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From the CEO: 5 questions CIOs need to answer

Thomas Wailgum | April 12, 2010
Slicing and dicing the IT budget in 2009 just to get through the Great Recession was strenuous.

Therefore, it's critical that companies be extra careful and strategic in how they choose to spend that money in the discretionary bucket. That's because those purchases will "set in motion 10 to 20 years of downstream cost" once they move to the non-discretionary budget in year two, he says. By his calculations, those downstream expenses for IT investments can end up costing four to 10 times the original capital outlay in the future.

3. How will we drive unnecessary complexity out of IT? "Unnecessary IT complexity is, in fact, a critical business issue because companies continually add much more to the IT base than they ever take away," Puryear says. "We go into organizations all day long and see almost-retired apps-which, quite frankly, need to be turned off-sitting on almost-retired technologies that need to be decommissioned, and all that just adds to the complexity of the business environment."

The result is that cycle times in business and cycle times in IT are out of sync, he adds. For instance: A line of business wants a add a new product line to the mix and wants to do it in three months, and IT starts talking about completing it in six months or beyond. Puryear is quick to point out that it's not all IT's fault. "In some cases IT has done it to themselves," he says, "but an awful lot of it is because IT mirrors the unnecessary complexity that sits in the business."

4. How will we take better advantage of "good enough" solutions? Puryear points to a competitive, "we know better" mindset that manifests itself in IT departments that "overinvest in the development of proprietary capabilities to customize solutions rather than make full use of acceptable off-the-shelf applications," he notes. "This is a temptation that senior executives who make investment decisions should strenuously resist."

Why? He states that in Bain's consulting experience, standardized apps are the "right solution for serving as much as 80 percent of a company's needs." Therefore, he says the right question to ask is: Can we take advantage of vendor-supported software by buying more and building less?

Additional benefits, he contends, can be found here: An "overreliance on in-house solutions development drains resources and diverts talent and energy from the 20 percent of applications where customization can give a business a huge competitive edge."

5. How do we make outsourcing more strategic? After cutting staff and resources to get through the recession, the last thing IT groups need to do is go on a "massive hiring binge" and bring back those resources, Puryear says.

Instead, CIOs need to come up with a game plan for taking advantage of today's outsourcing offerings, and for IT groups to use "outsourcing as flex capacity to stay lean and mean themselves," he says. "It's critical to have the ability to address the bubbles of [IT] demands-and then potentially back off of that-without permanently adding [staff] to the organization."

These five questions probably won't be able to fix the long-standing business-IT disconnect in one conversation. But cumulatively, the questions are a good start at realizing the full potential of IT investments now and in the future.

 

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