One can not get away from talk of a slowdown or even
recession this year. As a senior IT manager
infinancial services, what should I
emphasise abouthow IT can support the business through this
period? I am used to saying,
'technology is increasingly the business in our
sector', but I am wary ofwhat might seem to be the arroganceof
that.How should IT temper its casein
thesedifficult economic
circumstances?
Demonstrate value
Decisions on IT spending need to be linked to business
objectives and priorities.
The economic climate influences priorities, but
does not automatically mean IT costs are reduced.
You need to determine what the key objectives of the business
are. These can cover a wide range of areas such as
improving security architecture to reduce risk of fraud
improving applications to
enable more efficient business or
refreshing technology because of ageing legacy systems.
There may be ways of reducing costs by identifying opportunities
to consolidate systems. Look at your applications portfolio and
identify areas that require high levels of support and management
and return low business benefits. Identify options for retiring
these systems.
Economic downturns often result in
greater focus on getting maximum return from business
investments. You need to be proactive here,
identifying opportunities for both cost saving and
investment.
Understanding what the business is trying to achieve will enable
you to interface and
influence IT spending by presenting solutions to business
problems.
Roger Rawlinson, director of consultancy, NCC Group
Manage your IT department as a business
It is not unusual for IT departments to be one of the first
affected in such a situation.
Don't panic! You should manage your IT department as a business.
Consider the following points:
Demonstrate how you create value for the business
Rationalise costs throughout your department and
Help the business manage its overall risk.
Research shows leading-edge IT functions make a quantifiable,
positive difference in business performance. Create and demonstrate
the value you bring to your business by:
Aligning IT strategy and focus with that of the business
and
Demonstrating business efficiencies and commercial benefits of
what IT is doing.
For example, a straight-through-processing (STP) platform will
lower transaction processing costs and make processing more
efficient, making your business more competitive.
While IT may be challenged to reduce its own costs, there is a
growing realisation that the effectiveness of IT can affect a
company's overall cost position and strategically increasing IT
spending can drive even greater costs out of other parts of the
business. For example automating routine, manual processes (e.g.
insurance claims processing), will reduce overall business costs.
In parallel, assess your cost base and see if there are areas of
cost inefficiency or excess which could be pared back.
The potential impact of risk on the enterprise has become more
clearly understood by management, particularly in financial
services. Circumvention and failure of controls (automated and
manual), recently cost Societe General $7 billion. Further, failure
to comply with an ever-expanding and increasingly complex
regulatory environment can lead to large fines and reputational
damage. Demonstrate how IT can help manage the risks (for example,
by enforcing segregation of duties) and meet the strict regulatory
demands on your business.
Finally, measure your output in business performance terms.
Demonstrate the potential return on investment (ROI) of
improvements to IT capability or effectiveness that halting
decreases in IT operating expense might bring.
Taking this approach will enable you to pick your battles and
fight your case more robustly.
Ali Kazmi, director in the technology, security and risk
services practice of Ernst & Young in London
Respond quickly to business needs
The key for the IT function in a period of slow down is to ensure
that all IT activities and investments provide clear value for
money and align quickly to changing business goals and
priorities.
Firstly, set up review meetings with the business leaders of
each of your key lines of business and understand their revised
goals and objectives. Agree with them how IT investments should be
prioritised with clear alignment to business key performance
indicators. It is important to ensure potential investments follow
a clear and consistent stage gate review process to filter out
ill-conceived ideas early before they gain too much traction or
investment.
Secondly, you should review the adequacy of your IT investment
appraisal process. Research undertaken at Cranfield identified
that, in the majority of organisations, this process needed
significant improvement. Business cases frequently failed to
include full cost information, for example the internal resources
required to develop and deliver all aspects of IT-enabled change.
In other instances the benefits cited were at a very high level and
the casual relationships between the IT application and required
benefits were not clearly defined. Frequently there was a lack of
clarity in responsibility for delivering benefits, for example
whether it was with IT or business management. It seemed somewhat
idiosyncratic to us that the only reason for investing in
IT-enabled change was to deliver some aspect of organisational
benefit yet few organisations seriously monitored and tracked the
delivery of those benefits.
In summary, in times of slowdown it is critical investments in
IT demonstrate real delivery of business value. Our experience
suggests that, for many organisations, improving alignment and
killing ill-conceived initiatives early can significantly improve
the overall return from IT investments. Spend on IT but spend
wisely!
