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Technology + revenue generation and focus on customers, not cost-cuts

July 8, 2010

CIOs in the retailing sector have had a pretty rough go of it over the last several years. But according to the 2010 Global Retail CIO Survey, cost-cutting is now taking a back seat to finding ways technology can help boost revenue.

Retail CIOs are looking to boost revenue via automatic replenishment, demand forecasting, enhanced promotional effectiveness, and Web-based sales channels, a new study says. Plus the fact that 26% expect IT budgets to go up as a percentage of sales, while 51% expect them to hold steady.

And while the study focused on CIOs in the retail industry, its underlying results are important for CIOs in all markets because they reveal the forward-looking perspective CIOs must keep these days in spite of global economic gloominess. In particular, this excerpt from the study’s introduction powerfully captures the wrenching changes and challenges all CIOs  face today, regardless of industry:

“It’s important to recognize that today’s retail model is, largely, a system built for the realities of an earlier era — a linear, push-based process where products are manufactured in isolation and put into market en masse from factory to truck to store, for customers who do the majority of their shopping in suburban malls. This approach was well-suited to the needs of manufacturers, retailers, and consumers half a century ago. But today, this system is straining to adapt to global supply chains, new ways and venues for selling — both physical and virtual — and a very different kind of consumer.[Today, retailers and manufacturers need a system] “… that can be fed by customer insight at every point in the process — all the way from design to distribution. It needs to be instrumented, so every item of inventory can be tracked and accounted for. And it needs to be intelligent, so vast amounts of customer data can be analyzed and turned into real data in real-time. By building intelligence into our entire retail system, retailers, manufacturers, and suppliers can eliminate inefficiency and waste at every step of the chain — crucial in the current economic downturn. Even more important, retailers can serve the new breed of empowered consumer, whose needs for high value, individual service, and low prices will only grow.”

The challenges faced by Retailing CIO’s are the same for any CIO in any industry, only the terminology is different.  More-informed customers, outmoded and limited capabilities throughout the supply chain, and creaky processes incapable of handling the demands of “the new breed of empowered” customers — these are significant issues for all CIOs.

Continual cost-cutting is not a sustainable strategy.  The focus today needs to be on revenue generation through the eyes of the customer.

Offshore Outsourcing Facts:

September 17, 2009
  • India is the global leader in IT outsourcing, but more companies are outsourcing to China to reduce overall IT spend. Inflationary pressures and the increase in wages have caused companies to look at other places for cost effective alternatives.
  • Most Global IT Outsourcers (e.g. IBM , Infosys, HP, Cognizant) are recognizing the importance of creating a development centers in China which will service non-Chinese companies. Roughly 30% of the capacities of these companies are dedicated to internal Chinese companies, the remaining 70% is dedicated to US and European companies.
  • It is becoming more common to see development work spread across geographic areas (i.e. China and India) as a way to increase productivity within the development groups.
  • India is about 10 years ahead of China in terms of cultural awareness as it pertains to IT Outsourcing, but China is closing the gap a pace that is far faster than the time frame that India took to reach the same place.
  • There are still some obstacles associated with the infrastructure within china but “technology zones”  and government sponsorship appear to be breaking down these barriers.
  • India still dominates in the area of Call Center outsourcing and has invested a significant amount of GDP on linguistic training for its population.

Keys to Outsourcing Success are Communication, Communication, and Communication! This is especially relevant in the areas of offshore outsourcing.