Budget increase mirage

In the beginning of the year CIO surveys depicted an upbeat mood with redefined priorities, business bouncing back, economic situation getting better and last but not the least IT budgets going up. This was the global optimistic view portrayed and shared by many CIOs that I spoke to also; and everyone wanted to break into a spring dance and celebrate the return of the good old days. Few CIOs enthused about significant increases in their budgets not betraying the fact that they had the benefit of a low base; 100% increase in budget sounds better !

Every organization big or small goes through an annual operating planning of budgeting revenue and expenses. All CXOs play the game with their promoters, headquarters, Board and whosoever is the negotiating and approving authority. Revenues are understated, expenses inflated and the commentary is all about how tough the environment is while we need to invest for the future. Projects get labeled strategic in their quest for approval; expenses become unavoidable, while market conditions constraint growth which is linked to past mediocre performance.

The situation predictably repeats itself annually like clockwork with an element of distrust on either side built out of past experiences. There is an air of wasteful irresponsible spending that needs parental control which needs to be exercised by the approvers. Chastising the minions, the numbers are adjusted amidst protests to reluctant acceptance. If the normalization has been prudent, life releases the brakes and moves the organization into top gear; when the negotiation is unrealistic, then starts the frustrating process of out of budget approvals.

So when I met a large number of CIOs on the unveiling of one such report, I tried to validate if budgets had really gone up; majority in the room had participated in the survey which brought exuberance to the sponsors and vendors in the room as the details unfolded. The dipstick brought in mixed results, the percentage was lower but there was indeed a group which had seen an increase in their budget. The quantum of increase was also a bit lower than illustrated in the report with a higher inclination towards variability.

Deeper analysis revealed increases factored in inflation apart from business expansion or higher levels of dependence on IT with newer technologies taking up a lions’ share. Business As Usual (BAU) spends is under pressure and requires rethinking; there is an expectation of lean thinking but willingness to spend for innovation and quantifiable business value. CIOs are engaging the rest of the company in prioritizing the allocation of funds and challenging status quo. The number of non-participative CIOs is dwindling and that is good news.

I did not hear much about the earlier big discussion on open source towards cost reduction; open source is now a viable alternative for some technology stacks. Expectations of free software reducing costs have withered away with experience of engaging teams to sustain such solutions which require a little more effort, specialized skills and lenient service level agreements. In specific segments the uptake was large and benefit quite visible. The push towards open source personal productivity tools has taken a back seat.

Everyone likes good news ! And budgets going up after a while is indeed good news for everyone. The moot question is how much of this will be discretionary to the CIO, or will the strings be pulled by the business ? The shift of project budgets to business has been gradual but consistent; the perception of lack of control has created many conversations fuelling the insecurity of some CIOs. Though rarely observed now, it is also a check on some not to run away with technology ignoring the best interests of business.

CIOs with strong business connect will continue to innovate and create enterprise value with whatever budgets get thrown at them as they have already aligned the business to what is required and in almost all cases they do end up getting what they wanted. CIOs with patronage of a board member may in the short-term get endorsement, but will be under pressure to deliver more than the first set which is business aligned. So if you have an increase, either way, live with the good fortune of funds availability until the mirage lasts.

Is the CIO an Idiot ?

Congratulations on your new role ! We would like to come and meet you to understand your key priorities and challenges. We can help you in classifying your portfolio of applications, the technology landscape that you have, or consolidation and rationalization strategy, IT strategy and roadmap and help you align to the business. For multiple companies we have helped them optimize their IT operations and save costs. We can move dollars from BAU to innovation. Can we meet you in the next few days ?

Even if you are not new to the role, I am sure that all CIOs (at least I do) receive such messages from all kinds of vendors, consultants, research companies, and what have you with alarming frequency. They claim to have worked with companies who are highly successful in their use of IT; they make it appear that these customers would have remained in a challenged state if they had not come to the rescue with their frameworks and consulting practices that helped them get out of mediocrity to become winners.

They are aggressive in their approach and are willing to go across the layers of the company to get to you, as if the sky will fall by next week if you did not engage them. Some of them have retired or ex-CIOs as primary subject matter experts; most use decade old models as their base which were created by a few academicians. These frameworks can still be applied with reasonable success to most company’s IT portfolios throwing up opportunities for improvement or validating success for a well-run enterprise.

Having known some of their “subject matter experts” in their past avatars, I have never been too keen to connect with them with a bit of credibility crisis staring them in the face. Despite that, surprisingly the number of customers using one or more of these wonderful companies – who have answers to all the challenges faced by the CIO – appear to be overpowering with almost every enterprise that I know on the list. While I knew of some and their reasons, I found it hard to digest.

