The new IT mantra is balancing cost-cutting activities with carefully crafted business-process alignment, Jim Hatch says.
My clients tell me that their I.T. budgets will be flat this year and next, and CEOs are increasing the pressure on CIOs to deliver more for less. As a result, balancing cost-cutting activities with carefully crafted business-process alignment is the new mantra. I see four critical areas in which CIOs need to deliver value in this environment: alignment of business processes, radical simplicity in technology, cost management, and data integrity.
There are three key components of effective business-process alignment. First is a small, highly talented group of internal business consultants who understand business strategy, functional requirements, and cost/benefit/risk analysis. Second is a formal progress review and prioritization process. Third, the CEO must set the tone in juggling the business-unit competition for IT resources by conducting a quarterly session where all major IT strategies and business projects are debated and prioritized by senior executives.
Why does Southwest Airlines only fly Boeing 737s? One kind of aircraft simplifies maintenance, spare parts, and training. Standardization in desktops, servers, networks, software, and applications leads to optimal costs and agility. Radical simplicity requires an IT culture that values business success more than technology innovation.
Running IT like a business begins with systematic analysis of costs, including these essential components: identification of all direct costs of IT products and services sold inside the company; allocation of all overhead costs to these products and services in an IT cost-accounting system; and monthly reviews of budgets and cost-reduction opportunities with all IT leaders.
Data integrity, which touches the heart of system and data integration, is a huge strategic issue. It will affect application-integration strategies, legacy systems, and redundant databases, not to mention budgets. This year, CIOs need to develop data-integration strategies and get their companies on board, starting with CEOs. Less data redundancy, common data standards, and enter-once/use-everywhere processes reduce costs, improve accuracy, and increase agility.
Jim Hatch, formerly CIO at Pactiv, is leading a consortium of CIO and CXO coaches who focus on I.T. best practices and cultural transformation in the world's largest companies.
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