatable and scalable drive great value for business process

owners. In particular, solution suites can create a process ecosystem where one

outcome “feeds” the next, accelerating efficiencies across the value chain.

Business Effectiveness: As enterprises compete on all fronts, how each business

function or team executes can have a cascading effect on the larger enterprise.




Business leaders use technology to scale and streamline operations, but they also

want to use technology to improve them.

Visibility/Intelligence: In today’s data-driven world, the ability to mine data and

convert it into intelligence and value is table stakes. Systems that capture, aggregate,

cleanse, categorize, enrich, analyze, and present data that can provide users with

visibility and actionable intelligence are foundational to Best-in-Cass performance.

Compliance: Whether it is adherence to contract SLAs and T&Cs, internal processes,

or regulatory requirements, compliance can be a significant value driver and/or cost

and risk mitigation tool. Flexible solution design and smart reporting can aid

compliance efforts significantly.

Savings: However it is defined, savings can be a powerful dividend to a successful

technology deployment. Solutions that model and improve upon offline, legacy

processes can play an important role in saving money.

With a results-based approach, it matters less what capabilities or features the solution

offers, and more what can be done and enabled to generate value for the enterprise. CIOs,

CPOs, and the other business leaders involved in the technology evaluation process need to

define the desired business outcomes and then work aggressively to identify the solution(s)

most likely to generate them. Additionally, the provider’s experience delivering innovations

and general enhancements to its solutions in a well-executed manner and customer

references can provide valuable insights into service quality, a general ability to execute, and

future performance.

Strategies for Success Recent technology trends and innovations, like cloud platforms, self-service applications, and

the availability of feature-rich solution suites, have changed the technology marketplace

while also placing greater control over technology investment decisions in the hands of the

business process owner. Nonetheless, the CIO and CPO (and their respective organizations)

should continue to leverage their unique skills and experience to play central roles in the

selection of enterprise technology. Each leader should also work to develop a proactive and

collaborative relationship with the other and establish clearly defined roles and

responsibilities on project teams.

Together the leaders can develop a new approach to evaluating and selecting enterprise

technology that clearly defines and quantifies the desired outcomes of the project and stay




focused on identifying the provider that is most likely to deliver it. As the projects continue,

it is important that the CIO and the CPO work to avoid scope creep and keep the project

focused on the right results.

Ardent Partners offers the following recommendations to CIOs and other IT leaders:

Develop flexible IT policies and governance practices that consider and prioritize

overall business objectives

Revisit IT policies on a regular basis to ensure that they reflect the current and future

direction of the business and the market dynamics of enterprise technology

Leverage IT expertise to verify that the cloud solutions that are selected are true,

multi-tenant SaaS offerings

Leverage IT expertise to verify that the suite solutions that are selected are

architected as such

Validate any and all TCO inputs via internal benchmarking

Promote the technology innovations that offer enhanced opportunities to drive

business value

Collaborate with the project team to rationalize requirements and clearly define the

desired business results that can be used in the development of a TCO model

Additionally, Ardent Partners offers the following recommendations to CPOs and other

procurement leaders:

Standardize the solution selection process and scale it across the enterprise; codify

best practices and ensure that the level of process and analytical rigor used is right-

sized to the cost and scope of the project

Fully incorporate the voice of the customer into the development of any request for

proposal (“RFP”) documents and evaluation criteria

Work with the project team to define the desired business outcomes

Help the internal customer discern between the “must-haves” and “nice-to-haves”

Develop expansive TCO models to be used in evaluating technology investments

Collaborate with the project team to rationalize requirements and clearly define the

desired business results that can be used in the development of a TCO model

Conclusion

For most businesses today, technology has become a powerful enabler of the sustainable




efficiencies and strategic value that can transform operations and improve performance. As

a result, selecting the right technology has never been more important to a business. But, the

traditional enterprise technology evaluation process needs a makeover. Time-consuming and

costly evaluations that prize solution features and functions over bottom-line impact must

yield to a newer, more agile, and results-based approach. CIOs and CPOs should seize upon

the new opportunities to engage line-of-business leaders and collaboratively approach

technology evaluations in a way that aligns teams around desired business outcomes rather

than dividing them around specific features or requirements.




