Global CIO: CIO As Chief Cost Cutter: It's Not Enough

Feb 27, 2009 (07:02 PM EST)

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If it's true that when all you've got is a hammer then everything looks like a nail, then CIOs need to be careful that their current and temporary focus on cost cutting doesn't end up relegating them to permanent positions as penny-pinchers on the CFO's staff.

There's no question that CIOs need to be deeply involved in identifying and squeezing out nonessential costs -- with the IT organization's unique opportunity to see the web of business processes that run across the entire organization, CIOs are in a great position to attack inefficient systems and processes and liberate precious cash.

But cost cutting alone isn't enough. At some point in the future -- perhaps by the fourth quarter, or maybe even into 2010 -- the American economy and the world economy will turn around and customers will start spending again, and suppliers will start supplying, and factories will start buying and building, and logistics companies will start planning and shipping.

And when that happens, will your customers be satisfied with the capabilities your companies had in late 2008 before your company and you and your team went into lock-down mode and focused all your time and attention on cutting costs? Will your business partners across the organization be able to compete aggressively against companies that have continued to innovate during the downturn? Will competitors that have cut not only costs but also product-development time and customer-engagement cycles box your sales team out of opportunities?

If you let rigorous but essential cost-cutting morph into a broader disconnection from the needs of your customers and the evolving marketplace, how will you make up for that lost time? Odds are, you simply won't be able to -- every industry and every market is operating in faster and more-relentless cycles today than they were a few years ago, and the odds of playing a successful game of catch-up are not good.

At a roundtable meeting yesterday morning of business technology executives in the financial industry, about 10% of the attendees said that they have zero interest in pursuing innovative ideas because they and their teams are totally focused on completing the integration work tied to major acquisitions that have been made recently. Another 25% to 35% said their bosses have sent very clear and unmistakable messages about where to focus: The only priority is to survive.

More Than Survival Mode
But about half of the 25 business technology executives in the room said they have no choice but to find ways to help create future products and services, regardless of how bleak the current economic climate is. "In financial services, the technology is the business, and the business is the technology," one attendee said. Others said the current difficult environment is creating an opportunity for IT departments to work even more closely than before with LOB teams to squeeze out inefficiencies, to refine processes, and to close the deadly gap that all too often exists between IT organizations and the rapidly evolving needs and demands of customers.

The pressure to let these imperatives overwhelm all other possibilities is enormous these days. Here's how Sunoco CIO Peter Whatnell described it in a recent discussion: "The mindset many CIOs are bringing to the table these days is, what can we do right now to bring benefit very quickly, whether that's saving money or saving time?

"In large part, that's because projects leading to savings are easier to quantify -- conversely, if you say we'll grow market share by 2%, you're held hostage to enormous external factors such as the economy or market factors out of your control," said Whatnell, who gets to speak with many of his CIO peers as president of the Society for Information Management.

And then Whatnell said something that jolted me: "I never hear anyone talking about growth strategies these days." Clearly, Whatnell carries enormous credibility and authority and his counsel should be considered very carefully.

But I still think it's not enough -- it's just too risky to cut off all connection to the future. And since discussions of risk management are all the rage these days -- with good reason -- consider these three scenarios:

  • If your CEO asked you to brief the board tomorrow on the mobile strategy you began to lead last summer that extends from your field sales force to your logistics department, is that a presentation you'd be looking forward to? Or would you be kicking yourself for having neglected this project because you were "too busy" slicing nickels?

  • Through acquisitions and consolidations, your company has 14 different customer databases and last year your team was about to launch a database-consolidation effort that would allow cross-selling and up-selling. But when the cost-cutting mandates were launched five months ago, that project was put on hold. What will you say to your LOB friends when they tell the CEO you promised them this indispensable unified database by May 1?

  • In the middle of 2008, your team did a terrific job of showing how a move to SaaS and cloud platforms for select apps could speed processes and cut costs significantly provided you would authorize the hiring of some great but pricey SaaS integration specialists. You agreed, but required that the integration specialists put together a detailed plan for how the project would roll out and what it would deliver -- but before it came in, the Big Freeze arrived and the project was put on ice in spite of the fact that it would eventually lead to lower costs and better performance.

So right now is the time to ask the question: What's the proper balance between lockdown and forward-looking innovation? How can you deftly manage the relentless pressures of today's cash-management priority with an externally focused attentiveness to the marketplace from which future revenue will come?

Even more important, right now is an excellent time to pull together a plan for innovation during cost cutting -- you and your team already have made all the big cuts and diminishing returns are setting in. Share that plan with your C-level colleagues and with the LOB heads who depend on you and your team for indispensable expertise and partnership in creating your company's next wave of products and services. Communicate these important imperatives energetically to your team and be very visible in setting the tone for how you can both maintain great discipline on costs and continue to play huge roles in transforming your company's products, services, processes, and value to customers.

And as part of that strategic plan, you can surely lean hard on your IT vendor partners, many of whom have been recrafting their messages to align with the cost-cutting imperatives of today. These new programs from vendors are very real -- we heard them from a dozen tech companies in various markets during a tour of the Bay Area last week. Push those ideas out to your colleagues and use them to show that you can leverage that support to handle cost cutting plus innovation.

Because, while expense control is an unmistakable part of your responsibilities, your primary objective as CIO is to help drive greater business value and customer value, and no amount of blunt-force cost cutting will deliver on both of those goals. Cost cutting is not enough.

GlobalCIO Bob Evans is senior VP and director of InformationWeek's Global CIO unit.

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