Book Excerpt: The Adventures of an IT Leader, Part 2
A new CIO grapples with how to sell the value of IT investments and confronts a past failure. Read the second installment of our exclusive series.
Wed, January 14, 2009
CIO — The story so far: Jim Barton, the head of loan operations for financial services company IVK, has been tapped as the CIO by the company's new CEO, Carl Williams. The previous CIO, named Davies, has been fired. When Barton runs into Davies on a local running path a few days later, he finds out that Davies already has a new job—and thinks Barton is doomed. Barton must restore Williams's confidence in IT while he learns on the job. Read the first installment
Friday, April 6, 4:20 p.m....
Barton's musings about IT value finally sent him down the hall to consult with Bernie Ruben, director of the IT department's Technical Services Group.
Barton gave him an overview. "Carl is going to want to hear our ideas about how to measure IT value."
Ruben nodded. "You can distinguish, not just in IT but in other areas too, between investments that are merely "qualifiers" that keep you in business and investments that help you compete. It'd be interesting to know how much of the IT budget we spend to qualify versus how much we spend to compete."
"And we could try to affect the distribution of expenditures across those categories over time," said Barton. "If we can reduce costs for running qualifiers, then even if their numbers increase, we might be able to reduce our total spend on them. I like the idea of taking a run through our portfolio with these categories in mind. Any chance you'd be willing to take the lead on this? I'll get Gary Geisler to help." Geisler was the IT department's financial guru.
"I'll do that and get with Geisler to prepare for the value discussion. First thing Monday morning."
Barton returned to his office, encouraged by Bernie's [ideas], but still feeling unsettled. Maybe from a different vantage-point he could see a way forward.
If IVK is the forest, thought Barton, perhaps I should start with the value of IVK? Then at least I can establish an upper bound of the value of IT.
Although he knew it to be a controversial measure, one estimate of a company's value is the price at which investors are willing to buy its common stock. How much did IT contribute to this value?
The flip side of this question was also important: How much did IT diminish this market value? Barton remembered celebrating when IVK's stock price passed $75, giving IVK a market value of almost $4.8 billion. Just one-and-a-half years later, after a disappointing financial result, IVK had lost more than half of its market value. What role did IT play in that loss?
