We have by now all read advice from various experts
about how we should react to the current economic climate. As with
all good advice, it is the application of it that counts. During
these times budgets and especially IT cost will come under
increasing scrutiny.
By now most of us have sat in several board meetings with our
colleagues creating multiple budget scenarios as we prioritise, cut
initiatives and reduce headcount.
However, this is not as easy as it once was. As business have
grown, IT has become more and more entrenched in key business
operations. The wrong decision today can have dramatic
consequences, jeopardising the organisation with either failure or
impeded growth.
CIOs please stand up
This is a time for CIOs to come to the fore and begin to help
lead their companies through lean times and out the other side,
slicker and more efficient, with IT as the true business enabler.
This is the perfect climate for dramatic business
transformation.
Recognising that our organisations need to make informed choices
requires us to challenge and redesign the investment framework and
decision processes to provide accurate visibility, exposing all the
relationships and dependencies between these aspects, and the
overall change, cost and benefit landscape. We must, therefore,
turn and look inwards, not just at our IT operation, but at the
overall company operating models and core processes.
Having recently commenced such an exercise it was surprising and
encouraging how receptive other departments were to this approach.
By creating hybrid teams of business and IT experts with senior
analysts, we ensured that both business and IT views were
considered.
Teams were asked to evaluate current processes and indicate what
the future processes would look like. They reported back on process
revisions with a benefit case, which was reviewed for impact
assessment and value. This led to increased automation of revised
processes and structures, maximising gains in efficiency.
To manage this re-engineering you need to create the correct
environment to facilitate rapid change. We revised our governance
structure taking IT right to the heart of the business. This
resulted in re-directing remaining budget rapidly to areas yielding
highest benefit.
Although change is still tightly controlled, with the business
fully engaged the change risk is far lower and the business
understands exactly how to leverage change to maximum operational
advantage. These changes reduce the cost of the business operation
and IT work is beginning slowly to expand.
In the case of end-to-end process improvement, structures and
practices may need to be changed to achieve maximum efficiency.
The majority of IT costs, usually between 60% and 75%, is "run
cost". The problem is that much of this expenditure is not measured
in business terms, which makes it difficult to communicate the
impact of IT cuts on day-to-day operations.
We created a business service view of run, where metrics can be
directly related to business activities, with IT costs depicted by
transaction and type. We applied techniques such as virtualisation
to drive infrastructure efficiency, but this is driven by the rate
of permissible change dependent on the existing environments.
Apart from technology, the other run costs are licence and
support contracts. By mapping our IT suppliers' lifecycle to a
services plan we have been able to enter re-negotiation of
contracts and services much sooner than before. This provides more
time for our suppliers to adjust positively to our strategy and for
us to better explore and understand the available market.
This is also a good time to negotiate better trading conditions
and longer-term deals, as we understand suppliers' financial cycles
and market place far more clearly. With greater supplier tracking
we are able to zero in on supplier objectives, and yield
significant savings.
IT suppliers are no different than the rest of us; they want to
sustain business and retain clients during these turbulent
times.
Preparing for the upturn
Organisations that are able to manage their way successfully
through the downturn will be best placed to grow quickly as the
economy recovers, and IT-enabled business transformation should
play a vital part of the strategy for scaling back, while enabling
low-cost rapid growth for the future. Tactical cost savings and
efficiency must be balanced with making the right longer-term
choices to maintain future flexibility, and ensure the most
effective use is made of IT funds.
This is the time for clear decision and strong leadership.
Technology is the major trump card in most organisations towards
attaining survival and future growth. This is the CIOs' prime time
to excel: take full advantage of it.
Iain Patterson is CIO for the Olympic Delivery
Authority