IT Leaders Reassess Vendor Risks After Silicon Valley Bank Collapse
Corporate information technology leaders say they are reassessing vendor relationships and putting greater emphasis on risk management as they navigate the aftermath of the Silicon Valley Bank collapse.
“You can be proactive all you want, but the response to a crisis, the response to a disruption no one saw coming, is just as important,” said
Sineesh Keshav,
chief technology officer and chief information officer at logistics real-estate company
Prologis Inc.
He and other executives spoke Tuesday at The Wall Street Journal’s CIO Network Summit in Palo Alto, Calif.
Nutanix CIO Wendy Pfeiffer.
Photo:
The Wall Street Journal
Since the collapse of
SVB,
the startup world’s pre-eminent financier, vendors have been reaching out to customers as well as responding to inquiries about their short-term status, summit participants said, but CIOs say they are also worried about longer-term implications.
Wendy Pfeiffer,
CIO at cloud software company
Nutanix Inc.,
said she plans to keep doing business with vendors who might have been affected by the bank collapse and help them if necessary, but she added that she is concerned about the future for mid-to-large-sized vendors who depend on small vendors.
“I’m worried about three months from now, as some of their key components potentially are compromised,” she said.
“I do think we need to increasingly improve due diligence,” Ms. Pfeiffer said. “Look, if you receive the warning from the universe, take it on board.”
John Hill,
chief digital information officer for MSC Industrial Supply Co., said in an interview before the summit that his team has a process for evaluating the viability of vendors, but he added, “SVB lit a fire under it—somebody could not exist tomorrow.”
Egnyte co-founder and CEO Vineet Jain.
Photo:
The Wall Street Journal
“This just became a lightning rod to make sure that analysis is going on and that we’ve got contingency plans in place should suppliers cease to be able to operate,” Mr. Hill said. Before SVB, “I’m not confident that we were doing as much of that as we should have been doing” he said.
According to
Vineet Jain,
co-founder and chief executive officer at software development company Egnyte Inc., there will be more scrutiny of vendors going forward, adding that “the scrutiny is going to be a lot higher” for younger startups. It is something that could affect downstream innovation as the cost of capital rises and the amount of risk-taking declines, he said at the summit.
“CIOs need to challenge their teams to balance innovation with stability as they choose partners and solutions,” said
Mark Brooks,
CIO of
Centene Corp.
, in an email before the summit. “Easier said than done, but needs to be done,” he said.
At the same time, CIOs have continued to battle macroeconomic uncertainty and tightening budgets.
The banking crisis increased the odds of a mild recession to 70%-75%, up from 60%,
Scott Anderson,
chief economist at Bank of the West, said at the summit.
Elevated inflation is already pressuring CIOs to cut out “nice to have” technology, reduce cloud spending and give priority to efficiency.
The emphasis isn’t necessarily on cutting budgets but more on shifting spend to the next quarter or into the next year, said
Tim Crawford,
CIO strategic adviser at Los Angeles-area enterprise IT advisory firm AVOA.
Adding to the pressure are rising costs for software.
Dilip Venkatachari,
global chief information and technology officer at
U.S. Bancorp,
said he has seen software price increases of two to four times the going rate of inflation in some areas.
Prologis’s Mr. Keshav said he is having conversations with partners to avoid a situation where three years down the line when it is time to re-sign, the company faces major sticker shock.
As tech chiefs navigate the shifting financial landscape, cloud is the No. 1 area where they are looking to be paying less, said
Raj Konduru,
principal, CIO Advisory for KPMG, in an interview before the summit.
In the past, “there was a little bit of just almost recklessness with a lot of cloud budgets,”
Cloudflare Inc.
co-founder and CEO
Matthew Prince
said at the summit. “So I think people are definitely finding ways to constrain that.”
Write to Isabelle Bousquette at [email protected]
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Corporate information technology leaders say they are reassessing vendor relationships and putting greater emphasis on risk management as they navigate the aftermath of the Silicon Valley Bank collapse.
“You can be proactive all you want, but the response to a crisis, the response to a disruption no one saw coming, is just as important,” said
Sineesh Keshav,
chief technology officer and chief information officer at logistics real-estate company
Prologis Inc.
He and other executives spoke Tuesday at The Wall Street Journal’s CIO Network Summit in Palo Alto, Calif.
Nutanix CIO Wendy Pfeiffer.
Photo:
The Wall Street Journal
Since the collapse of
SVB,
the startup world’s pre-eminent financier, vendors have been reaching out to customers as well as responding to inquiries about their short-term status, summit participants said, but CIOs say they are also worried about longer-term implications.
Wendy Pfeiffer,
CIO at cloud software company
Nutanix Inc.,
said she plans to keep doing business with vendors who might have been affected by the bank collapse and help them if necessary, but she added that she is concerned about the future for mid-to-large-sized vendors who depend on small vendors.
“I’m worried about three months from now, as some of their key components potentially are compromised,” she said.
“I do think we need to increasingly improve due diligence,” Ms. Pfeiffer said. “Look, if you receive the warning from the universe, take it on board.”
John Hill,
chief digital information officer for MSC Industrial Supply Co., said in an interview before the summit that his team has a process for evaluating the viability of vendors, but he added, “SVB lit a fire under it—somebody could not exist tomorrow.”
Egnyte co-founder and CEO Vineet Jain.
Photo:
The Wall Street Journal
“This just became a lightning rod to make sure that analysis is going on and that we’ve got contingency plans in place should suppliers cease to be able to operate,” Mr. Hill said. Before SVB, “I’m not confident that we were doing as much of that as we should have been doing” he said.
According to
Vineet Jain,
co-founder and chief executive officer at software development company Egnyte Inc., there will be more scrutiny of vendors going forward, adding that “the scrutiny is going to be a lot higher” for younger startups. It is something that could affect downstream innovation as the cost of capital rises and the amount of risk-taking declines, he said at the summit.
“CIOs need to challenge their teams to balance innovation with stability as they choose partners and solutions,” said
Mark Brooks,
CIO of
Centene Corp.
, in an email before the summit. “Easier said than done, but needs to be done,” he said.
At the same time, CIOs have continued to battle macroeconomic uncertainty and tightening budgets.
The banking crisis increased the odds of a mild recession to 70%-75%, up from 60%,
Scott Anderson,
chief economist at Bank of the West, said at the summit.
Elevated inflation is already pressuring CIOs to cut out “nice to have” technology, reduce cloud spending and give priority to efficiency.
The emphasis isn’t necessarily on cutting budgets but more on shifting spend to the next quarter or into the next year, said
Tim Crawford,
CIO strategic adviser at Los Angeles-area enterprise IT advisory firm AVOA.
Adding to the pressure are rising costs for software.
Dilip Venkatachari,
global chief information and technology officer at
U.S. Bancorp,
said he has seen software price increases of two to four times the going rate of inflation in some areas.
Prologis’s Mr. Keshav said he is having conversations with partners to avoid a situation where three years down the line when it is time to re-sign, the company faces major sticker shock.
As tech chiefs navigate the shifting financial landscape, cloud is the No. 1 area where they are looking to be paying less, said
Raj Konduru,
principal, CIO Advisory for KPMG, in an interview before the summit.
In the past, “there was a little bit of just almost recklessness with a lot of cloud budgets,”
Cloudflare Inc.
co-founder and CEO
Matthew Prince
said at the summit. “So I think people are definitely finding ways to constrain that.”
Write to Isabelle Bousquette at [email protected]
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
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