Outsourcing and packaged solutions have hollowed out IT. Yet CIOs still have the opportunity to create competitive advantage - by differentiating customer-facing processes
At a recent CIO magazine conference, an attendee asked me: "What's left for IT?" In his half-empty, zero-sum world, all he could see - after outsourcing and packaged solutions had taken their toll - was the anaemic "brokering" role often hypothesized for CIOs.
His perspective is consistent with that of executives who have decided they are running a business in decline. In the effort to pump up short-term results, they cut budgets and headcount. The best people escape; product quality and service decline; customers defect; the financial situation worsens; and the negative cycle repeats and reinforces itself. By viewing IT as "half empty", IT executives perversely work very hard to make their dire predictions come true.
Another part of the half-empty mind-set is to view the past through rose-coloured glasses. Many CIOs long for the days when all the technology experts and gear resided under one roof, and they could approve projects and spend money without the bureaucratic hassle of executive oversight.
It's time for a reality check: There were no halcyon days of IT. Since its birth some 30 years ago, our relatively young profession has been struggling to grow up. IT is just starting to reach voting age in those companies where it has demonstrated that value, quality, efficiency and innovation are not mutually exclusive. For less mature IT organizations, there are constraints and consequences: Struggling CIOs are placed in the equivalent of reform school, as evidenced by the increase in the number of CIOs reporting to their CFOs.
Yet a bright future is ahead for those half-full IT executives who understand what's important and how to leverage the world around them. Every organization is faced with the challenge of differentiating capabilities while lowering the costs of two distinct types of processes: customer-facing and non-customer-facing (my source for this model is a white paper by Booz Allen Hamilton, "A New Take on Business Process Redesign").
Customer-facing processes include everything needed to develop and sell products and services: Understanding markets and customers; designing products and services; and marketing, selling and managing customer relationships. The customer-facing processes provide the key source for competitive advantage for internal IT organizations versus external vendors. Applying tailored approaches is fundamental to IT's long-term viability and success.
IT organizations typically do not realize a competitive advantage from most of the non-customer-facing processes, which include fulfilling demand for products and services; monitoring performance; and managing the financial, technical and human resources. Whereas the enterprise will pay a cost premium for custom-tailored customer-facing processes, it wants commodity prices for the non-customer-facing processes. To the extent that CIOs want to keep non-customer-facing processes largely in-house, they must be able to optimize internal processes to keep them competitive in cost and service with external providers.
Your emphasis as a CIO should be on creating relationships with your customers so that you understand their business, their challenges, their data and processes. You should be defining and delivering solutions based on an underlying unified infrastructure platform that supports the unique aspects of the enterprise's customer-facing processes at the lowest possible cost.
Outsourcing and packages are not the issue. If, in the process of delivering against your customer-facing processes, you decide you need to outsource some or all of your non-customer-facing processes, so be it. For many companies, outsourcing is a viable solution to address the challenges of small-scale, headcount constraints and legacy IT capabilities. Likewise, packaged solutions make sense if they allow your organization to operate its non-customer-facing activities in a cost-efficient manner.
Rather than asking: "What's left?" CIOs should be considering how they can lead the customization and tailoring of IT's customer-facing capabilities, while at the same time simplifying and standardizing activities in which IT gains no competitive advantage. According to Booz Allen Hamilton, "internal service providers need to define their core processes from the customer back and redesign them using measurable business value as the metric".
As the IT profession grows up to address this very important challenge, you can emulate those CIOs who are mature enough to see the many opportunities for IT as a cup that is half full rather than half empty.
Susan Cramm is founder and president of California-based Valuedance, an executive coaching firm
Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.