Mark McDonald

It’s near the halfway point in Fiscal 2009 for many companies and its time to take stock of what is going on now and start planning the resources needed for 2010.

It is also a critical time for CIOs, particularly those who have been urging their teams to ‘work harder’ or ‘do more with less.’  These CIOs face the greatest challenge of all when it comes to 2010 budgeting.  That challenge can be easily summed up in the words of one CFO:

“We reduced your IT budget last year by 10% and nothing bad happened, so we are going to reduce it by another 10% this year.”

You can see the CIO’s dilemma. 

“Sure nothing bad has happened, but that is because we are working hard, we are short staffed, we are doing heroic things to keep systems going, we have answered the challenge for this year and cut the budget, but we need some of that money back as we are running too lean.  I can not tell you what will break, but I am sure that something will if you keep this up...”

The CIO has become their own and the IT organization worst enemy, by doing more with less, they make that the mantra for managing IT until something breaks.  When that happens, its often the CIO who pays regardless of how many times they warned of the risk, or told the CFO and CEO that IT was becoming a calculated risk.

Lets be clear, I am not saying that you should let IT break to make a point of its role and criticality in the enterprise.  That would be irresponsible and unprofessional.  Please note that I am deadly serious about the above point, no wink-wink or anything like that.

CIOs need to show that; yes they have done a good job this year delivering IT services with less resources.  But without some structural investment and change, simply doing more with less sets the stage for a major IT failure.  It is not a matter of ‘if’ but ‘when and how bad.’

How do we know? 

Well we have talked with IT turnaround specialists about the nature of catastrophic IT failures – the kind that get the CIO and senior leadership team dismissed.  The IT turnaround specialists experience covers more than 40 major IT turnarounds and they all point to underinvestment in IT as the primary cause of IT failure.  The full report “Maneuvering an IS Turnaround” is available to Gartner Executive Program Members – subscription required.

So what is a CIO to do?

First remember that IT is not alone in the need to reduce their budget.  Other parts of the organization face the need to reduce their costs and those reductions will have an impact on revenues, operating costs and customer service.  Look at how others are positioning their budget issues, the implications of those issues, the framing of the decision. 

Look at how marketing is positioning the tradeoffs between their budget and sales.  Their communications form a pattern for connecting budget reductions and revenue.  Understanding the mental models used to communicate revenue changes will help you communicate the business impact of changing customer service levels or technical capacity. 

Pay particular attention to the executives responsible for production processes (manufacturing, supply chain) as they face the need to maintain and invest in infrastructure to keep costs down and availability up.  They can defer maintenance only for so long before the quality presented to the customer suffers.

These are hard and complex decisions for the CIO and the entire organization. 

Executives, including the CIO, are used to making business decisions.  However, when the CIO frames the IT budget decision in technical terms it puts the CIO in a weak position.  Weak because, you are asking them make a decision outside of their expert judgment.  That judgment comes from their experience that guides their evaluation of options and choice.

Use the terms and frameworks the other executives already know to help them apply their expert judgment to the situation.  Position the IT decisions using these terms and frameworks to leverage what executives know, their ability to decide and make the right choices even when they are tough.

Submit a Comment »

Category: 2010 CIO Strategy     Tags: 2010 planning, IT budgets, IT Leadership

Share

Tweet