In my discussions with CIOs over the years about investment, they have always stressed that cost cutting should be done for a business reason. However, what about cost cutting to make way for an increase in business investment?
CIOs showed recently that they have strong feelings about this topic. In general, they feel that cost cutting can enable CIO credibility, act as a fuse for business innovation, but needs business partnership like anything else IT does.
Basis for Credibility
For organizations that are immature, it is not uncommon for CIOs to mature processes and cut expenditure from IT. In fact, multiple analyst organizations have found that less mature organizations spend more for their IT across industries and sizes of organization. CIO Dennis Klemenz says that “making your organization more efficient frees up resources (budget and staff) and builds credibility. Additionally, many IT organizations are understaffed (lean) and therefore, efficiency may be necessary to have the time to innovate.”
For CIO Wayne Sadin, “CIOs that spearhead digital optimization to increase cash flow make it easier to convince their CEO/CFO to fund riskier projects. I once worked for a CEO who agreed to reinvest 50% of what I could save the firm. Two years later we made the cover of CIO Magazine.”
What a great deal!
However, CIO Adam Martin worries that CIOs can become too focused upon cutting of IT and business costs. “Creating operational efficiencies is table stakes for the CIO. However, when innovation is driven from IT up, versus the CEO down, operational efficiencies become a means for IT to create the budget headroom needed for innovation. It’s merely the requirement to start working in the area of innovation. If you can’t efficiently operate the organization, the leadership team is not going to buy any of the innovative ideas a CIO might have.”
Cost Cutting to Light the Fuse of Innovation
Martin Davis believes that “CIOs should always be looking to generate efficiencies to help reinvest in the business. Be it for innovation or transformation.” Mike Kail agrees and suggests that “operational efficiencies lights the fuse of innovation and creates the virtuous cycle of increasing both.”
With this said, CTO and Chief Innovation Officer Stephen diFilipo asserts to avoid the issue mentioned above by Martin that “innovation should be an initiative that stands alone. As others have noted, there is a symbiotic relationship between efficiency and innovation. However, they are not interdependent. Investment in innovation should have its own line item in the budget.”
With regards to driving innovation, CIO Milos Topic says that “CIOs should demonstrate the value of dedicated innovation team prior to asking for additional funding.” Former CIO Isaac Sacolick agrees with Topic but suggests with cost cutting that comes from “better prioritization, governance, and sun-setting dead end business processes can reduce keep the lights spend by 70%. The bigger issue is when there is constant firefighting burning platforms, there no energy is left for innovation.”
A Place for Partnership
Honestly, I had never thought about partnership occurring around cost cutting. But much cost cutting requires investment to, for example, get off an ancient platform that is too expensive to maintain.
For this reason, CIO Cathleen Curley says, “CIOs should help business partners create operational efficiencies so the business can innovative more.” So it should be about IT cost cutting and business efficiency at the same time. Analyst Jack Gold concludes by saying, “If the CIO is not creating operational efficiencies, why is the CIO in that role? Any good business manager looks to create more efficient operations. But a good CIO will negotiate to get some of that money back to reinvest in new or improved operations. It’s a virtuous cycle.”
Theodore Levitt wrote several years ago that “few things are more important for a manager to do than ask simple questions: why do we do it; why that way, what are the alternatives; and how much does it cost.”
It seems clear that CIOs need to ask questions about efficiency and innovation and muster support for doing both. And it is important to know that operational efficiencies can light the fuse of innovation as there remains a symbiotic relationship between efficiency and innovation spending.
ABOUT THE AUTHOR:
Myles Suer is Head of Global Enterprise Marketing at Dell Boomi. He is also facilitator of the #CIOChat, and is the #1 influencer of CIOs, according to LeadTails. He is a top 100 digital influencer. Among other career highlights, he has led a data and analytics organization.