The chief information officer of global tyre manufacturer Pirelli has urged IT directors and CIOs to resist attempts by their executive boards to dramatically reduce IT budgets as the financial situation worsens.
In a presentation to CIOs at the Gartner Symposium in Cannes, Dario Scagliotti says, "The world today is so different than it was six weeks ago. There is greater concern on business sustainability in the coming months. But I have no magic stick to reduce operating costs by 15%, if the CEO asks. Pirelli operates in a low-margin businesses, so cost efficiency is essential."
Instead, Scagliotti has rerouted his IT plans, looking at ways to create value and trust between IT and the business. "IT is a service to the business. It is crucial to create value together."
With recession looming, he recommends that CIOs plan in advance. "I have a plan B and a plan C budget. If the CEO sells 20% of business, he would expect IT costs to be reduced by 20%." This is only possible if IT is flexible and adaptable.
"My advice is to try to really understand the urgent imperative for your business. I understand that business imperatives have no correlation to a new version of software or a new technology. At Pirelli I decided the way you manage IT is the same as any other area of business."
He says, "Try to find the most important element - this tells you exactly where your company wants to go. Understanding where the company wants to go is crucial if IT is to add business value."
One of the ways he has tried to add value to the business is by creating a working group to eliminate applications that were used by only a few people in the company.
Another step was to make sure that IT staff understand the role they play in the business. "Some 20-30% of what we were doing was not useful. I believe at Pirelli IT we were guilty of not trusting the business. We were in an ivory tower."
"We were using SLAs and KPIs to protect ourselves," Scagliotti says. That needed to change if he was to achieve his goal of winning the trust of the business.
"Be aware of giving away too much information. Overselling IT can create a reluctance for business users to talk to IT," he warns.
Another potential pitfall is that IT staff are not particularly flexible, even though they expect users to be. "I found the people who were devising flexible adaptive systems needed improvements themselves."
Has it worked? Scagliotti's believes he has achieved his objectives. The president of Pirelli trusts IT to deliver the information the company needs to make major decisions in a timely fashion.
Furthermore, the CEO has been the top executive sponsor in a major 18-month IT programme to consolidate systems around a single SAP system, a single datacentre infrastructure and 15,000 standard desktop PCs. As Scagliotti recalls, "It was the top item on his agenda at meetings before anything else."