Avoiding the Axe

By Patrick Gray

(Back to article)

Many CIOs, the title having been around for decades rather than weeks, have grown comfortable that their role is here to stay. Perhaps these executives should not be getting too comfortable in the corner office just yet.

For years IT was perceived as an engineering function of sorts. Detailed technical skills were far more relevant than business acumen, and this faded notion continues to hold true in many IT shops where the CIO is an “uber-technologist” first, and a competent leader second.

More recently, the concept of “IT-as-a-business” emerged, advocating that CIOs run their IT department as an internal business, perhaps even managing a P&L while acting as a service provider to other business units.

Related Articles on CIO Update
Is Outsourcing Right for Me?

Cost vs. Value

Making the Case

Talk to Me: The Disconnect Between Business and IT

The fatal flaw in this strategy is that IT is effectively reduced to a utility that can be purchased at commodity pricing. While running your IT organization as a business brings rigor to managing costs, it does little to change the focus of IT beyond providing a commodity service, implemented only when requested by other business units.

As IT outsourcing continues to flourish, larger external IT support companies will always be able to under price an internal IT group, putting the CIO and their organization in an untenable position of competing on cost with an external provider with greater resources and larger economies of scale.

Avoiding Commoditization

What is the CIO to do in this environment? Some have chosen to stand their ground as chief technologists. They beef up the technical acumen of their staff and sharpening their focus on the technical side of the house in the hopes they become too valuable to be outsourced.

Some choose to streamline IT as much as possible, outsourcing some parts of the organization and trimming costs, hoping that the CEO and CFO will be satisfied and avoid any discussion of further cost cutting and outsourcing.

In this environment, the IT function of one company is distinguishable from the next primarily based on cost; creating a continual pressure to do more with less. Competitive advantage is tied to cost cutting, and the CIO is relegated to a glorified, albeit well-paid, facilities manager.

The Strategic CIO

The “new CIO” takes a completely different tack, viewing outsourcing as an opportunity to shed the utility portion of his or her business.

Support infrastructure and other utility functions of IT are outsourced, either to an internal support organization or an external vendor, freeing the attention of the CIO to focus on the future: executing business strategy, rather than attempting to be a low-cost commodity provider.

This CIO does whatever it takes to gain “trusted-advisor” status with key executives within the C-suite, providing advice on how IT can be used to enable strategy rather than touting the latest and greatest technology irrespective of the business problem at hand.

Just as evolving thinking in marketing envisions marketers and product designers sitting together when designing a new product, the strategic CIO is also at this table; determining how IT can get the product to market faster, cheaper and better than the competition.

Suddenly, IT is no longer a utility to be invoked after a strategic direction has been embarked on by the company, but IT is a business “weapon” that contributes to and enables that strategy early in its execution.

The effect of this shift is profound. IT now generates value for the business, rather than just providing a service at the lowest cost, increasing the perceived capability of the CIO and his or her organization. IT is also involved early in the release of new products and services, and changes in strategic direction of the company.

Rather than being brought on board late in the game, and being forced to wedge new business processes into existing systems, IT can ensure the processes and systems will act in harmony.

This saves customization and development time modifying existing applications and creating new ones and provides the ancillary benefit of further reducing IT costs. An increase in value and a reduction in costs—a knockout combination.

Building the Organization

A key component to building a strategic IT shop is establishing the necessary rapport and trust with fellow C-level executives. The second element of this transition is changing your IT shop from a center of technical and engineering competence to a group of business process experts first, and technologists a distant second.

As many technologies have matured, buying technical competence, whether via internal or external resources has grown ever cheaper, causing some CIOs to overload their organizations with pure technicians.

What the strategic IT organization needs is people who are able to quickly grasp a business process, and determine where technology could improve the speed, cost or capacity of the process. These folks then translate this process into technical requirements, which can be farmed to the low-cost internal support organization, or outsourced cost effectively.

At this point, the technology becomes ancillary to the process and IT becomes a center of process and operational excellence—using IT as its “weapon-of-choice” rather than providing a technology-based commodity.

The only caveat is this model hinges on the CIO having the ability to insert themselves into strategic discussions, and his or her employees being seen as valuable contributors to the process, rather than a bunch of tech guys pondering which cool technology should be implemented next.

This transition will not be easy but at the end of the road the rewards are immense. Not only does the IT organization as a whole become a central part of delivering business strategy, but the CIO moves from the ranks of glorified line manager, to a position truly deserving its inclusion in the C-suite.

Patrick Gray is the founder and president of the Prevoyance Group, located in Harrison, NY. Prevoyance Group focuses on providing project performance consulting, which combines project management and process improvement to ensure large IT projects deliver organizational value. Past clients include Gillette, Pitney Bowes, OfficeMax and several other Fortune 500 and 1000 companies.