IT leaders are under increasing pressure to find new sources of innovation. With creativity seen as key competitive differentiator, CIOs are being charged to help find new solutions to intractable business challenges, including from the startup community.
So how can CIOs benefit from working with fast-growing firms and what’s the best way to use their expertise? Computer Weekly speaks to five IT leaders who give their best practice tips for working with startups.
Manage risk and rate your suppliers
Chris Hewertson, chief technology officer (CTO) at hotel group GLH, says his organisation spends a lot of time talking with startups and does, in the right business circumstances, draw on their expertise. “We trial and evaluate startup services, and we recognise the values they bring can be a potential competitive differentiator,” he says.
Hewertson, however, also believes CIOs should be looking to create an entrepreneurial spirit in their own organisations. He says GLH is still operating at a scale where it likes to manage developments in-house.
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“We’ve used other companies but we haven’t handed anything over yet,” he says. “In fact, we’re starting digital businesses in our own organisation. We have agile developments going on and we’re building apps.”
When it comes to closer ties with external partners, Hewertson says CIOs must understand there is a risk that a startup partner can fold. But the same is true of any supplier, he adds. Economic and business circumstances can change and CIOs must consider all potential eventualities.
“You have to manage through risk,” says Hewertson. “We have a corporate risk board and I run a monthly risk session. We manage and rate our suppliers. If we think a partner isn’t performing, we let them know. If we think there’s a risk they’re going to go under, we put in mitigations.”
Hewertson says supplier management is one of the key strengths of a CIO. He says IT leaders need to draw on that experience because they will play a crucial role as their organisation starts to work with more startups. “Who knows about service level agreements and service contracts?” says Hewertson. “The answer is the CIO – we’ll sort the contract, manage the service and insist on clauses.”
Balance the need for innovation with good business sense
Andy Wilton, CIO at Claranet, says that startups by their nature bring a new perspective to solving the challenges that CIOs face. The results are not always positive, however, as a new perspective can also represent an idea that has not been tempered through widespread adoption and adaptation.
One of the key concerns is that a startup will struggle to cope with demand, particularly if their service is embedded as a key component in a larger supply chain. “Understaffing, mismanagement or a failed product can all cause problems and this is more common than you might think,” says Wilton.
“For many IT leaders it is important to get the right balance of innovation – and that’s about bringing in startup suppliers in an iterative way alongside their long-term, and often more experienced, providers. With the help of a larger partner, the culture, values and service of the startup can be adjusted to meet the needs of your business.”
Problems are not just confined to smaller startups. Wilton says CIOs must recognise that larger, fast-growing startups should be approached differently. Companies that float on the stock market can change their approach and even become destabilised, especially if they are burning through cash to reach a target size.
“This situation can create another source of uncertainty for CIOs, as many will be at risk from having the rug pulled out from under them as business circumstances change,” says Wilton. “For this reason, due diligence on the profile of a fast-growing startup should be undertaken with greater care by CIOs during the tendering process.”
He says organisations looking to avoid risk in the procurement process should look to those suppliers that operate with a working profit. “But ultimately, if the service offered is genuinely innovative and the value proposition can’t be beaten, partnering with a startup could be a rewarding decision,” says Wilton.
Accept the challenges of working with fleet-of-foot suppliers
Neil Davison, IT director at law firm Farrer & Co, says his organisation has reached out to startups for certain elements of IT provision. One area is email management, where the legal firm called on a London-based startup that received significant funding to help develop software for filing and archiving.
The startup became particularly popular in the legal sector before hitting financial issues. Davison says a larger software firm is currently purchasing the supplier. Such issues might dissuade CIOs from partnering with a startup, yet Davison remains sanguine.
“The product’s great – it’s a really reliable system,” he says. “We now manage the product ourselves and it works well. In fact, we’ve recruited one of the startup’s best technical employees into our IT team.”
Davison, however, recognises the lack of support could create challenges in the long term. He is using the changes to email filing provision as an opportunity to take a broader view on electronic document management (EDM). Davison has recently installed NetDocuments’ cloud-based EDM system, which is helping to improve workflow across the firm.
Date: January 19, 2016