In this time of global recession, every CIO is faced with conflicting pressures. On the one hand, there are headcount freezes, Capex and Opex budget reductions, and increased cost and cash flow controls. On the other hand, all the legacy systems still need to be maintained, and the business needs more efficient systems and processes in order to manage their cost base down.
How does the CIO respond to these seemingly irreconcilable pressures - the need to do more, but with fewer resources? Here are some suggestions:
1. Increased business environment pressures result in increased stress on relationships between business and IT. It's critical to invest heavily in this relationship, as a breakdown in trust will undermine any possibility of success with limited resources. The business needs to be educated as to the impact of the limited IT resources, but also empowered with information they can use to leverage the resources that are available.
2. The project prioritisation process becomes more critical than ever before. If the scarce IT resources are not working on the most critically agreed business priorities, the trust relationship will degenerate further.
3. IT needs to examine its internal quality philosophy and processes. Quality is often the casualty of the pressure to deliver, and the pressure is higher right now as a result of the recession, especially for CIOs in the financial services industry. But we all know the medium-term impact of poor quality is that the systems become harder to maintain, negatively impacting on future delivery, and a downward spiral develops. It is better for long-term benefit to compromise on scope or schedule, rather than the quality. This insight needs to be shared with business, so they can assess the trade-off themselves, and be more willing to contribute to setting project parameters. Of course, this concept is much easier to sell to business when there is a strong quality vision within the IT department, and when the quality processes are visible and tightly integrated to the overall systems delivery processes.
4. When looking at where costs can be cut, longer-term initiatives often take the brunt of the cutbacks. This can be a serious strategic error. It is very important that business and IT realise that this recession, however bad it may seem, will not last indefinitely. Cutting too many long-term initiatives can mean positioning the company for future failure once the economy turns. Business needs to imagine the scenario when sales and opportunities pick up; and plan to be in the driving seat when this happens. Even if the required projects are not developed in full, they could potentially be de-scoped, or done as proof of concepts. If this foresight is applied, the groundwork would have been done, and IT will be able to more quickly respond to meet future business needs.
5. Another area seen as a soft target for cutbacks are internal IT projects, such as infrastructure, architecture or R&D. These projects should be seen as analogous to the need to service a car - if the car is not regularly serviced, costs will be spared in the short-term but the car will need to be replaced many years before it is necessary, as a result of poor maintenance. While there is sometimes room to postpone major capital costs (such as hardware upgrades), it is unwise to put a complete halt to all these activities. If business is able to view the IT application infrastructure as an investment, as opposed to a cost, it is usually possible to sell the need for the protection of this investment via internal IT projects - even if these projects do not deliver short-term functional value to the business.
6. Finally, IT training is sometimes “temporarily suspended”, even if there are budgets available, for two reasons. Firstly, in a culture of cost cutting, training is sometimes seen as a luxury item and viewed as “politically incorrect”. Secondly, a reduction in internal IT projects, such as software upgrades, new methodologies, etc, results in less training required in new technologies or processes. It is dangerous to allow this situation to develop, as it results in the “boiled frog” syndrome, where the IT department slowly stagnates, until such point in time it is too late to catch up again when the market turns.
In conclusion, it is important for any CIO to remember that it is their responsibility to assist business to manage any cutbacks in a responsible manner. Balancing the need to achieve short-term cost reduction, against the need to protect IT investments and capability for the longer term, is a difficult tightrope to walk. The CIOs who get this balance right, will not only assist their companies to survive the recession, but will also ensure they are in the best position to take full advantage when the upswing arrives.
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