Manage IT in the times of recession Part 2:

Consolidating vendor relationships

In the first part of our ‘Manage IT’ thought leadership series, we spoke about reviewing and consolidating solutions and cloud licenses. We are seeing a wave of partnerships in order to consolidate vendor relationships. Businesses see this as an opportunity to work with fewer providers as cost optimization becomes a key factor in IT-cost savings strategies. This also helps retailers get better end-to-end service and to improve leverage on scale.

Explore new engagement models technology vendors

While digital transformation initiatives may be underway, due to the economic slowdown, the Retailers’ focus shifts from transformation to optimizing all available resources. The need for operating models, governance, and skills change. These three factors become levers to find opportunities for Retailers. Here are the ways in which engagement models can be reshaped.

• Operating Model: Depending on the geography where the work is being delivered, retailers can increase their offshore dependence and or look for near-shore options which also helps in remote work situations. Retailers may choose to shift their heavy dependence on their on-site MSP to nearshore vendors. Retailers who need managed services support close to home but not necessarily within the same country can opt for nearshore outsourcing of their managed services. For instance, popular locations to outsource for retailers in the US is often Mexico, Ukraine (before the war) and Poland.

Nearshoring has become popular among outsourcers not just due to the obvious advantages of cost optimization, belonging to the same time-zone, cultural similarities, but it also helps to improve engagement and fosters innovation. The tangible and intangible costs of nearshoring are far less than offshoring and companies in Northern America and Western Europe have started to realize the competitive edge it could provide them in the current global crisis.

There are two aspects to this, vendor, and skill consolidation. We often observe our customers have multiple vendors, sometimes as many as 4 to 5 tier 1 and tier 2 vendors each. Retailers need to look at possibilities of getting volume discounts because with consolidation. Skill consolidation could translate to combining the project and program manager roles managing two to three projects. You achieve the volume of scale when negotiating pricing as well as consolidation of different roles.

• Governance: Driving operational efficiencies and risk management are the two primary goals of governance. In terms of governance, a key factor to consider would be if you are consistently measuring KPIs and SLAs and looking to see their steady improvement. At this stage, the maturity of operational efficiency is required. Retailer should ensure that they are lean in their operations while managing the right KPIs and managing the risks.

At this stage, it would be advisable to not take excessive risks. Instead, look to unlock capital for self-funded transformation programs. When you are saving cost by driving operational efficiency in a lights-on support mode, you can reinvest those savings to customer experience improvement initiatives.

Fill the skill gap

One of the things retailers may need to do, in order to pivot in the age of the Great Recession and Quiet Quitting, is a change in their existing strategies of reaching out to managed services support. Companies are not just keeping the lights on with lean managed services, the support system of an MSP also helps firms become more efficient, help in the optimum utilization of the existing solutions, and highlight areas where gaps need to be filled. Furthermore, MSPs also have the talent to fill those skill gaps. So, it’s a good idea for Retailers to rethink their IT-spends now more than ever.

Moving from an engineering mindset to a maintenance mindset can be tough for your employees when you have several ongoing transformation initiatives. While there are Managed Service providers that can provide more support on multiple skills, there are also options of getting help in depth in a particular technology aspect.

Moreover, when you work with vendors, they also bring along with them a service mindset, where the client’s needs are met through scalable and customizable solutions.

Automation as a service

CIOs want to urgently reduce the reliance on human resources for mundane, repetitive tasks. Moreover, customer service is one of the most fast-advancing areas where automation and AI/ML technologies are being implemented. Managed service providers can aid and accelerate the adoption of automation technologies at scale. Leading publication CIO Dive have quoted Gartner analyst Brett Sparks as saying, “[Companies want] advanced technologies to come in and start offsetting labor arbitrage and move into a digital arbitrage mindset so that they can reduce their spending year over year.” As more retailers take the MSP route, more automation implementations can see the light of the day.

Conclusion

For service providers and businesses, managed services looks like scheduling an appointment with a managed services provider, setting up a connection, and reaping the benefits of tech solutions that lead to more happy and loyal customers. But from a CIO’s perspective, MSPs do more. Managed Service Providers lay the groundwork for a strategy to cope during an economic downturn. This could include mission-critical tasks such as addressing technical and process debt. Be it tackling a specific problem, or keeping operations running, there is a right managed services provider for everyone.

The author of this article is VP & Practice Head - Retail Solutions at Aspire Systems, a technology consulting and services enterprise that helps businesses achieve their optimization and transformation goals. With a customizable Managed Services framework, businesses implement innovative improvement strategies such as automation, shift left and AIOps with the most optimal operating models, including an onshore-nearshore-offshore combination.