How can you expect returns if you are unwilling to invest ?

Business is hurting from the lack of the right tools and enablers, we need a good dose of IT to create efficiency. We acknowledge the need to transform and that is why we are talking; the team also agrees with the direction and the way forward. The benchmark results are well received and we would like to be in the top quartile of the industry. We should create the framework for evaluation of options to our specific requirements before we finalize on the best option and let’s work to an aggressive time line.

The CEO intuitively knew, to take performance to the next level, technology has to play an important role. Coming in of global competitors had started slowing growth and put pressure on profitability. Operating margins and other business metrics were lagging behind; survival was not at stake but to stay relevant to major customers, the business begged for technology. The absence of mature IT leadership posed additional challenges in execution of the strategy defined through a technology consulting engagement.

Early investments in technology solutions had not delivered to promise; early decisions were taken by the business based on promises made by vendors on business benefit. Business participation in the project waned quickly as technology formalized processes and exposed lacunae in operations. People on the ground resisted the change creating roadblocks – real and imaginary – towards deployment. The cycle repeated itself a couple of times leaving everyone frustrated and wondering if technology will ever deliver.

That was before global players invaded the market changing the way business was done, improving customer satisfaction and driving profitable growth became an urgency. Even with higher overheads and manpower cost, they delivered; in came Consultants offered a mirror to the business and helped them with a well-crafted plan and strategy; technology strategy followed. A new CEO added to the excitement with experience at competitors. Culmination of events necessitated that the company reach a decision rather quickly.

In a perceivably low margin business where the average margin was half of the best, it was evident that operational efficiency can gain significantly with the right IT interventions. Industry specific solutions and generic options competed on functionality and price with a wide variation in between. An all hands meeting agreed to the strategy and initial steps enthusiastically committing resources and time. With negligible investments thus far, in parallel the Management decided to approach the Board for budgetary approvals.

The Board members had diversified business interests with business operations of varied size; they were also parsimonious in their approach to investments especially technology which was seen as necessary but not essential. Thus while their companies had grown in size and reputation, they had not been able to realize the true potential while newer competitors had moved ahead. The minnow in the family thus started from a disadvantage when the CEO put his case across for investments in technology.

Discussions went back and forth on various technology options, merits of one over the other, cost of acquisition and support, TCO (Total Cost of Ownership) and business benefit; the figures appeared obscenely high even though they were competitive and in line with benchmark investments. For the Board reality was that other larger entities in their bouquet too had rarely invested similar amounts barring the initial stages for industry standard ERP solutions. They finally approved a significantly reduced number which turned the project into a non-starter.

The business case was clear in identifying the benefits – financial, customer satisfaction, growth, profitability – the ROI was less than a year; but past experience made the Board wary of committing to the investment. Ensuing “What if” had no answers beyond a point; there are no certainties, only probabilities of success. The sanctioned budget did not cover basic costs even if executed in phases to demonstrate potential success. Risk mitigation strategies can be created for most action plans, the keyword being “action”.

Except in cases of some of the new technologies and innovative digital models, most of the solutions – vertical or horizontal – have successfully established credibility to deliver business value with discipline of execution and leadership oversight and endorsement. Phases can reduce risk if logically broken down with continuity in the journey. Processes if left out of design consideration will fail to provide the end result. Analysis paralysis can miss opportunities that become clear only in the future, status quo breeds mediocrity.

Years have passed since the above happened; they are still at the same milestone the debate continues, they are yet to decide and the industry continues to grow rapidly !

Insecurity about Cloud Security and Value versus Return

I was at this conference of small and mid-sized Cloud service providers who were discussing the current state of the market and evolution with everyone talking digital. They were hoping to collectively brainstorm and learn from each other’s experience. They discussed the evaluation criteria they were subjected to, problem statements they had to answer, and the two biggest stumbling blocks that would not go away even with the maturity of the cloud solutions and growing customer base; they are ROI and Security.

Some large enterprises have adopted a cloud first approach to their new initiatives while they seriously evaluate movement to the cloud whenever faced with any upgrade or refresh decision. These early adopters and fast followers now are more or less convinced that it does not make sense to continue investing in conventional hardware solutions. Data centers and servers are best left to the experts to manage while application management was outsourced a decade back. DevOps is the way to go and Cloud is where everything should reside.