Rob Lambert, senior lecturer in information systems at
Cranfield School of Management
Highlight purposes of IT, not costs
The financial constraints that come with a gloomy economic climate
provide everyone with new levers for making the best strategic
decisions about IT. Strategies need constraints. While a strategy
sets the ambition and context for decisions, constraints force us
to make them.
Rather than make a case for IT, the most supportive role you can
offer is to guide everyone through informed decisions about their
IT costs, given their constraints and the company's commitments to
IT suppliers.
Make sure they are looking at the total costs of IT to the
company's profit and loss, and cash, not just the IT department
budget. The IT departmental budget is rarely the same as the
company's total costs of IT. Sometimes the total costs of IT rise
while the IT department budget decreases, and vice-versa.
Focus everyone on what is causing IT costs, not what they pay
for. Your non-IT colleagues will struggle to make meaningful
decisions if IT costs are broken down into expense categories, such
as staff costs and external licences, or by category of technology
like infrastructure and applications. Instead, explain the business
decisions and activities that cause IT costs in the first place.
Highlight the options for keeping costs at a level people can
afford, while create maximum value by fully exploiting the
capabilities these costs deliver.
If your colleagues have not experienced this approach before,
they may discover some uncomfortable messages. In particular,
because their bottom-line costs of IT were caused by projects that
were completed in past years - in many cases ages ago - the best
time to have been constraining those costs was then, not now. So be
very careful to manage the political and cultural implications of
your tactics. They, more than anything, will be the keys to
success.
Chris Potts, corporate IT strategist at Dominic
Barrow
Cut costs, not business
The trick in a downturn is to carry on doing all the things which
will help you to win and retain clients, which will include
faultless execution, whilst doing everything you can to reduce
costs. So don't stop doing any of the "good things", but do focus
on those which will help in a difficult market, and reduce business
costs.
You should revisit all your cost-saving strategies, and look at
how you can defer expenditure until the business environment has
improved. It is also a good time to revisit your supplier
contracts, and to get some good deals.
Ben Booth, global chief technology officer at Ipsos
How much would users lose without IT?
The situation is tricky because the users claim the benefits from
the applications you have designed, the packages you have bought or
the service on demand facilities you run for them.
The days of major headcount reduction through the application of
IT are largely gone. New IT capability is aimed at increasing
performance especially in the areas of response time and
reliability, so to increase margins. It is probably too late now,
but what did you manage to get your users to commit to when the ROI
was done at project submission? Certainly for the future, remember
users try to commit only to the minimum benefit they can in order
to get the project approved - further benefits are then explained
as down to them for how well they are using the functionality!
You can try the "consequential loss" approach whereby you ask
the users how much they would lose per day if the IT facilities
were not available. You can also try to use as much market
intelligence as possible to establish how much your competitors
attribute to their IT capabilities, although there is,
understandably, some reticence about too much trumpet-blowing in
today's fiercely competitive environment.
Why should you temper the importance of the job IT is doing? I
do not see any arrogance when you say "technology is increasingly
the business in our sector". It is! The good IT manager is the one
who is always looking for ways IT can enhance their company's
performance and is in frequent contact with their users to ensure
their emerging needs are responded to quickly and efficiently.
Robin Laidlaw, president of the Computer Weekly 500
Club
How will you deal with an upturn?
You are right to be wary of the claim "technology is increasingly
the business in our sector" in these difficult circumstances,
particularly if some misinterpret your statement as technology
increasing the business. Recent experience has demonstrated once
again that business success derives mostly from people. Having said
that, it is clear technology has a role to play at many levels.
This change in circumstances provides you with an opportunity to
engage in a forward-looking debate with senior business
colleagues.
One way of encouraging discussion is to categorise where your
investment in technology is going today and where it should be
directed. For example, technology may be used to increase the range
of online products which would directly support your assertion. IT
may also be aimed at different areas such as enhancing client
relationships, improved profitability analyses, more effective
support processes or reducing cost through eliminating
inefficiencies.
It is quite possible that the response from the business
executives will be that changing allocation of IT costs is fine but
you also need to reduce the total expenditure. Given the change in
the market, it is worth exploring if you can reduce infrastructure
costs without affecting, or with agreed reductions in, service
levels. You would of course need to consider how you would deal
with an upturn but the current reduced demand may give you
increased options at this time. The same types of considerations
apply to staffing - both internal and external resources - although
the former will need to be carefully reviewed with HR.
The key point is that you are confirming that you are a business
manager prepared to adjust to circumstances and make tough
decisions, rather than being seen as someone who 'pushes the
technology' whatever the economic circumstances.
Sharm Manwani, Henley Business School
Check in at the strategy clinic >>