Satisfying Customers vs. Reducing Costs: You Can Do Both

By Steve Berger

and Mike Matheis,

A.T. Kearney

In today’s economic environment, IT leaders are trying to deliver on conflicting priorities. By managing costs with laser like focus, they have streamlined IT staff, instituted a longer refresh cycle and slowed down new development projects. Despite these cost saving measures, these same IT leaders are expected to maintain, if not improve, customer satisfaction. Given this seemingly contradictory mandate, it is no surprise that IT customers are not satisfied with the service they are receiving from their IT organization.

The Challenge – Improving customer satisfaction is a cost constrained world

While key stakeholders can cite a number of reasons for their unhappiness (see figure 1), at a macro level, these issues can be grouped into three root causes:

• Misaligned Expectations: When IT has poor insight into customer needs and demand, it is nearly impossible to align IT and business customers’ strategies, goals and objectives
• Poor Service Definition: When IT products and services are not clearly defined – resulting in non-standardized solutions and poorly managed SLAs – they are highly unlikely to meet customer needs
• Inefficient Service Workflow: Without a clearly documented process and supporting tools to manage the IT service request lifecycle, turn around time is slow and the IT organization seems unresponsive

Becoming Customer Focused

These issues are not unique to IT. Many companies have struggled to manage costs while achieving superior levels of customer satisfaction. One such company that has successfully addressed these challenges is Commerce Bank.

Recognizing a business opportunity in breaking the rules of traditional retail banking, Commerce Bank developed an innovative approach to working with its customers. This company modeled itself not as a bank, but as a retail operation. It has “stores” not branches and “relationship managers” instead of tellers. Commerce Bank also vowed to understand customer needs and turned tradition upside down. It offers extended weekday hours and is open on Sunday – something unheard of in the retail banking industry. The Commerce Bank revolution has proven quite rewarding. Over the past year, revenue growth has been 50% higher than the industry average and net income growth more than double the industry average. Over the past five years, earnings per share similarly grew at more than twice the industry average.

Applying World Class Business Processes to IT

IT organizations can use the experiences of Commerce Bank and other innovators to improve their customer relationships. In fact, any group that wants to improve customer service can join the party. The key is to follow a discipline that puts the customer first. However, reaching this new level requires organizations to perceive themselves and their customers in non-traditional ways. While many IT organizations claim to focus on the customer, few have actually applied the lessons of Commerce Bank. To provide guidance, A.T. Kearney developed an innovative framework called the “IT Front Office Model” that applies world-class sales, marketing and product development processes to the IT organization. In this model, the IT organization delivers valued services and products to its customers at a lower cost by building better relationships and focusing its efforts on a core portfolio of offerings.

The core components of the IT Front Office Model are as follows:

• Relationship Management: This is the primary point of contact for the customer. Relationship managers will understand each customer thoroughly, from the business strategy and related IT needs down to the service request level. With these insights, they can predict and shape demand to drive standardization, which will in turn lead to cost containment and increased customer satisfaction
• Portfolio / Marketing Management: This function provides the right mix of IT products and services to meet customer needs. Again, the retail banking analogy holds true: the provider manages a changing portfolio of offerings that respond to varying economics, customer requirements, and product advancements. The Portfolio/Marketing group also publishes a standard catalog that clearly defines the services available and the corresponding price, SLA, delivery terms and timing. The catalog obviously includes infrastructure services (desktop, compute, telecom, help desk) but could expand to offer high-value added services which the business values even more (such as BPO, sourcing, IT architecture)
• Solution Management: When working with customers, not everything falls neatly into the “standard catalog.” New services must be developed and designed. When a request cannot be fulfilled because it is either not part of the standard suite or requires a complex combination of standard services, Solution Management comes to the forefront. This function also looks ahead to ways that IT can support innovation at the corporate level and contribute to business growth
• Supplier Management: As service providers increasingly comprise internal, domestic external and offshore external organizations, supplier management is a key element in customer satisfaction

Realizing the Benefits

Applying best practices to the revised IT organization results in four types of tangible benefits for the entire enterprise.

• First is improved customer relationships that will provide IT with insights to better deliver on results. With active strategic account management and other interactions, IT will communicate its intent to be more customer centric and to become a trusted partner of the businesses
• In addition, the businesses will receive greater value by concentrating investment on a standard set of products and services. Portfolio and marketing management will enable IT to offer services that are most important to customers. And all services rely on the same interfaces, request system, and demand shaping concepts – regardless of service type, and, more importantly, delivery organization
• At the same time, delivery costs will decrease. As businesses receive standardized services, there will be less complexity and greater economies of scale
• Finally, when IT gains the trust of business customers, it can expand beyond traditional support services to growth and innovation – ultimately increasing the value realized by the enterprise

Getting Started

Optimizing the IT Front Office is not a quick fix for the many issues challenging IT organizations today. Putting it in place requires top-level executive support, a committed partnership between customers and IT, and an aggressive implementation plan with clearly defined milestones.

The key – and also the challenge – to improving customer relationships is to understand how to best leverage the components of the IT Front Office model for your business. Many organizations have already begun to incorporate one or more of the components. Optimizing the IT Front Office is an evolutionary process; IT organizations can begin to realize the benefits from this innovative model by taking these initial steps:

• Assess current performance against best practices of sales, marketing and product development leaders
• Identify and prioritize areas for improvement and develop concrete, aggressive plans to address them
• Build momentum by realizing a few quick wins that are valued by your customers

By optimizing the IT Front Office, IT leaders can adopt an innovative approach that achieves the benefits of the seemingly conflicting mandate of lowering costs and improving customer satisfaction.

Steve Berger is a principal with A.T. Kearney. Mike Matheis is a vice president with A.T. Kearney.