Objectives and Opening Assumptions
To jump start our discussion of the future role and skills of the senior IT executive, we’ve prepared a position paper reflecting discussions with three CEOs with first- hand information technology experience: [REDACTED] acknowledging the CIO title is a lousy catch-all for many of you with far broader responsibilities. Our appreciation to all these savvy souls who shared their precious time, knowledge and experience.
Our opening assumption is that the wondrous tech boom-and-bust ‘90s coincided with a “perfect storm” of intersecting IT disasters: inflated management expectations, excessive costs for systems components and labor, and unacceptable performance in project implementation. Doubtless, management exuberance for systems was floated upwards by tech stocks weightlessly borne into the stratosphere – along with the extravagant claims of software package vendors and their running-dog consultants.
Higher prices followed from tight supplies as hardware vendors, software suppliers and systems integrators short-sightedly charged anything the market would bear. Installation delays became inevitable, even as CIOs navigated their highest-profile projects in decades: Y2K, ERP and e-business. In many cases, the crunch was too much. Systems delivery “time and budget” capacity was swamped by the unfortunate combination of overarching ambition and underwhelming talent, ballooning prices and deteriorating people quality. Fairly or not, the credibility of Information Technology executives suffered. And when the revolution fizzled (at least temporarily), top management enthusiasm for information technology sagged in its wake.
But in business three years is a long time. Cold reality and difficult economic times have wrung out the corporate euphoria and technology sector excesses. Today, IT performance draws fewer barbs from senior management, partly because a “perfect thaw” has placed the same intersecting factors in harmonious assent.
The pragmatic systems benefit expectations now projected by line executives and suppliers alike are well grounded. Prices continue to decline across every technology sub-sector - driven by softer markets for hardware, communications, applications software and technical labor. With declining equipment and communications prices, many IT infrastructure budgets have also become self funding. And savings from greater productivity in development teams is paying for many applications enhancements. Finally, "time and budget" delivery has become more predictable as project management skills improve and also as the massive projects of the 90's give way to incremental harvesting of existing information.
The good news has slowed the barbs, but the information technology fraternity has not (yet?) regained the executive enthusiasm and mind share it enjoyed in many enterprises during one of the greatest economic bubbles in history.
CIO Priorities: Cost vs. Innovation?
Our participants are asked to rank the relative priority of three classic objectives for IT organizations: lower costs, heightened innovation and quicker enterprise "adaptability" or flexibility in business systems and (by extension) business processes. To enrich our analysis, we use the mechanism of distributing 10 total points between the three objectives. Typically, our friends give 5 points to the importance of adaptability, 4 points to IT cost management and 1 to innovation. Some reverse their weightings for cost management and adaptability. A few respondents give innovation more points - but only when it drives lower costs. Only one CIO gives "adaptability" less than 3 points.
It's hardly a revelation that widespread caution is now the rule whenever large enterprises consider innovative new applications or intriguing new technologies. Two reasons: first, the applications base in most companies has become so complex in the last few years that new systems aren’t worth considering if the techno-tasties require extensive integration. "Software is easy-it’s integration that is hard," observes [REDACTED]. Second, efforts to calculate and assign specific benefits (beyond cost reduction) to applications remain contentious territory - even after years of research on the "value of information" however innovative.
As the [REDACTED] CEO recalls: "Except for the early years, when installing back office systems resulted in measurable and substantial clerical displacement, few managements can convincingly assign many hard dollar benefits primarily to IT systems. So to expect that our new automated branch system would encourage clerical employees to sell more services was unrealistic, for example. And of course, customers won't pay a premium for technology-based conveniences (i.e.15,000 ATMs and other new contact points) in a highly competitive banking environment." But benefits abound. The Bank can handle its business today with no more employees (33,000) than it had 25 years ago when its assets were far, far smaller, he enthusiastically observes.