Monday, May 6, 2013

CIOs as "Chief Investment Officer" Is IT still Triple-Puzzling: Costly, Complex and Confounding

IT is not perfect, but IT continues to stretch out and make progress.

Year after year, the similar debates are spurred in CIO forums: What is the TCO on IT investment? What is the value added of IT service?  Does IT lack of cost transparency into initiatives. So is IT still triple-puzzling: Costly, complex and confounding?

1. Is IT still Costly?

That's debatable, as the cost is not a good measure in today's dollars. Technology becomes cheaper than ever these days, IT can just do more with less now, If you break down the costs into functional units, though the overall spend is higher as IT intends to achieve more, the cost has come down. That said, indeed, IT has higher performance-cost ratio today than ever.

  • Linkage of IT to Top-Line Business Growth:  IT in many organizations is only viewed as cost center, it doesn’t define a clear business case of a dollar for dollar translation, while many of the application, infrastructure, etc. may have revenue generating implication, and if that business linkage could be clearly defined and a solid IT would have a strong voice in the organization.
  • Revenue Requirements of IT Investment: If you really want to hold the business feet to the fire, bring up the concept of "Revenue Requirements." Assume you're going to allocate the cost of an IT investment across several revenue generating groups. Whatever the cost is estimated to be, they will then need to determine the net increase in revenue at current margins needed to offset the cost of the IT project. 
  • It’s both Science & Art to Well-Define Metrics Right: IT TCO can be difficult to determine, simply because many of the costs inherent to an organization are often "soft" costs that the corporation itself doesn't have a handle on. Especially the more complex the solution, the more difficult it is to ascertain a true TCO. 
Therefore, be positive, IT is not perfect, but IT continues to stretch out and make progress, year after year,  the Business can get a better clearer picture of IT solution from a cost, transparency and complexity level. No solution is a plug and play but being able to quantify value and cost on IT initiatives is essential especially given the magnitude of the investment.

2. Is IT still Complex?

Complexity is relative to the audience & not always bad. The more IT intends to plan and implement, the more moving parts and more complexity are there
  •   Complexity is not always bad: Who says complexity is an only bad thing. Some of the most elegant systems out there are ecosystems, and they are very complex.Thus, IT needs to focus on ease of use, and reduce unnecessary complexity, but improve flexibility even certain level of complexity needs to be added. It will be as complex as it needs to be to work well.

  •   User Experience is indeed optimized: While technology is still complex on the back end, it has become much simpler from an end user perspective to the extent that one of the great challenges of CIOs is justifying their enormous budgets while all this stuff "just works.". IT is business solutionary to simplify and optimize business processes while IT infrastructure pieces are still complex. Much like no one wants to hear the electric company lament how complex power generation is, so,  the tolerance for IT complaints about how hard their life is has fallen dramatically.
  • IT automates "thought" with strong governance practices  It’s the "thought" that is the real issue. Too many conflicting priorities of organization do not create an environment for clarity in thought. The root of all lack of coherent thought is in the way to divide work in organizations - The performance design.  Thus, a mature IT will clarify & automate "thought" of organization. If organizations have true governance, wouldn't the corporate strategy to a great amount deal with the conflicting priorities and provide greater clarity.

3.Is IT still Confounding?

Well-designed and executed technology is not confounding. The real issue is that IT needs to stop touting how well it does infrastructure, and start demonstrating how they help the company achieve business objectives like accessing new markets, generating new products or becoming more operationally effective. There are many issues facing IT that need to be addressed. 

  • Finance usually tries to use some antiquated methodology to measure IT. IT projects don't often neatly fit the "well-worn" model, because a lot of IT initiatives are one-offs with unique impacts and requirements. As a result, responsibility for developing TCO, IRRs, and ROIs tend to be "thrown over the fence" to IT, making them solely responsible for the result. Therefore, the CIO and CFO need to work closely to update IT finance methodology and practices. 
  • A Well-set Corporate Strategy can clarify IT purposes & goals: The sum of the parts starts with Corporate Strategy to act collaboratively for business as a whole, and a well-set business strategy mirrors IT governance. Modern financial systems and processes, in conjunction with PPM/ and the PMO functions and auditable communication throughout the leadership ranks. The strategy and message must be the same from boardroom to the mail room. The process and systems must all work in concert to deliver the agreed upon IT projects and programs. 
In closing, IT may still be more costly than other business investment, but it's value benefits for improving business capabilities; IT may still be complex, but a premium complexity can optimize user experiences; and IT may still be confounding for some audience, but it's at the right way to be interwoven into corporate strategy. Importantly, many IT organizations continue to make progress and deliver high performance result. At high mature IT organizations, these triple puzzles may well turn to be triple rewards for their organizations. 


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