by Michael Schrage

CIOs Must Align with the Business, or Risk Ousting

Dec 15, 20036 mins
Business IT Alignment

Date: December 15, 2009

TO: Executive Committee

FROM: General Manager at a Fortune 500 Packaged

Consumer Goods Company

RE: The IT Business Performance Audit

This past year has been a nightmare. We’ve been experiencing the backlash of bad decisions our IT “leadership” has made?or should I say, not made?during the past five years. While the technologies may have greater capabilities, our IT management does not. Shame on the Executive Committee?and the Board?for not confronting IT earlier. Shame on me for not complaining earlier and more often. So much for the “alignment” promised by our CIO. He should be replaced. Now.

I do have some praise for IT before burying it. The Bangalore help desk seems fluent in English?finally. At least, I don’t hear complaints about it anymore. But IT’s pending proposal to shift the help desk to Chinese tele-centers in the Guangdong province to cut support costs and save an additional 15 percent strikes my management team as ill-advised. I think IT is chasing false economies in the name of making its numbers look better.

What does productivity mean when support requests that should never take more than two e-mails inevitably take five because of language problems? Or a straightforward upgrade that should take five minutes on the phone ends up taking 20? Do the math. IT’s “productivity” comes directly at our expense. That’s unacceptable. Attachment A is an audio file of real support calls with comparable Chinese help desks obtained from a colleague in another firm. I’m prepared to post it on our intranet if you tell me we have to go to China.

In fairness, however, I acknowledge that the remote diagnostics infrastructures IT has built into our mobile, laptop, desktop and server assets have made an enormous difference in both uptime and maintenance. Running those remotes overnight and getting people to call in or e-mail application settings to the help desk URLs for next day service has yielded phenomenal benefits at (apparently) very little cost. I’m prepared to give credit where credit is due.

It’s too bad the best help desk interactions we have don’t involve human contact, but we’re still impressed. If we can effectively replace Chinese and Indian help desks with artificial-intelligence-based or neural net expert systems support, let’s do as much as we can. Open Attachment B to see three XML-based prototypes of autonomous software initiatives our group wants to see from IT. Let’s build on success.

I am similarly pleased by the business Wizards that empower our departmental, account and supply chain managers to make real-time modifications in process/workflow execution without any IT intervention. Our ability to improvise and customize process innovations on the fly has made people both feel better and work better. They feel less like data slaves to the ERP.

That said, why do I think that IT set up these Wizards to get us out of their hair? They are nifty tools. But IT kicks us over to the Wizards rather than collaborate with us whenever we come out with innovative ideas for IT-based differentiation. IT’s definition of collaboration and business alignment seems to be giving us new Wizards when we have new ideas. I confess we like the Wizards, but the approach seems very tactical. IT’s strategy appears to be focused on having us do ever more work on our own rather than in partnership. This is a feature of our relationship that has the potential to be a bug. It’s a sign of the CIO’s constant “accountability avoidance.” I’m sick of it.

A Big Winner

Without question, though, IT’s mandating public-key encryption for all internal and supply chain communications has been a big winner. Everybody feels more confident about the security of their messaging and?of course?the added benefit has been our ability to screen out all manner of spam and viruses that aren’t appropriately keyed. The initial resistance we saw from vendors and suppliers two years ago has vanished. More open exchanges of proprietary information have resulted. Ironically, the rise of traceable encryption has led to greater levels of trust and respect than anyone had anticipated. Good for us.

Better yet, our decision to require “personal” communications to be sent in nonencrypted clear text has cut down on systems abuses while preserving employees’ needs to coordinate their private and professional lives.

Let’s now talk about what doesn’t impress: We all acknowledge that IT’s global outsourcing of development over the past six years has proven to be a financial and business debacle. We got suckered by flawed accounting models that didn’t incorporate hard dollar and time value-of-money costs for functionality upgrades. When Indian and Chinese developers cost 10 cents on the dollar for slightly lower productivity and quality, we could live with inefficiencies and slips. After all, we had saved a bundle by getting rid of our own older and disproportionately expensive developers. Getting 80 percent of the value for 20 percent of the cost was a good deal. I accept that.

But IT invested in Third World software development as if the 80/20 value proposition would exist in perpetuity. It obviously hasn’t. To the contrary, IT seems addicted to believing it can always get good enough developers for 25 cents on the dollar. I’m here to tell you they can’t and don’t. (See Attachment C?our spreadsheet/Monte Carlo simulation of “cheap” programmer development on our cash flow.)

For our division, that 80/20 proposition has degenerated into 60/40, and I’ll bet that holds true for more than half the divisions in this company. While that still looks like a bargain, it’s not. Do the math. Except for commodity systems changes, any value-added software development initiative must now undergo an elaborate requirements analysis before being shipped overseas. We lack the in-house capability to do major application upgrades. We typically find that what should be accomplished in a quarter takes at least nine months. This in a marketplace that’s demanding faster response times. Maybe that’s why we’re so Wizard-driven.

IT has at least three major in-sourcing initiatives under way, and I can describe them only as chaotic. Our involvement in the supply chain in-sourcing initiative only underscores that our IT leadership thinks Hindi or Cantonese is the most important software language. We don’t agree. We think our IT leadership is less interested in being a partner than a low-cost supplier of IT services. Unacceptable.

What I have to say about IT’s botching of our real-time CRM/SCM integration implementation I don’t want circulated. So let’s set up a time when we can videocon.

In the meantime, Happy Holidays! I look forward to the New Year.