Off course there are industries which have seen exceptions for some types of solutions which are still not amenable to be on the cloud. Even the providers acknowledge this and keep away from pitching for such use cases. Big monolithic solutions are facing the agility challenge and the paradigm has shifted to accommodate multiple for purpose apps on the cloud that are making some parts of the big solutions redundant or enhancing productivity by reducing the effort to complete a workflow or task in the conventional solutions.

Consumer and personal apps reside on the same devices that are used at work; this transgression managed or otherwise is here to stay. CIOs and CISOs have learnt that pushbacks are no longer accepted and they have to find a way to make peace and find solutions that allow coexistence. MDM has evolved to provide some level of containerization to separate the official from personal and the ability to brick a device should it be lost or fail to return on exit. So where is the unfulfilled promise of security and ROI or is it just a favorite flogging horse ?

How secure is your cloud solution ? Have you had any security certification done for your software ? When was the last time penetration test was conducted ? What is the uptime offered on your cloud ? Clouds are expected to save money; what is the ROI of your solution ? The service providers’ reality was that they had to field these questions every day with every customer with every opportunity with everyone they met. It was as if repeating the message would strengthen its value and make it work for the customer and stakeholders.

After all the due diligence and certifications, customers then go on and deploy the solution with limited security governance and vulnerable practices that expose the data. Eventually if and when data leakage does occur, the cloud and/or the solution is deemed immature and not upto the mark. Attempting to create idiot proof solutions with all the checks and balances to protect against human stupidity is the final and ultimate step in ensuring that the solution is secure; and this has remained the goal of every enterprise and the challenge for every provider.

Return on Investment is a different ballgame; value is a function of the frame of reference of the perceiver and nothing to do with reality. For someone a dollar a month per user may be value and for another $10 is not expensive. Can service providers do justice to the wide spectrum of expectations ? I am not sure that kind of elasticity exists; volume driven discounts or market entry strategies may offer initially low pricing which is rarely sustainable in the long-term unless the end game is market valuation and not profitability.

At the end of the discussions collective wisdom indicated that alleviating the fear factor will take its time with evolution not being consistent and everyone wanting to reassure themselves of the risk factors. It does not matter how many have taken the leap of faith or how long the solution has been around. Even today there are buyers apprehensive of every decision lest it not work in their unique environment or their inability to leverage the value. I think that the discussion will keep popping up and we will have to reassure a zillion times over.

Value Destruction

For every organization that invests in IT there is an expectation that IT will contribute to one of the outcomes from topline or bottom line improvement, customer or employee satisfaction which in turn impacts profits or revenue, operational efficiency or regulatory compliance or a new capability that creates a differentiation in the competitive market. After all if none of these will be impacted then why invest? Many times there are IT investments labelled “strategic” normally endorsed by named consultants specializing in business transformation or strategy, or the Board.

The company hired one of the premier consulting firms to help them with an IT strategy that would align to their growth objectives. They did not have success retaining talent at the top and had a string of CIOs who took up the challenge and left within 2-3 years unable to create sustainable change. Every CIO to his/her credit tried to approach change in a holistic way and when they realized that the inertia from people was strong, processes rigid and everything required measurement, they were unable to sustain the rigor.

The company had always measured every investment using financial metrics and did not believe that IT should be any different. The owners and management acceded to all new technology solutions and investments but many times changed CIO decisions to select the most cost effective solution which offered the highest ROI. Lumped with at times unaligned solutions or vendors who had been squeezed so badly that they ended up cutting corners, the CIOs had not been able to recoup the situation to create visible success.

After quick succession of CIOs they determined that consultants would be able to help them solve the enigma of unsuccessful IT driven projects. After all they had been diligent in their choices, the loyal CFO had worked hard to create models for measurement of success. Their prudent financial decisions had paid off in many functions which is why they wondered why it is not working in IT. The consultants conducted their diagnostics rummaging through history, talking to business, some of the old timers and the IT staff on the journey.

