A recent analysis by ISG Momentum® Research concludes that consumer packaged goods (CPG) companies are moving away from a traditional focus on IT operational efficiency, and are moving towards a model of using IT to drive innovation, support new strategies, establish new delivery models, speed product development and improve supply chain processes and inventory management.
Perhaps the most significant trend I’ve observed among our CPG clients is an increased commitment to understanding and enhancing the role of IT across critical business processes. Rather than managing IT in isolation, CIOs are measuring service levels across business processes. For example, server availability metrics aren’t enough; today, companies want to use IT to ensure that delivery trucks are leaving warehouses on time. IT investment is focusing on shortening cycle times and developing applications that enhance make/move/sell processes around manufacturing, logistics and distribution. Speed is king and emerging metrics are gauging the time it takes to move an input or raw material – a green bean in a field, say – to a product on shelf – a bag of frozen beans in a grocery store.
This is not to say that the blocking and tackling basics of IT operational efficiency are being ignored. Indeed, companies seeking to gain a competitive edge through innovative applications need to be able to afford them. We’re seeing an increase in outsourcing, with the objective of taking cost out of non-critical systems to re-invest in change-the-business initiatives.
In many other respects, IT priorities within the CPG sector reflect what’s happening across industry lines. For example, like many companies in a variety of sectors, CPG firms are putting their toes in the water of cloud-based services, primarily focusing on SaaS applications and rapid provisioning. And like many firms with data sensitivity concerns, security remains an obstacle to broader deployment.
Like most companies in most industries, CPG firms struggle to develop effective data storage and management strategies. Demand for resources continues to be insatiable, and volumes continue to grow at annual rates of 30 to 40 percent. To complicate matters, new or changing regulatory compliance issues are requiring longer retention of certain types of data. On the technology front, we are seeing some progress as more and more organizations are leveraging disk for backups and for site-to-site replication for disaster recovery. Many organizations in a variety of sectors are beginning to pull useful business intelligence and analytics from their “big data” and using tier-3 disk storage to keep that data on-line.
The question of what to do with that “big data” remains an open one. As customer-facing websites and social media platforms become increasingly important marketing vehicles, CIOs have an opportunity to raise their profile as a true strategic business partner – or risk being relegated to a role of filling orders from the CMO. Faced with similar challenges, we’ve seen retail CIOs forge effective alliances with their marketing colleagues to positive effect.
Finally, like any industry characterized by M&A activity, divestitures and acquisitions, developing and implementing an optimal strategy to manage and integrate legacy systems remains a priority. CPG firms seek to understand what their competitors and other comparable organizations are doing, and are similarly interested in benchmarking their existing environments in order to better define their options for moving forward.
What’s your experience? Share your insights on CIO challenges within the CPG sector, or within other sectors for that matter. Are your challenges unique? Or are we all, ultimately, in the same boat?About the author
Mr. Kalnik, a Partner at ISG, brings extensive experience in the Information Technology (IT) Services industry to ISG’s clients. Since joining ISG in 1994, Chris has advised over 100 clients in the Americas, Europe and Asia-Pacific in developing strategies, assessing delivery alternatives, and negotiating and implementing successful sourcing relationships. He also leads ISG’s Commercial & Financial Analysis Global Domain, focusing on assisting clients in analyzing sourcing alternatives and Service Provider pricing, building business cases, negotiating commercial and financial terms and conditions, and managing financial transitions and the ongoing financial and commercial management of complex sourcing relationships.