Corporate spending on information technology budgets is expected to increase only 0.5 percent in 2012, Gartner suggests. The spend on IT outside the CIO budget is growing at more than 10 percent while the overall IT budget under the CIO is shrinking or is flat. This so-called shadow IT trend not only wrests control of corporate technology from the CIO, it often leaves the IT department having to clean up the mess when these services and devices procured by business units need to be integrated into back-end systems or customized in some way.
More than ever, CIOs need to step back from running day-to-day operations to take the long view. They must first understand their company’s business drivers and determine how IT spending can help achieve their strategic business goals. Then they must take their case to their peers in the C-Suite, armed with evidence to show that when done correctly, IT investments will drive competitive advantage.
“CIOs must become far more creative than they were five years ago,” says Nair. “They need to do more with less. They need to get more productivity out of their efforts and their labor force. CIOs today have to juggle business priorities and technology ones; it’s not as easy as it used to be.”
STEPS TO SUCCESS
Before a CIO can begin to align technology investment with business goals, he or she must have a clear understanding of the company’s strategy. Whether that strategy is entering new markets, squeezing inefficiencies out of the supply chain or helping to drive customer insights across all business functions, a nuanced understanding of the organization’s business strategy for today and tomorrow is the starting point. Gaining this view requires CIOs to focus outside of the IT department and engage in conversations with other executives in the company, to investigate the competition’s strengths and weaknesses, and to get a firm understanding of trends in the industry.
The next step is for the CIO to gain the trust of the business in terms of the reliability of services that IT provides. The IT department needs to ensure that it is viewed as a partner which provides “value for money” and can be relied upon for the basics. For this CIOs need to be sure they understand and can communicate IT costs in a clear and transparent manner to the business. Alignment of these costs with the services provided is critical to gain the trust of the business.
The final step is for CIOs to determine how IT investments can help achieve their business goals – and describe these benefits in concrete business terms, such as estimated return on investment, productivity enhancement projections and reduced time to market. Technology vendors and market analysts are good sources for such supporting information, as well as any internal assessments that quantify the benefits of past projects at the company. Over time, CIOs should dedicate the energy and resources required to develop a regular and rigorous process for quantifying the value of IT to the business. This process isn’t easy, says Wipro’s Joshi, as the metric models available today aren’t at a level of maturity that makes them simple to adopt and align with business. But it’s important; not only does taking this step give CIOs the data they need to prove how IT can help the business, it also will improve the chances of success of IT initiatives. It can help ensure that projects are launched because they will help the business, not because the technologies are interesting or because competitors are using them.
“The primary benefit that companies gain by having a process in place to quantify the value of IT spending is that the decision making can be much more informed and contextual; therefore there’s a much higher chance of hitting the bulls eye,” says Joshi.
The onus is on CIOs to not only understand and control but also effectively communicate IT costs – and quantify value – to their counterparts so that the return on these investments is clear to all. CIOs who can successfully do this become valued partners with the business, and begin IT’s transformation from infrastructure back to strategic. During this process, CIOs must work to improve IT’s relationship with business leaders. In many organizations today there exists a disconnect between how technology executives and other executives view IT. While nearly half of IT professionals who responded to the survey said that IT is an integral part of their company’s strategic and operational goals, only slightly more than one quarter of non-IT senior executives viewed IT as strategic. (see Exhibit 5 (survey question 4)) It’s the job of the CIO to change that perception and improve how IT is viewed by the rest of the C-suite and business leaders across the enterprise.