Transformation or Business As Usual CIO

“This is crazy but I am loving it”, so said a CIO who had taken on the mantle to transform the way his company uses IT. He had been in the role for a while and his company was one of the market leaders in their chosen industry; they needed a strong dose of really good medicine to shape up the information foundation. Business welcomed him with open arms, he showed them what was possible, he brought all of them together to the common cause; the company began the journey with multiple projects starting in parallel.

The roadmap drawn and agreed upon, the company created a healthy pipeline of initiatives that would leapfrog the reputation of the company and the CIO. His team rallied around him as they saw a future with promise of good days to come. They believed in the vision and toiled sweat and tears to shed the inertia that was the hallmark of the company. Projects rolled and went live building credibility and adding fuel to the fire of desire; the going was good and everyone loved the orchestration that created music they had not heard before.

Another CIO on the table retaliated with her wisdom of focusing on one project at a time and doing it very well with no window for error. She was a veteran herself though not the visible types but staying in the shadows of quiet achievement. Her journey was of incremental innovation staying close to business and efficiently focusing on getting it right eventually made her slow and dependable. Growing with time in familiar territory her rise was a story of “I will do what the business wants even if it is irrational and requires maintaining status quo”.

Working with a monopolistic market leader, there was no real pressure for majority of her career, the global enterprise driving strategy and direction while controlling local innovation in areas that mattered. The rest was about creating solutions that worked to digitize existing manual processes. She had toiled diligently and grew through the ranks doing a fair job of maintaining status quo. By virtue of the years in the company her understanding of the business was good and she had built empathy which helped her.

The two were a study in contrast in their approach to partnering with business and how they created value for their respective enterprises. It was a function of market dynamics as well as individual desire and capability to be a transformational leader. One demonstrated passion and a sense of urgency while the other was happy to be an order taker and wait for something to happen. The group of CIOs present took sides with many inclined towards aggression though most professed that a middle path is the best approach to staying relevant to the business.

A few years later many of us happened to meet again; reminiscences of the last discussion offered an opportunity to check how both had done. The transformation aspirant had slowed down a bit though he was still miles ahead of the conventional pace of implementing technology solutions. He had more or less delivered to promise with the organization struggling to keep pace with the fast track path they had chosen. He was satisfied with the change he had architected and the fact that his company was a much sought after customer by many IT companies.

The lady was struggling for survival, her company having been acquired, new set of expectations, new pace of change, new set of deliverables, all of which were alien to her. Her incremental approach was seen an unaligned to new business speed and the urgency to expand market share and dominance leveraging technology. She was unable to step up having lived a life of a passive though reasonably effective partner to the business. Having worked for one company all her life, she was clutching straws to save herself.

Our collective wisdom could only recommend that she seek alternative pastures before she becomes irrelevant to the company. Her shallow experience did not give her too many choices which she realized. Someone suggested to the aggressive CIO that he hire her to run the operations and business as usual which she was good at. Today most CIOs do take on multiple projects which is the need of the hour to stay relevant; it is a rare luxury to not do so and fraught with danger for the long-term. BAU does not require expensive resources.

Where are you in the continuum ?

Finding alternatives

The bewilderment was visible to everyone who even glanced at the face; not that too many people were in the room, but everyone could clearly see the expression on the face of the Chairman. The trigger was the suggestion that the big ERP that has worked well for almost a decade should be discarded in favor of another one. The animated voice and high throughput beyond the normal diction made it difficult to comprehend the entire story. So I slowed down my friend the CIO of a fast growing enterprise and asked him to begin from where else, but the beginning.

Over the last year or so there was a rumbling of discontent about the lack of adequate support and the rising cost of licenses and annual support. The problem was brought to the forefront when after a version upgrade necessitated by end of support announcement, the system started behaving abnormally with earlier functioning features now working differently. Stability took a long time to achieve.

