Twenty years ago, information technology — computers, software, networks and people — was usually considered a back office function. IT was simply a necessary expense, like the janitor, the air conditioning, or the plumber. The CIO was a technology expert who knew computers and systems, and reported to the CFO, who really ran the show.
Things have changed a lot since then. Cloud computing is a reality, and data stored thousands of miles away on hundreds of distributed servers is now instantly accessible. The role of the CIO has changed, and so has the role of information technology. Today, at most successful organizations, the CIO is at the same level as the CFO. Information technology is not considered just an expense; it is a strategic investment in the company’s future growth.
A quote in a 2003 article in the Harvard Business School’s Working Knowledge series sums it up nicely: “Companies that manage their IT investments most successfully generate returns that are as much as 40% higher than those of their competitors”.
Earlier in my career I was CIO at a leading commercial real estate brokerage firm. I reported to the CFO, and IT was considered an expense with no strategic value. However, one of our competitors (which started almost the same time as our firm) clearly viewed IT as a strategic driver. Over 20 years our firm grew to $70 million, whereas they exceeded $100 million. Of course there were other factors involved, but the differing attitudes toward IT was likely a factor in the two companies’ growth trajectories.
Here are a few tips for getting the most out of your IT investments
Look at the big picture, not just the individual parts.
Many companies pat themselves on the back because they are spending large amounts on equipment. But equipment alone doesn’t solve business problems. It’s how you use the equipment that really matters.
Look at your competitors, and monitor industry trends on IT spending.
Are you spending less, or more than your competitors? Are you getting real value out of your IT spending? Review your IT budget, and determine what is giving the most value and what isn’t. Think of IT as an investment portfolio, and rebalance it on a regular basis.
Outsource IT functions carefully.
Monitor consultant expenses, but don’t focus on price alone. Good technical people cost more than handyman types. A really good technical firm might cost as much as 50% more than a marginal one, but the quality of their work could be 10 times better. You usually get what you pay for.
Make IT accountable to your management team.
Make sure someone on your management team is on top of all technical decisions and watching them from the business standpoint. Business should drive IT decisions, not the other way around.
Take the time to make good decisions.
I see far too many executives who just throw their hands up in the air, say “this is too complicated”, and make critical IT decisions based on incomplete or inaccurate information.
Don’t make IT decisions solely on price.
Don’t make the common mistake of rejecting IT software, hardware, or services based on the initial price. The main costs usually come down the road, in the form of bug fixes, extra service calls, hardware breakdowns, maintenance costs, incompatibility issues, endless customizations, etc. Think long term.
Even if your core business is tiny and has nothing to do with technology, you can still reap benefits and enhance your competitive advantage by viewing IT as a key strategic driver.