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Summary:

CIO bashing has become popular sport, but in reality companies are now finding an edge by focusing less on cost-cutting and more on how IT can help enable better functionality and innovation.

The buzz on the street is that CIO, as a job, is becoming obsolete: That all forms of cloud (IaaS, PaaS, and SaaS) are so simple to enable and buy today that they replace traditional data center-grown and -maintained alternatives that used to come exclusively via the CIO’s office.

Well, that’s a bit of a stretch. In reality, somebody needs to track all that spending or it threatens to spin out of control – and that’s a role the CIO is perfectly suited for, in fact.

That doesn’t mean, though, that business can still be conducted in the same old way. Instead, it requires company leaders to stop thinking of IT as a cost center and start thinking of it as a functionality enabler. As we saw at GigaOM Structure recently, during presentations from the likes of Revlon and Kohl’s, companies with this line of thinking have CIOs that are seen as the solution instead of the problem.

Lessons learned from the biggest IT cut ever

The Randy Mott CIO years at HP were the epitome of tracking spending in a centralized way. As HP.com Chief Architect during that period, I wrote about how we tackled the largest data center and application consolidation in the history of IT. The idea was, the 100-plus business units that made up HP were spending too much on IT individually. The only way to control costs, argued Mr. Mott (who has since moved on to GM), was to centralize spend and ruthlessly standardize everything from cooling to network cabling layouts to application components.

By one measure, this worked brilliantly. We went from 85 data centers in 26 countries to just six – all in the U.S.  Some 4,000 overlapping applications got whittled down to a tidy 1,500. And IT cost went from roughly four percent of company revenue to around 1.8 percent – and in a company the size of HP, that’s a heck of a lot of money.

But ask any business unit how that three-year odyssey went and they’ll tell you they hated it. While IT was busy consolidating costs, business teams got far less functionality to help them run their rapidly changing businesses. Promises of a more streamlined project delivery got mired in planning processes that required business teams to forecast needs up to 18 months in advance – despite developers on the front line clamoring for more agile approaches.

What’s happening today to CIOs is similar in that they face pressure to lower costs with cloud approaches. Only now, any impatient business unit with a credit card can go get services for themselves without involving IT at all.  This is leading down the road of overlapping vendor spend and architecture sprawl that necessitated the HP IT transformation almost a decade ago.  So how do you centralize IT spending but keep innovation flowing to your business teams?

Enable business teams to fail fast and cheap

A better approach to controlling those costs is for IT and business teams to embrace agile software development processes along with cloud deployment, regardless of whether your choice is public, private or hybrid. You might expect this kind of thinking from companies like LinkedIn, Netflix, or another organization for whom software is the product, but folks like Revlon and Kohl’s are embracing these ideas and making IT a functionality enabler, with use of cloud technologies and agile project methodologies.

During a GigaOM Structure panel discussion in June, Revlon CIO David Giambruno talked about the rollout of his private cloud over the past six years and how it led to huge gains for his business constituents. While he didn’t use the word “agile” in describing how they changed their culture, he did say things like “ability to fail fast and cheap” and “ability to react” as key tenants to their approach (words that would make any Scrum Master smile).  Then he showed how much they improved in product delivery:

Revlon growth

That’s a 425 percent improvement in the number of projects completed over a five-year span. (I guarantee you HP IT’s consolidation example, where cost-center thinking was king, isn’t anywhere close to that.)  The difference is a rapid application mindset with a private cloud that can keep up with rapid change. That’s how a low margin business like cosmetics can get data in the hands of the product teams quickly and stay ahead of competitors.

Ratnakar Lavu had a similar story to tell about Kohl’s, where he is SVP of Digital Innovation.  Not exactly an internet-boom company, as Kohl’s was founded during the Kennedy administration, Lavu talked about the importance of letting the consumers interact with their brand in creative ways by innovating in bite-sized pieces. “It is all about agility, it is all about experimentation, it is all about trying things out, failing fast, and failing cheaply too, if we’re going to experiment with things,” he said, later adding that their cloud investment comes through the use of a SaaS solution for build, test and deployment.

CIO as the Solution, not the problem

Putting the same old cost models on a different provisioning paradigm doesn’t work. It’s slow and business teams will run around you, spending whatever they want while unknowingly overlapping with other parts of your company.  Instead, control costs in a way that embraces agile development methodologies enabling quicker implementation of new ideas.

Pete Johnson is senior director of cloud platform evangelism of ProfitBricks, a cloud infrastructure service. Previously he was head of enterprise architecture for HP, where he worked for 19 years.

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  1. Author, are you writing from experience? Have you ever been a CIO? No and No.

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  2. I could not agree more. This is similar to oft heard remark about corporate lawyers: there are lawyers that prevent business, and there are lawyers who make business happen.

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    1. I hope my son is the latter. He takes the NY Bar exam tomorrow and Wednesday.

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  3. As a CIO, I couldn’t agree more.

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