In a tough economy, business are looking for ways to reduce expenses and, if possible, to improve sales. Both efforts are intended to improve the bottom line, but they do so while coming at it from different directions.
When times get tough, it’s natural for people running companies to quickly and possibly aggressively analyze the expense structure in an effort to find ways to reduce costs. It’s during this process that CIOs, if they don’t know already, will gain insight regarding executive perceptions of the IT department.
IT as a cost center
If IT is considered a cost center, the department will feel the full brunt of expense cuts and will begin to hear phrases such as “doing more with less” being bandied about. In these cases, IT will be helping the bottom line through a reduction in its operating budget.
IT as a business enabler
If, on the other hand, the company considers the IT department to be a strategic enabler that is capable of helping the organization attack the expense structure more strategically or find and support new and/or enhanced revenue streams, rather than attack the IT budget line by line to cut, organizations will take a different approach. Although the IT department may still face some budgetary pain—for example, perhaps the group will be included in a travel ban or lose some professional development funds along with other departments—but it may escape deeper cuts and, in some cases, may be provided with additional funds in order to enhance efforts or to accelerate projects that can affect the bottom line in a positive way.
Challenges that face the CIO
This seems to be the great challenge for many of today’s CIOs and it happens for a variety of reasons:
- The IT department remains too focused on “keeping the lights on” activities, thus creating a perception that they are a team of technicians rather than business leaders. This is not always the fault of the IT department, but in these organizations, the CIO should be looking for ways to reduce non-core activities so that existing staff can be refocused on business-facing initiatives. For some additional thoughts on changing the IT culture and for some ideas to what activities should be eliminated, look at this article.
- The organizational culture is one of “IT servitude” in an order-taking way. While IT is certainly a service organization, in some places, this is translated as meaning that the department should simply do what they’re told, regardless of who is telling them and without regard for the importance—or lack thereof—of the task.
- IT is seriously understaffed. I don’t know many CIOs that would say that they have plenty of help, but there are many that will say that they can get the job done. In other organizations, however, IT struggles just doing the basics due to lack of enough people resources to get the job done.
- Lack of appropriate governance. In these kinds of organizations, IT is often aimless, even when led by a strong CIO. The reason: Lack of organizational commitment to IT in the form of governance, which helps both IT and the broader organization understand true IT and business priorities.
What’s a CIO to do?
First, if the organization resists expanding IT’s role beyond that of electronic janitor, either move to a different organization or find a way to change the culture. This might involve outside consultants or it may mean the CIO begins taking small steps toward making internal IT changes that may ultimately make their way outside to the broader organization.
Here are some things that CIOs might consider:
- Ensure good governance. This should be step 1 and will raise IT’s credibility throughout the organization as there will be new levels of transparency into IT projects and priority.
- If possible, get rid of some routine activities as per this article. By eliminating some of the routine, IT can start taking steps to prove business value and increase it’s credibility as a business multiplier as opposed to being a simple cost center to be cut.
- When cuts are ordered, make sure that the business truly understands the impact as well as the opportunity cost. When cuts are made, something has to suffer. By opportunity cost, this is the delta between what can be done with the reduced funding and what would be possible if the business were to instead invest in IT.
- Take on a small project that has business outcomes. In some instances, actions speak louder than words. The CIO can consider taking on a small project that can demonstrate a bottom line impact.
In 2012, it’s a shame that more businesses can’t get behind the idea that IT can be leveraged as a serious business multiplier, but in these environments, the CIO might start taking small steps toward demonstrating the possibilities that can be achieved once IT is considered more to the business than a simple cost center.