Should the CIO Embrace Moore's Law?

By Steve O'Connor

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In 1965, Intel co-founder Gordon Moore saw the future. His prediction, now popularly known as Moore's Law, states that the number of transistors on a chip doubles about every two years. This observation, made a reality by Intel, the world's largest silicon supplier, has fueled the worldwide technology revolution.

Today, this principal has become an iconic symbol for radical, continuous improvement without the continuous price upswings. What would happen if CIO’s adjust their center of gravity to Moore’s Law-style of radical improvement?

The catchphrases “running IT like a business” or “aligning IT with business” are so overused today they are almost cliché. What do these concepts really mean, and what should companies do differently to achieve these elusive goals? What if CIO’s decided not simply to run IT not just like a business, but like a commercial IT business, living or dying by the concept of continuous innovation and improvement embodied in Moore's Law? With CIOs constantly asked to do more with less, why not build that principal into the very foundation of operations?

Applying the genius and simplicity of Moore's Law to corporate IT operations is, at first blush, an impossible idea. IT executives are so mired in day-to-day tasks that they can barely see past putting out fires to figure out how to deliver a service faster, better, and cheaper.

But as a former CIO who now works on the vendor side, it seems clear that a Moore-inspired continuous improvement revolution could be embraced by corporate CIOs too. The key to achieving this lies in looking at IT business value as a process, not a one-time event. If embraced, the results could be compared to going for Lasik rather than getting a new refraction every couple of years.

The Five Lessons

I first began thinking about this when I left my CIO position to join an IT vendor. During the ensuing months, actions once seen as “best-practices” suddenly seemed to be not quite on target. I began to think about applying some of the best-practices of commercial IT in today’s internal IT organizations—in which IT is not simply a strategic part of the business and its differentiation, but actually is the business—could have great value. Here then, are five chapters from the commercial technology world success manual that should also be applied to Corporate IT.

The IT Income Statement

At the philosophical level, every CIO recognizes the need create business value, and some are actually building an IT view of income, expenses, and revenue. Many CIOs are already doing an admirable job of understanding the total cost of delivering core services and being able to define their intrinsic value in business terms such as increased revenues, faster time to market, and so on.

What is not built into the IT psyche is the concept of continuous improvement—such as halving the cost of CRM every two years. Given the constant pressure to do more with less, IT leadership must build ongoing innovation and its cost into everything.

Perception is Reality

It's all about perception. (Disclaimer: this doesn’t mean going down the path of some of our better known vendors who painstakingly build a perception far above reality.) But, speaking in general terms, corporate IT departments are notoriously weak in marketing their services. Unlike IT vendors who compete daily on price, functionality, and service, IT grudgingly accepts their relationship with "users" but rarely takes time to win them over.

Almost no corporate IT leaders segment internal customers by type of business user (i.e. power user, manager, VP, auditor) as IT vendors do, then try to understand what keeps them up at night, and address those specific concerns in their terms. If they did, it could mean being seen being a business partner rather than part of the plumbing.

For example, IT departments rarely think about the difference between the economic buyer (Capital "C") and the user (Lower-case "c"), but the vendors who serve them do. Corporate IT must design and deliver appealing solutions that improve productivity, increase business value across an entire department or company, and continue to deliver gains over time.

The value and success of IT needs to be explained to executives and power users alike. Buyers and end users don't care about the functional components or "speeds and feeds." They care about what drives success in sales, new product development, or HR. The most successful vendors have figured out how to deliver to this as well as how to help corporate IT sell the value of the total solution to both segments of the customer base.

Expanding Roles

A big lesson-learned during my transition to the vendor side is that roles vary depending on where you sit. The typical corporate-side project manager rides herd on a clearly defined project, such as installing a Web server. On the vendor side, though, the project manager is more of a general manager; required to understand everything, from make-buy decisions, and installation requirements to training, marketing and competitive analysis.

Were I to return to the corporate world today, I'd create a GM for every application or service IT delivers and make that person responsible for everything related to it, including profitability and successful business use. This approach forces IT to do the math—an area where software vendors are already experts. For example, vendors build quality assurance into product engineering because better quality correlates with fewer support requirements and reduced costs. Short changing this equation only leads to higher post-sales costs, whether the solution is delivered by a vendor or an internal IT team.

Optimize the Supply Chain

If corporate IT embraces the principles behind Moore’s Law—which I believe is increasingly likely—the relationships they have with IT vendors and service vendors will be fundamentally altered. The entire semi conductor industry supply chain, for example, has reconfigured itself around meeting customer demand and innovating rapidly. Companies are partnering in ways that would have been unthinkable even a decade ago. Brand owners are including their contract manufacturers in new product discussions, and the manufacturers are driving execution across multiple organizations.

In the context of corporate IT and vendor relationships, turning the tables will be both exceedingly productive and disruptive. Instead of being invited to sit on customer advisory boards, perhaps corporate IT should give key vendors a seat at the table during strategy sessions, in much the same way that a contract manufacturer might be early participants in new product design sessions.

Or, instead of one vendor delivering a single product or service, applying Moore’s Law means that corporate IT should push vendors to orchestrate success across a network of players. Many vendors are currently building “ecosystems” but right now, this is really a fancy name for partnerships that define points of integration between complimentary products.

While electronics companies choose contract manufacturers based on their ability to quickly and cooperatively deliver innovation, could a new class of IT vendor step up to the plate? Not to be a systems integrator on steroids, but to be an innovation hub. This means collaboration across vendor boundaries, and if done up front, it can foster Corporate IT innovation that keeps pace with Moore's Law.

Move On

Success is about more than measuring speeds and feeds or up time. Technology vendors pop a cork on the day that a new release goes GA, but the next day they put the glasses away and begin all over again. In the corporate IT world, the same should apply.

For example, the new CRM solution is up and running, but that's not the end of story. IT must think ahead about how about potential improvements and that requires real-world metrics. Are the lower-case “c" customers happy? What's the data, anecdotal or otherwise? What has it cost to deliver the solution in terms of network components, training, and support? Can IT go back to the economic buyer with evidence that money was well spent?

Regardless of the results, if IT is on top of the situation it can more effectively manage expectations. Having the answers to these questions is what enables IT to base its discussions with business unit managers on business value, rather than overhead. It can also shift the basis on which bonuses are awarded from projects completed to customer satisfaction.

Mindset is key in successfully "running IT like a business." IT vendors compete for business on price, functionality, and service while corporate IT organizations enjoy a monopoly. If the professionals running them adopted a commercial IT business point of view, the average tenure of a CIO or IT manager would lengthen, the perception of IT's value across the organization would rise, and the IT environment itself would be profoundly impacted. Steve O'Conner is the founder and SVP of ITM Software, an IT business management solutions provider. Previously, Steve was CIO of companies such as Silicon Graphics.