So I started connected with some CIO friends to ascertain what were their key drivers ? Did they face an identity crisis or they developed cold feet in putting forward their strategy, plan or take risks ? Behind the brave face that they put up in conferences and meetings, were they a bunch of scared or uncertain individuals struggling to figure out how to make things work ? I could not accept my own fears on this hypothesis and gingerly approached the subject lest I create a self-fulfilling prophecy.

Sigh ! The result was a mixed bag; in most cases the usage was to get endorsement or a stamp of approval from an authoritative source for higher credibility to the project or technology. In some I observed that the organization was risk averse or did not have the requisite confidence on the IT team and thus sought validation of the CIO proposals. Global and local research analysts and the models I referred to earlier give the requisite crutch or platform to the CIO to get endorsement and alignment.

The more interesting insight was with a few CIOs who did need the help to get there. They were bright individuals with technology expertise but limited ability to create a business case or put across a transformation agenda to the Management or Board. They were smart enough to work with these companies to find solutions thereby overcoming their limitations. I stopped applying my filter criteria for evaluation of the proposed engagements from this plethora of value providers.

Considering there is indeed a segment that finds value in engaging such companies (which is why they exist and continue to thrive, demand supply equation you know), my sincere and humble submission to all the wonderful companies is not to assume that everyone they talk to has a problem that they are unable to solve. All CIOs are not equally created, some are bigger Idiots than others, and others believe “I” stands for Intelligent or Innovation …. I think I was an Idiot for some time, and that will pass. 

Taken for a ride !

By design, omission or inadvertently, all of us have faced the situation where the vendor has declared the product “end-of-life”. This puts at risk legacy applications, instrumentation, automation, or in many cases plain old processes that have survived all attempts to change them. CIOs and IT realize that upgrades are expensive and in some case not as good as the earlier working versions in terms of stability and/or functionality. But then they have to do it lest there be no support when the software fails.

Many CIOs succumb to the pressure quickly, only to realize that the deadlines have shifted and they could have avoided the nasty dialogue with respective functions (normally finance). They could have saved the unbudgeted expense in the upgrade which wiped out buffers that were provided for some innovation. Sometimes this leaves a feeling that this was a ploy to move everyone along reducing the support costs for the vendor, maybe some incremental licences (new versions typically may have different breakup).

A CIO friend bought a software package that fit business requirements so well that it appeared to have been developed using the requirement specifications of the company. She loved it as it implied very little customization and a deployment timeline better than what the business wanted. Everything went like a dream, the solution went live with celebrations and everyone was happy. The vendor was acquired by one of the big IT product and services companies; the new CEO promised to keep old customers happy.

As it was time to scale up, the CIO approached the new entity for new licences. The offer for upgrade had her fall off her chair; it was twice of what she paid earlier. Reaching out to the old team she found no help forthcoming with them citing new policies of the acquirer. The big guy sales team explained the new investments into the solution justifying the increase. Left with no choice in the face of the earlier business success, the CIO felt cornered and frustrated though had to accept the new terms.

In another scenario recounted to me some time back, a packaged vendor gave a demonstration of a specialized solution to the business team who loved what they saw. They approached the CEO and the CIO with a claim of higher productivity and ROI. The CEO endorsed the purchase and the IT team got down to creating the project charter, implementation plan and timeline. Quickly they realized that the solution required significant customization to work in their environment.

The CIO got together with the Business Head to provide the reality which was quite different from the short trailer and demo. Since they shared trust, it was evident that the solution provider had only revealed the surface; they had pressed the right buttons and given the messages that created empathy. The resultant in high expectations created a feeling of being short changed; while there was no false information, limited revelations created desire and expectations that were unrealistic.

I could go on and on with many examples on how every day we face situations which leave us with a negative gut feeling and a sense of having been taken for a ride. Some of these are a result of our own naivety, inexperience, or overenthusiasm; also in many cases due to intentional concealment of facts and/or our interpretation of what is said. There are rare cases when mal intent has been the driver too; it is largely taking advantage of the gullibility of the buyer. And every time I hear of an incident, I feel restless.

I do not believe for a moment that this situation is unique to the CIO; at times all CXOs face situations that leave a feeling that we are being taken for a ride, sometimes during the journey, sometimes after we have been gypped. Is there a solution to this ? I do not have a silver bullet to resolve such situations; I believe that tactically the CIO has to work on each case to address the issue at hand. Due diligence and contracts go some distance, the rest falls into risk zone and have no easy answer. 

