Welcome to the New World: IT Moves from Cost Center to Value Driver

Two recent articles caught my eye that deal with a key topic at the center of the changing role of the CIO in today’s business world. One is a Wall Street Journal article that highlights the new stature of the CIO in today’s digital economy. The WSJ cites that more than 53% of CIOs now report directly to CEOs, as opposed to 46% some five years ago.

The other article, from McKinsey, highlights five questions that executive boards should ask CIOs in the digital world. Together, these articles emphasize the fact that CIOs and IT organizations are very much integrated with business strategy as well as execution. It’s no wonder then that boards and CEOs alike are becoming increasingly interested in evaluating and boosting IT performance.

Moving Beyond the Preoccupation with Costs

We have a new world order emerging — one in which IT and technology are driving business competitiveness and success as well as becoming a fundamental part of company operations. As a result, CEOs are viewing IT in a different light, as an enabler of growth and revenues rather than just a cost line item.

The McKinsey article in particular urges the board to look beyond costs and headcount and ask questions such as “How long does it take the IT organization to develop and deploy new features and functionality?” The article goes on to say that boards need to master a new language focused on digital themes such as speed to market, agile product development, platform-based delivery models, and the benefits and challenges of analyzing various forms of corporate data.

What are the implications of such an approach for IT professionals? To begin with, the conversations will migrate from painful cost-cutting discussions to more investments-oriented analyses. The rank and file on the business side will see their IT counterparts as their business partners, on whom they depend for their success. That’s positive for IT professionals, as IT can provide critical inputs and new ideas on leveraging new technology to drive business performance.

The New Efficiency-Driven IT Organization

At the same time though, IT will also have to be far more metrics-driven — not so much from a technical or cost perspective, but from an operations and business angle. For example, rather than explaining the headcount of a project, IT will have to explain which projects are running behind schedule and where scope can be cut to meet schedules. This is because reduced scope usually means fewer features, which would translate into limitations for a business process or an initiative.

In addition, the business will challenge IT to perform more efficiently and use the same yardsticks that businesses use to measure themselves. This would mean higher SLAs, higher mean time to restore service, and lower MTTR for all incidents and requests — especially those related to revenue or customer service/operations systems. Finally, introducing more features at a faster pace translates to more changes being pushed through the system, but without impacting service stability and performance. In one case, McKinsey cites a travel company where the board monitored IT productivity and quality by tracking metrics related to incidents and enhancements reported per software application, help-desk staffer, or call-center employee.

Analytical Frameworks for IT Performance Improvements

At Numerify, we think these are positive changes that bode well for IT leaders and professionals. IT will become more metrics-driven and will prioritize performance improvement initiatives. I have already met quite a few IT leaders who have created analytically driven teams with the explicit responsibility of identifying and fixing inefficiencies in their organizations. Some of the teams are adopting CSI framework from ITIL, while others are following Six Sigma. Still others are working with business counterparts to translate business objectives into IT metrics and goals.

Have you seen a noticeable transformation in your company at the top or bottom level on how business works with IT? Does your organization have any initiatives to use data and analytics to drive improvements in IT performance? If so, we would love to hear from you.

[Photo courtesy of flickr.]

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