The Cost Of Bad IT Economics

pagebreak title = 'The CIO's Failure?'}

Who's at fault for that?

Rubin: That's a failure of the CIO, and it's also a failure of the current metrics that are out there. Most companies will look at calibrating their performance against competitors and say, "Let me look at my technology spending versus revenue, and is it too high or too low." But CIOs don't control revenue. They should look at technology spending versus operating expense to understand if they're under- or overinvested in technology. In a healthy company, spending versus operating expense will rise in terms of IT because as you spend more in IT, you drive operating expenses down faster.

It's an interesting conundrum. One of the key things to managing IT is to have a strong financial perspective on the relationship between IT spending and what it does to business performance, and that's usually visible through the CFO. But if you have this cost-focused view, looking at the wrong metrics and the wrong gauges on your dashboard, you'll never get it right.

So is it more help or hindrance to have CIOs report to CFOs?

Rubin: A CFO can be a very effective partner for the CIO because the CFO has access to the right information. To manage IT investment, you should look at the business and business products, understanding product profitability, future growth plans and product introductions. That's what things are about. You need to slice that down and say, "What's the role of technology that makes us competitive? Does it drive our cost down? Increase our margin? Give us informational effectiveness to do better customer intimacy and match buyer and seller?"

By partnering with the CFO and the right businesspeople--through the CFO, if necessary--the CIO should be able to create a map of the entire enterprise, of all its products, and where the competitive levers are for IT. And the CIO, with the cooperation of the CFO, should be able to see if the investments are going where the bang for the buck is to drive future business performance and do IT investment from the bottom up.

It's going to be a balance between IT optimization--see that IT dollars are spent the right way, get the right value per dollar from staffing to everything else and make sure the dollars are placed right--and building the investment portfolio from the bottom up.

Page 4: The Mission of IT

This article was originally published on 02-11-2008
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