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Process Overhaul Due

Most tech companies aren't ready to compete in the rapidly evolving global marketplace
Most American technology and telecommunications companies haven't yet put into place new processes and practices to compete in a rapidly evolving global marketplace, according a study released last week.

The report, "Crunch Time: The Competitiveness Audit," is based on a survey conducted in late 2004 and early 2005 of more than 300 CEOs and business-line executives at North American technology and telecommunications companies. The study was conducted by organizations including the Chief Marketing Officers Council, the Business Performance Management Forum, and consulting firm A.T. Kearney.

"My expectations are that companies would've been further along by now in executing" new strategies, processes, and practices to compete in a fast-changing global market, says John Ciacchella, a VP in A.T. Kearney's high-technology practice. But many still are struggling with how to compete at a company level across different markets based on processes that already are in place, which might not give companies the agility to innovate, adapt, and compete effectively worldwide, he says.

"It's time for companies to be establishing beachheads in the new global market," he says. "Typical boundaries are changing, yet companies tend to think of competition in terms of product and market segments," he says. "But if market and product segments are breaking down, they need to change."

Only about one-third of companies have instituted formal processes or developed a formal function for assessing their company's competitive position in their industry, according to the study. About 54% say "informal discussions that are part of business meetings" constituted their approach to measuring competitiveness.

One strategy that companies use to cope with overseas competition is increased use of outsourcing and offshore operations. The cost of skilled labor offshore is the most important factor driving respondents toward offshore operations. Other important drivers of offshore operations include access to local markets and intellectual capital, as well as innovation, capacity, and speed.

The role of CIOs will change as global competition heats up and more companies outsource functions, Ciacchella predicts. CIOs will increasingly need to "help integrate technology into the business manager's products," he says, to fuel companies' competitive innovations.