Buddying up with the CFO, parceling out scarce resources to desperate LOBs, proving the value of discretionary projects, learning to love regulators, and negotiating turbulence in global IT sourcing -- who could ask for a more-inviting agenda than that? McKinsey says successful CIOs must master all five of those challenges in 2009, and adds that a bit of luck won't hurt.
Buddying up with the CFO, parceling out scarce resources to desperate LOBs, proving the value of discretionary projects, learning to love regulators, and negotiating turbulence in global IT sourcing -- who could ask for a more-inviting agenda than that? McKinsey says successful CIOs must master all five of those challenges in 2009, and adds that a bit of luck won't hurt.McKinsey's global leader of its business technology practice, Stefan Spang, writes in the February issue of McKinsey Quarterly that while downturns always exert pressure on CIOs and IT budgets, this one is different because of the sheer ubiquity of business technology in every facet of businesses today:
"...technology budgets are larger, businesses have automated more processes, employees make greater use of tech-based productivity tools, and e-commerce has moved to the core of day-to-day operations.
As a result of these and other related factors, Spang writes, "this combination of cost pressures and IT organizations that are leaner, larger, and more vital to company goals will have new implications for business technology." It's an intriguing list, and Spang keeps it from slipping into the ether by focusing each of his five trends on how successful CIOs should ride them out.
1) IT and Corporate Finance Converge. As we've noted before in Global CIO, cash-generation has become paramount in these highly uncertain times, and Spang suggests outsourcing deals involving up-front cash payments from outsourcer to client; the sale or lease of data centers; and taking advantage of vendor-financing programs, which, as we noted yesterday, have become quite compelling. The successful CIO, Spang concludes, will be assertive in suggesting sound approaches to optimizing cash.
2) Increased Tension Over IT Budgets. This section is, I feel, the most interesting and probably also the most dangerous for CIOs: with highly valued IT resources cut back to or beyond the point of scarcity, and with LOB heads now fully convinced of that value, how does the CIO ration out the goods? Spang puts it the challenge in stark, survivalist terms: "competition for rationed IT resources will become especially fierce as senior executives see access to them as critical to the success of their business units and their careers" (emphasis mine).
3) The End of IT Projects? Some CEOs with unsatisfactory history with big IT projects might decide to conserve more cash by shutting down all discretionary tech efforts, and Spang urges CIOs to focus intensely on finding ways to prove -- and improve -- the business value of those projects.
4) Regulators Demand More From IT. While we can all wish it were otherwise, increased governmental scrutiny of business practices will typically result in proof being delivered through IT systems: in banking, pharmaceuticals, environmental concerns related to industry and manufacturing, and regulatory compliance. Successful CIOs, Spang writes, will collaborate more closely with internal legal and corporate-affairs teams to give the greatest chance for cost-effective solutions that disrupt business operations as little as possible.
5) Offshoring and Outsourcing Landscape Shifts. "A shakeup in the vendor landscape will likely follow the huge capacity increases of recent years, the current downward pressure on aggregate demand, and massive uncertainty in currency markets," Spang writes. "Adding to the pressures are the strategic, government-sponsored initiatives launched by China and other nations to grab market share." Successful CIOs, he says, will utilize portfolio-management to be able to align with the winners that emerge.
Strong stuff to consider, and a big thumbs-up to Spang and McKinsey for this valuable insight.
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