Managing IT Through Tough TimesBy Edward Cone | Posted 01-29-2009
Managing IT Through Tough Times
It looks like 2009 is going to be a rough year, and every time you turn around, it looks a little rougher.
Throughout the second half of 2008, forecasts for corporate IT spending kept getting revised downward, from hopeful to gloomy to dismal to maybe-I'll-just-stay-in-bed-today. As of press time, Goldman Sachs was calling for outlays for computers, software and services to decline by 8 percent from 2008 in developed markets, the first such decrease in six years. Predictions for the broader economy are no more cheerful, with housing, employment and consumer spending expected to remain trouble spots until 2010, along with enormous government deficits as far as can be projected.
So what's a CIO to do? Focus. Your job has never been more important.
Old-school virtues like cost-cutting and efficiency are back in style, as companies rediscover the need to husband their resources and rationalize costs. That's stuff IT has always known how to do. At the same time, strategic vision and new business opportunities are at a premium; as weaker rivals falter, sounder competitors will move ahead.
And this moment will pass. Whether this turns out to be closer to the beginning than to the end of the bad times or if prosperity is around some not-too-distant corner, businesses will eventually start to grow again. And when the economy recovers, companies that have managed the downturn well will accelerate into the next growth cycle. So, even as you're feeling for the bottom, your priority should be to put your company in a position to prosper in the years ahead.
That's not to make it all sound easy--they're called "tough times" for a reason. Jobs may have to be cut, and pet projects and real needs may have to be put on hold for the foreseeable future. John Baschab, managing director of staffing firm Technisource Management Services and co-author of The Executive's Guide to Information Technology and The Professional Services Firm Bible (Page 13), says this could be the right time to consider outsourcing certain job functions.
But the hard choices must be made carefully. As Forrester principal analyst Bobby Cameron points out, the focus should be on agility and innovation, not big spending, though some spending will be necessary. Different sectors of the economy will face different scenarios, so there is no one-size-fits-all solution. A key point from one of Cameron's recent presentations provides solid advice: "Drive IT's decisions based on the business value of investments and operations, not wholesale cuts."
It's important, too, that the CIO get out ahead of painful budget reductions. The numbers coming out of the CFO's office may be immutable, but you can plan for them and bring that plan to the leadership team. This may be the time to execute on hard choices, such as the consolidation or staff reductions you've put off in the past. Be proactive, not reactive, and your shop--and the enterprise--will be healthier for it.
We spoke to three CIOs about their plans for managing through the hard year ahead. Paul Johnson, the veteran CIO at regional banking powerhouse BB&T Corp., is moving forward with a multiyear network infrastructure investment project that is critical to the company's business strategy. Ramon Baez, CIO at retail-products giant Kimberly-Clark, says tough times are an opportunity for IT shops to spotlight their value--but only if their leaders don't shy away from the challenge. And James Knight, CIO of insurer Chubb, urges CIOs to display strong strategic business perspectives to help push projects and overall effectiveness.
Your mileage may vary, but the underlying message is clear: When the going gets tough, the tough get going.
Staying the Course
Staying the Course
Paul Johnson, CIO, BB&T Corp.
By Edward Cone
Paul Johnson has a plan for getting through tough times. It looks a lot like the plan he had before tough times hit.
That's not to say that Johnson, the veteran CIO of financial services company BB&T, isn't tightening his belt and resetting some priorities. But the Winston-Salem, N.C., bank is healthier than many of its rivals, and Johnson sees the chance to widen the gap during the downturn and accelerate into an eventual recovery.
To do that, he's sticking with the strategic vision set in 2007, which calls for an IT transformation project to support BB&T's transition from an acquisition-driven company to one that focuses more on the organic growth of its business lines. CEO John Allison IV, who retired at the end of 2008, turned a once-sleepy small bank into a regional powerhouse with assets of some $137 billion by gobbling up 60 banks and thrifts, along with scores of insurance agencies and non-bank financial services companies.
Johnson's job is to remake his organization from a traditional cost center to a value-generation center that is closely aligned with current business priorities and customer needs. The goal, he says, is to spend a third of his time on traditional jobs ("keeping the lights on and the doors open"), a third reacting to the needs presented by the business and a third on projects that generate competitive advantage. A big part of the portfolio involves serving customers, who expect excellent online service and security.
Thus, a big multiyear investment in network infrastructure, which Johnson expects to generate about $100 million in savings in the next five years, is proceeding on pace. The IT services budget for 2009 shows a double-digit increase over 2008; aggregate IT costs, which reflect efficiencies gained over time, will not rise as sharply.
Johnson is investing with care, mindful that rapid return on investment is a priority. "We have more of a short-term focus on generating as much value as possible in 2009 and probably into 2010," he says. "There are projects where we say that if you can't do it quickly, you don't do it now."
BB&T has what Johnson calls "a very disciplined methodology for the submission and approval" of projects, with a traditional emphasis on ROI, often in the two-to-five-year range. Now, though, he says, "The strategic project pool is narrowed to things that will give us value in that period. There are some things we would have gone after at broader scale if we had more money, but I can't think of anything that we're not doing at all."
Johnson works closely with executive management, and his interactions with them contain few surprises. "I've always got to have a good business case when I go to them," he says. "I can't say it's the right thing to do because the technology is better or the architecture is better. I'll lose that argument every time." That certainly has not changed during the downturn.
However, the recession has had an impact on Johnson's messaging to his own staff: It's become the focus of one of the regular town hall meetings he holds with all IT managers. "To ignore the economy is to evade it," he says. "You have to talk about what's happening, to help people understand how BB&T is doing in this economy." Johnson is always mindful of the fact that his people and their families may be affected by events outside the company.
