Meta Group Quarterly: CIOs - coming out of a slump

Three months into 2004 and it's clear the priorities of those at the top of each organisation's tech tree must be changing. Luis Leamus explains Meta Group's position on where the focus must now be...

Today's typical 13-year-olds are awesome, multitasking, enthusiastic users of technology. To them, technology is a pervasive and assumed part of their lives. Friends and a good work/life balance are often more important than high levels of economic success and these young people will carry their expectations into college and the workplace.

CIOs should prepare their organisations (IT and business) for new cultural and workplace challenges, especially for this new generation’s use of IT in a business context. Funnelling the expectations and the usual enthusiasm of youth is in itself a complex task. In addition, the potential for adapting to new technologies is a critical skill that employers must encourage and leverage from these younger potential and actual employees.

Being able to adapt to the needs of the workforce is only one part of the equation. The agility of the IT organisation must be a key focus for IT leaders as they face continual budgetary pressures. With technology now a significant portion of an organisation’s budget, CIOs must be able to scale up or down as the business requires. The ultimate goal is to run IT as a business that can effectively respond to the new economic, security and people-centric realities of today's working environment.

Creating this adaptive organisation will not be achieved by accident. As economic conditions improve and information technology organisations (ITOs) are asked to respond rapidly to market opportunities, their ability to be 'adaptive' (namely, positioned to add value) may be constrained due to prolonged lack of focus on quality.

Unfortunately, steady reductions in both operating and capital expenses, coupled with staff reductions and skill erosion, have placed many ITOs on a 'turnaround' footing. For many, more effort is spent stabilising the current applications and infrastructure rather than improving quality or supporting new ventures.

Savvy IT executives recognise that successful turnarounds result from deliberate and well-executed steps that move sequentially from 'stabilise' to 'improve quality' to 'add value'. Attempts either to skip or to shortchange needed quality improvements will adversely affect ITO responsiveness and the ability to be adaptive.

A further consequence of managerial efforts to reduce or eliminate costs has been a reduction in training. Such action has affected not only 'soft skills' (for example, presentation delivery, appraisal writing) but also the 'hard skills' needed to maintain levels of competency. As new employees are hired or as current employees are transferred into new positions, they must gain awareness of the tools and techniques required to perform their duties. Self-directed on-the-job training results in quality errors and increased workload to support personnel.

As economic conditions improve, CIOs should allocate a portion of available funds to reacquaint or train employees relative to the tools critical to enterprise operating performance. They should also augment the help desk staff by at least 25 per cent during the first 60 days of this re-skilling initiative.

Although economic indicators are on the up, CIOs will remain under pressure to communicate IT investment value to the business. CIOs should consider the EVA (economic value added) concept to calculate the real costs of IT spending. Integrating the total cost of capital employed by using the EVA formula of WACC (Weighted Average Cost of Capital) x Capital Employed in the IT scorecard can help the business visualise the IT ROI.

For those IT organisations that have adopted balanced scorecards to enhance communication, 85 per cent of surveyed CIOs report expanded responsibilities. The highest-performing CIOs (top 15 per cent of Global 2000) are linking technology and information across the enterprise and discovering previously unrealised benefits in customer relationships, supply chain management, marketing opportunities, knowledge sharing and real-time interactions. The challenges and changes are neither trivial nor easy to anticipate but the CIOs who embrace them are extending their longevity beyond the 18-month career average.

When it comes to communicating value and recovery of costs, the CIO should consider switching from virtual charges for IT services to an actual chargeback model (for example, line items in business unit profit/loss statements). Such a change motivates users into gaining a much deeper understanding of the value of IT and the role that the IT organisation plays within the business. IT organisations successful with such a switch repeatedly and consistently forecast and then deliver on the services tied to each chargeback line item, as proof that they run IT services like a business and are competitive to any alternative the business may think of.

Just as the allocation of money points to levels of alignment and commitment to goals, so too does the allocation of time. Ways in which executives spend their time - whether by luck or design - point to how well they plan and execute against desired goals or how vulnerable they are to situations not yet addressed or conditions currently beyond their control.

Capable CIOs deliberately gauge their levels of productive time (for example, adding value, building relationships, enhancing skills) to unproductive time (handling mundane tasks, fighting fires). They use these variances as inputs to make needed organisational changes, develop staff, delegate responsibility and improve operating procedures and controls.

In fact, saying 'No' appropriately demonstrates the key executive talent of focusing on the right things at the right time, to the exclusion of distractions. Discipline ensures correct execution of what is being focused on. Because IT professionals regularly bite off more than they can chew, leading CIOs create a high-performance IT culture, coaching their teams to focus on executing a clear plan and saying 'No' to extraneous demands on their time.

To ensure CIOs make consistent, repeatable business and IT portfolio decisions, they should employ software-based portfolio management tools. Now that past years' cost-cutting initiatives are beginning to uncover excessive risk potential in business resources and processes, leading organisations are including risk in their portfolio assessments and using their tools' simulation and optimisation techniques to make more informed, higher-quality investment decisions alongside being able to identify least-cost risk options.

Luis Leamus is senior vice president International at META Group. He is an acknowledged authority on the IT organisation, business value of IT, adaptive infrastructure and integration and middleware. Luis has more than 20 years experience in the global IT industry in business development, marketing, financial analysis and strategic planning.