Programmed for recovery

Smart CIOs realise that there's a lot more to surviving a downturn than cutting costs and waiting for the storm to pass. A bold IT strategy can boost productivity today as well as laying the foundations for growth when the upturn comes. Paul Fisher explains how.

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Last Updated: 09 Oct 2013

In December 2008, the Financial Times reported that workers at some of Silicon Valley's biggest-name companies would be spending a lot longer with their families over the holiday. Cisco, HP, AMD and Dell were some of the IT giants closing down operations for an unusually long time, in response to the fall in orders from the world's IT departments. The recession was hitting the big IT vendors in their heartland.

It highlighted the fact that, all over the world, chief information officers are taking the first obvious step in surviving a recession - cutting down on their spending. But is that enough? After all, any department can reduce costs - usually by reducing headcount. Unique among their peers, CIOs may have at their disposal the means not just to help their business survive the recession but to remain competitive and to emerge stronger when trading conditions return to normality.

'There is an opportunity to be had here,' says Michael Nieves, a senior executive with Accenture. 'Those IT organisations that kept their heads used the last recession to find new opportunities, but those that just swung the axe found themselves in a weaker position.'

However, the role of the CIO is already akin to spinning plates - responding to board demands to deliver IT value, protect the architecture from increased security threats and understand and meet challenging compliance and legal requirements.

Despite this, the feeling persists that the recession could provide an opportunity to finally establish the CIO function at the top of the corporate tree. 'In challenging times, there's more willingness in organisations to change, to do things differently,' says Diane Bryant, vice- president and CIO of Intel. 'Our partners look to IT to help improve efficiency and productivity. There is a significant opportunity in times like this for IT to drive company-wide competitiveness.'

John Thorp, a consultant with IT governance group Isaca, has for a good part of his 45-year career been trying to instil the notion of getting business value from IT investments, and sees the current recession as a perfect opportunity to rethink the role of the CIO. 'Are budgets going to be squeezed? Absolutely. But the question is: how intelligently are they going to be squeezed? You hear a lot of talk about IT innovation, but most of the work is around efficiency. We need to take away the focus on efficiency. Smart organisations will think about what they can do in the future - during the downturn. They need to ask themselves: "What can we get out of this; what can we do to move ahead out of recession faster than anyone else?"'

According to its CEO Russell Bolan, Dimension Data's corporate clients already expect their CIOs and IT departments to be accountable for real business issues and business metrics. 'No-one's in a position to say what will happen in 2009-10 - everyone's very frightened. The problem is that costs need to be cut but the right architecture hasn't been implemented in the past. I've never been deluded that technology can drive the top line, but it can boost productivity,' he says.

The problem is that too many CIOs are either not business-minded or not allowed to be. A cultural shift needs to happen. In most organisations, IT is seen as the department you ring when things fail, and the CIO - the person in charge of those people - is seen as doing a good job if the system architecture functions as it should most of the time.

'The IT department is largely just keeping the lights on,' says Peter Hinssen, an IT entrepreneur and London Business School lecturer. 'Only 10% of time is spent on truly innovative projects. This is a very unstable, unhealthy and dangerous situation. A significant number of CEOs don't understand IT and an enormous proportion of CIOs can't make their case. This is bad at the best of times; in today's economic climate, it's far worse.'

Part of the problem, believes Hinssen, is the nature of CIOs themselves. Unlike the CFO or HR director, they are still not seen as fully fledged C-level executives, and it's mostly their own fault. Given the extent to which IT is embedded in global business and the dependence on connectivity, it seems nonsensical. Yet Hinssen has hope for the future. A new generation of CIOs is showing that they can change, that they are more than just system managers.

He singles out Filippo Passerini, the chief information and global services officer at Procter & Gamble. 'He eliminated the IT department, turned it into an IT community and blended it into the business environment. But P&G did this five years ago, when things were good. Right now, the average MBA would rather be shipped to Siberia than work in IT. In P&G, the best place to work now is the IT department.

'In the US, CIOs are saying IT as we know it is dead, let's change our role,' adds Hinssen. 'European CIOs are waiting for the slowdown to blow over - a mistake. If you were clever as a CIO, you would take advantage of the slowdown. It's a chance to rethink everything: the role of the CIO, the role of IT and the composition of the IT department.

'Most IT departments are filled with deep experts, but commoditisation and consumerisation mean that ordinary people are becoming experts. IT people are finding it difficult to cope with that and change.'