Appendix

About The Author

Andrew Bartolini, Chief Research Officer, Ardent Partners

Andrew Bartolini is a globally-recognized expert in sourcing, procurement,

supply management, and accounts payable. For the last 17 years, Andrew

has focused his research and efforts on helping enterprises develop and

execute strategies to achieve operational excellence within their

procurement and finance departments. Andrew is also the publisher of

CPO Rising, the news and research site for Chief Procurement Officers and

other procurement leaders (www.cporising.com).

Advisor to corporate executives and leading solution providers alike, Andrew is a sought-after

presenter, having lectured and presented more than 250 times in eight different countries.

Over the past decade, Andrew has benchmarked thousands of enterprises across all facets of

their supply management operations and his research has been used as part of the Supply

Chain/Management curriculum at several US universities. He actively covers the technology

marketplace as well as trends in sourcing, procurement, supply management, and accounts

payable and has been published or quoted in leading business publications including The Wall

Street Journal, Business Week, Investor’s Business Daily, Forbes, and Fortune, as well as the

major trade publications focused on procurement and finance.

Prior to becoming an industry analyst, Andrew developed, packaged, deployed, and used

supply management solutions on behalf of enterprises in the Global 2000 while working for

Ariba and Commerce One. Additionally, his experience in strategic sourcing (where he

managed sourcing projects totaling more than $500 million in aggregate client spend),

business process transformation, and software implementation provides a “real-world”

context for his research and writing.

Andrew has been named a “Pro to Know” by Supply and Demand Chain Executive multiple

times and holds a B.A. in Economics from The College of the Holy Cross and an M.B.A in

Finance from Indiana University. He welcomes your comments at

[email protected] or 617.752.1620.

http://cporising.com/

http://www.cporising.com/





Matthew York, Research Analyst, Ardent Partners

Matthew York is a research and analytic professional who for more than ten

years has written and managed content, data, and projects for diverse

customers -- including scholars, business executives, and senior government

officials. His primary areas of research at Ardent Partners include sourcing,

contracts, procurement, and supply risk. Matthew also serves as the editor

of CPO Rising, drives the firm's social media operations, and has been named

a “Pro to Know” by Supply and Demand Chain Executive. Matthew comes to

Ardent Partners from Aberdeen Group, where he conducted survey research and data

analysis for multiple research practices, including the Global Supply Management, Supply

Chain Management, and Business Intelligence practices. Prior to joining Aberdeen, Matthew

served for three and a half years in the U.S. Intelligence Community as both a Human Capital

Management analyst and an Intelligence Analyst. He earned a B.A. in Political Science from

Stonehill College and an M.A. in Political Science from the University of New Hampshire. He

can be reached at [email protected].

About Ardent Partners

Ardent Partners is a Boston-based research and advisory firm focused on defining and

advancing the supply management strategies, processes, and technologies that drive

business value and accelerate organizational transformation within the enterprise. Ardent

also publishes the CPO Rising and Payables Place websites. Register for exclusive access to

(and discounts on) Ardent Partners research at ardentpartners.com/newsletter-registration/

and join its LinkedIn Group.

Industry Standard “Fine Print:” The information contained herein has been obtained from sources believed to be reliable. Ardent Partners,

Ltd. disclaims all warranties as to the accuracy, completeness, or adequacy of such information. Ardent Partners, Ltd. shall have no liability

for errors, omissions, or inadequacies in the information contained herein or for interpretations thereof. The contents expressed herein

represent Ardent Partners’ best analysis at the time and are subject to change without notice.

© 2016 Ardent Partners, Ltd. All rights reserved. Reproduction and distribution of this publication in any form without prior written permission

is forbidden. Solution providers and consultancies should take special note that Ardent Partners reserves the right to seek legal remedies

including injunctions, impoundment, destruction, damages, and fees for any copyright infringement (which includes but is not limited to usage

of any Ardent Partners content in company collateral, presentations, and websites) in accordance with the laws of the Commonwealth of

Massachusetts and the United States.

http://www.cporising.com/


http://cporising.com/

http://payablesplace.com/

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