CIOs Need To Improve Budget Practices, Says Study

CIOs need to be more strategic about budgeting if they want to use technology to better deal with the rapid pace of business change. That's the advice of experts at CEB, formerly the Corporate Executive Board, a global member-led advisory group that has just published a new study on the trends that will shape corporate IT in the next four years.

The study, The Future Of IT, is a follow-up to a report published three years ago, the group's managing director of research Andrew Horne told Information Week. In its previous study, CEB identified four major changes in the role of IT in business. In the current report, the group suggests five ways CIOs can drive productivity and growth in what it calls "the new work environment."

[ Belt-tightening in government spending has saved £10 billion in the last three years. See Whitehall Spending Hawks Tout IT Savings. ]

First, the four workplace changes that impact IT:

-- Greater interdependence between individuals in the modern workplace, which IT needs to better support.

-- Frequent organizational change, which shortens business partner time horizons and puts a premium on responsive IT planning and budgeting.

-- Greater knowledge intensity, which means more money spent on analytics and collaboration and less on process automation.

-- More technology choice: "After BYOD comes BYOI, BYON, and BYOA: bring your own information, networks, and applications."

How should the CIO respond to these changes? The current report offers five tactics:

-- Use technology to increase employee productivity.

-- Give employees not only tools, but also competencies.

-- Split off flexible interfaces from foundational data.

-- Shift engagement focus from managers back to employees.

-- Shift IT from a reactive approach to business demands to a proactive one -- i.e., go from "respond" to "anticipate."

One problem, according to CEB, is that IT's operating model and skill sets are often ill-prepared for the new work environment, which could lead to clashes with impatient CEOs. The study points out that even as business leaders aim to increase productivity, failure to adjust to the new work environment will result a productivity decline.

That's where budget comes into play. "The way in which IT gets money from the business just has to change," Horne said. "The whole multi-year or annual, long-term process just doesn't work in a time of such rapid technological change; the organization needs to be a lot more flexible in terms of IT strategy, able to make quicker decisions and react better."

Another challenge, according to the report, is that CFOs often see IT as a cost center and are unwilling to work on anything other than big-picture budget cycles, especially in larger enterprises. Horne explained that this is partly because many CFOs distrust IT due to what they consider irresponsible spending -- but the recent focus on cost control and commodity procurement now needs to change. "If you are dealing with a very rigid, risk-averse, fiscally conservative budgeting process," Horne said, "you're just not in the best place for any sort of innovation."

Horne suggests that IT leaders ask their business colleagues to rank their upcoming priorities and use that as a basis for a series of "weightings" on projects. "If [your colleagues] say that keeping customers happy is higher than streamlining the supply chain at the moment, use that to build a case for greater investment in that area of activity," he said. "In any case, you should end up with a set of priorities that will give IT a clear vision of priorities that you can use to push for appropriate action."

What if your CFO objects? You may need to go higher. "A good CEO will be happy if they see their managers looking to properly organize around the real objectives of the company," said Horne, "even if this goes beyond doing things as cheaply as possible."