Good communication is a hallmark of BB&T, he says, but these are unusual times, and Johnson has a special message for his people: "I want them to know that to control our own destiny, we have to execute at a high level. They need context, to see that we are on a growth trajectory, that we're on the attack and we'll take opportunities where we can. Now is the time to take advantage."
Making IT a Stronger Resource
Making IT a Stronger Resource
James Knight, CIO, Chubb
By Eric Lundquist
"Resourcefulness" is the one-word answer to what a CIO needs to be in 2009.
So says James Knight, global CIO of Warren, N.J.-based insurer Chubb, in a telephone interview conducted while he was attending the Society for Information Management's annual SIMposium meeting in Florida. Learning when to delegate and to be resourceful at all times have been the keys to his rise in the company, and they continue to be key attributes in good times and bad. Knight has more than 28 years of experience in the property and casualty insurance industry.
"The more I was able to reach out across boundaries to get something done, the better I performed," Knight says. In 2009, he sees some opportunities that would not be available if Chubb were facing many of the challenges currently affecting some firms in the financial sector. Because Chubb is prudent in its underwriting, Knight says, it has had no exposure to the subprime mortgage fallout. "From an IT point of view, I see demand ever increasing," he adds.
With technology at the center of everything Chubb does, Knight finds himself looking at "all the moving parts"--all the new technologies and all the demands from the business groups, as well as sorting out the priorities and projects that are most urgently needed and represent the greatest investment payoff.
"For information-based companies, information and the need for analytics around that information are paramount, and everyone recognizes the importance of that," Knight says. Despite that, Chubb does not want to be the first to utilize a new technology. "A comfortable second wouldn't bother us at all," he adds. In 2009, Chubb's technology investments will still require a robust business case in order to proceed.
For CIOs who may not have experienced as many ups and downs in the economic cycle, Knight advises that they build trust within their companies by delivering on what they promise. He adds that a high degree of transparency of projects is also needed so thatexecutives supporting the project will have a clear understanding of what is to be delivered--and at what cost. Finally, it's crucial for IT executives to speak about the business outcomes of their efforts, rather than simply engaging in technology-laden descriptions.
One of the items that is high on the IT agenda is dealing with information overload. Helping the company find the information it needs, applying business intelligence systems to the information and
presenting the information in the format that business managers need are key requirements, and they can be addressed only through a combination of processes and technologies.
"It's all about synthesizing numbers down to the key indicators," Knight says. "That tells you a lot."
Regarding social networks, Knight says their most immediate value may be in finding and highlighting skills within the company. He's considering using something like an "internal Facebook" to identify and highlight the internal wisdom of Chubb's employees.
Regardless of the economy, Knight says qualities such as resourcefulness; the ability to understand "the business first and IT second"; and the talent and skill necessary to take an idea, build a project structure around it and then deliver on that project will continue to be differentiators for CIOs and their companies.
Stepping Up in Today's Economy
Stepping Up in Today's Economy
Ramon Baez, CIO, Kimberly-Clark
By Brian P. Watson
Ramon Baez is not hid-ing in the data center. "This is the time when you get out of the office," says the Kimberly-Clark CIO. "Get into those conference rooms and meet with the business people on how you can help them through these difficult times. That's when they see you as a true business partner."
That's the only way CIOs can convince the business that IT can be a value creator and not just a cost center. In tough times, Baez says, business leaders must understand that IT can provide a competitive advantage.
Clearly, that's not an easy task, and it's become tougher as events have made a mockery of the planning process. When his team plotted its strategy in April 2008, the focus was on flexibility. By July, the Dallas-based company was dealing with inflationary hurdles: Think oil reaching $147 a barrel, with petroleum commodities a key component of Kimberly-Clark products. Baez and other executives had no idea when the inflation issues would subside, so they worked to reduce fixed costs to free up capital for investments to help make the company more efficient.
Then came the Wall Street meltdown. Executives became more jittery and asked Baez, "How can IT help us next year?" "Top of mind for all of them wasn't what IT could do to add value from a strategy perspective, or what's the next great technology," he says. "They were viewing IT as, 'Wow--you cost us a lot. How can you help us continue to drive down costs?'"
When the economy imploded, Baez kept close to his executive team, offering ways IT could help
Kimberly-Clark weather the storm and come out stronger. He didn't see any of his projects or budgets cut. He acknowledges that his IT shop may have to make some course corrections this year, but any changes will be closely aligned to corporate strategy, he says.
In the meantime, Baez is focusing on optimizing his IT assets in 2009 after a multiyear, multiphase outsourcing project. Today, he's managing more than 800 in-house IT workers, with another 1,000 outsourced contractors. In-house workers, embedded into various business units, get a close-up view of what each department needs. That, he says, allows them to discuss priorities and opportunities from a business perspective--all while anticipating what's expected from IT.
"It's being proactive--instead of being told what to do," Baez says. "It's coming to the table with ideas to make the company more profitable, improve margins and be more effective in dealing with customers."
Baez also says it's time to focus on your people. Cutting for the sake of cutting runs the risk of alienating talented IT staffers, which can make them seek greener pastures. As he points out, the most talented workers usually have no problem finding a better job, despite the economic climate.
So Baez is ramping up some leadership development initiatives he enacted this year, and he aims to keep his staffers motivated toward the post-recession era. "You have to demonstrate strong leadership so they feel like they are where they want to be," he says. "Too many [CIOs] get this deer-in-the-headlights look, where they say, 'I don't know what hit me--this global economy is falling apart!' No one wants to work for that type of person."
Above all, Baez emphasizes more face time with the business, not hiding in your office. "The last thing you want to do is hide because you think the business will cut your costs," he warns. "Forget about that. Get out there and ask, 'What can we do to help?'"