Commoditization has been the buzzword threat for IT professionals for years. This reached a fever pitch with Nicholas Carr’s books about IT. If you wanted to scare a CIO all you have to do is raise the threat of IT becoming a commodity. The commodity threat abated some as people rushed to cut their budgets and do more with less.
As things turn around and IT demand increases, the threat of commoditization will return. It is an argument that is now a red herring. The issue facing CIOs and IT execs is not commoditization, but choice. Not their choice, but the increasing choice business executives have and will have in provisioning IT services and solutions.
Business executives have unprecedented choice. A scant ten years ago, the captive IT organization was about the only game in town for a business that wanted to innovate with technology. Since that time, venture capital and technology companies have invested billions to create technologies that create alternative approaches to the traditional IT organization.
It is ironic. Technology companies have used funds generate from traditional IT to create solutions that challenge traditional IT. I am talking of course about the increasing capabilities of cloud, software-as-a service, managed services, other service based computing models and other alternative delivery models. This should be expected as solutions that bypass traditional IT enable tech companies to address the business directly – a larger potential profit pool than the IT budget.
So what is a CIO to do?
Forget about becoming a commodity and think about how the business chooses you as the preferred provider of technology solutions. Leading from the fear of commoditization is a race to the bottom defined by best value in terms of lower price/performance ratios,
Leading from the perspective of choice requires more. Think back, you did this to some degree when combating outsourcing threats by pointing out your lower overall costs, the things that you did cheaper than the outsourcer, the things that no outsourcer would do, etc. However, combating the outsourcing threat was more of a commoditization argument – particularly if concerns about “security and risk” were used in your argument.
Being the option of business choice requires a positive decision based on a positive argument not one driven by the threat of risk or loss. That requires CIOs to do the following:
- Commoditize the stuff that does not matter, the things that are not essential to driving scale or speed in the business, the things that do not contribute to competitive advantage or capability.
- Concentrate on raising IT productivity from two perspectives: the business power/impact of your solutions and the resource efficiency involved in creating these solutions. Business choice is driven by the value you create which needs to be greater than the prospective value offered by your commercial competition.
- Give the business an experience working with IT: impressions matter when choice is on the line. Commercial competitors get to hide their mistakes you do not. That means that how you do your work, how the business feels about working with you are important factors in business choice. Think about how you work with your customer and if someone treated you that way – would you choose to work with them in the future?
- Be frugal in every aspect of IT: every enterprise is under pressure to manage cost regardless of economic conditions. Being frugal demonstrates that you are spending the company’s money as if it is your own. This means looking for ways to reuse components, reduce cycle times, and gain greater leverage out of your technical and other resources. Don’t be cheap, which plays into the commodity argument. Recognize the difference between cheap and thoughtfully frugal.