Strategy Will Squash the Recession
In recessionary times, many corporations are pulling the plug on proposed projects -- trying to penny-pinch and cut unnecessary costs. Ray Wang, an analyst with Forrester Research, cautions against such haste. In fact, Wang says, the expense of abandoning already-in-the-works projects might exceed the cost of following through with them. Instead, organizations should look to breathe new life into in-flight projects.
In his latest Forrester Research report, "Five Steps to Building a Recession-Proof Packaged Applications Strategy," Wang shares a plan that aligns with business drivers, gains executive support, and makes the company more efficient. Wang says that appeasing the executive team and reinvigorating current application strategies comes down to two goals:
- cost-saving and
- cost-avoidance (in the form of regulatory compliance).
"A number of clients are cancelling [implementations] -- but leaving so much effort and momentum on the table," Wang says. "What you're looking [to prioritize] is a project that addresses regulatory compliance, something you have to do, or something that will help you save money."
Wang's five-step approach to application strategy is as follows:
- Align Your Strategy with Recession-Relevant Business Drivers: Business leaders must recognize both internal and external forces affecting the future of the workplace, including:
• economic and geopolitical uncertainty,
• the emergence of new business models,
• changing workforce dynamics involving a new generation of workers, and
• advances in technology.
Regulatory-compliance efforts avoid potential risks and costs involving litigation. Wang relays that, on the consumer side, new technologies pose little threat, but for enterprises, it's crucial to be vigilant in complying with regulations in every instance. "In the enterprise, you make the assumption, ‘I don't know who's on the other end and who's going to take down the system,' " he says. "Corporations have a…responsibility to protect themselves from attacks like that." It's all about finding the right balance between, on the one hand, emerging and innovative technologies and, on the other, governance and security. Wang also warns business leaders to view operational-efficiency initiatives as bottom-line drivers. Examples of these kinds of initiatives, he adds, include improving supplier and procurement leverage, mitigating aggregate credit risks, improving the "days sales outstanding" metric, reducing time spent on analyst relations, reducing the cost of sales, and improving overall sales cycles.
- Organize Stakeholders for Sustainable Change: Once an organization recognizes the key business drivers needed to improve efficiency, it must look for support within the corporation -- support which Wang believes must move beyond basic executive sponsorship. For true project buy-in, he says, project leaders need to involve (and garner support from) line-of-business employees. Both IT and business leaders should be involved in budget planning for organizational synergy. "And if you tie everything back to…business drivers, you can save your project," Wang says, pointing back to Step 1.
- Identify Opportunities in Commoditized and Differentiated Processes: No application should be deployed without fully examining the company's business-process orientation. Wang recommends designing with the end in mind to tailor how people are using -- or are going to use -- the application. Additionally, he suggests process mapping as a means to identify common processes and competitively differentiated ones.
- Select Effective Technology Strategies: Wang outlines several strategies that align to both regulatory compliance and operational efficiencies. One of these, the consolidation of applications, can have the added benefit of a rapid return on investment, he says. Data archiving is another potential strategy. Strategies that offer only operational efficiencies include paying close attention to software-upgrade schedules and preparing for new deployment options such as software-as-a-service (SaaS). Wang notes that, because of tightened budgets, SaaS and its "try-before-you-buy" approach becomes more attractive, as does open-source technology. Both, he says, are areas that will drive innovation.
- Reexamine Your Vendor Relationships: "By saving this step for last, [application-delivery] pros gain the freedom to make decisions based on business needs rather than bias toward a particular vendor or technical solution," Wang writes. Part of the reexamination process involves avoiding single-vendor lock-in and trying to work around hefty maintenance and licensing costs. Third-party maintenance is becoming a viable option to avoid escalating maintenance costs, the analyst writes.
Stay tuned for CRM magazine's upcoming Recession Issue (February 2009) for more on this topic.
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