Their report was presented after a few months; there was a lot of anticipation especially within the IT team who saw a ray of hope in the study. The management had a heated discussion with the consultant refusing to believe what was presented. They debated and defended their past actions and labelled the report biased and the consultant ineffective. They still needed a silver bullet and thus decided to hire another competing consulting firm to repeat the exercise. The consulting firm agreed; they were the best and the most expensive.

One of the beliefs that I have inculcated with my teams and others who I have had the opportunity to work with and mentor, is that everything can be measured. Maybe not always using the conventional measurement criteria of Return on Investment or Return on Capital Employed. There is also a category called soft benefits or non-quantifiable returns which has fuzzy terms like better awareness or connect to people with no defined baseline or clear benchmark against which it can be compared. Even these could have been measured with proper definitions.

D-day arrived and the senior partner from the firm was solemnly ready to present the report. They had also reviewed their competitors report. They had insisted that the entire management team be present. There was suspense in the room and a hush as the presentation began. Through the hour everyone listened with rapt attention as their story unfolded in front of their eyes. When the senior partner completed with an air of authority, there were no questions; the data and evidence presented with benchmarks did not require any clarifications.

The company suffered from wanting to get everything at rock bottom prices; for them L1 pricing was the only way to do business. That is how ROI was always best ! The CFO being in a position that he was everyone was terrified to do it any other way. In the quest for value they took irrational decisions and displayed the fabled “penny wise and pound foolish” behavior. No one dared point this out and the realization came ironically from the most expensive no nonsense consultants. A lesson learned the eminently avoidable hard way.

Value can be created even from high cost investments while value can be destroyed even when you pay less. Value is a perception of price paid and has nothing to do with the price.

Nonlinear impact of IT

In recent times we have been talking about business projects and not IT projects that are evaluated on business criteria and require business owners to sign-off the impact it has. The funding for such projects is done by respective business owners and part of their P&L and budget. This has also led to higher ownership and thereby improved success. The enablement and partnering by stakeholders has changed the way IT has traditionally acted in the role of creator of solutions now focusing more on business outcomes.

Many CIOs that I talk to now are creating significant impact with business partnership extending to the customers of their internal customers. The outward focus has created many new opportunities for making a difference to the company. The resulting rise in credibility puts the business savvy CIO in a position of advantage which they are willingly capitalizing. On the flip size it is creating pressure for the IT teams to manage expectations and the pipeline of new projects; an interesting problem to solve.

Not too long ago I was at a conference where the speaker raised the question on how does IT impact the business – process, efficiency and effectiveness. He spoke about looking beyond the obvious KPIs and metrics used by business and IT teams, challenging CIOs to go higher to view the impact technology is creating. A supply chain or customer engagement initiative has larger impact than the immediate efficiency or new capability it creates. The new capability can be a game changer for enterprises competing in a low margin hyper-competitive world.

A company implemented a supply chain project to bring visibility and transparency downstream and upstream. Connecting vendors and suppliers linked to a demand forecast or sell-through resulted in improving the order fulfillment resulting in increased revenue as well as bringing down the holding cost of raw material and inventory. This led to improved customer satisfaction which in turn got them incremental business. Thus the impact was not just visibility; it also created new opportunities with existing customers.

The initial project when it was drawn up had modest expectations of visibility impacting supply and consistency of execution. The result it delivered was however beyond the defined outcomes. The limits were based on known direct impact not factoring in the derived benefits which it actually delivered. It took some time for the stakeholders to connect back these to the small project taken up by IT for the supply chain team. The acknowledgement of the nonlinear impact took a while and raised the team morale.

This case study had every CIO thinking about the nonlinear impact their initiatives had created which they had failed to capture in the post implementation reviews, management debriefs or meetings. Almost everyone had a set of projects that had delivered the ripple effect of positivity which they shared with each other. The speaker urged them to change their thinking beyond the immediately visible to a holistic view of how every project can potentially provide a higher ground for discussion. He also cautioned that It may not be obvious to begin with.

