Monday, July 25, 2011

Cost of IT versus Value of IT

The CFO has traditionally controlled the purse strings ensuring fiscal prudence to keep the enterprise healthy with adequate financial safety net. As a part of the management team the discussion and debate ensured that investments stayed aligned to overall company direction. With adequate risk controls, only in rarest of rare cases the CFO could overrule other CXOs. Recent times have been full of analysis and news that the CIO is no longer in control of the IT budget, now the CFO purportedly controls IT investment decisions.

The CIO being the youngest CXO not always by age but the role has evolved only in the last decade or so and having typically grown from a technology background was perceived to lack business acumen and unable to take all aspects into account. The majority migrated and matured with ease working lockstep with other CXOs to the benefit of the enterprise. Post slowdown “new normal” changed organizational risk appetite and with finances being scarce the CFO rose to prominence. Now with growth back on track, why is it that the CIO continues to stay shadowed considering s/he demonstrated higher changeability and adaptation to the environment.

IT budgets have stayed stable over the years with mature enterprises focusing on bringing down IT operating expense leaving the capital investments open for discussion. Corporate and IT governance provided the necessary checks and balances on where to invest. So what gives rise to the new paradigm ? Does it indicate breakdown of the balance or has the CIO relinquished his/her responsibility now satisfied to stay in the back office ? Has the foundation and partnership set by IT crumbled with cost remaining the residual reality with the value being discarded on the wayside ?

IT does incur cost; everyone is aware and acknowledges that a significant portion (40-90% depending on the enterprise, IT maturity, CIO, Board of Directors, etc.) of the budget is allocated to “Business as Usual”. Where the IT organization and its leader is unable to clearly communicate the benefits or have a dialogue with other CXOs as an equal, irrespective of the good work done, IT gets labelled as a cost thereby nullifying the efforts.

IT also delivers value to the enterprise, customers, employees and the shareholders. Sustained differentiation and competitive advantage in the near term are typically IT enabled innovation. Multiple industry IT and CIO awards, and case studies validate success clearly illustrating value. New disruptions created by mobile consumers, social online engagement, analytics, and many more would find it difficult to survive without a good IT platform and sustained focus. Is the balance shifting ?

I believe that recent times have accentuated the value of IT and have created a wider role for the CIO that goes beyond technology lead interventions. Outsourcing the operational activities has also given the IT team an opportunity to focus on what matters. The task of managing the budgets and reporting has become even more important thus creating a stronger bond between the CIO and CFO. With increasing financial acumen, the CIO and CFO are on the same side of the table with the CIO deferring the financial decisions to the CFO. This is rebalancing the equation and not a shift.

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