By Rajib Datta
In simpler times, the CIO’s challenge was to demonstrate cost efficiency. Success meant showing that unit costs per gigabyte of storage were trending down over time in alignment with competitive market standards, that service quality targets were being met, and that user problems were being resolved within prescribed time frames.
These traditional metrics for gauging performance were as straightforward as the CIO’s traditional role, which was to be a technical expert who reactively provided services to business customers. In today’s world, CIOs are required to deliver business value by leveraging technology as an enabler. So how does the CIO achieve this transformational shift from order taker to business partner?
The specific answer is to tie IT to business outcomes. So, rather than measuring IT on a cost per server basis, IT organizations should base their contributions on key business drivers representative of both the contributions of IT and the value of IT. For a hotel chain, IT’s contribution might be measured in terms of new hotel openings and reservations booked. For an airline, the key metrics can include reservation bookings or passengers boarded, while in financial services the metrics might be speed and volume of transactions.
Regardless of the industry, understanding the fundamental drivers of IT cost and translating them in a meaningful way to the business is essential to aligning IT with business partners.
In this context, CIOs often find that their biggest challenge is to drive and champion change in the business and make technology part of the discussion, rather than just a tactical part of the solution. To get a “seat at the table” for the business discussion, CIOs need to create practical ways to reduce costs to efficiently run operations, which in turn frees investments to proactively support and strategically partner with the business to drive change. This dual challenge likely requires material changes and a deeper review of how IT functions, both operationally and organizationally. In many cases, this process involves broader and more fundamental changes to the IT target operating model. The result is to focus attention on effectively running the business, changing the business and growing the business.
So where to begin?
The first step is a reality check: business stakeholders must understand the constraints and core challenges to change that exist within the enterprise, and recognize that any change can impact envisioned initiatives. Changing the focus of an organization in the short term can impact productivity. Awareness of this is essential to set expectations and define actionable and achievable priorities in the context of business objectives. CIOs need to demonstrate flexibility, agility and the ability to respond to alternative scenarios and develop realistic plans for change. Different business stakeholders will have different “must-haves,” so the CIO must articulate the tradeoffs and implications involved in choosing option A over option B.
Specific questions CIOs should consider might include: “What is our business alignment model?”, “How do we integrate services across providers effectively?”, “How do we incorporate technology solutions such as cloud and SaaS models?” and “How ready is the organization to make this change and how do I build momentum around change?” All of these considerations are essential to defining differences in timeline, sequencing and prioritization of activities with business initiatives.
Through continued collaboration, CIOs can give business stakeholders a sense of ownership and move the relationship from one of client and customer to one of partnership and relevance and, finally, to that of a trusted business partner. This “It takes a village” approach can achieve significant results. At ISG, we recently worked with a major global hospitality chain to help evolve its IT organization to be more responsive to changing business needs. An assessment of the existing environment enabled the articulation of a set of alternative scenarios for pragmatic solutions. Through collaborative workshops that explored the risks and benefits of the different options, a path was selected which best met the short, medium and long-term needs. The benefits included cost reduction, improved productivity and enhanced alignment with the business.
Clearly, IT is no longer just about cost reduction. With the role of technology becoming a broader enabler of organizations, it’s becoming increasingly imperative that CIOs transform themselves into trusted business partners.
About the Author
Rajib Datta is a partner with Information Services Group (ISG). Datta leads ISG’s IT strategy service line, is an expert in the evaluation of complex global strategies and has helped clients design, execute and operate transformational change. Datta provides expertise across Application Development and Maintenance (ADM), IT infrastructure and IT transformation to a variety of industries, including travel, retail, manufacturing and financial services.