In the simplest terms, the CIO and IT leadership must be relentlessly focused. Focus on the broader picture when running the IT organization. The mission is clear: the CIO is foremost a business leader--one who relentlessly delivers IT in support of business objectives, all while continuously seeking to drive down overall costs.
The full recipe for success--for themselves and the business--includes these 10 ingredients.
1. Run the Shop Effectively
Seems pretty basic and unglamorous, but this is the most fundamental principle of running IT. Nothing will undermine the credibility of IT leadership more than instability and a broken platform. Without predictable, reliable and stable systems and infrastructure, permanent progress is not possible. Transformation goals cannot be achieved, building new software (on a broken platform) becomes more difficult, and multi-sourcing grows immensely more complicated and risky.
The CIO must have a seasoned leader running the operational platform. And that individual must also deeply understand the business he/she supports. Putting a highly technical leader in charge of operations won't do the trick. Rather, it's crucial that the leader understand and be able to explain the business ramifications of operational issues in addition to understanding the systems and technology they support. It is also essential that the operations leader is able to articulate an operational vision for their organization.
The CIO, IT leadership, and the whole IT organization must develop a culture where operational competency is valued. The CIO should be briefed on operational matters (running the shop) every morning. The CIO should know the status of overnight processing, should review the key value metrics, and should understand the key operational risks and issues (including audit findings, key risk indicators and information security matters).
2. Reduce Expenses
Reducing expenses is more than simply satisfying the latest mandate of the CFO. CIOs must demonstrate a commitment to reducing expenses perpetually, even in a climate where budgets increase. A CIO who earns a reputation for financial prudence will quickly earn the respect of executive leadership. Ironically, those CIOs who are constantly finding ways to reduce expenses are given more consideration when they are requesting additional funding or an investment in IT.
So, how can the CIO reduce expenses with such tight budgets? It starts with culture.
IT leadership and IT professionals down to the lowest level in the organization know where the waste is. Ask for it. Pursue it. Incorporate it into performance objectives.
And most important, make it someone's job to find ways to reduce expenses. At the same time, ensure that the organization understands that reducing expenses does not automatically mean job eliminations.
Generally speaking, the CIO should always be looking at the basics:
- Evaluate consulting rate structure
- Look at existing software contracts and licenses
- Multi-sourcing (see below)
- Obsolete systems
- Server consolidation
- Workforce optimization
- Data center charge backs, storage usage
3. Multi-Sourcing as a Mechanism to Reduce Cost and Add Strategic Value
Multi-sourcing provides a dual benefit: cost savings and strategic value. Certainly, a strategic partnership with a global partner will reduce overall expenses, and if done properly, done without introducing risk into the organization. The key thing to understand about focusing solely on cost savings is that once the financial benefit of the cost-benefit analysis is achieved, the CIO receives a pat on the back and a new financial baseline is established (which will certainly be challenged again). Therefore, the strategic value benefit of the relationship is equally important to the cost savings.
For the CIO, a key strategic value in multi-sourcing is agility, or the ability to quickly ramp up and ramp down. This allows the CIO to run as lean as possible while being able to react quickly to new initiatives. Another important value of the offshore partner is that they bring to the organization expert (global) advice, which should be regularly leveraged. The sourcing partner must be regularly challenged to bring ideas for cost reduction and solicited for their expertise when evaluating new projects or initiatives.
When introducing multi-sourcing to the IT environment, it is most prudent to focus on both the cost savings and the strategic value benefits. Business executives expect IT organizations to employ responsible multi-sourcing, certainly for cost-saving measures. However, the CIO should ensure that they are also deriving value from the strategic relationship.
This article was originally published on 03-03-2010
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