IT directors need to focus on five key areas if they are to
convince the board to continue investing in IT.
A panel of chief information officers spelt out how to make IT more
business focused during the Economist Conferences' Chief
Information Officers' and IT Directors' Summit in London last
week.
Involve the business in IT decision-making
Ann
Neidenbach, CIO at Nasdaq Europe emphasised the importance of an IT
leader understanding the board's objectives. IT people are prone to
over engineering, but if an IT enhancement does not meet the
business' objectives it is irrelevant. "Don't build a house when
all the board wants is a tent," she said.
To ensure objectives are met Neidenbach said, "Make sure the
business is involved in your decisions." To prove the value of a
project enhancement she advised CIOs to use cost/ benefit
analysis.
Distinguish between discretionary and non-discretionary
spend
Laurence Holt, chairman and founder of consulting
firm Quidnunc divided IT spending into two parts: infrastructure
spending to sustain the business and spending on business enhancing
IT. He said the main strategy for the former should be to minimise
expenditure. For business enhancing IT the key was to show a return
on the investment.
The two are closely linked -- without ongoing infrastructure
expenditure organisations cannot grow.
Nasdaq's Neidenbach discussed one approach for justifying
the cost of IT infrastructure. Last year she spent heavily on
upgrading network switches. "Sometimes you have to spend a lot of
money on infrastructure," said Neidenbach. "But the cost should
feed into some revenue opportunity."
At Nasdaq, the investment in network infrastructure was to set
against business growth. "You need to sell ['infrastructure
investment] within a business framework," she explained.
IT as an on-going concern
One way to put IT at the
forefront of the business is to spin off the IT department as a
separate business entity with its own profit and loss account.
This was the approach taken by insurance firm Axa Group. Its global
IT operation competes for business within the company. However
internal IT departments do not always compete effectively with
external IT providers, prompting business units to consider
outsourcing a project.
In this situation Claude Cargou, a 10-year veteran CIO at Axa
Group, who now heads the company's audit and risk management
operation, said the IT department had to get across the old
outsourcing maxim that it is dangerous to outsource a problem.
"Outsource when you have a solution," he advised.
Focus on short discrete projects
Nasdaq's Neidenbach
urged CIOs to concentrate on projects that can provide the business
with discrete deliverables quickly. "One to two year projects are
killers," she said. By scoping a project over three to six months
Neidenbach said the CIO could manage the business' expectations
more easily.
Make IT agile for business
Mikko Kosonen, senior
vice-president for strategy and business infrastructure at Nokia,
said a key driver for his business has been building an
infrastructure that could adapt quickly to the fast-paced world of
mobile communications. Nokia has used IT to create competitive
advantage using open, modular architecture and reconfigurable
business intelligence modules.
Other CIOs also emphasised the importance of software reuse and
reconfiguring existing systems. Nasdaq's Neidenbach advised CIOs to
"leverage existing technology in order to lower costs."
Axa's Cargou said he would not dream of replacing the company's
mainframes. Instead he has surrounded legacy systems with
middleware.