By creichert | May 14, 2008
By Vaughan Merlyn, Executive Vice President of nGenera
Just as a lot of CIO’s were gearing up for a year or two of growth and innovation, many are now being told to “hunker down” for a period of austerity. The usual first victims – cut travel, cut training, cut anything that smells like overhead! That Enterprise Architecture initiative that was starting to pay off? Cut it back! The SOA pilots? Put them on a back burner. The Relationship Management training program? Put it on hold. That IT Strategy Refresh retreat? Let’s still do it, but cut it from 3 days to 6 hours, and do it in-house instead of at that resort hotel we were going to use.
Yes – the CIO has to be a good corporate citizen, but I find a pattern common among some of my CIO clients. Historically, when cost savings were needed, IT was the first to step up to the plate. In fact, smart CIO’s used the pressure of cost cutting to rationalize, standardize and simplify their IT environments. There were plenty of cost savings to be delivered, and deliver they did! And, they got themselves a leaner, meaner and more agile IT infrastructure along the way. Problem is, that a few years later when cost savings were needed again, the CEO first turned to his trusty CIO. ”Mary, you remember how successful you were turning in that $70 million savings back in 2002? And the other $60 million you found in 2006? Well, I need another $50 million for 2008. OK?” What’s a CIO to do without limiting her career options?
I’ve been told by a few CIO’s what they’d like to say, “Last couple of cost take-out rounds, it seems that I was the only member of the management team that played! In fact, several of the divisions got even fatter while I was wringing blood out of silicon stones! It seems that the thanks I get is to take some more out!” And, of course, the CIO well knows that previous cuts came out of aggressive rationalization and consolidation of systems and infrastructure. Those plays have been played, and can’t be played again in any significant way. The outsourcing plays that could safely be taken, have been. If we go further into outsourcing, it’s not clear that we will get real savings, and it is possible that we will lose some core capability that we will later regret.
So, what’s a poor beleaguered CIO to do? The first part of my answer depends upon where your organization is on its Business-IT Maturity journey. If you are somewhere in the Level 1 Supply space, you almost certainly have lots of opportunities in rationalizing, consolidating and standardizing IT infrastructure and common applications. If you’ve not already done this, recessionary times provide wonderful air cover to take the draconian measures you’ve always wanted to take. If you are in the Level 2 Supply space, the options are somewhat less. This is typically a great time really turn up the heat on demand management. Shift the cost savings burden from the IT budget back to the business budgets where it belongs. But help your business partners strengthen their ability to build realistic business cases – ones that have teeth in terms of ongoing results tracking and accountability for results. It’s also a great time to turn up the heat on Enterprise-wide IT improvement activities such as Enterprise IT Portfolio Management and Enterprise Architecture. These activities will increase transparency into the work of the IT organization, and can help surface new opportunities for cross-enterprise leverage and consolidation. On top of that, look for opportunities to leverage Software as a Service (SaaS) and Cloud Computing plays. These are becoming more feasible by the day, and already have a meaningful and growing community of very satisfied customers, including some of the largest global companies.
It you are in the lofty Level 3 Business-IT Maturity space, I suspect the topic is moot – as a CIO, you probably aren’t being asked to give up your first born. You are just being asked to continue being a careful steward of the firms resources, and to perhaps watch travel spending and things that might have unintended and questionable “optics”. As with the Level 2 folk, take a good look at SaaS and Cloud Computing – it is likely that there are places to take out some costs, or at least to continue to innovate and create value without large capital outlays. Other than that, because of all the things you did to move through Level 2, most of the belt-tightening now is business belt-tightening, and, of course, you will do you bit for that.
It’s easy to sit on the sidelines and through a blog advise CIO’s on what and what not to do. I know the realities are much tougher. But I’ve also worked closely enough with some great CIO’s over the years to know that knee jerk responses to IT cost cutting requests don’t always turn out as well as was intended, and may just take you down a spiral of reduced IT services, leading to even more questions about the cost and value of IT, leading to a demand for further reductions, and so on. “Tears before bedtime” as my very British wife is fond of saying about such situations. Having said that, let me give some free advice on what not to do.
Topics: Economics: IT Staffing & Discretionary Budgets | No Comments »
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