CIOs fall short in building bridges with corporate finance when they do not speak the language of the business. CFOs and other CxO-level executives are looking for IT executives to measure IT performance in the context of the corporation and to evaluate technology initiatives post-mortem from a business results standpoint.
These are the sentiments expressed by Toby Eduardo Redshaw, CEO of Kevington Partners and former CIO for American Express, Aviva plc and corporate vice president of IT with Motorola, during a recent interview with Nearshore Americas. Redshaw believes that the most effective CIOs will have broad technology expertise while at the same time understanding that IT serves the mission of the larger organization.
Experts in the industry concur with Redshaw’s sentiments. In ZDNet’s November 2013 article The strange life, death and rebirth of the CIO and what it means for the future of IT, Steve Ranger quotes Alastair Behenna, an analyst with Forrester Research as saying, “Some CIOs get it, some don’t. Becoming more strategic is important, and that’s what’s going to make the difference. It’s not about keeping their hands on the tin, it’s about using it for business value. Some people will thrive and some will not.”
Later in the ZDNet article, Behenna elaborates, “whereas the CIO’s role in the past was to manage technology efficiently, business expectations around what technology can deliver have changed significantly in the last five years. As a result, the CIO now needs to demonstrate how IT contributes to the bottom line.”
Historically, IT has not tuned into the business on its own turf and yet has been the recipient of millions of dollars of investment for a host of technology solutions. Redshaw believes that “IT is out of sync with finance,” simply in how it manages its organization. Instead of running technology as a business, CIOs and other IT executives commonly measure and manage based on technology-driven metrics.
Redshaw explained that three mistakes are often made by IT leaders, including:
- The score in business is in dollars and cents and yet, IT typically uses a host of technical metrics that “prove its value.” These technical metrics are not meaningful to corporate finance.
- Reporting in IT is almost always done in terms of budget and headcount numbers when IT leaders should be measuring how technology contributes to the delivery of business objectives.
- IT executives typically lack the skill and insight needed to build internal and external partnerships.
The most effective IT executives will learn to speak to the business on its own terms. Redshaw believes that IT executives fail to circle back around and prove the value of successful technology deployments. Instead of building on a winning strategy, the CIO can lose credibility as they have asked for investment, delivered and yet not educated the C-suite about the outcome or results of the technology business case.
Meet Toby in person at next week’s Nexus 2014, where he will moderate the “CXO Super Panel”
There are tools and services on the market that can help IT move towards managing IT as a business. While it may appear counter-intuitive to pursue expense dollars to deploy such a tool, doing so may be the leverage IT needs to maintain its strategic role in the enterprise and develop a partnership with the CFO. An astute CIO will explore IT Financial Management (ITFM) solutions as a means to build credibility with the CFO as technology grows as a source of corporate innovation and competitive differentiation in all vertical segments.
One such tool is from a company called Apptio, whose solutions help IT run as a business. Many business performance solutions are available from the company and perhaps most interesting is its IT Benchmarking solution which enables business-savvy CIOs to measure performance of their IT organization against business metrics from similar companies. For instance, a CIO can assess their infrastructure costs, labor costs and many other factors that are relevant to the finance office. These metrics enable the CIO to demonstrate performance of IT within the context of its peers; illustrating an understanding of the vertical as well as business performance metrics.
Apptio has developed the concept of technology business management (TBM) to address the need for managing business metrics even within the IT domain. Additionally, the company started an organization called the TBM Council to provide a forum for CIOs to network and address contemporary needs for managing the business of IT. Nicus Software and ComSci are two other examples of the growing realm of ITFM solutions.
Advice for CIOs
Sourcing decisions can be a great way for CIOs to build a relationship with finance. Redshaw explained that “IT executives need to find things to give away.” He acknowledged that the expertise required to get technology projects off the ground and delivered is immense and the most effective CIOs have a technical background. Yet, he believes that CIOs are “not humble enough” when it comes to sourcing decisions. Many choose to retain IT functions internally, believing the company is best-equipped to provide the service, when outsourcing might be a better choice. Redshaw went on to say that “IT needs to focus on what really matters.” Outsourcing affords the CIO the opportunity to reduce costs and more importantly address more strategic projects—a shift that will win respect by demonstrating that IT understands business decisions.
The CIO needs to be selective in the “smart use of tools” as Redshaw put it. Tools cover a lot of domains including infrastructure, business process management (BPM), big data, analytics, using agile to scale, consumerization, mobility, etc. The trick is to apply meaningful technologies and trends in a way that helps the company to move ahead of its competition. Outsourcing more routine functions makes room for consideration and pursuit of new technologies.
In March 2014, a new book on the topic of the CIO’s role was released. Author Dan Roberts and Brian Watson interviewed CIOs to gain insight from successful CIOs. The results, as explained in HP’s article, CIO ‘confessions’: 5 critical attributes of the best IT leaders, indicates that “They’re leaders, not techies. They talk business, not bits and bytes,” says Watson, the former editor in chief of CIO Insight magazine. “The CIO of today—and most certainly of the future—needs to navigate the C-suite the same way the other occupants do.”
Over time, Redshaw expects the role of the CIO to “bifurcate into those who do and those who don’t.” In short, this viewpoint is simply to say that those who do will put technology to use and communicate with the business on its own terms–financially and with regard to overarching business goals. CIOs who do not will continue to measure technology success on the basis of the technology itself.
Redshaw believes that CIO’s have a responsibility to support their organizations by:
- Protecting the company’s brand which is exposed due to the proliferation of social media.
- Implementing robust security in all technology domains to mitigate risk factors.
- Understand trends specifically to innovate and educate the company about technologies that add value to the bottom line.
- Build relationships with all that influence the business’ success. This includes regulators, industry organizations, internal departments, etc.
- Increase output per unit dollar cost for technology investments and labor – reducing cost as technologies become less expensive.