by Peter Bendor-Samuel

CIO focus needs to shift from cutting IT costs

May 06, 2016
BudgetingBusiness IT AlignmentCIO

CIOs and IT departments need a new cost emphasis beyond slashing their own costs.

Scissors cutting money for budget slashing
Credit: Thinkstock

Put your own house in order before you start giving advice to others is a popular idiom. And CIOs have been doing that for years, incrementally cutting costs in IT functions. But what if the mandate from your CEO is for IT to help improve the performance of another department such as finance and accounting (F&A), for instance, but at the same time cut F&A costs by 60 percent? How can IT help that department?

We at Everest Group are assisting in a strategic plan for a client’s IT organization, and the cost reduction effort for that F&A department is part of the plan. The IT plan is part of a company revitalization, and the CFO recognizes their finance and accounting function is too large. She needs to dramatically improve reporting and analytics functions — but do so with 60 percent fewer resources. Sure, they can move some work offshore to get lower unit costs. And that’s good. But it won’t achieve operating the F&A function with 60 percent fewer people. The only way the CFO can possibly do this is through the judicious use of technology to enable digitizing the workforce, stop doing some functions and implement new tech-enabled functions.

As another example, we’re also working with a company seeking to improve its sales and marketing function to identify and reach new customers, while still engaging with existing customers, and understand customer behaviors so it can better respond to their needs. How can IT help them drive sales yet cut costs?

These examples of needs in F&A and sales/marketing departments illustrate how the mandate is shifting for CIOs and IT groups. The focus has shifted from getting IT’s house in order to now helping other departments get their house in order.

Many CIOs are losing their jobs because they still focus on how to cut costs in their existing IT. I’m not saying that existing IT organizations don’t need to get their internal house in order; in fact, this is why we’re seeing an acceleration to the cloud. But the acceleration in migrating to the cloud is not driven by better price performance. Yes, the cloud is cheaper; but that’s not why companies are moving to the cloud. They’re moving because they aren’t able to have the necessary speed and agility in their applications when they’re sitting in a legacy environment. That’s what is driving most of the migrations to the cloud.

The consequences for CIOs and IT groups from this shift in focus is that they must stop running down the path of trying to get IT functions cheaper. Now there is a completely different mandate to help other functions or departments become more effective.