Chief Interrogation Officer

Last week when I wrote about selling projects, there was a flurry of responses on what is wrong with the overall approach proposed; according to many, I painted a picture of a CIO who is subservient to business and not proactive in his/her approach to creating change and transformation using IT. Some were of the view that if the CIO does not sell, it will lead to CXOs creating a shadow IT organization which will be available at beck and call to do their demand thereby side lining the CIO.

I met with a senior IT leader who postulated that the “order taking” CIO will not find success as s/he is waiting for the business to define what they want. Most of the time business does not know what they want and in such a situation there will be little progress and lot of dialogue and frustration. According to him the business friendly CIO will explore opportunities and propose the solution to what business may desire and then deliver a solution. He summed up with “know your customer and the industry and get deep into the business”.

I do not disagree with him on knowing the business or proposing a solution; I disagree with the statement that business does not know what they want. Often they presume that lack of technology knowledge creates a gap in how they need to define the business problem. They do need help in articulating the problem statement such that it clearly states the market, the process and the outcomes. It is imperative that the ownership stays with the business stakeholders lest it become an IT project.

A friend and CEO of a mid-sized company joined the discussion on what should be the terms of reference and engagement between IT and business. He is known to be “IT friendly” and good customer who uses IT effectively. He acknowledged his inability to provide a well-defined problem statement that can be translated into a system. So I probed further to give an example of what he implied. He warmed up and started talking about his current situation and his information needs.

The company was entering a new market and with commencement of commercial operations needed systems to enable the business. Local regulations being tough and demanding, the competition fierce, the CEO needed end to end visibility across the supply chain and customers while addressing the needs of the regulators. He defined the need, the growth, and the ecosystem going on to say that he had no clue what IT systems will solve the problem while throwing some available options from experience.

To me the problem definition was quite clear and so was his information needs. The point is that the questions you ask will determine what you get. We did not discuss any technology options; neither did we get into details of hosted, cloud, or solution options. Clarifying some of the finer nuances it was clear that he was at ease on my overall understanding of the need. I then turned to the CIO and signalled that despite the starting point where the CEO stated he did not know what he wanted, he actually did.

When you meet business leaders, what is the approach ? Do you probe based on your knowledge of the situation or do you expect the business to come up with a formal requirement document ? Is it a discussion or is it a template given to the business to fill and define what they want ? What kind of engagement model do you practice ? For any discussion to be fruitful, involved stakeholders have to have a common ground and assumptions to make sense. I don’t know what I don’t know, let’s collaborate.

The answers you get is a function of the questions you ask; if you start with “What reports you want”, that’s what you will get without the background context. If you ask only about the process, you will hear that; take a detached and a connected view simultaneously to get the information required. You will be surprised at the insights you can garner. I believe that CIOs and the IT teams need to be trained on how to ask the right questions; and that is also a function of how well you know the business.

Selling Projects

It’s been 2 years in the role and I have been reasonably successful in changing the IT landscape modernizing the applications and infrastructure; many new applications have done well and have been acknowledged by the Management. The IT team some of which had spent decades in the company too has undergone change with skill upgrades and their alignment to the new way of working. However I have been finding it difficult to make big moves which I know will create business transformation.

I met an old teammate after a long time who had blossomed into a first time CIO. He had done well for himself and the company by taking them from what he described IT 1.0 to IT 2.0. He took the journey step by step reviewing the existing architecture and creating a roadmap that he systemically executed with ease. I remember him having an eye for detail and scrupulous in his approach. Proudly he explained his and his team’s handiwork which was achieved despite the lack of overtly enthusiastic support from the business.

As he narrated his story, I could not help drawing parallels from a decade back when he worked in my team. He and imbibed the principles well and upgraded the team to deliver; he was now struggling to move to the next level where he was unable to find support from his peers or his Management who did not share his enthusiasm for the new initiatives. The company with a strong legacy and loyal customers had grown with the founder driving the business skilfully not just locally but globally as well.

My CIO friend had many ideas based on his understanding of the business; networking with peer CIOs and taking help from vendors, he had come up with a few projects which he had been attempting to sell to the leadership team. They did not share his excitement on the change and resultant outcomes; everything is working well, business growth is better than it was in the past. Why upset the applecart ? He found it incredulous that despite a clear ROI no one was willing to take up the cause.

I dug deeper to figure out the key business drivers (inorganic growth), the makeup of the people (loyalists), the culture (conservative), the connect and receptiveness (cautious), and finally the sense of shared urgency (none). The business perceived the new initiatives as unnecessary and a distraction; they saw no need to change; why fix something that isn’t broken ? It was evident that he was unable to make it their priority or convince them of the merits. So I pushed back and asked him to stop selling.