We are all conditioned to believe that large high value multi-functional long duration projects are the ones that create new capability for our companies. I am not discounting this belief; smaller projects too can have a cascading effect that creates a competitive differentiator at least in the short-term. They are rarely captured as baseline benchmarks in the initial stages. The post implementation review (PIR) rigor which is quite weak culturally (except when things go wrong) needs to change to bring forth the benefits.

CIOs move their teams from project to project with a sense of urgency to fulfill the pipeline of new initiatives and keep the business happy. It is imperative for the CIO to enforce PIR for all projects not limited to the traditional post go-live capture of learning, but also review the same again in three months, six months and a year after the solution has been institutionalized. PIR is not about what went wrong and what worked or for that matter whether the stated business benefit was delivered. It can be about the nonlinear impact.

Go ahead and make a beginning and you will be surprised !

IT is windy and cloudy

The last fortnight could be classified as the official cloud period of the year with multiple conferences vying for attention; it also saw business newspapers and magazines write about clouds. A couple of television channels aired hyperbolic programs with the usual set of vendors and spokespersons talking about why enterprises have to adopt the cloud for survival. One of these had an interesting open and candid discussion between two senior CIOs on clouds which kept the organizers on their toes and the audience regaled.

A brave move by the organizers, in an unstructured dialogue with no moderator, their bantering got off to a good start with sharing of experiences on how they had used various technology solutions to create purported private clouds as well as engaged with third party service providers to leverage varied cloud offerings. They unanimously admonished the vendors for creating hype more than they could deliver in reality. The hysteria parallels the dotcom era in its fervor with everything being tagged to the cloud.

The senior retired CIO used his sharp wit and tongue challenging the audience if they had different experiences. He demolished a few hypotheses and claims as myths with no evidence apart from anecdotal references. He sought to differentiate between public cloud solutions for consumers from ones available for enterprise users. The clouds are drifting with the wind created by a lot of hot air in the room, so let’s be practical and realistic in promises to customers on cloud solutions.

We all know that cloud for the consumer has been a big hit connecting mobile devices to ubiquitous cloud solutions offering multiple for purpose apps. Almost all the content is uploaded or downloaded to or from the cloud with seamless access across multitude of devices. Try for free, if you like it, buy it; micropayments allow easy download and upgrades, and if you don’t like it, you don’t feel the pinch. From tweens, teenagers to grandfathers and grandmothers everyone is hooked on in varying degrees.

The corporate journey started with sales applications gradually moving on to full-scale sales force automation solutions; employee self-service and customer facing portals (B2B or B2C) kind of rounded off the foray on the public cloud. Test & Development, archiving, and experimentation of new solutions were the other deployment cases. None of the core applications moved to the cloud; small and medium enterprises, and start-ups though did find the cloud offering quick solutions at affordable costs.

All As-A-Service models worked on the assumption that enterprises are desperate to move their capital investments to operating expense; in reality all of them were not excited. The variability of expenses that clouds promised was rarely delivered with rigid contracts and time to (re)provision. ROI remained elusive in the public and hybrid cloud models, the private cloud (which was created as a term to appease the CIOs who did not embrace the real cloud) did provide some benefit with agility and higher utilization.

Re-purposing a consumer offering to the enterprise (read the micro-app nemesis) has many challenges which I guess will eventually get resolved; the reverse may to the consumer as I know is not been ideated; the boundaries are blurring between the two. While the transactional need fulfilled by enterprise applications will rarely move to the cloud or onto the mobile, information consumption and field data gathering will become key processes working off the same personal mobiles on the public cloud.

With the boundaries between consumer and corporate devices no longer tenable and enterprises adopting BYOD, the next disruption will be the convergence and unification of the consumer and enterprise device, and applications. Until that happens, the debate will continue on where the cloud has a promise for the CIO and where it impacts the person the CIO is. Stock tickers, games, utilities and what have you gratify the individual and are perceived as a distraction and risk by the enterprise.

Coming back to the chat, a vendor in the audience challenged the duo that the vendor had customers who have successfully deployed the cloud but meekly backed off when challenged to verbalize the business case and benefit. The hot air was indeed clouding a normal discussion; so the CIOs agreed to wind up the discussion with the conclusion: clouds are here to stay, they are/will be a part of the IT setup, don’t go gaga over it, be pragmatic, practical and deploy only if it fulfills a business need. Sound advice if there was one !

