By Denis C. Picard, ComputerWorld.com,
"Cut costs. Reduce staff. Cancel projects." That unpleasant refrain will soon be heard -- or is already being recited -- at companies facing sinking margins in troubled economic times.
Many companies that react to the tough times by outsourcing IT to a low-cost provider or slashing IT head counts will regret those choices. As institutional knowledge walks out the door, poorly conceived cuts will impede management's ability to meet business goals, both in the short and long terms. That said, simply protecting IT budgets from business reality is not a viable alternative.
The challenge for IT leaders is to act before their companies are in dire financial condition. Even healthy companies are at risk from rising commodity costs and declining revenues. The best CIOs recognize that the ultimate measures of IT effectiveness are reflected in their company's performance around cash flow, growth in profits and customer service. Those CIOs are focused on developing and retaining the right mix of skills to produce results for the business as a whole. It's no longer a question of maintaining a large staff, but rather getting the right mix of skills and knowing how to obtain them.
Consider the dramatic changes in the IT landscape over the past 10 years:
-- Customers, suppliers and employees now have global access to information through the Internet.
-- Large software firms have created de facto technology standards that companies can build upon.
-- Many companies have invested in enterprise-class transaction-processing engines such as ERP.
-- Technology has enabled professionals to be productive in or out of the office on a 24/7 basis.
As capabilities have expanded, so have expectations. Systems are expected to be available at all times, from any location. Yet while assuring that systems are operational is necessary for a CIO's survival, it is not sufficient to create success. The best CIOs recognize that a talent shift is occurring within IT departments. For IT staffers, this shift creates stress and opportunities.
Secure, reliable systems are essential for today's IT organizations. As standards proliferate and become embedded in IT architectures, the options for accessing required technical skills increase. Some companies have found third parties to be effective ways to obtain necessary skills -- not as a cost-reduction tool, but as a way to obtain grade-A talent that might not otherwise find the company's technical challenges of interest. Midsize businesses may find this option especially appealing, since they must meet the same technical challenges as large companies, but with far fewer resources. This option expands the breadth of skills and talent available; however, it also requires strong skills in managing vendor relationships to ensure benefits and avoid unproductive finger-pointing.
Another key talent challenge many companies face is to combine technical and business skills in order to solve business problems and reduce the organization's break-even point. Enterprisewide ERP implementations have gone a long way toward building this knowledge, but gaps remain. Some organizations have created "centers of expertise" where the lines between technology and business functions are blurred. The focus in these organizations is on improving the underlying business processes that contribute to shareholder value, blending deep knowledge of business processes with an equally deep understanding of how the software works. Skill requirements have shifted as use of package software has increased. Rather than focusing on transaction processing and updating databases, IT professionals need to add business process knowledge and change-management skills to their tool kits.
Technical skills remain important and must not be underestimated. The technical skills needed in the future are different from what produced success in the past. ERP systems create large databases containing critical information that can provide insight into business operations and customer preferences. Much of this information lies fallow, as executives await help in accessing those insights. IT staffs need to be proficient in mining these databases to identify opportunities for creating revenue or reducing costs. That requires technical skills to properly implement and use business analysis tools to glean insights. It also requires deep analytical skills to know what questions to ask.
The human challenges IT leaders face are significant, even daunting. The rapid and dramatic pace of technology change can make technical skills obsolete, seemingly overnight. What does not change in a properly led business is the desire of professionals to learn and contribute to the organization. Effective CIOs recognize this and take a strategic view of the skills needed to effectively deliver IT capabilities. They may, for example, engage in the following:
-- Work closely with the executive team to understand business trends and priorities. They translate that knowledge into the IT skills needed now and in the future to move the business forward. They then work with human resources professionals to develop career models that will encourage and reward professionals for building the skills needed by the business.
-- Build effective teams of high-performing professionals. That requires training to obtain required technical skills and candid, direct feedback around individual performance. Some employees will be more eager to learn new skills and technologies than others; all of them must understand how their ability to learn will affect their futures and decide for themselves which paths to take.
-- Prioritize skills around potential business contribution. If an IT organization is to be viewed as a business contributor and not a cost center, it must focus resources and attention on high-impact opportunities. "Utility" services that can best be delivered by third parties should be carefully evaluated as candidates for outsourcing. The primary objective is not to reduce costs, but rather to focus resources and management attention on the activities that will generate the biggest results.
Proactive IT leaders take action before they are forced to; as a result, they have more options to produce business results and avoid a crisis. Waiting until the crisis arrives will limit choices and quite likely create even more challenges in the future.
Denis C. Picard is managing director at Alvarez & Marsal Business Consulting in New York.
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