Mark McDonald

Ken McGee, Garter VP and Fellow began asking an interesting question last year as the economy slipped into the Global Financial Crisis – how busy are you in IT? 

The answer came back, almost universally, busier than ever. 

What gives?  In one dialogue we are all talking about the cost cutting we’ve done, how scarce resources are etc. and in the other hand we are busier than ever, there is more demand for our services, the business needs IT more than every. 

These two forces have been pulling CIOs in opposite direction throughout this year.  So what is a CIO to do?

Well the answer quite simple.  For CIOs, they face the need to work smarter rather than working harder.  The time to “do more with less” has passed.  So with that in mind, CIOs should be looking to take actions to raise the productivity of IT.  That can be measured many different ways, but perhaps the best way to measure it is throughput – the amount of work done by the same set of resources.  The issue of throughput is the topic for another entry.

Raising productivity is a sensible response.  If I am able to do more, and there is more demand, then I can create more value.  The logic is simple, clear and business focused.  The idea of raising IT productivity to do more with the same resources should be a win-win-win, for the enterprise, the CIO and IT personnel.

However, when presented with the idea of increasing productivity at a CIO meeting recently a CIO mentioned “well if I make my team more productive the CFO will just cut my budget.”  It was a sentiment shared by many IT executives in the room.  They were all there shaking their head yes that greater productivity would result in greater staff cuts.  At the same time they are saying that demand for IT has never been greater – how can this be?

This exists because CIOs have two competing models in their head.  A market based model of supply and demand and a resource allocation based model-also known as the budget.  The latter reflects reality, the former a wish for many.

Market based models of supply and demand are not applicable in the provisioning of internal enterprise services for IT.  There are a whole host of reasons for this, again another blog entry, but recognize that there is no ‘internal market for IT.”  So attempts to match IT supply and demand, particularly at a fixed ‘price’ do not behave like

The IT marketplace is one of resource allocation, not according to a pricing mechanism, but in terms of a governance mechanism.  Governance is a dirty but necessary word, but someone needs to make the decisions about how to allocate and oversee resources.  Unfortunately it is often the case that executives cannot make these decisions easily and wind up defaulting them to the budget process, under the rubric that if we cannot figure out our priorities, or more accurately they are in such fierce competition that we cannot sort them out, then lets have everyone suffer and restrict supply.

In a resource allocation model it makes perfect sense to reduce IT resources as IT productivity increases – particularly if you are looking to ration resources across the enterprise.  In this case the goal is not to get more for less, but to get a predictable amount at a predictable price.  Resource allocation satisfies issues of budget and control, but not the issue of value and strategic need. 

In a resource allocation model it makes perfect sense for IT resource to be cut as it becomes more productive regardless of demand.  Resource allocation is more important than demand, more important than strategy, more important than the opportunities presented in the market. 

Resource allocation models penalize effective management – the good management penalty.  How?  Well by seeing the productivity gains of good managers as windfalls, that are to be clawed back into the enterprise and redistributed to support those functions that are not able to make their plan.   It’s the classic’ punishing the innocent and rewarding the guilty” model.

Resource allocators put up political barriers in the belief that if the need is really that important the executive will fight for it – effectively raising the political and operational price of change.

Don’t play this game, as the CIO and IT cannot win.  Play the game you can win, which is more about value created and realized than resources managed, supply and demand, etc. 

Playing a business value game revolves around increasing IT productivity and then applying those productivity gains to handling a broader set of enterprise priorities and creating more results for the enterprise.  The rules of this game are simple:

1)   Use your IT governance mechanisms to have the business give you a list of priorities, don’t make them up yourself.  The CIO cannot be a business leader if they are also the prime resource allocator.  When others want to give you that responsibility by either not providing a plan, or failing to engage in the discussions related to trade-offs, point the issue out and leave it on the table.

2)   Deliver the first things first and faster.  Inject schedule (time) into the portfolio process to recognize that the high priority things are the most important and allocate your resources in that way.  Do not spread yourself people, priorities or actions like peanut butter across the enterprise.  That is just resource allocation in disguise and it creates a sticky mess where you do a little for everyone, but nothing for everybody.

3)   Raise IT productivity.  Take the steps necessary in terms of process improvement, skills, organization, etc to increase IT throughput.  Working smarter, rather than harder will be good for your people, will create more value and give you all something positive to work with.

4)   Don’t tell anyone that you have increased IT productivity.  Reporting that we can now support the same work with less people is like blood in the water to the resource-allocating shark.  You should be understandably proud of raising your productivity, just don’t show it that way.

5)   Apply more productive IT resources to deliver more of the priorities and create more value.   If you are delivering more, getting greater results either in terms of quality or in terms of both quality and projects completed, let you r results speak for themselves.  If demand

6)   Keep track of the results; make them visible, not your resource model.  This means showing the completed number of projects, the resulting business value constructed, the changes in average cost of infrastructure and operations, the degree to which you are protecting the enterprise.  Show the results so people talk about what you have done, rather than the resources you have consumed.

7)   Recognize when people are trying to play a resource game and politely play with others.  People will notice the increase in productivity and the resource allocators will try to cut your budget, beat them to the punch by going to the executives who benefit from your new productivity – line executives, the CEO, etc.  Show them what you intend to be able to do with this increased productivity – show them the forward value stream they could be getting.  Make the decision a trade off between the value stream and the IT budget/resource allocation.  If you just play the resource game then you will lose.

This game works if the demand for IT is greater than the supply.  Ken’s original question was a good one; it highlights the competing forces pulling on the CIO.  Resolving that tension is the goal of a good business executive – and that starts by playing the right game.

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Category: CFO CIO Leadership Strategy     Tags: IT Economics, IT Leadership, IT strategy

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