Are CIOs in Denial?

How can CIOs respond to this uncertain economy? Here is a 10 part recipe...

CIO Executive Board Recommends 10 Critical Actions to Respond Decisively in an Uncertain Economy

Whether leading economies are in fact headed into recession or the press is simply "talking us into one," many CIOs hold a sanguine view on the implications for IT, and could be in for a rude awakening. Instead, CIOs should be taking a hard, pre-emptive look at their processes, teams and cost structures to identify areas for better cost and performance management.

The CIO Executive Board (CIOEB), a leading provider of best practices research, executive education, and decision-support services to CIOs, has the following 10 prescriptions for CIOs to respond decisively in an uncertain economy. Unlike analyst conjecture, these ideas are drawn from the real-world experience of leading CIOs, and contain pragmatic insight into what actually works within exemplar IT organizations.

1. It's Not Just About Cost - Many CIOs are interpreting the current economic uncertainty as a mandate to cut costs. However, cost-cutting is only one side of the equation, as the performance mandate from business partners has just become more urgent. CIOs will have to parallel-process on both performance and cost efficiency initiatives. Our research also shows that the leadership behaviors that drive dual success are different in kind from what most CIOs possess - only 1 in 10 CIOs can handle simultaneous "top priorities" of cost-cutting and business enablement.

2. Increase Business Engagement, But Free up Business Partner Time - Companies reporting the highest levels of IT-business engagement document that senior business partners spend almost 25% less time with IT than those at other companies. With that in mind, CIOs should explicitly halt initiatives that make IT overly bureaucratized, such as new chargeback schemes, extended business case reviews, and unnecessary business process standardization.

3. Protect the Growth Portfolio - Ensure that portfolio management processes do not undermine investments in architecture and business innovation that promise sustained strategic value. Our research shows that companies who excelled through the last downturn retained at least 5-7% of their IT spend against innovation projects.

4. Lock-in Management Skills and Business Knowledge - IT financial, negotiation, and communication skills, and business process knowledge are key "foundational" capabilities that are most at risk. Leading CIOs continue skill building initiatives for critical IT sub-segments. All the while they are seeking to selectively upskill their teams with top talent that has become available from other firms, even if it requires tough decisions about current staff.

5. Build a Cost Architecture - CIOs can seize the opportunity of the current economic burning platform to lower IT's long-term cost base for politically difficult simplification, consolidation and externalization decisions given these will be more palatable right now. They should establish executive-committee consensus on IT cost-performance trade-offs up-front so that a clear CEO/CFO-mandated "cost architecture" is established for all subsequent tactical decisions on prioritization.

6. Kill Orphaned Initiatives - Just as some priorities go up in a downturn, others go down. Our research shows that in most organizations at this stage of the business cycle, up to 20% of total IT projects have lost sponsors. CIOs should search for these hidden sources of savings and do their partners and themselves some good by killing projects that are no longer at the top of the priority list.

7. Further Reduce Infrastructure Spend - Adopt new service management approaches that address tower-based operational inefficiencies by solving problems that cut across towers; our peer benchmarking shows organizations can realize up to 20% of their infrastructure spend in this fashion. Cut support costs and provisioning time 15-25% by managing the number of technology "combinations," not the total number of technologies. Formalize a process to measure IT complexity and build business consensus on complexity reduction targets.

8. Drive Sustained Reduction in "Lights-On" Applications Spend - Manage demand for enhancements by cataloging requests using a small and consistent set of criteria; filter these requests through the retirement roadmap to cut maintenance costs by as much as 30%. Create maintenance SLAs based on strategic value and mission criticality to triage treatment of applications - determine which can be merely rust-proofed as opposed to retired. Finally, generate periodic application usage reports to negotiate metered licensing costs and inform maintenance resource allocation.

9. Pause Before Knee-Jerk Outsourcing - CIOs should put SWAT teams against root causes of operational inefficiency such as poor process design, metrics and documentation before the next wave of outsourcing agreements are completed, or your outsourcers will inherit your inefficiencies.

10. Take A Lightweight Approach to Process Standardization - Reduce effort by 20-30% on rolling out IT process standardization initiatives (e.g. ITIL, CMMi) by re-using documentation and tools already proven successful at other institutions, and understanding cost-benefit of progressing beyond certain maturity levels.

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Posted on 05/21/2009 by

Are CIOs in Denial? author sourabhhajela



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