By Jack Rosenberger
A vice president of datacenter initiatives and digital infrastructure with the analyst firm 451 Research, Michelle Bailey recently spoke with CIO Insight about IT investments, the current lack of innovation, business metrics and what many CIOs should be thinking about but aren’t. Here is a condensed version of Bailey’s remarks.
It’s time for companies to invest in IT. “The economy is improving, and we’re seeing jobs growth and improvement in the housing market, especially in the U.S., but what we aren’t seeing a return to IT spending. We haven’t seen the return to IT spending that we would have expected to see by now. Instead, we are seeing companies hoarding cash and a lot of bloated balance sheets. We’ve seen a lot of IT consolidation projects, with CIOs going after the low-hanging fruit, which is fine during the downturn of the economy. But what we’re not seeing—and what we should be seeing—is long-term investments in IT.”
We need to see a return to “innovation first.” “Right now we’re short on innovation in IT. During the last several years most of the ‘successful’ projects in IT have been cost cutting and consolidation and, frankly, there has been little incentive for CIOs to drive innovation given the emphasis on cost cutting, but the economy is turning around. Cash is cheap right now, which means that organizations that aren’t afraid to spend can be fierce competition to established companies. What we need to see is a return of IT leaders who will swing the balance of the IT project portfolio from maintenance and trimming to innovation and growth. Time and again we see the CIO that is terrified with being labeled the ‘CI-No,’ yet their maintenance activities are at an all-time high. We need real leaders who will go to their boss and say, ‘Here are five projects that will not save money, but they will drive business value.’ We see pockets of innovation happening, especially in the banking industry, where it’s all going to be about mobile apps, and in health-care, where the industry is being transformed by IT. In general, a closer touch to the consumer and business-to-consumer applications is universally appealing, but many businesses fail to reward transformative IT projects. Also, they involve the IT organization way too late in the product development process. The CEO and other business leaders fail when they minimize the value of technology.”
Use metrics to measure business value, not just costs. “IT probably does the worst job of any business unit in terms of measuring itself. IT usually measures infrastructure and IT costs, and because it focuses on costs, it is viewed as a cost center. The metrics you should be thinking about are business availability, time to market, application deployment and security. We rarely see IT organizations that can measure their contribution to revenue or shareholder value. The future CIO will employ portfolio managers who think like a financial analyst and not just about costs but about business risk and reward. They’ll think in terms of projects that increase competitiveness, as well as drive business value, such as improving customer satisfaction. They will think more like a broker of IT services that will have clear rules of engagement for business users.”
New companies are spending money—and innovating. “The new businesses are not frightened to spend money. In fact, many of them are raising money. Large, traditional companies are either reluctant to spend or are paralyzed by their escalating maintenance costs or pent-up demand for new projects. They are facing a real threat from new companies that aren’t afraid to spend and innovate. These new companies have no legacy IT and they’re spending money as an investment in their future. They will be incredibly disruptive to many existing businesses.”
What’s your five-year plan? “Time is something you can never regain. You will be playing catch-up if you haven’t thought of where your business is going to be in five years. If I was a CIO I’d worry about things like ‘Do I have a credible strategy that is aligned with business investments? Is it realistic for the next three to five years? Who are my competitors?’ I’d be worried about new competitors blowing right by me and I don’t even know it. That’s what would keep me up at night.”
About the Author
Jack Rosenberger is the managing editor of CIO Insight. You can follow him on Twitter via @CIOInsight.