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Many people suffer from having too much month left at the end of their money. Corporate IT departments are no different. There is always more to do than we can afford. Without resorting to printing money, how can we make the most of what we have?
It’s not an unusual scenario. An executive approaches you with a new project that just has to be done this year – yet your IT budget is already totally allocated. You ask what currently planned efforts can be delayed. Nothing – it all has to be done in addition to this new project. You might approach other executives to see if anyone is willing to delay one of their projects, but that doesn’t usually meet with much success. You might review all the IT expenses to see if anything can be cut there, but those were likely cut to the bone years ago. A final step might be to go back to the original requestor and suggest that you can help if they can find the money for outside resources; otherwise, the project will have to wait until next year. The meeting doesn’t end well. The requestor is frustrated and muttering about the IT bureaucracy and your excessive costs. Moreover, he vows that if he has to spend his own money, he will go outside to find the solution himself rather than waiting on your slow-moving department.
It can be very challenging to manage a cost center where the CEO feels that the value provided is insufficient for the costs. Yet that is the very situation many CIOs face every day. How did such a difficult circumstance arise, and what can be done to overcome it?
Years ago I recall reading that the purpose of technology within a company is three-fold: increase revenue, reduce costs, and enhance the differences that cause a customer to select our company over our competition. But while we understood this in a theoretical sense, IT at most companies became primarily dedicated to cutting costs. Many of the factors contributing to this were addressed in my post on Moving IT from Cost-Cutter to Difference-Maker. As this post indicated, cost centers are typically managed by continually reducing their budget. This results in an even larger percentage of the IT budget dedicated to keeping the lights on and fewer dollars available for technology projects to move the company forward. It is important for IT to move away from being seen as a cost center toward being a business driver.
But even being seen as a cost center does not necessarily cause the CEO to believe that IT costs are too high for the value received. After all, you don’t often hear that cost centers like Accounting or Procurement are too expensive. And while the size of the technology expenditure quickly shines a spotlight on IT, that in itself doesn’t mean that the company is not receiving enough bang for its technology buck.
IT professionals typically choose to enter the profession because they enjoy technology. They like to solve problems through careful analysis. They pay great attention to details. They are tough-minded in that they want to keep digging until the problem is resolved to their satisfaction. They enjoy bringing order out of chaos but then again, they become easily bored by processes they see as repetitive and mundane. They love to tinker and change things to make them better. They are fascinated by the challenge of learning something new.
Many in IT pride themselves on their technical skills rather than their business proficiency. They see themselves as IT professionals rather than bankers, manufacturers, or retailers (see “What Business Are You In?”) They reason that they can easily take their skills to another industry using similar technology. As such, these professionals are much more invested in learning and understanding technology rather than the business of the company currently cutting their paycheck. This in itself is a major cause of the knowledge/communication gap between IT and the rest of the business. It’s not that IT people are incapable of learning about the business; it just isn’t a high enough priority when compared to everything else. It isn’t that they enjoy speaking in a tongue foreign to others and honestly, they don’t always realize that is what is happening. It’s simply the way they think, and they have not made the effort to learn how to translate those thoughts into a common language. Relate it to someone who wants to learn English as a second language. It takes time and effort to learn to do so, and it doesn’t happen without motivation, commitment and dedication.
Too often it seems that almost the singular focus of IT has been to cut costs within the company. There is no doubt about technology’s capability to bring organizational efficiency and reduce costs; however, when cost-cutting is the primary focal point, it can mean little attention being given to the ability of technology to help increase revenue, improve customer retention, enhance competitive differentiation, etc.
What caused IT departments to become so narrowly focused on cost-cutting? Obviously years of economic uncertainties and difficulties had a huge effect. But perhaps factors internal to the company played an even larger role.
Instead of seeing themselves as business professionals with an expertise in technology, many IT professionals instead view themselves as technologists. As a result, they have not concentrated on truly learning the business of the company actually cutting their paycheck. After all, the reasoning seems to be, why should I see myself as a banker or a manufacturer when my technical capabilities will easily allow me to move to another industry the next time I need a job. Failure to gain a knowledge of the business makes it easy to see why these IT professionals do not speak the language of business… they don’t know it. We all know the difficulties this causes in communication, but we must also admit that this lack of business knowledge prevents IT professionals from contributing as much to the success of the company. It also makes it extremely difficult for IT to communicate the value they are bringing and likely prevents them from even being aware of what they might be doing to enhance competitive advantage or increase revenue. Without exhibiting a firm grasp of the business, IT is often pushed into an order-taker role. And it doesn’t help that the natural introvert tendencies of many IT professionals (including the CIO) are sometimes allowed to become barriers to developing solid relationships with corporate leaders within other areas.
The pace of business is rapidly increasing. Technology-based enhancements to back-office operations seem to be required almost continually. At the same time, there is an incessant demand for technology to improve the customer experience, drive innovation in products and services, and help us transform our businesses. The backlog for IT services is growing, and there is a growing frustration with what many see as the IT roadblock in accomplishing the things they need done.
With a significant percentage typically dedicated to keeping the lights on, there is relatively little left within most IT budgets to spend in moving the company forward. Business executives are left scrambling to drive the changes they need to respond to new economic realities and competitive pressures. Increasingly they are looking to cloud and SaaS offerings to help meet their business needs. They can implement these solutions quickly with a “per use” cost basis – quite a marked contrast to the typical IT project. And, perhaps even more appealing, they can do this without touching the IT budget. As SaaS offerings continue to increase and address more business functions, we can expect their use to proliferate. The pace of acceptance will be quickened with as employees continue to become more tech-savvy and SaaS vendors targeting sales to business units (instead of IT).
Too often, this “shadow IT’ ability is implemented without the knowledge of the CIO. This may be the result of a poor relationship between the CIO and others in the C-suite. Or it could occur because the business unit simply feels that since IT doesn’t understand – and seems uninterested in – their business, they just don’t add much to the equation. It could simply be that they didn’t feel it was important enough to matter. Hiding the effort could ultimately create problems in information security, regulatory compliance, and integration with legacy systems. If such issues come to light, the CIO may feel somewhat vindicated while the company suffers and those in the business unit grow even more frustrated with IT.