On the other side another function was struggling to support the continuously increasing license and support costs. The thought of additional functionality and modules was abandoned upon hearing the new licensing norms. This indeed creates a difficult scenario for the CIO and the CXO to contemplate the future. As the company grows, how to ensure that the efficiencies gained thus far are not lost ? How to control the ever increasing burden of Business As Usual ? The ratios of BAU to new initiatives were in favor but slowly sliding.

So the CIO called his team and started exploring alternatives. Can the already good discounts from the vendor be improved upon ? Is it possible to move away from per user license to something better ? What if we exclude a section of employees from the technology solution ? Would the enterprise technology architecture become complex if multiple solutions were deployed ? Would the cloud make any difference to the outflow ?

That is how the recommendation came up that the current technology stack be replaced with a competing product which offered (at least on paper) better TCO. And the CIO decided to raise the question with the management which led to the scenario above. The CIO had done his homework by talking to the respective functions and gaining their grudging nods. But the scale of change scared everyone.

We all know that change is not something anyone likes despite whatever pains may be currently plaguing the process, function or enterprise. It takes a lot of effort to even get the idea to gain traction. We discussed the merits and pitfalls of the proposal and agreed that there is no easy way out. The change will be transformational also providing an opportunity to kill a few “this is the way it is done here” kinds of processes. The TCO over the next 5 years with the projected growth did indeed demonstrate more than 30% reduction.

Reinvigorated the CIO agreed to push ahead armed with confidence that he was on the right track and that the change agenda will indeed benefit the enterprise in the long run. Would you do the same if faced with this challenge ?

Holy Grail of IT, Operating Expense vs Capital Investment

IT budgets were never a great discussion; the CIO struggled to find the right balance between “Business As Usual”, or keeping the lights on, IT infrastructure, incremental innovation, new projects that business wanted, initiatives that IT wanted, and some that the CIO believed will have a transformational impact on the company. Over a period of time, the operating expense ran out of control to reach almost 90% of the total. Across the industry, this required a conscious effort to bring back the innovation budgets with BAU settling around 70%.

In the recent past (at least the last two years that is vivid in my memory), almost every IT solution, vendor, consultant, and CIO has promoted the idea of shifting capital investment to operating expense. Capital investments almost withered away, as the economic challenges dictated cash flow controls. Large initiatives found it difficult to get initial funding. IT companies turned around models to offer almost everything as a service, thus obviating the need for capital expenses. New business models liked payments to outcomes spread over a period.

The operating expense model helped forward movement; in success based engagements, everyone was a winner. For the CFO or the CIO, in the absence of success, it was easy to pull the plug, and stop loss. Yes, there was, and is, an inherent risk of the project or initiative not working, but we have not heard of any such anecdotes as yet — as if success rates now equaled the past’s failure rates. Is this due to the fact that the financial risk is now shared in a different proportion between the stakeholders? Or is there another angle to it?

The answer is probably affirmative when it comes to the shared financial risk. However, I also believe that the vendors now prefer the OPEX model, as it helps their profitability over the long term with continued revenues and the ability to spread their capital investments over a set of customers. The customer is probably paying more over the useful life of the product.

There is another angle as well. Once any process operates over a shared IT infrastructure, application, or solution, with the data too being stored in the service providers premises (sounds like the Cloud?), the ability to get out of such an arrangement into an independent model will be a huge, if not insurmountable, challenge. Everyone recognizes it, and believes that the changeover is executable, but I would be worried to be in a situation where I could be held to ransom — despite what the lawyers tell me.

I am not propagating the message that we all need to move back to the good/bad old days of big capital expenses. The CIO should be wary of the “too good to be true” deals, and safeguard the enterprise’s interests by reviewing alternatives to disruption of services, or the possibility of a shift should the service levels fall below acceptable limits; and in the worst case scenario, the service provider increasing the fee to abnormal levels. The time and cost of any change in this situation can be very high indeed.