The current approach appears to be desperation from your side with an automatic pushback response. It is your project, your idea and not theirs; they don’t see any value in your projects, so stop selling and start asking questions. Take a different approach and start engaging them in a conversation on new possibilities that open up to them and make their lives simpler or make them winners. You have to stimulate and connect with different stakeholders across the chain to kindle interest.

In the current scenario even if the project were to get started, the possibility of successful deployment and effective use is relatively low; because it is an IT project and not a business project. I have observed many projects floundering when key process or business owners were not aligned to project deliverables. A challenged HR project where the CFO and CIO pushed the decision on better ROI; an ecommerce portal with reluctant or indifferent business stakeholders, a CRM disconnected from field operations !

Why do CIOs sell projects ? There’s the hypothesis about being proactive and partner to the business, something to do with alignment. I believe that situation belongs to the past as it ends up in a situation where the wooing is all left to IT, business playing the role of a reluctant partner. Unless there is connect on both sides and endorsement from senior management, the CIO begins to appear desperate while others wonder why. So stop selling and start collaborating; proceed only if you find reciprocal acknowledgement of need.

Politically (in)correct

I am beginning to discover new benefits of drinking wine; apart from being a social icebreaker with people discussing the merits of Merlot over Shiraz or the lineage of the grapes and the geography, it also opens up their heart with the cup of woes flowing over with gushing speeds. I was party to one such conversation with a well-known CIO who had scraped through challenging times and was drowning his sorrows in the red. And thus the saga unfolded.

He had joined a diversified conglomerate as the Group CIO; most of the companies within the group had mid-level IT heads who now reported to him. He was expected to bring synergies and efficiency across the companies while taking the IT agenda forward to the next level. The group itself had aspirations to grow manifold over the next 3-5 years and believed that IT can contribute to expediting the journey. Everything looked well set for the CIO to capitalize on and forge ahead.

The group had humble beginnings and had tasted success with some of the new ventures that brought it to prominence. Expanding global presence, the founders had begun to hire professionals to run individual businesses as well as leaders like the CIO to drive the corporate agenda. Collectively the team was tasked with bringing to life the strategy and goal. The recipe thus appeared to be what would achieve the stated objectives.

The seasoned CIO got started by meeting the business and functional leaders, understanding their key drivers and opportunities, and within a span of 30 days charted the IT agenda and roadmap. It had all the components of internal efficiency that could be gained with technology standardization as well as connected some of the initiatives with the external end customers. Commendable progress noted the family who owned the business.

The next 30 days had some of the initiatives getting off the ground with participation from business and IT stakeholders. The larger investments needed discussion and debate on the selection of solutions as well as partners who would deliver them. Everyone had a view on how they wanted to make the selection and everyone had an opinion on what should be prioritized. The CIO attempted to moderate expectations without success. And that is when things started going haywire.

Over the next 30 days the power struggle continued with no one wanting to give away, each holding their ground; the CIO in his righteousness and professional pride believed that he knew how to run with the critical projects. The business leaders believed that they knew the business best and the CIO should yield to them considering they have to finally deliver the business outcomes. The owners left it to the group to take a decision not wanting to be the arbitrator.

As the status quo continued for some time, patience wore thin and the level of exasperation grew; in the next quarterly business review meeting they orchestrated a show down. Most of them updated the respective family members of their discomfort and the decisions they were hoping would prevail. The CIO did not have this connect and neither did it cross his mind that he should work with the majority owners to achieve what he believed was the best outcome.

In a stormy meeting the CIO quoted from success within and outside the industry with his proposed solutions and why his path was the best way forward for everyone. The business leaders refuted the claim and chorused the CIO’s limited knowledge about the culture and business. The Chairman had to react and he did what was obvious; he took the path that the CEOs had advised him of rebutting and chastising the CIO for not listening to his customers.

The CIO had a devils choice; he could accept the verdict and get started or he could refuse to bow to the decision and move on. His stand had created a deadlock; his abrupt manner and straight talk had alienated the business. The superior attitude ensured rejection of the proposals giving him limited options on the way forward. He believed that others did not understand technology neither did they respect his experience.

We know the CIO should have tactfully managed the relationships first selling his ideas to become the choice of solutions and vendors. The politically incorrect situation was self-created and this dawned upon him in our discussion after a few drinks had been downed. I am not sure if the self-revelation was too late to make amends or he had the opportunity to go back and change the direction. He thanked me and left. How this unfolds ? Keep watching this space !

