Tony Treccapelli, a former interim CIO and consultant specializing in IT planning, infrastructure optimization and program management, answers CIO‘s questions about current and future IT issues.
What do you see as the biggest issue facing IT departments?
The business’s perception of IT as a cost center, especially in the SMB arena is the biggest issue. IT should be viewed as an enabler and cost-reduction department. Otherwise, it is likely that budgets will become starved to a point that innovation is unlikely. This negative cycle then causes the IT department to become outdated, have less of an impact and lack executives with the ability to engage the business while implementing IT successfully. A CIO who can engage the business will be able to change these perceptions. (Read 5 Tips on IT Alignment That Can Generate Profit.)
How do you see the role of CIO changing in terms of responsibilities and required skills?
CIOs need to know their customers, employees and shareholders as well as they understand the firewalls, servers and databases they manage. The CIO needs to understand the business goals and drivers that improve the bottom line first, and then assess and manage what IT tools make the requirements come to fruition.
In addition, as the trend toward sourcing IT services from vendors continues, vendor management, and in particular, vendor negotiation skills, continues to become more critical to the success of the CIO. (Read The Keys to Vendor Management.)
To what extent do you see the outsourcing trend in IT changing?
I see it increasing. Non-IT companies are not in the business of building and maintaining technology, so to ensure that the IT department has not burned the business with large underperforming capital investments, they need to shift focus on listening to and understanding the voice of their customer. Once the focus is shifted, IT departments will find it more efficient to outsource the execution tasks of delivering the IT. Having IT departments addressing building better requirements will naturally force them to utilize other resources. Since IT is becoming more commoditized, we can deduce that outsourcing will only increase.
How much of an annual IT budget is spent on “maintenance” (keeping the status quo operating) versus “development” (adding truly new business capability)?
Truly estimating the cost of maintaining IT is difficult because the technology is continually changing (a great example is the virtual server). But to get an idea one would need to ask the following questions:
- Will we be expanding onto a new continent or will our supply chain expand?
- Will the product base be diversifying?
- How many of our applications are standard and how many are custom?
If the business makes the same product, in the same location, and had a fixed customer base as of five years ago, there is a preventive maintenance metric that can be set at 20 percent, but if you are a growing company with burgeoning concepts and products, the answer varies greatly. (Also read Negotiating Better Maintenance Terms
How would you improve these ratios?
A CIO would need to be aware of next year’s architecture capabilities. For example, don’t buy last year’s solution because you lack an understanding of next year’s capabilities, and don’t purchase solutions that address only current needs. I recommend assessing 3- to 5-year business requirements before purchasing new solutions.
The CIO needs to be continually implementing IT maintenance cost reduction initiatives while simultaneously proposing business enablement projects to be viewed as effective. Most IT budgets have reached the level where they cannot always be increased to accommodate business needs. Instead, it is part of the CIO’s job to continually be shifting finite IT dollars from maintenance activities to enablement projects.
How can IT departments better engage other departments—from operations to HR to the CFO?
CIOs need to engage other parts of the business—it’s all about understanding the voice of the customer to address and drive the work of the IT department. It’s not about pet projects, the coolest tools and vacuum thinking. IT departments need to consider themselves concierges and waiters. They need to be community service workers who hold town hall meetings to educate the “citizens.” Projects like SharePoint and other company portals are forcing IT staff out of the data room and into the conference room to work hand in hand with the rest of the organization.
Tony Treccapelli, a managing director at Alvarez & Marsal Business Consulting, leads the firm’s Information Technology Solutions team from New York. He specializes in IT planning, architecture, data reengineering and migration, business intelligence/data warehousing, infrastructure optimization and program management. Some of his recent assignments have included serving as interim CIO for New Orleans Public Schools and Regatta Pacific Alliance.