CIOs: Talk to your CFO and agree on how you define IT value

charlesbetz.jpgBy Charlie Betz

 

Charlie Betz is research director for IT portfolio management at Enterprise Management Associates (EMA) and author of the white paper, “Business Intelligence for the Business of IT.”

 

In my last few posts I’ve written about the changes in commoditization and sourcing that IT leaders have to navigate today. The implications of cloud and supply-centric thinking in IT mean that many CIOs end up reporting to CFOs – in effect they become supply chain managers. Regardless of who you report to, it’s important not to lose sight of the fact that IT isn’t just about supply. There’s also demand. And this is where you define IT value to the business. CIOs need to have a frank, fundamental discussion with their CFOs and ask: What does IT value mean for us in this company?

 

The answer can fall along a spectrum of everything from utility IT to IT being a strategic differentiator. But if at the end of the day, the CIO and the CFO are not on the same page as to what IT value means for that company, it’s going to be an unsuccessful relationship.

 

How well do you understand demand for IT?

Say you have this conversation, and the CFO immediately defines IT value only in terms of minimizing costs and reducing risk. That says right there that the CFO is very biased toward a supply-chain way of thinking. What you need to ask then is: How do we understand demand for IT services? Because that’s where value is first understood. People don’t demand an IT service unless they have some idea of the value it would provide them.

 

Now, sophisticated supply chain managers might say, of course we understand demand. But there’s the danger that they are biased by their sources. Someone can have a purchasing catalog, and great, you can go there and order something from it. But that doesn’t prove they understand demand at all. Because they are biasing the discussion with what they can offer, not what’s possible.

 

Start with business relationship management

How do you make the case for the demand for IT services? It starts with a business relationship management (BRM) function. ITIL actually added that as a process in the 2011 refresh. So BRM means you’ve got somebody who’s paid to serve in the critical liaison role between IT and its business customers.

 

So this BRM person can go out people in the business and ask what IT value means to them. Don’t bias that conversation by starting out with what IT has already or what IT can offer. That’s a fundamental flaw in IT thinking. Instead, the conversation needs to be: What do you need? What does good look like? Of course, at a certain point you have to focus on what’s feasible. We don’t have computers that can predict the weather with complete accuracy, for example, so that’s out, no matter how useful that would be. But don’t start the conversation out of a sense of limitations.

 

The power of demand

People working with computers 70 years ago would be amazed if they were to come back and see what we’re doing today. What we do with computers is going to continue to evolve. Demand for IT services is going to continue to evolve.

 

As the pendulum in IT swings toward commoditization today, it’s important not to get so caught up in sourcing issues that you lose sight of IT demand. By paying real attention to what value IT can bring, and formalizing that with BRM, IT can become a driver of strategic innovation in the enterprise.  

 

More by Charlie Betz:

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Labels: IT Value
Comments
Nadhan | ‎10-01-2012 03:28 PM

Charles, You make a great point about the need for CIOs to factor in the demand for IT services when having the conversation with the CFOs.  It is an important perspective that brings a whole new dimension to the 5 steps that must be taken to compute the cost of cloud computing.

 

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