What Goes On Behind Your Back

Your company may outsource IT, but your business units will build their own IT systems anyway. Here's how to make sure you stay in the loop.

An IT exec who effectively outsourced himself out of a top job at a huge consumer-packaged-goods company seemed more surprised than annoyed by his old firm's digital strategy.

"They've outsourced everything they think isn't core," he observed. "The problem is, a lot of the stuff the CEO and the management committee says isn't core, the business units and brand managers do."

The result? This executive, who's taken early retirement, anticipates a return to the bad old days of "black market" and "grey market" departmental IT budgets. "You just watch," he predicts, "when corporate IT won't provide them with the system they think they need, the business units are going to go out and build it or buy it themselves. They're going to do what they think is best for their business regardless of whether headquarters thinks it's core or not."

Welcome to the dirtiest not-so-little secret surrounding the rise of recentralized IT management and relentless outsourcing: The P&L businesses will build or buy IT anyway. They may do so with their own IT budgets, bootlegged budgets, slush funds, "consultants", college interns, hackers, geeks, toothpicks and sealing wax, but they will get it. Line managers frequently - and understandably - have radically different perceptions from the executives at the corporate pinnacle of what process, products and programs are at their business core.

If corporate history, human nature and Machiavellian enterprise politics are any guide, they'll also build or buy these systems and apps without either the knowledge or approval of the CIO. This is IT innovation done despite - or in spite of - the CIO. Why? Because CIOs in this era of recentralization, cost-cutting and outsourcing are unambiguously perceived more as managerial overhead than value-added partners. If coordinating with the CIO to deploy a CRM initiative is more costly than beneficial, then the CIO is an enemy, not a business ally.

The result? For a growing segment of P&L executives, the "CI" in CIO no longer stands for "Chief Information" - it's become the acronym for "Centralized Infrastructure". Centralized infrastructures are more about managing cost than spurring top-line growth and profitability. In other words, business units have powerful incentives to cut the CIO out of the loop. That's bad news. "The CIOs I know are way too busy putting out fires, cutting costs and supervising SLAs to focus on the particular needs of a particularly entrepreneurial divisional leader," asserts one KPMG managing director. "Line executives who actually want to grow their business are operating in 'better to seek forgiveness than ask permission' mode. If they think their CIO will help, they'll ask. Otherwise, they have this attitude of 'Screw 'em . . .'

"So if it's IT crap they have to do for the auditors or regulators, they'll get the CIO to pay for it," he continues. "But if it's an app they think will boost margins, they'll just do it by hook or by crook. If it doesn't work out, they'll blame IT for not being supportive enough. If it succeeds, they'll ask for even more money and say that IT is a support function, not a real partner. So, again, screw 'em."

Harsh words. Then again, CIOs have to ask whether they've fallen into the seductive but debilitating trap of supporting strategic corporate objectives at the cost of creatively enabling annual line-of-business goals. (CIO readers who think these two are synonymous are advised to update their resumes.) When CIOs are cast in the corporate roles of "cost containers" and "outsourcers", they're sending a clear signal throughout the enterprise that IT growth investments are a secondary priority. More important, CIOs redoubling their commitment to their C-level colleagues are effectively communicating to business unit executives whose calls and e-mails will likely be returned first.

If you're running one of a company's most profitable business units, does putting your money where your mouth is in IT mean collaborating with a CIO who gets "attaboys" for saying no and sending software development to Bangalore? Or does it mean launching an under-the-radar CRM or sales-force automation or datamart initiative that generates just enough positive results that the management committee literally can't afford to say no to a funding request? You tell me. People who run P&Ls generally aren't fools. On the contrary, they tend to be more pragmatic than C-level executives who are often more beholden to impatient analysts and investors than unhappy customers and clients. CIOs are caught in the middle. On the one hand, they have to make the organizational trains run on time. On the other, they're being asked to build 747s and stealth aircraft for precision market strikes. It's hard to do both; it's impossible to do both well.

Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

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