My colleagues running the fourth annual Capgemini Global CIO Report went looking for something different, and they found it. As with all surveys the questions inevitably influence the outcome somewhat, for example if you ask a CIO if costs are important then you’ll struggle to find one that says ‘no’!
And so the challenge was to provide an ‘open’ survey that would focus on how CIOs felt in the current economic circumstances, and what role IT was playing in their enterprise. That led quite naturally into a conversation about how well this role was being played, should, or could, IT be playing other roles, and perhaps most crucially of all, a comparison between how IT was used and how successfully their enterprise was weathering the current conditions.
The results showed three common profiles of the CIOs surveyed:
Technology Utility (24%) = IT is managed as a pure utility
Service Centre (39%) = IT assets are packaged to provide specific services
Business Technology (37%) = IT is a key asset in the leadership of the business
Actually what lies behind these headline summaries is really interesting as 490 CIOs effectively end up comparing notes on what, and how, things are working, or not working. As the saying goes ‘the devil is in the detail’ so it’s well worth studying in full. The encouraging part is that a third now thinks the credit crunch has driven a reappraisal of how technology can genuinely move to be a revenue, margin, or performance enhancing part of the business model.
My question, and my point of view, is can this really happen without attention to the funding model? For the last 15 years or thereabouts, IT has traditionally been a back office tool designed to centralise and improve key business processes and as a result, improve enterprise efficiency while reducing costs. As such IT has been treated as a ‘business cost’, funded through the annual budgeting cycle as an overhead to be recovered. There are various ways to apportion this overhead, but at the end of the day it is a cost to the business, and like all other overhead, needs to be hammered down.
The three key pillars of an IT investment have been, for much of this period, to invest a relatively large sum of money, in a longish project cycle, and then wait for a payback by gambling on the stability of the situation. At the end of this your enterprise should have a permanent competitive advantage. Even worse, the end result of this is that the running costs of IT have increased exponentially so that right now the headroom in the budget for investment continues to decrease, and, with cash in short supply and stability non-existent, the three pillars of starting new IT projects are not generally acceptable in 2009/10.
So let’s stop fooling ourselves. In reality much of our IT estate is a requirement to stay in business, is pretty stable in terms of the rate of change, is a genuine overhead, and should be treated as such in terms of ruthless cost management. The value to the business in investing and using new technology in the manner that the third of CIOs are aspiring to, or have attained, within their enterprise’s business model lies in small, focussed, direct activities that support individual parts of the business in doing what they do uniquely, better. That’s not part of an enterprise wide cost recovery overhead model of funding, it’s a directly attributable cost to that specific business activity.
The pressure for new projects comes from two directions; one is from the CFO around core IT but the other is from specific functions, increasingly directly relating the need for intelligence, decision support, even building new online products and services to sell. One of the key advantages of ‘new’ technologies is not just that we can build and deploy them rapidly and at low cost, it’s that we can manage a different and direct charging model by using ‘X’aaS (everything as a service). The challenge for the CIO and IT is to make sure that this happens in a coherent and cohesive manner in the context of the entire enterprise.
To take such a role, and such a direct hand in supporting the business model, is the challenge that a third of CIOs are currently grappling with, and interestingly, these CIOs are often those working in the most successful enterprises! So I conclude by stating what I see as the simple fact. In business life today, employees (and those who do business with our enterprise externally) are technologists evaluating and using technology as a key part of their work, and their department’s success. They are increasingly even providing their own technology in the form of phones and PCs. In response to such a change it’s time to consider how to adapt the funding model of the last century (1990-9) to one more suitable for the coming decade (2010-9).