Feeding the Elephant

Recently I participated in a Big Data conference which boasted of speakers of all shapes and sizes (literally too) from government, global multinationals, large enterprises, to vendors and academicians rounding off the tail. The audience filled the room to the brim with expectations of gaining insights from the deliberations and debate. After all, according to IT research analysts, Big Data is one of the key technology trends on everyone’s agenda and priority list. It’s like if you are not doing it, then you are Jurassic.

The agenda comprised of speakers from all mentioned above; some had done it, some were selling wares with titles containing “Big Data”, a couple of consultants and service providers who offered their “expertise” on the subject, and finally a CIO to provide an enterprise perspective of how are corporates looking at it. All in all it was an eclectic mix which promised to give value for time invested to the organizers and participants. I took up a corner perched at the edge of my seat and watched the proceedings.

Setting the foundation the keynote speaker talked about the concept, progress made by IT companies, known deployments of Big Data by a few FMCG, internet companies, and government agencies. A case study of a potential big data application at a government initiative demonstrated the dimensions of Big Data, i.e. Volume, Variety, Velocity and Value. Everything was going well thus far with the audience – a mix of technology staff, IT students, and some service providers – lapping it up all.

Then events took a turn that changed the atmosphere in the room; everyone sat up awoken from their stupor and peaceful existence in the cushioned chairs. Like falling off a cliff was how a participant described it later; the turmoil changed the agenda and the utterings of future speakers who were cautious in their exultations of Big Data. The speaker exceeded his time; no one interrupted his thought train. He challenged everyone to challenge his hypothesis; none did. He was the CIO talking about relevance to the corporate.

Who needs Big Data ? Where does it fit into the maturity curve of an enterprise using Business Intelligence or Analytics ? How do you partner with business who is still swamped by reports or dashboards at best ? Actionable insights ? When does a data warehouse become inadequate and Big Data become necessary ? Is it about unstructured data only or volume of data or complexity of analysis ? Is analysis of social media tags or text Big Data even when volume is low ? So what is Big Data ?

Consultants and IT companies have developed models and tools respectively to hypothetically help companies mine the sea of data. They have been talking about uses and value across industries based on some assumptions. A few pilots with companies have not empirically demonstrated a correlation between the Big Data analytics and the benefit. Internet companies have used scalable models of their earlier working solutions as they grew; e.g. recommendation engines, product associations, etc. These are not new.

Is it just hype or a technology solution created for specific purposes now being touted as nirvana for all kinds of data problems or analytics that have historically belonged to the data mart or data warehouse ? The CIO challenged the audience to clear their vision, heads, and minds and think rationally on what is the business problem they want to solve before deciding on the tools and technology. The yellow elephant in the room cannot be ignored; its relevance however needs to be established before feeding it.

At the end of the session which led into the lunch break, the CIO was hounded for his contrarian views; everyone wanted a piece of advice and some wanted to debate their conflicts in private. The poor fellow was deprived of lunch with the next session being ringed in. I believe Big Data like any new technology trend needs evaluation in the context of the enterprise’s reality. Is there benefit to customers or employees ? If not why do it ? Like my old CFO friend said “If it makes cents, only then it makes sense !”

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 ?

Return on Investment, Intelligence or DR

Considering that almost everyone is at some stage of the next year’s budgeting process, ROI has been dominating mindshare. Amongst these were two discussions around return on Business Intelligence and return on Disaster Recovery. Both are fairly nebulous in their manifestation, and difficult to put a fix on the number that can satisfy the CXOs, especially the CFO and the CEO.

Business Intelligence is a discipline that as an enterprise orphan suffers from detachment from its real users and owners, largely due to the technology’s complexity. Thinking beyond conventional reports to analytics is a leap of faith, and the enterprise’s ability to formulate and use trends and associations that are atypical. In the flurry of operational activity, discretionary time is a luxury that many can ill-afford. Thus, most organizations end up with expensive automated reports which serve the same purpose that ERP reports did earlier.

