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GenAI complicates IT vendor management

IT leaders at the MIT Sloan CIO Symposium cited the challenge of managing the 'explosion' of GenAI companies while also working with vendors in maturing technology sectors.

CIOs in many organizations will find themselves coordinating a more complex partner ecosystem as emerging technologies call for a broader set of products and services.

IT leaders participating in the 2024 MIT Sloan CIO Symposium, which wrapped up today in Cambridge, Mass., acknowledged the challenges of multiparty IT vendor management. They pointed to generative AI (GenAI) as a case in point: The technology requires a mix of product suppliers, implementation service providers, business process consultants, regulatory experts and ethicists.

Gayatri Shenai, a senior partner at McKinsey & Co., said CIOs have become more comfortable in a multipartner environment in recent years, but she noted that the arrival of GenAI has intensified matters.

"You've gone from managing a couple of vendors, to a couple more vendors, to now where there is an explosion," said Shenai, who led a panel discussion on the multivendor landscape at the MIT event.

Managing diversity

The expanding roster of generative AI providers compels IT leaders to evaluate and orchestrate more options. But the increased diversity also lets them hedge their bets. That's an important consideration in a field where vendors constantly leapfrog each other on technical capabilities.

"We don't know who the winners are," said Mojgan Lefebvre, executive vice president and chief technology and operations officer at Travelers, a New York City-based property and casualty insurance company. "Right now, I'm really not ready to say, 'OK, guys, let's go with this one or two.'"

Lefebvre, who participated in the multivendor panel, cited the arrival of GPT-4o, an updated version of OpenAI's enterprise-grade large language model, as an example of GenAI's ongoing early-stage development.

"I think you still have to experiment," she said.

Graphic summarizing generative AI business benefits.
GenAI offers business benefits along with vendor management challenges.

In contrast, other IT technology categories are maturing or shrinking, which simplifies IT vendor management. Lefebvre pointed to cloud computing, saying organizations can feel more confident working with fewer vendors on that.

Maturing technologies, however, can also potentially lead to vendor lock-in.

"We are seeing a massive consolidation happening in some of these mature products," said Amish Patel, CTO at Elevance Health, a health insurance company based in Indianapolis. "That is a level of concern because you don't have the optionality, and then a lot of these predatory pricing [practices] are coming into the picture."

The task for IT leaders is finding a way to simultaneously manage consolidating and expanding technologies.

"You really have to have two different models to manage both of them," said Patel, who discussed his company's multivendor approach during the panel discussion.

Another panelist, Chris Bedi, chief digital information officer at software vendor ServiceNow, added a different layer to the multivendor discussion. Avoiding commitments to particular vendors goes against an IT organization's multiyear technology roadmap, he contended.

The cost of changing vendors is another issue, he added.

"If you're in a place where the switching cost is pretty low, which is very rare, in my opinion, then you can get out of vendor lock-in," Bedi said. "And if you're in a place where there's parity across multiple players in a unique space, then you can actually mitigate the risk of locking."

Otherwise, enterprises must accept the risk of lock-in -- ServiceNow included.

"We are building a three-to-five-year roadmap," Bedi said. "We are training our teams. We are investing in integration. And the switching cost isn't small."

He said the key is knowing "who you're doing business with" to avoid pitfalls such as predatory pricing.

Communication among partners

The importance of communication grows with the expansion of partner ecosystems, industry executives said.

"When you're working with a lot of these multipartner ecosystems, I think clarity, communication and change management really have to be at the forefront," Patel said.

Technical architectures present engineering problems, but organizations can solve for those, he said. The "people architecture" is the more difficult part of the equation.

We have to fly in formation.
Darlene WilliamsSenior vice president and CIO, Rocket Software

"That's what I think is going to get amplified even more with GenAI," Patel said, adding that CIOs and CTOs must be prepared to deal with that complication.

For one, they'll need to get people from different companies moving in the same direction.

"We have to fly in formation," said Darlene Williams, senior vice president and CIO at Rocket Software, an IT modernization software company based in Waltham, Mass.

Close coordination means partners must understand her company's business imperatives, Williams said. With that knowledge, they can align their offerings with Rocket Software's strategy.

"We may be technologists, but we are absolutely at the table as a strategy partner," said Williams, who attended the CIO Symposium. "And in order for us to be effective strategists -- we don't know it all -- that's where partners come in."

John Moore is a writer for TechTarget Editorial covering the CIO role, economic trends and the IT services industry.

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