StrategicIT Services
International Data Corp. estimates that companies worldwide will spend over $1.8 trillion dollars on information technology every year, slightly more than the GDP of France or the United Kingdom. The companies that execute IT successfully rarely advertise that fact other than a sentence or two in a press release, preferring to keep their new systems as a competitive “ace in the hole.” The less fortunate corporations quietly write off their IT foray, burying the wasted expenditure in a note on their financial statement that obscures the squandered millions of shareholder’s investments. In extreme cases, the results may push companies to the brink of financial ruin.
The executives responsible for the success of strategic IT have a difficult role to fill. The Board of Directors and CEO regard any large IT investment with a healthy dose of skepticism after the boom/bust cycle of late 1990’s. The CIO is seen by his peers as a glorified network administrator and not a visionary or executor of corporate strategy, while IT usually remains a second string player to the sales or finance organizations of most companies. Similarly, IT regards the finance and executive arm as a bunch of bean counters and Luddites. Organizations where the CIO reports to the CFO are at further disadvantage; as technology is a cost to be managed rather than a strategic asset to be leveraged.
In this environment, organizations of all sizes must decide how IT fits into their business strategy. Is it merely an operational expense that should be mitigated through outsourcing and cost savings, or can IT be used as a true “competitive weapon,” allowing corporate strategy to be executed more quickly and effectively, and staving off external threats?
The Fourth Quadrant
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Too often, technology spend has been a “black box.” Companies in the first quadrant find the CEO and CFO spending large amounts of cash to keep systems running, and rarely have a solid understanding of what they are buying. The CIO at such a company is seen as a technologist with little business or finance acumen, and is often on the periphery of the C-suite, rather than in the “inner circle” with the CEO and CFO.
With the growing prevalence of outsourcing, and demands for increasing fiscal responsibility of IT executives, some organizations have moved into the second quadrant. These companies rigorously focus on streamlining operations and cost-cutting in their IT shops, providing a utility-like service to the corporation at the lowest cost. In these companies, the CIO generally reports to the CFO, and technology planning is focused primarily on cost mitigation rather than strategic investment. These organizations often find the CFO and CIO at odds; how deep can budgets be cut while maintaining an appropriate service level? Many of these organizations are held up as “model shops,” and are quite effective at providing quality operational services at a low cost, but are missing out on a key use for IT: implementing business strategy.
Technology marketing has long focused on the “strategic” value of IT at a superficial level, but under the hood, many in the industry still do not understand how to translate corporate strategic objectives into a technology plan. Companies in the third quadrant realize that IT may meet a strategic objective of the business. A plan to increase customer satisfaction may lead to the implementation of a CRM system, or a large merger may require replacement of multiple legacy systems with package software. Companies in the third quadrant are trying to deliver business results through IT, but often are “blinded” by technology, and lack the focus on business processes and financial rigor that are required to deliver strategic projects with a predictable ROI. These organizations are trying to do the right thing, but often end up with a portfolio of projects that are failing or troubled, or do not deliver on their predicted organizational value.
Organizations in the fourth quadrant have generally migrated from quadrants two or three. In these companies, the CIO has effectively outsourced ongoing IT operations, either through a true outsourcing arrangement, or by delegating the management of these operations to internal resources. The CIO in a fourth quadrant company is a business process expert with financial acumen first, and a technologist second. He or she is a member of the CEO’s “inner circle,” and frequently meets with the CEO to learn about the direction the company is moving in, and what problems or opportunities the organization is facing where IT could be applied as part of a comprehensive solution. The CIO also holds similar meetings with other leaders in the organization, developing a portfolio of projects that will deliver on corporate strategy with a predictable return on investment, and is an expert at project portfolio management (PPM).
The technology organization itself consists of several project teams, composed with resources who have strong knowledge of business. Areas where niche technology expertise is required are staffed with temporary resources, and IT monitors its increasing competence in understanding and delivering efficient business processes rather than chasing the latest technologies.
Prevoyance Group will help your company move its technology organization into the fourth quadrant. We act as a trusted partner to your company, at all times seeking to increase the value generated by your IT organization, rather than trying to sell implementations or software. Our sole goal is designing and implementing a plan to move your IT shop from an expense to a value engine.
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