Recession Global

By: Dave Carmichael
Although it seems hard to believe at the moment, the global economy should be on an upturn sooner rather than later.  There have been many blips in the nation’s financial stability over the last 100 years, not least two World Wars and the great depression of the 1930s. However, the economy has always bounced back and this recession should be no exception: in fact, the global economy is predicted to double in the next twenty years.

 

At present, it appears that CIOs are spending their time struggling to cut costs and only implementing projects that are guaranteed to provide a rapid financial return. But it is vital that they also consider what lies around the corner by preparing the company for the predicted upturn.

 

As business processes fall under greater scrutiny during cost-cutting drives, more companies are becoming acutely aware of the importance of improving business-to-business (B2B) efficiencies throughout the supply chain. Not only will this enable them to achieve ‘flat growth’ in the current economic climate, but it will also ensure they are best placed to scale and grow when the expected upturn arrives.

 

The challenge is increasing these efficiencies when the board insists on rapid ROI and smaller budgets.

 

A change in priorities: from inside to outside the enterprise

 

At the end of the last century, efficient business integration was focused on activity within the enterprise and ensuring the different applications within the business could talk to each other. But as companies have entered a global economy and are now battling their way through the recession, it has become obvious that if they want to stand any chance of remaining efficient and competitive, they need to be able to integrate beyond the four walls of their organisation and achieve full B2B integration.

 

The global economy has meant that the supply chain has lengthened; businesses are now sprawled across different time zones and languages; acquisitions and mergers are occurring more frequently; and communication between all these different areas of the business has become more challenging. During the recent period of growth up to 2008, most companies responded with tactical point solutions that created “islands of integration” and added headcount to fill in the integration gaps.

 

Businesses can no longer survive by relying on these “islands of integration” that cannot talk to each other. Processes throughout the supply chain must now be fully integrated both inside and outside the enterprise across the business collaboration network in order to create a fully efficient and profitable business.

 

B2B Integration hurdles

 

Sterling Commerce recently carried out a survey, amongst 300 senior IT managers across France, Germany and the UK, to find out the current challenges that businesses face when trying to integrate different sections of the business. Four out of five companies said that they experienced problems with their current B2B capabilities mainly due to the use of legacy technology which made it difficult to integrate their trading partner data with their back end applications.

 

The fact is that many companies not only rely on old technology, but also on manual processes. There are still companies sending faxes and manually enter orders on to a system. One small human error, or a fax that doesn’t get through, can lead to delays in information entering the supply chain, as well as errors all along the supply chain.

 

Failing to automate even the simplest transactions means companies cannot achieve a real-time, holistic view of the supply chain. In fact 23 per cent of the businesses Sterling Commerce questioned said they have no real-time visibility into B2B activity. Without supply chain visibility supply disruptions can’t be indentified and acted upon quickly. This can lead to excess inventory in some cases or stock-outs in others and is one of the main barriers to efficiency in today’s globally connected economy.

 

To achieve B2B efficiency, companies need to focus on the strategies, trends, technologies, skills and services associated with linking the business processes, IT infrastructure and data of their internal applications, both internally and via multi-enterprise (B2B) integration. Those companies that adhere to this focus achieve the sustainable competitive advantage and cost savings associated with faster and more efficient B2B integration.

 

Reducing the cost of B2B integration and enabling business growth

 

Whatever the current financial situation, the business requirement is the same as always: to support the business and its customers. It is just the drivers that have changed and so have the options for funding it.

 

Firstly, CIOs will no longer want to invest their staff’s time and effort on developing the B2B integration strategy; it’s certainly business critical, but there are more differentiating core competencies his team could be focused on. Secondly, many CIOs are finding that they are struck with a shortage of employees with specific B2B skills; the survey conducted by Sterling Commerce revealed that 25 per cent of skilled IT people are actually within five years of retirement age. Lastly and perhaps most importantly, traditional IT is associated with big up-front costs, so as companies look to remove gigantic capital expenses, investing in an entire new integration capability may not be the most appealing option.

 

As CIOs struggle with the above challenges, they need to ensure that IT is not just perceived as a financial black hole, but something that yields the best results for business. This is why the ability to move a cost from a capital one-off expense to a monthly operating fee is becoming increasingly compelling for today’s CIO.

 

Taking advantage of a cloud-based offering means that CIOs will have very little, or even no upfront costs, resulting in minimal capital expenditure and happy board members. By subscribing to a B2B managed service, which leverages the economies of scale that can only be achieved with a multi-tenancy platform, users can benefit from a configured service that can respond to rapidly changing B2B integration demands, with a monthly fee that reflects usage levels.

 

This approach to overcoming B2B integration hurdles not only reduces the cost of B2B integration today, but also helps businesses manage fluctuations in demand in this volatile market and puts them in a better position for further growth come the upturn. It may not result in rapid growth for the organisation at this moment in time, but in this current climate, staying flat is the new black.