But perhaps that is what's required, because, unlike other enterprise leaders, CIOs have at their disposal not only an essential function but the ability to do things with it - not just to reduce costs but to innovate ways of delivering IT services more efficiently. Uniquely, every other department relies on the architecture that the CIO delivers.

The Boston Consulting Group produced a report on how CIOs can help the enterprise through the downturn. Demonstrating Leadership (November 2008) urges them to push towards stronger corporate governance, aiming at a 'one IT' approach for the whole company. On a more practical level, it hints at the theme of 'make do and mend'. The CIO will be expected to deliver to ever tighter deadlines. 'IT will have to become creative, fast and very efficient. This means considering multi-mode operating models, Web 2.0 or rapid development approaches,' it states. Yet this recession might be the making of the CIO. 'If they can mitigate the worst effects of the downturn, create business value, [they will] enhance the role and perception of the IT organisation.'

That must wait until the recession is over, and to get there CIOs need to look long and hard at what they have at their disposal, what they can cut, what they can re-use and what is not being used properly. For the brave, it could be the moment to invest. 'The best time to invest in new technologies is during a downturn,' says Accenture's Nieves.

As elsewhere, a recession is also a buyer's market for IT. Vendors will have to fight harder for their dollars, and deals can be had. At e-auctions, vendors pitch for the deal, follow up with a proof of concept and then sweat as the CIO decides on who gets the contract.

Says Mike Ansley, VP EMEA at networking company 3Com: 'Customers need to be more aggressive in the procurement process. Our industry's products are feature-rich. It's incumbent on the IT organisation to know why it's buying what it's buying. A mature industry means there is less scope for innovation and therefore for IT to drive revenue. CIOs need to think carefully about whether what they buy or replace is going to add anything to the functioning of the business.'

As companies look at ways to reduce energy costs, green computing may gain traction. A fringe issue at the start of 2008, it is now top of the agenda, and the power consumption of any IT installation will be seriously examined in the next few years. 'Legacy systems, especially those dating from the 1990s, are horribly inefficient,' says Mike Ansley.

In contrast to the recession of the 1990s, CIOs have at their disposal an array of technologies, thanks largely to the internet, and cost concerns will speed the drive towards virtualisation, cloud, grid and utility computing solutions. More prosaically, home and mobile working will be actively encouraged among reduced workforces, while the use of bespoke social networking tools to create 'stickiness' with customers is an instance of how CIOs will work directly with marketing and sales.

The CIO will have to prioritise quickly. Systems that manage liquidity and risk assessment and management must be protected from cuts, and, if necessary, re-invested in. Given the events of 2008 and the cry that 'we didn't see it coming', many enterprises will be looking to the CIO to set up effective risk management systems. CRM and ERM systems will also become vital as businesses fight for dwindling customers. Everything else can wait. So no across-the-board Windows upgrades. If CIOs were reluctant to go to Vista before, they have zero interest now.

It's also a great time for CIOs to 'clean the mess'. Most IT is a muddle of legacy systems, unauthorised software, vulnerabilities and incompatible systems. There are savings and efficiency to be gained by a thorough IT audit of the enterprise, and this is the perfect time to do it. 'The payback on our efficiency programmes is too big to stall or defer,' says Intel's Bryant. 'In 2008, for example, we saved almost $100m through data-centre efficiencies and $45m by consolidating older servers to the latest quad-core solutions.'

The message for CIOs during this recession is to speak up and be bold. Do that and few will have to implement Boston Consulting Group's frightening Plan B scenario: the absolute minimum level of IT service that can be provided before the company is shut down.

And, finally, spare a thought for those Silicon Valley workers. They had to take the enfored days out of their annual holiday entitlement.

SEVEN WAYS TO MAKE A DIFFERENCE

Make your voice heard across the enterprise. Transform the downturn into an opportunity by promoting new technologies.

Perform a deep and honest audit of your systems. Cut what you don't need and invest only in areas that drive revenue.

Make the most of what you already have: much of it is under-used.

Push for the best deals possible from your suppliers - it's a buyer's market.

Make it company policy to encourage home and mobile working - it's an easy win and employees appreciate the flexibility and freedom it brings.

Recognise that cloud, grid and utility computing are no longer blue-sky - they are serious ways to transform your IT and reduce costs

Climb out of the silo. Your department is the only one with the means to change the enterprise. Start doing it.

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