by Robert D. Austin, Richard L. Nolan and Shannon O'Donnell

Book Excerpt: The Adventures of an IT Leader, Part 2

Jan 14, 20096 mins
CIOIT Leadership

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.

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

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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?

Wednesday, May 2, 1:30 p.m….

The most recent leadership team meeting had included a discussion of the company’s approach to allocating resources. Each department would assess its approach to resource allocation and propose improvements to increase return on investment. In IT, this meant improving processes for figuring out which projects deserved investment.

But Barton had just come from lunch with Paul Fenton, whose infrastructure and operations domain included IT security. Fenton had mentioned a concern that John Cho, the department’s top security expert, had expressed. “We can close those security holes Cho is most worried about with an upgrade project,” Fenton had said. “We’ve tried to get it funded twice now. Davies never could make much headway.”

“Why not?”

Fenton looked uncomfortable. “I’m not sure,” he said. “Geisler probably has the most complete picture.” Barton thought he was leaving something unsaid.

“I’m meeting with him after lunch. I’ll take it up with him.”

Later, in a meeting with Geisler, Barton started with Fenton’s security issue. “I’d like to get this project done.”

Now Geisler looked uncomfortable. “We have a few slush funds. For when we can’t get important projects approved.”

“Why can’t we get our projects through the same decision processes we use for business unit projects?”

“We have trouble getting some projects approved. Especially the deeply technical ones.”

“So somebody thought this was not as important as the things that we did fund?” asked Barton.

“That’s one interpretation,” said Geisler. “John thinks there’s a security hole. But it’s more a professional opinion than a specific threat. So the project aimed at plugging this hole keeps losing out.”

“That’s nonsense,” said Barton. “Did Davies present it? I might have been at the meeting.”

Barton thought Geisler grew paler: “It was technical and didn’t go over well.”

“Who argued against this project?”

Geisler said nothing. Barton waited.

“Well,” Geisler said, indignation slipping into his voice, “as I remember it…you were the biggest critic.”

Barton had no memory of the meeting, but he had often complained about the way IT presented its project proposals.

“What did I say?” Barton asked.

“You said they should come back when they could speak English.”

Barton remembered. Davies had flushed bright red. Now Geisler’s recounting of the events on that day made Barton’s own face warm. “Well,” said Barton, recovering weakly, “that was unfair of me.”

“Cho thought so. He almost left the company.”

Barton would need to follow up on this. The company needed John Cho. Yet another reason why this upgrade project would have to be approved this time around.

“Maybe we need to get better at presenting our cases to justify IT projects.”

“Maybe,” admitted Geisler.

“Two objectives,” said Barton, resolutely. “First, I want to find a way to fund this—an aboveboard way. Second, I want us to review the process we use to decide how to allocate IT budget dollars, how we decide what priorities to fund. And, as this situation demonstrates, we need to improve the process.”

Next: The Wrath of the CEO

Excerpted from The Adventures of an IT Leader by Robert D. Austin, Richard L. Nolan and Shannon O’Donnell, Harvard Business Press, April 2009. Austin is a professor at Copenhagen Business School and an associate professor (on leave) at Harvard Business School. Nolan is a professor at the Foster School of Business at the University of Washington, Seattle, and a professor emeritus at Harvard Business School. O’Donnell is a PhD fellow at Copenhagen Business School and a former director and dramaturg at People’s Light and Theatre in Philadelphia.