Disaster is something that strikes others; so why put aside significant investments, time and effort that could be used to create new capacity or build additional capability? With a few exceptions, almost everyone has a disaster recovery plan on paper nominally funded, rarely tested end-to-end, and seen as an item necessary to pacify the statutory auditors. Should an untoward incident strike, the ability to retain continuity of business would not withstand the rigor of time and process.

In both cases, continued budgetary support is seen as cost and not as an investment. The discussion on ROI is thus fraught with danger avoided by the CIO, challenged by the CFO and others. Is there a way out of this predicament? Definitely yes, but it requires the CIO to approach the discussion a bit differently maybe play a difficult hand; conventional dialogue will not change the outcome.

One track that some have used is to debate the absence of these solutions, what it implies and the associated risks. Absence of BI may probably not be treated with the respect it should, as transactional reports are also possible from the ERP systems and the belief that everything else can be done in a spreadsheet. So a BI discussion has to be guided towards the benefit to different stakeholders and possibly transferring ownership to one of the business CXOs. IT should not be the driving force and implicit owner. After all, the starting point of BI is B-business.

The absence argument has better traction with DR; with the primary systems being out for a period of time, the impact with varying degrees will be felt by everyone, irrespective of industry segment. The time to recovery will decide the type of DR option to be executed. DR is also synonymous with insurance. No one wants to die, but almost everyone buys insurance. So if the data center were to pop it, DR does step in and take over (hopefully, and that is where the discussion went awry).

Are there any models that can be universally applied to formulate ROI on BI and DR? Unfortunately, even those that exist (perpetrated by vendors or consultants) are being challenged to shorten the payback period. Innovation is pronounced after success is evident else the debate will get ugly. We all know that “insurance promising ROI” is not insurance, we are paying more than we should.

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.

Justifying IT budgets and the bicycle stand syndrome

A long time back during a budget meeting, one of my CEOs narrated a story (or maybe a fable) on Boardroom discussions on budgets. This story has stayed with me for a long time, and the memory was refreshed last week in a discussion with some industry leaders. Here’s the story:

In the Board meeting of a large and successful company with multiple manufacturing plants, two agenda items were tabled; first to discuss $400 million investment in a new manufacturing facility, and the second the layout including employee amenities of the same manufacturing plant. The second agenda item was unusual for the board to discuss, but found its way into the chambers since the Employee Satisfaction Index at one of the older plants was low. The financial proposal was tabled by the Head of Manufacturing, with added guidance from the CFO. The resolution was passed unanimously, and done with, in about half an hour.

However, the discussion on amenities took almost two hours — with the longest time spent on the location, structure and type of the bicycle stand. Everyone had an opinion, and disagreements continued until the Chairman of the Board decided to put the debate at rest by appointing a committee headed by the HR Head to review other plants (including those of competitors) and table the recommendations in the next meeting.

Last week, the meeting with fellow CIOs and a few marketing heads veered towards budgeting and ROI. Snide remarks aside, the debate on how these distinct functions justify their million dollar proposals took an interesting turn. When the CIO presents a business case for an enterprise wide system that potentially benefits everyone but requires significant participation and change, it takes immense effort and documentation in order to get everyone to listen, review and agree. Multiple iterations are the norm, and a chain of signatures essential before the grant of even a tentative approval. Whereas, the CMO sails through in a jiffy citing brand building, customer touch and impact on sales, even when most of them are not necessarily attributable to the discussed campaign or idea.

Why is it so difficult for CIOs to get funding for new projects as compared to, say CMOs? The difference is, I would guess in many parts. To begin with, the language in which these proposals are put across. Another is the change that IT purports to create in a change-averse world. It could also be that marketing as a function always focuses on the end customer, while IT initiatives are predominantly inward focused (though that is changing fast now). The conversation initiated by CIOs when they connect to stakeholders and customers does find traction. So maybe peer learning has to be gained on how to pitch right the first time, every time, and win when every function is competing for the same precious resources.

Scott Adams (of Dilbert fame) in his unique manner put across the marketing formula, “It’s just liquor and guessing”. I have yet to find a good enough one on IT budgeting.