As the economy worsens CIOs are being asked to do more with less. For many this presents a real challenge as for five years they have been driving out cost and delivering performance improvement.
Most likely they will have aligned their portfolios effectively to support business strategy, streamlined and standardised their processes and systems, outsourced them where appropriate and are exploiting the cost savings and talent opportunities of a global resource pool.
For these businesses there be little fat left to cut. Yet budgets are being cut, investments postponed, hiring freezes imposed and headcount scrutinised. One CIO I work with had just restructured his organisation and was part way through filling the new slots when he was required to withdraw all outstanding offers.
At the same time, 84 per cent of organisations still look to the IT function to provide innovation (according to research by PA Consulting / Harvey Nash). Here are four practical steps CIOs can take to get on the front foot:
1. Develop a rapid reaction capability – Guerrilla IT
Guerrilla IT is a CIO’s secret weapon. It is typically a small unit (or units) of people with cross-functional and technology expertise, which can be deployed rapidly alongside a business department to solve a specific business issue.
It can also represent an innovative approach to solving a distributed and manually intensive problem, by empowering individuals at the front-line. It is particularly useful when applied to areas that are data rich but information poor; a good set of tools and practices can yield some surprising results at surprising speeds.
For example, for a global energy company this technique was applied to a Business Intelligence (BI) problem, where there was a requirement to build a flexible and extensible solution to report on progress across a complex transformation programme; a small team accomplished in just 10 weeks what the whole programme had failed to solve for months.
This implies both keeping back a small percentage of portfolio investment from longer term programmes. Many investment banks have realised the value that can be derived from being hyper-responsive to those parts of their business which generate the most value. This enables key parts of the organisation to function more effectively, enhancing IT’s reputation as an agile and innovative partner.
2. Consulting to other parts of the business on achieving efficiency
Many CIOs have developed significant expertise in extending the enterprise through outsourcing and offshoring and building new organisational structures such as shared services. Executives implementing finance and HR shared service centres from 141 of the largest 500 companies across Europe are typically achieving 12 per cent savings, with an average payback period of just 3.5 years, according to research by PA Consulting Group.
The CIO has a great opportunity to add further value to their organisation by accelerating the learning curve in other shared service initiatives across the organisation in finance and HR in order to deliver the benefits more quickly.
Indeed a number of CIOs are progressing formally into roles which give them responsibility for all operational shared services – the financial services industry has been setting the pace on this in advance of the current crunch.
3. Make outsourced suppliers accountable for delivering continuous improvement
CIOs are looking again at their outsourcing contracts and are seeking to build in continuous improvement and innovation clauses as these contracts come up for renewal. If CIOs are not requiring their partners and suppliers to drive continuous improvement in their service delivery then they are ignoring a significant opportunity to add further value to the business in hard times.
To achieve this they also need to ensure they have an effective in-house service management organisation that can manage the supplier relationship to ensure all SLAs, including those related to continuous improvement, are being met and value is not leaking from the outsourcing contract that was originally agreed.
4. ‘Outomation’ and cross-industry shared services – treating lean process improvement and sourcing as two halves of the same coin
Outsourcing and business process improvement have been important tools that many companies have used over the last decade to improve the efficiency and effectiveness of their performance.
The problem is that many companies have already banked the savings from the initial wave of deals and the days when a CIO could confidently tell a CEO that he could save them 30 per cent are gone.
Leading edge companies are beginning to adopt a more radical approach: “Outomation”. By leveraging globalised provision of outsourced services together with experience in process improvement and automation there is the potential to re-design and re-source in one go to achieve the 30 per cent – plus savings of the initial wave of outsourcing.
The foundations of outomation are long established in manufacturing where car makers have shared platforms and competitive glass makers built factories together. Now these principles are being brought to IT-enabled services that can be simultaneously improved, automated and outsourced as part of a single transaction, possibly as a shared service across industry rather than for a single organisation.
For example companies such as Google are intuitively implementing outomated services by fully automating their end-to-end transactions through ”mega“ data centres.
Taking steps such as these will help CIOs respond to the downturn in innovative ways which help both the top and bottom line. The downturn presents an opportunity to establish the CIO role once and for all as a critical business partner playing a leading role in their organisation’s ability to thrive and survive in the face of adversity.