The CIO: Between a Peak and a Valley

The combination of the down economy, resetting of IT investment patterns, and the need for agile business processes, along with the arrival of some new technologies, are all combining to force CIOs to reevaluate their plans.

What should CIOs make as priorities in the short, medium and long terms? How can they reduce total cost while modernizing and transforming IT? What can they do to better support their business requirements? In a nutshell, how can they best prepare for the new economy?

Here to help us address new questions during a very challenging time, and yet also a time in which opportunity and differentiation for CIOs begins, is Lee Bonham, marketing director for CIO Agenda Programs in HP’s Technology and Solutions Group.

Listen to the podcast (17:16 minutes).

We certainly get the sense that CIOs are shifting in their priorities and making real-time adjustments. So much has happened in just the last six months, as a result of the shifting economic landscape. How do you think, from your vantage point, that IT has to adjust, given these new economic realities?

Lee Bonham: We all recognize that we’re in a tough time right now. In a sense, the challenge has become even more difficult over the past six months for CIOs and other decision-makers. Many people have budget challenges and are having to make tough decisions about where to spend their scarce investment dollars. The demand for technology to deliver business value is still strong, and it perhaps has even increased, but the supply of funding resources for many organizations has stayed flat or even gone down.

To cope with that, CIOs have to work smarter, not harder, and have to restructure their IT spending. Looking forward, we see, again, a change in the landscape. So, people who have worked through the past six months may need to readjust now.

Dana Gardner: Is this what you mean by the new economy — doing more for less — or is there more to it than that?

Bonham: Doing more for less has been around for a little while, and will continue. As we look ahead, we see a few new questions emerging. From an economic and financial point of view, hopefully we’re close now to the bottom of the downturn. The forecasters suggest that the economy will start to improve slowly, but hopefully steadily, over the next 6 to 12 months.

What that means for CIOs is they need to think about how to position themselves and how to position their organizations to be ready when that growth and new opportunity starts to kick in. At the same time, there are some new technologies that CIOs and IT organizations need to think about, position, understand, and start to exploit, if they’re to gain advantage.

Gardner: From HP’s perspective, what sort of factors are important in terms of moving to improve productivity and to gain that agility.

Bonham: If we think about the priorities and the challenges, as they have been over the past six months, what we’ve been saying is that organizations need to take stock of where they are and implement three strategies:

• One is to standardize, optimize, and automate their technology infrastructure — to make the best use of the systems that they have installed and have available at the moment. Optimizing infrastructure can lead to some rapid financial savings and improved utilization, giving a good return on investment (ROI).
• Secondly, they needed to prioritize — to stop doing some of the projects and programs that they’ve had on their plate and focus their resources in areas that give the best return.
• Thirdly, they should look at new, flexible sourcing options and new ways of financing and funding existing programs to make sure that they are not a drain on capital resources. We’ve been putting forward strategies to help in these three areas to allow our customers to remain competitive and efficient through the downturn. As I said, those needs will carry on, but there are some other challenges that will emerge in the next few months.

Gardner: So, I suppose looking backward over the past six months or so, it’s been very much a cost-cutting and cost-saving mode, but you really can’t save your way out of a transformation. How do they know when to make that switch, if you will, from defense to offense?

Bonham: That’s a really good question. The answer is very dependent on the industry, the geography, and the specific environment that each organization finds itself in. In general, we’re seeing and suggesting that now is the time for CIOs to move their foot nearer the accelerator and maybe a little bit off the brake.

If CIOs are not laying the groundwork now and thinking about their plans for when the economy starts to recover, they are in danger of being too late and missing the opportunities as they emerge. There is no hard-and-fast rule, but at the same time, people should think and take stock and maybe set some plans — perhaps drop some plans — so that they can get ready for growth over the next few months.

Gardner: I imagine that having a strong ROI analysis associated with certain projects will allow them to get funded. How do they balance the long-term with that need for a short-term use case or cost-benefit analysis story?

Bonham: They still have to balance those two things. What we’ve been saying is that firms need to optimize their cost, focus on the short term, and make sure that they can survive in this current period, but also thrive as the economy recovers.

There are a number of different techniques and ways that customers can achieve that. Clearly, an alignment between business and the IT organization is key. CIOs need to work closely with their line-of-business managers and colleagues and make sure they understand business requirements and priorities of the rest of the organization.

There are some tools and techniques that leading CIOs have been putting in place around project prioritization and portfolio management to make sure that they are making the right choices for their investments. We’re seeing quite a difference for those organizations that are using those tools and techniques. They’re getting very significant benefits and savings.

Gardner: I suppose having that visibility, knowing exactly what you have, what works, what doesn’t work, and how to measure those become really critical, when you’re trying to make the transitions, as we said, from long-term and short-term, offense and defense, or the brake and the accelerator.

Bonham: It’s really important to understand what projects are in progress, what projects are delivering real value, and to optimize the spend. What we’ve seen is that leading organizations are really focusing their resources on projects that are delivering fast ROI, typically, within six months or less, so that they get real benefit, savings, and real business value in the short-term.

But there is also another set of applications and opportunities as people look to grow. Growth may come in emerging markets, in new industry segments, and so on. CIOs need to look at innovation opportunities. Matching the short-term and the long-term is a real difficult question. There needs to be a standard way of measuring the financial benefit of IT investment that helps bridge that gap.