CIOs reveal the benefits of working with startups

Recent CIO round table events and market investigations have highlighted the growing pressure on CIOs to move quickly to deliver ‘agile’ technologies and services that can keep pace with ever-changing business needs.

Many solutions are typically developed by small startup companies that are able to react quickly to shifting market and technology trends, but dealing with such companies is clearly potentially more risky than doing business with less innovative, but long established tier-one suppliers.

But even after the recent financial crisis when demands to rein in costs for many organisations have been unprecedented, playing it safe is becoming more and more commercially untenable as rivals seek competitive advantage through strategic technology roll-outs. In this environment it is increasingly evident that the way in which forward-thinking companies go about sourcing products and services is undergoing a transformation. Established and lucrative vendor revenue models are being challenged by a powerful confluence of forces – technological and cultural – including social media, tablets, smartphones, BYOD, the cloud and the trend towards consumerisation of IT.

In light of these pressures, CIOs are increasingly evolving their sourcing strategies to deliver diverse application landscapes that can incorporate innovative additions from small, fast-moving technology startups, rather than relying principally on large suites of applications from single top-tier providers.

Mike Wright, global head of technology at hedge fund Man Group, says there is evidence of migration and movement in almost all dimensions of the technology spectrum in today’s market. “There are extraordinary vibrant factors in operation and there is a push and a conflict between consolidation of supplier base for cost efficiency verses seeking innovation from a variety of suppliers,” he says.

“We are all under pressure to increase agility and by agility we mean reducing the elapsed time to support business change. That can either be because it takes less time to develop something or that it takes less time to reduce an inhibition such as a legacy system. Cost remains a constant pressure, as does risk.”

Richard Warner, CIO of insurance giant LV=, agrees that, in today’s diverse world where there is a wide range of legacy applications combined with emerging new technologies, CIOs are facing ever more stringent demands for innovative technology to address rapidly changing business needs. He believes that the issue of addressing the broad universe of suppliers required to support such complex heterogeneous technology and business ecosystems is becoming more complex in many organisations.

Read the CIO Profile interview with Richard Warner LV=

Warner says that effective technology and intellectual property (IP) sourcing strategies must strike a balance between engaging leading-edge companies and safe but less pioneering tier-one suppliers.

“For many years people perused the Nirvana of how to simplify and consolidate estate,” says Warner.

“And while we need to strive to do this when we can, the reality is in every large enterprise where I have worked there has been in the region of 200 to 400 major applications. It never seems to get much lower than that.

“We need to live with this and go on to understand how we manage this complexity and how to identify new and emerging technologies that we can plug into this landscape. And more importantly we need to work out how we can plug them in and leverage them quickly and effectively. One of the challenges is that some of these emerging technologies may be very well known and we are seeing many of these new ideas developed by small- to medium-sized enterprises.

“I would say it is ‘horses for courses’,” he adds. “Bigger suppliers still have a role in that they can provide access to leveraged assets and IP which we would find difficult to access ourselves or through smaller suppliers - purchasing mainframe processing (MIPS) is a good example. They can also provide a safe bet for some commoditised resources at times.”

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