By Al Passori
The META Group believes that fewer than one in five Global 2000 companies
has the vision and planning expertise to navigate through an economic storm
and chart a course for competitive positioning through 2003. We also believe
that fewer than one in five G2000 CIOs has mapped a course to react to a
changing economy by exploiting either digital planning — a dynamic process
that helps identify innovation opportunities and revise budgets instantly —
or event-based financial modeling.
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According to our most recent studies, 10 percent of G2000 CIOs have failed
to adopt any planning models whatsoever. The lack of a formalized planning
process fails to communicate the IT organization’s value and hinders CIOs’
ability to lead their teams down a path that aligns business goals with IT
investments.
Our research indicates strategic and financial planning is one of four core
competencies that IT organizations must cultivate to maintain high
credibility (the others being promotion, execution, and monitoring).
High-performing CIOs will adopt digital planning models, train their IT
professionals to work with these models, and, in some cases, share or
transfer their planning knowledge and expertise to colleagues.
By 2004, we expect one-third of G2000 CIOs to adopt a portfolio management
process. By 2002, one-third will institute digital planning, including
quarterly reviews. By 2003, one-fifth will promote an IT marketing program
for communicating IT value and altering perceptions of management; we
predict this percentage will rise to more than one-third by 2004.
We believe the key to economic survival in a sense-and-respond economy is to
adopt a planning model that is simple but effective — one that is easy to
teach, comprehend, and apply; one that enables rapid plan development; and
one that can be quickly modified and easily communicated throughout the
business (to boards of directors, management committees, colleagues, and IT
staff). CIOs must increasingly run their departments as a business and
contribute to improving the bottom-line financial performance of the
organization.
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A best practice is to adopt a portfolio prioritization process that involves
a project sponsor, the CIO, and the chief financial officer (for risk
review, budget approval, allocation, and commitment); is structured as an IT
investment committee; and is chaired by the CFO. This committee should be
chartered to achieve higher efficiency by reviewing and managing the IT
asset portfolio. It should establish and approve the business rationale for
IT investments, support funding, and commit the investment dollars based on
the accrual of quarterly objectives and milestones.
At any time, a single member of the triumvirate should be able to suspend
further commitment of investment dollars due to problems, changing economic
climates, unmet milestones, poor-quality deliverables, or vendor delivery
delays. This method of portfolio management and investment enables the group
to ensure project success and aggressively respond to changing market
conditions.
As a process within portfolio management and digital planning, CIOs should
adopt a derivative strategic planning framework with the same attributes of
speed and simplicity. ITOs should articulate strategies and tactics that
address business expectations for IT alignment and value, or that help alter
the business perception of information dependency and IT capability. The
plan should be reviewed often (at least quarterly), amended to achieve the
intended vision, and revised to adapt to changes in the economic and
business climate.
Thoughts on Getting Lean
CIOs should take an introspective look at their IT department functions,
services, and asset portfolios to unearth non-performing assets. They must
fix, outsource, or dispose of unused assets and reallocate the IT budget to
areas that will provide the greatest return to their colleagues. In addition
to adopting portfolio prioritization techniques and digital planning and an
IT investment committee review of high-priority projects, CIOs should
consider the following to trim costs:
- Reviewing asset management practices and shedding underused and unused
IT assets (including applications, systems software, application development
tools, and hardware) - Reviewing service contracts, such as cellular usage and service plans,
and consolidating wherever possible into a single plan for economy of
scale - Renegotiating existing long-term contracts, especially those with
escalating costs and inflationary clauses - Postponing or freezing IT hiring (except for critical needs)
- Reducing or eliminating consultants and contract employees
- Consolidating the IT workforce, eliminating all positions deemed
unnecessary –counseling underachievers, discharging underperformers, and
rewarding overachievers to signal their value to the organization and ensure
their continued allegiance - Curtailing or freezing discretionary, investment, and venture spending
while postponing or eliminating planned projects with deferrable priorities
or low economic value (being careful not to eliminate statutory compliance
programs) - Reviewing service delivery expectations; for example, pricing the
differential of a service-level agreement of 98.9 percent and 99.9 percent
availability to determine if the performance change of 1 percent is worth
the incremental effort and expense - Placing constraints on corporate travel, including as a short-term
tactic limiting travel to that which will directly improve revenues and
profits - Restructuring infrastructure for greater efficiency while consolidating
IT assets and resources (hardware, network, data centers, staff, and
facilities) - Revamping employee stock options
- Eliminating or delaying high-cost personnel programs, such as paid
sabbaticals - Training senior staff to mentor junior personnel in needed skill
areas
CIOs should consider soliciting cost-cutting recommendations from both IT
staff and other constituents. CIOs can encourage active participation by
publishing recommendations and publicly acknowledging and rewarding those
with merit. These practices will result in a leaner, more efficient IT
organization.
Business Impact: The absence of a digital planning process, portfolio
prioritization management, or a structured IT investment process will result
in the CIO’s failure to be perceived as an effective business manager.
Bottom Line CIOs must adopt digital planning and portfolio management
processes, trim costs, and maximize the return on IT investments to
demonstrate their business acumen.
Al Passori is a consultant with META
Group, an IT consulting firm based in Stamford, Conn.