Commentary
4/21/2009
05:06 PM
Bob Evans
Bob Evans
Commentary

Global CIO: Prove IT's Business Value To Your CEO -- Or Else

CIOs face relentless pressure from CEOs to prove, in financial terms, the business value of the IT team and the IT budget.



Dear Chris:

Your first year as CIO has shown mixed results. You've made some nice contributions in speeding up applications development and unlocking the potential of virtualization. But you've been either unwilling or unable to connect your team's performance and compensation to the business value the IT organization delivers. In the absence of that visibility, Chris, how can I as CEO get an accurate fix on how you and your team are doing? How can I know whether to promote you to the Executive Committee -- a role I believe a strategic CIO should have -- or fire you?

This need to tie IT performance and compensation to business value has a profound impact on this company's ability to succeed with customers and succeed with shareholders -- and outside of that, what else matters? Before the end of the quarter, you need to complete the "Business Value of IT" analysis that we have discussed and that I have championed on your behalf. If you don't, then you'll have proven that while you're a solid senior director of IT, you're just not qualified to be CIO.

I need a CIO who can clearly and simply show me, in plain language, whether the $85 million we'll spend on IT in 2009 is helping us or dragging us down. And that is unacceptable. Let me repeat this question because it's the only one that matters right now for you and me: What specific business value is the company gaining from spending $85 million on IT under your leadership?

At the Management Committee meeting yesterday, you cited a "Salary Survey" report from InformationWeek, and from all of the interesting statistics you pulled from that study, I want to focus on two that are particularly relevant to our company. (1) Last year, 43% of IT staffers felt strongly secure in their jobs, while this year only 32% feel as secure; and (2), nine out of 10 IT pros believe their career path is as secure or more secure than most other professions.

First of all, Chris, it's not your job to be worried about their feelings of "job security," but it sure as heck IS your job to let them know whether they're creating value for the company or doing irrelevant busywork. Second, it's also your job to know that yourself. And third, it's also your job to get me that information as well. Here are four quick examples:

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  • BI project: We spent $9 million in the past 15 months. What's the quantifiable impact on revenue? Customer retention? Up-selling? What's the ROI, Chris?
  • Notebooks to netbooks: Nine months ago, you said this would reduce overhead, simplify administration, lower security risks, and increase productivity. All I've seen is a very tired PowerPoint slide showing that buying 200 netbooks would be less expensive than buying 200 notebooks. Where's the analysis of business value, Chris? Was it a success that should be expanded, or a mistake that we can learn from?
  • Data warehouse project: You said the big trend here is for enterprises like ours to give customers and partners the opportunity to do more self-service and analysis by seeing what's going on with the products they purchase from us. Are we cutting incoming service calls from partners? What are customers doing with the warehouse, and are those users buying more?
  • Project Web 2.0: We got a lot of people excited about new ways to engage with customers, and we have lots of cool links and tags on our sites, but where is the evidence that this is enhancing revenue, lowering costs, delighting customers, and helping our sales team find new and better leads?


Link Work To Company's Success
Let me come back to that survey data about job security. One of the reasons your team is feeling worried about their jobs is that while they know they're busy for 10 hours every day, they don't have a sense that what they're doing is important, vital, and essential to our company's success. And without that sense of direct linkage to the company's success, your team will never feel secure. You need to be able to tell them what they need to be doing to drive business success, how those efforts will generate business and customer value, and how we're going to measure their performance against those business-driven goals.

As you know, we work with executive-search firm Spencer Stuart on a regular basis, and to help you get an unmistakable sense of what I'm driving at, I asked them about trends they're seeing in the CIO role. They passed along these excerpts from a recent report they've prepared called "The Future Of IT Leadership: The Strategic CIO." I'd like you to consider how your business value can incorporate this type of thinking as expressed by State Street CIO Christopher Perretta and Motorola CIO Patricia Morrison.

  • "Formalizing the innovation process is more important than ever and we need to focus on and invest in the outcome of our innovation, as opposed to simply executing one-off tactics," says Perretta. He explains that large transaction-based systems being built today have to be designed in such a way that will make them relevant to the future market. "IT needs to be plugged into the long-term innovation plans of the business so that it can provide the capabilities needed when the commercial opportunity arises," he explains.
  • Servicing global clients in a very complex environment at a minute's notice requires dynamic, reliable, and effortless collaboration. IT must be able to respond immediately, regardless of where the team sits. "As organizations grow, the ability to instantly engage all the company's capabilities makes it not only a much more agile customer-focused provider, but a more formidable competitor as well," Perretta says. Social networking capabilities also enable the enterprise to bring the global workforce closer together, connecting the people who can accelerate delivery.
  • "A lot of CIOs typically had the luxury of controlling much of the technology environment, but that is no longer the case," says Morrison. "You now have to think in terms of innovating and supporting technology that is open to the public domain, not just the business world." This adds an extra layer of complexity in successfully meeting enterprise customers' needs since CIOs now have to think about aligning architecture with more publicly available applications and capabilities.
  • "There will be increasingly more outsourced work coming back in-house, and what will be left out-of-house will be transaction processes and services as CIOs focus internally on data and enterprise information management as well as insight and predictive capabilities," she says. If the 1990s was the era of ERP and outsourcing, Morrison says the next decade will be all about the dynamics of information.
  • "As CIOs, we need to be more focused in-house on initiatives that accelerate the value we deliver to the business by engineering robust and high-performing systems that anticipate business change and materially speed coding and testing," he says. Perretta believes this positions the business for growth and improves the efficiency and effectiveness of global third-party providers.
  • "In the next 10 years, CIOs will be driving revenue rather than just serving as an internal support system," says Morrison. From innovation to architecture, she explains that the role will be more externally focused.

I think you get the picture, Chris, and I think you have it in you to do a great job in this role. But you need to bear in mind above all else that a CIO is a business leader who sets and executes a business technology strategy that creates business and customer value. And if you can't quantify for me how you're doing that, then I can't have you as CIO. Let's talk soon.

The CEO

GlobalCIO Bob Evans is senior VP and director of InformationWeek's Global CIO unit.

To find out more about Bob Evans, please visit his page.

For more Global CIO perspectives, check out Global CIO,
or write to Bob at [email protected].

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