Budget Begging Bowl

Year after year enterprises engage in an exercise that is like a well-orchestrated dance of corporate executives, each playing their best role and they have to collectively also look good to the audience. Interestingly the audience is the executives themselves, the Orchestra Master (CEO) and Board of Directors who asks for changes to the story line or approves the end result. At a broader level successful execution played to the stock market and analysts acknowledges work well done.

Like in an orchestra an ill tuned instrument can strike a discordant note, the collective sum of efforts needs complete alignment for an enterprise to work at as close as possible to its optimal level. This applies to the planning process as much as to the execution. Undercurrents during the planning process if ignored will come back to haunt the team during execution. All this is common sense, nothing new here, but we still continue to self-impose challenges and then find complicated solutions.

Every year give or take a few weeks this is the time when for most companies budgets are approved for the next year. The process begins many months earlier and after multiple rounds of discussions and negotiations, the final budget is presented by either the entire management team or select few (read CEO, CFO and maybe the CMO) to the Board. As boards have to “add value” they challenge the collective wisdom and either inflate the top-line or bottom-line or both or cut costs leaving the team perplexed or so it seems.

We all learn the game fast and keep buffers in the budgets for such eventualities. We offer the token protest and accept the fait accompli moving on with life. It is funny that this repeats itself in every department, company and everyone goes through the charade almost unthinkingly. The process leading into the D-day and thereafter is notable. But there are many who are challenged; let me reveal a few scenarios based on some direct, incidental and anecdotal data.

Budget planning is typically a function of planned capital investments and operating expenses. Most companies are CAPEX unfriendly and there is always pressure to reduce operating expense. For the CIO the two edged sword draws blood by moving hardware and licensing to operating expense and then the CFO wants to cut OPEX. Finance and/or business friendly CIOs know how to manage this, others struggle to keep their head above water until one of the powerful CXOs throws them a lifeline.

Post “rationalization” by the Board, the situation gets even more interesting. Now that everyone has been given a say 15% operating budget cut, the un-buffered and bewildered CIO struggles to stay afloat. A frustrated CIO once commented, where do I cut without impacting service levels ? I cannot go short on licenses, nor on bandwidth, and service providers want inflationary increase, AMC needs to be paid, travel and training are already down; do I go to the CEO, or CFO, or better the Board with a begging bowl ?

In jest or otherwise the remark portrays the helplessness felt by many and not just the CIO. Is there a way out ? There is if everyone went back to basics and stopped predicting the future based on the past and making unrealistic projections on what the business will be next year. It would help if all functions worked the budget together acknowledging dependencies for success rather than in silos. It is then up to the CEO to play the galleries or stand firm ground with the Board when s/he represents the team’s collective effort.

Where would you draw a line as the CIO/CEO ? Will you accept the cuts ? How will you ensure that realistically the company has enough cushion to react to market and competitive moves or the black swans that seem to be common now ? Will you put your neck out for the team ? I have always gone into a meeting with the maxim that budget is an intent to spend; we collectively determine the spend and own it up irrespective of which head or bucket it sits in. There are limits to cutting cost, let’s focus on the customer and how we can increase revenue. That is a better discussion !

Business buy-in ? Why do we need that ?

In a panel discussion involving a few vendors and CIOs, someone asked a question to the panel. “My business users do not seem to be interested in the project, even though I know for a fact that the implementation will create big benefit. How do I get business buy-in ?”. This kind of question comes up every so often (words change, context is similar) as if evolution will be denied to a few.

It is amazing to see that IT heads in their enthusiasm to push ahead ignore the signs of discomfort or lack of interest, rarely pause to reflect upon the message coming across quite clearly that “No !”, we are not interested in this wonderful project. In some cases, it could be due to the inability of the CIO to articulate the project clearly enough for everyone to understand and be on the same page. Thus the business case is not compelling enough or the benefit statement is not a true reflection of the real case.

It could also be that there are other priorities that consume the business users and thus they would rather have the CIO focus on them as compared to the latest trend or new fad which the IT vendor may be interested in selling. In a few rare cases, the digital divide between the CIO and the CXO may be the raison-d’être for the disinterest in moving ahead.

The basic principle in all cases is listening first, and then talk. Communication is not about your ability to use your linguistic skills such that the other needs a dictionary to decipher, but to ensure that you understand the frame of reference of the listener. Effective communication always happens when the involved stakeholders share a common interest and are willing to listen to each other.

Finally, if you are still facing the same question, then stop pursuing it. After all you do not want a scenario where the system is developed to specifications that were sketchy and no one uses it. Why are you interested in the project when your customer is not ? Sometimes the answer can be no too.