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IT Leadership // IT Strategy
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Cheap IT Will Cost You

Under-investing in technology likely means you can't achieve your business transformation goals and you're probably overspending somewhere else.

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Here's a question that IT leaders are not generally encouraged to contemplate: Are you under-investing in IT? Peter Muggleston, CIO of Foodstuffs North in New Zealand, is now my hero because he publicly contemplated this question.

Traditional mainframe-like thinking about IT goes like this: "Cut costs! Be lean!" Efficiency is equated with spending less in IT. That, of course, is not always the case. Sometimes spending a little more on IT means spending a lot less elsewhere, but business partners don't always understand that. The truly uncomfortable truth is this: Spending too little on IT in the digital age is ineffective, maybe borderline irresponsible.

Why? Muggleston, who joined Foodstuffs three years ago, pinpointed the problem in his talk at CIO Summit 2015 last month in New Zealand. Foodstuffs was embarking on "reinventing every process in selling stuff to our customers" by embedding digital technology in everything it did. It was, said Muggleston, "the biggest, longest, most expensive, and riskiest change in the history of the company." The problem? It was "rolling it out on flaky foundations." That probably sounds familiar to 80% of IT leaders.

(Image: Manuel Faba Ortega/iStockphoto)

(Image: Manuel Faba Ortega/iStockphoto)

The trouble: "We celebrated our parsimonious IT spend," he said, and "we operated with the intellectual property in the heads of some very clever, loyal, and entrepreneurial people who were very good at coming up with workarounds" to continue to work on those iffy foundations.

To Foodstuffs' credit, it eventually invested $150 million and 130 full-time folks to fix those foundations. "The entire business was involved," said Muggleston.

[Want more IT lessons from New Zealand? See CIOs: Adopt Social Media For Success, Now.]

Job No. 1 was to make sure that IT got ownership and commitment from the highest levels of the organization. Muggleston did all of this during a merger which created the third-largest company in the country.

Muggleston took a multi-step approach to fixing the foundations, especially on:

Capturing the "hearts and mind" of employees. He said that, previously, IT used lots of custom code. Custom code, of course, is expensive, and it robs resources from other areas. So the team had to work on convincing employees that, although they were all singular people with unique needs, "we really could run on standard software."

Focusing on people and process. The investments on the technology side included two new data centers, replacement of the network, and switching the database, storage, and compute platforms. But most importantly, he said, it was about people and process. There was as much business prep as technology prep.

Why We Under-Invest

To be fair to business leaders, the reasons why people under-invest in IT are usually rational and threefold:

1. They feel disconnected from IT. They don't see the benefit of funding something that they don't fully understand or something that isn't "theirs." Thus, Muggleston's focus on people, process, and "hearts and minds."

2. They think everything is fine and no additional investments are needed. Muggleston's point about IT staff performing miraculous workarounds probably exists in many, many organizations: IT folks care deeply, so they do whatever it takes, even if "whatever it takes" is at great personal cost. Result: There's IT burnout with business leaders left thinking that no investments are needed

3. They believe that risks are overstated. Or they think that the risks, when compared to the expense, are acceptable. This "it won't happen to me" mindset is called "unique invulnerability" by psychologists. It pops up in many situations, and it's one of the reasons that people engage in risky behaviors in general.

This last reason created one of the great guffaw moments of his talk. Once the camera was off and he was being interviewed on the stage, Muggleston said, "I'd love to say it was all co-operative dialogue. In truth, there's nothing like a massive outage to outline need for IT change." Cue 500 people chuckling knowingly -- because it's true at their organizations, too.

And it is so true for many of us. Our organizations want the digital Buck Rogers front-end, but usually there's poor investment in fundamentals.

What can we do? We can't necessary do anything about reason No. 3 (unique invulnerability) unless and until there is a massive, prolonged outage, which, unless you're brand-new like Muggleston was, is pretty risky, career-wise.

I think that the call to action for IT leaders adds up to: What actions will you take about No. 1 (feeling disconnected) and No. 2 (thinking all is well)?

Building credibility and connectivity with business partners and exposing the "ugly hacks" in your organization to business leaders are the paths to avoiding that massive outage.

To be fair, not only must IT leaders make the effort, business leaders must also work to understand that cheap IT won't get them where they want to go.

Jonathan Feldman is Chief Information Officer for the City of Asheville, North Carolina, where his business background and work as an InformationWeek columnist have helped him to innovate in government through better practices in business technology, process, and human ... View Full Bio
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User Rank: Apprentice
7/29/2015 | 6:18:23 AM
Re: People and processes
CIOs in this situation need to:
1. Engage Board and Exec Team in strategic dialogue
2. Focus on Communication about IT value add
3. Move towards a bi-modal model (cutting cost on legacy side and investing in 'digital')
4. Benchmark IT spend versus competition
5. Highlight Operational Risks

Bjorn Ovar Johansson

Interim CIO
User Rank: Ninja
7/17/2015 | 11:57:53 AM
Its all about the money
I've worked for and with many companies.   The disconnect is caused by those responsible for the money (budget, purse strings, etc) and those responsible for the processes.  Rarely do I see a distributed budget process married to the business processes and when there is such a marriage there is a further disconnect between the people and processes and the hardware and software budget necessary to make it happen.  I think its just human nature to "conserve"  spending money while just using people.  Few still understand the connection between people and processes with hardware and software.
User Rank: Ninja
7/17/2015 | 11:41:11 AM
Re: People and processes
@Shamika,  You are missing two other key components besides people and processes, Hardware and Software. This is the fundimental mistake made, directly identifying the cause of the issue and why this article exists.
User Rank: Ninja
7/16/2015 | 12:30:43 PM
Re: Cheap IT Will Cost You
Everyone talks about 'getting closer to the business', and it's true - IT is no longer an otional component of any business activity. The problem we run into here is that sometimes the business end doesn't know how close it should be to IT. Mr. Muggleston mentioned they got a new board of directors during the project due to a rollout - constant corporate shakeup is also a factor. You might have buy-in from the right people, but then they leave, or priorities change and they're no longer the right people. Getting them invested in IT (#1) goes hand-in-hand with getting them to see where processes are broken (#2), so this is really important. 

One interesting point is that Foodstuffs North is actually a cooperative of grocery stores that are independently run, with the corporate body only having so much say-so. To bring the huge variety of management styles and processes under one roof, Muggleston had to be careful not to slow anyone down or step on their independence. Instead, he presented their new SAP system as a means for each individual store to innovate quickly, and have access to the best information at all times to make their own decisions. That way of thinking is a great lesson to any CIO proposing a big upgrade at any kind of business. 

Going in and training a bunch of non-IT people at that many retail locations in as many processes is definitely not something most CIOs have faced. I'd be interested to hear some testimonials from store managers about how they felt the process was handled, and some data about how things have changed for Foodstuffs North stores since then. I suspect the proof will be in the pudding when it comes to validating all the groundwork investment that Mr. Muggleston did.
User Rank: Ninja
7/15/2015 | 12:16:04 PM
People and processes
This is an interesting article. It is important to understand the value of people and processes. By improving processes continuously, it will help in increasing productivity. 
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