CVS IT Chief on the Remedy for Business-IT Alignment

CVS Caremark has no technology projects, says CIO Stuart McGuigan, just business projects. In this Q&A, he outlines the retail chain's strategy for keeping the IT and business relationship healthy -- and successful.

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Page 3 of 3 When there's such a strong governance mechanism in place, it must make some of those dreaded "IT project conversations" much more beneficial for the business and IT?

McGuigan: I've heard back from different business partners over the years that it's liberating for them. Because there's the perception that they have to understand IT at some technical or mechanical level before they can have the conversation.

I had a conversation a number of years ago with someone running a business unit [at a company] in the insurance industry. He had just gotten an assignment to be the president of a business unit, and he was fretting that he would have to learn about IT—and he didn't want to. We had an underwriting system that we were about to kick off, and I said: If instead of developing an underwriting system, I came to you and said, "I need 200 new underwriters"—which is about the same cost—"how would you respond to that request?"

Well, he knew exactly what questions to ask and had a spreadsheet model that told him what to expect from that [situation]. What I suggested to him was: Ask those same questions of your underwriting project. Don't get into the technology. Just be able to get a clear answer to the question: What will I be able to do after I build the system that I can't do today? For him, at that moment, the light went off, and that's how he governed IT. After that, he was an enthusiastic sponsor of IT projects because he knew what he was getting. It must be a whole different world when you can have those kinds of conversations?

McGuigan: They take time to develop. It takes time for people to unlearn their expectations that they need to know a lot about technology in order have a discussion about technology project. How do you keep the IT department focused on business needs first?

McGuigan: IT is a relatively immature business discipline, but our clear goal is always this: We cannot just allocate, as you would in a chargeback system, but we have to align end-to-end costs and performance metrics with business metrics. So, for instance, we should be able to calculate the IT cost of filling a prescription in retail, down to the cost of electricity cooling in the data center.

And if we can get that degree of alignment, so that performance and cost are indexed in business terms, then it's a lot easier to have the conversation to say: If we put X dollars into our retail pharmacy system, then we're going to see this kind of benefit to the service at this cost—and it's "all in." There's no "squeezing the balloon," which means that "we've reduced it in one place and it pops out another place." There's been a lot of progress made in doing that in application development, driving that all the way through infrastructure, so you have that degree of alignment and understanding of cost drivers. And that is where more progressive IT groups are going.

For IT, you also need to be at least conversant with every area of the business you support, which can be many. So that is a challenge, which is one of the most exciting parts of job: You have to keep up with every aspect of the business and every area of technology, so that you can participate in those conversations intelligently.

There's a willingness to invest in technology to make our company work better and more efficiently, and that fits into the way the company manages itself. With a very strong IT governance program it seems?

McGuigan: There are really no "field of dreams" projects here. That's never been a good strategy, and that has never been part of this company's culture.

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Copyright © 2010 IDG Communications, Inc.

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