ETR Insights reviews a recent interview with the Senior Director of IT Strategy and Transformation of a global consumer brand, who has a particular focus on regional regulatory requirements and the productivity of their distributed workforce. Hiring within the Retail/Consumer industry remains strong, and investment in technology continues apace. Read on to learn about this executive's experience in transitioning a traditional ERP installation to the cloud, including detailed vendor commentary.
Our guest sees investment in digital transformation and Software-as-a-Service as linked to growth in a company’s overall revenue. “As companies are growing at the top line, the technology that’s used to differentiate themselves as an organization continues to grow as well.” Analytics is an important differentiator today within information security. And as both organizations and perpetrators become more sophisticated, demand for more robust legal and cyber insurance protection is rising.
This IT director sees opportunities to consolidate and scale any company’s stable of vendors. FinOps as a discipline is expanding, as organizations monitor license counts and what services are running, and are broadly seeking to optimize their cloud services. "There’s a huge opportunity in that space.” As office settings are wound down, companies are investing to make sure employees can work from home. This should be viewed as more cost-basis optimization than necessarily cost-cutting: "There’s always going to be a question about productivity, but I think it’s the discipline of knowing what levers you can pull. You want to make sure that you invest into that top line. You don’t want to cut costs that are also impacting the way that you perform as an organization.”
ETR Data: The model above shows preliminary data from ETR's April 2023 Macro Views. For the first time since January 2022, respondents indicate an increase in accelerating new IT deployments, up 3 percentage points from January 2023. Hiring freezes have also stabilized, plateauing at 30%, while the proportion of respondents indicating plans to freeze new IT projects and deployments continues to fall, below 50% percent for the first time since this survey's inception in April 2020.
While technology is constantly advancing, our guest favors a methodological, architected approach to application adoption. “You have an enterprise architecture framework which gives you an application road map, and then within that you’re following the road map.” Though they constantly monitor the market, this organization generally steers employees away from haphazard purchases and subscriptions outside of this technological roadmap. While some regions may have specific local regulations or ways of working and demand specific tools, in our guest’s experience, the same is generally true for global organizations. “Many companies that are global in nature will have these massive ERP solutions that usually will help rationalize an application portfolio. That’s an opportunity also to look at, how do we streamline processes where it makes sense?”
In order to keep a business operating, some groups may take priority over IT; this may explain the shift to longer procurement cycles around software and technology. Paired with inflationary pressures and ongoing supply chain issues, this means that IT managers today must be particularly forward-thinking.
Our guest does not see layoffs or freezes in hiring within CPG; hiring within this sector remains a challenge. “Your competitors are technology companies, and people out of school sometimes don’t recognize that CPG organizations run on technology.” Companies must move quickly to attract and hire talent and strive to retain the talent they have. Technological deployments are accelerating. “If anything, we’re trying to be more aggressive in delivering value.” The company monitors the market in an effort to remain wage-competitive and expects some wage pressure due to macroeconomic conditions.
ETR Data: According to preliminary Macro Views data (shown above), a quarter of IT decision makers surveyed indicate a longer vendor procurement cycle in the first half of 2023, of which 2.2% expect the process to be "Significantly longer" (+26% to +50% change in duration). Meanwhile, another 42% of respondents expect little or no change at all to the length of their organization's vendor procurement cycle (5% to +5%).
Additional Insights: Managing Complexity and Cost Controls in Cloud Environments
Cloud ERP and HR. Rolling out ERP solutions within a cloud environment can be costly. “When you finish, you think you’re done, but you’re not, because the next iteration comes, like an SAP S/4HANA.” This, alongside the solution or system integrators that come with it, is driving continued investment. As a global consumer brand, this IT director is particularly focused on regional regulatory compliance, where particular labor laws may influence how you configure any cloud-based human resources software. “That’s where you start the incremental costs because you’re building business logic and rules that go along with it.”
SaaS Consolidation + Expansion. Our guest notes that ServiceNow is broadening its portfolio and that its offerings are becoming more robust; Salesforce and Kronos are similarly expanding and acquiring, as has SAP with Concur. However, our guest advises providers to favor more direct integrations and cautions against overly diluting their services. “If you look at an Ariba and SAP, building that integration is a fantastic win and you can have it end-to-end in a seamless way – whereas if you were to buy Ceridian or something like that, then these other tools, now you’re talking about integrators, business processes, and the language between the systems. You’re basically creating a whole integration pathway.” Organizations want to run as simple and seamless a back office as possible, as there are limited ways a company can differentiate itself there. “The more complex you create your environment, the more challenges you have.”
ETR Data: The model above shows preliminary Technology Spending Intentions Survey (TSIS) data for select products and vendors tracked within the Enterprise Apps sector. ServiceNow and SAP S/4HANA hold the highest Net Scores in this grouping, though ServiceNow is nearly twice as pervasive. Salesforce registers a healthy Net Score and robust Pervasion metric; however, along with S/4HANA, downward movement in Net Score over sequential survey periods is worth noting. Data for Ceridian, while citations remain low, shows impressive growth in spending intent on the vendor over time, approaching healthy Net Score levels.
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