Scenario: The global recession of 2009 hit a formerly fast-growing $1.2 billion manufacturer hard, bringing its customary 20 percent annual growth to a halt. Rolling budget reductions cut business and IT resources deeply, leaving technology resources spread thin. Everyone in IT feels overworked, yet the slow-motion economic recovery is renewing a push for growth.
What should this CIO do to position IT to support business expansion?
The recent downturn has given many IT executives an MBA from the school of hard knocks, and I’ve recently worked with several financial services firms struggling with this same problem. One company was highly entrepreneurial, but its IT people were really resistant to change. Their lack of business savvy (problems such as poor skills in developing business cases, little thought given to downstream risks and so on) was only magnified by the recession. My advice to the CIO in our example would be to concentrate primarily in three areas: 1. Improving direct communications with business stakeholders to build relationships and trust, and also with staffers to help them transition to the desired behaviors; 2. encouraging joint business and IT investment; and 3. strengthening IT capabilities and operational performance.
On the operational improvements, for example, the CIO should fast-track demand assessment, prioritize specific opportunities and create a business technology road map to direct activities. Next, I’d recommend taking a closer look at governance processes to see where project and quality capabilities could be improved (by introducing hybrid agile development approaches, for instance). I’d also look hard at whether the company might be able to shed some bad projects. With one of my clients, a delayed data center consolidation plan was returned to the front burner. We also revamped the information management strategy to make sure it could support emerging growth-related business intelligence requirements.
Paul Bergamo, former CTO of Liberty Mutual, is a general partner at NewVantage Partners, an IT consultancy in Massachusetts. Reach him at firstname.lastname@example.org.
One of my clients is in a similar situation. Being a direct consumer marketer, this company experienced a huge drop in sales that forced it to drive cuts across the board just to stay open. We took a similar approach to Paul’s by partnering more directly with the business units to spell out what IT needed to do to support business growth. Another move I recommended was developing a strategic plan for IT to better leverage its minimized budget. We developed a proposal to potentially outsource data center operations to a managed provider, where shared resources could be utilized at less of a cost than building internally.
This option promises to provide a much more stable environment than the present situation, allowing IT to focus internal resources on developing customized applications. We also took a full RFP-type approach (incorporating ROI and total-cost-of-ownership analysis) to demonstrate potential savings and cost-avoidance of the data center move. This helps the CIO build credibility with the rest of the executive team by coming proactively to the table with money-saving initiatives while also positioning the company for rapid growth once the market returns. It turns the focus toward more of a business discussion rather than an IT “expense” discussion.
My advice to this CIO is to quickly develop a plan outlining areas where IT can leverage the budget and resources available. The plan must be business-centric (no technical jargon allowed), with the financial impacts defined in relation to each business initiative.
Jesus Arriaga, formerly CIO at Keystone Automotive, is president of CIO Strategic Solutions, an IT consultancy in California. Reach him at Jesus.Arriaga@CIOStrategicSolutions.com.