Strong foundations: How CIOs and IT help their companies weather economic uncertainty
Founder, KAT Advisory, former CIO, Walmart
It starts with becoming an essential partner to the business, proactively finding efficiencies, leveraging data, and nimble operations.
Economic uncertainty is a challenge for everyone, but it can be especially difficult for CIOs. After all, technology is often the most significant cost organizations have that isn’t customer-facing, and few are so willing to cut down their sales force.
So when companies decide to pull back, the whole C-suite is looking in the CIO’s direction. I’ve been in that seat, in fact, having worked in IT leadership over the past two decades, including chief information, digital, and technology officer roles at GSK, Walmart, DaimlerChrysler and Baxter International.
Right now, there’s plenty of volatility in the global macroeconomic climate, and I know that many corporate boards are running worst-case scenarios that were unthinkable even a few years ago.
By taking a strategic approach, CIOs can help their organization navigate any rough weather and emerge stronger than before. There are at least nine areas where enterprise IT can excel in this area — but first, the CIO must know where they stand in the organization if they are going to help propel it through any potential crises.
The CIO as a partner in the business
The CIO’s job is twofold. The first part is to drive demand, and thus revenue, by executing the organization’s strategic initiatives. In this role, the CIO is a partner of the business and takes the lead in digital transformation, whether via federated governance or as a centralized service.
The second role is to manage supply, building the capability and capacities of technology for the organization, which can lead to the (often misguided) view that tech is nothing more than a cost center. As a result, the CIO is seen as a purely supportive role that takes orders from the business. The question then becomes, are you a partner, or are you just heading up the support structure?
Now I know it’s never this black and white, but it’s important to make an honest assessment of where the IT department lies on this spectrum, especially if you hope to steer it towards a greater partnership with the rest of your organization. I’d much rather be in a position where all the technology, capacity, and capabilities at hand are being effectively deployed to drive strategy.
By defining their role as a partner, CIOs and IT leaders will be better positioned and prepared to respond to economic challenges.
And once they’ve earned that partnership, here’s what I would recommend CIOs do to make the most of it — it’s what I’d do if I was still in C-suite.
Where to build your resilience
Don’t use the demand lever to cut back on costs.
When the order comes down to cut back on general and administrative expenses, the easiest course of action as a CIO is to pull back on demand. You may be tempted to slow-roll projects and cut back on headcount. Avoid this temptation. It may work in the short term, but it never gets you ahead. It just stalls the progress of projects that are critical to the organization’s strategy.
Instead, focus on supply.
Rather than starving your company’s strategic initiatives, find ways to reduce costs in the short term that will set you up for success in the future. Smart CIOs see cost-cutting as an opportunity for a long-term play. Utilizing automation, cloud computing, and other mechanisms can help you do more with what you have.
Trust your instincts.
A CEO facing economic uncertainty is likely to come to the biggest cost center — technology — and say, “Do something for me.” The CFO will point to your big, multi-year enterprise contracts and say, “Start there.” But here’s the thing: As CIO, you don’t need anybody’s permission to act strategically. They just want to see an improvement in the bottom line, so it’s up to you to find strategic ways to do that.
Use data to your advantage.
As keeper of the company’s data, the CIO is in a great position to leverage that data to find sources of savings without cutting to the bone. Are there employees idle on certain days of the week? Can you cut certain hours without significant impact? This type of analysis can go a long way to streamlining operations, not only in IT but also across the organization. Be a proactive partner with your business leadership.
As keeper of the company’s data, the CIO is in a great position to leverage that data to find sources of savings without cutting to the bone.
Form a tiger team for strategy and advocacy.
One way to save IT from the chopping block is to make it indispensable. Long before anyone asks you to cut costs, demonstrate the value of data analytics. Make the CFO your advocate and ally by guiding them to opportunities and helping keep the ship on course. The further you can get ahead as an invaluable asset to the business, the more likely it is that you'll be left in charge when it comes to your investment decisions.
Don’t try to scare the business into spending money.
At the same time, going hat-in-hand to the CFO for exceptions to across-the-board spending cuts is a bad look. It shows you’re not focused on the business’s immediate needs. There are always ways to bring your costs under control when needed. I remember being able to get price concessions out of a large and indispensable technology partner, even as a smaller business, because I knew they were keen on using our company as proof of concept for a strategic new product. And don’t exempt cybersecurity challenges from the cost pressure. The smartest CISOs are on top of cost management and innovation.
Transition to an OpEx model.
When capital becomes scarce and expensive, your company might curtail infrastructure investments to support growth. I have never viewed this as a problem, but rather as an opportunity to take advantage of cloud economics. By transitioning to the cloud, you can move away from big capital expenditure spending on infrastructure and toward a predictable, fit-for-purpose subscription model. This also means you can eliminate depreciation expenses by selling off assets like data centers.
Save costs in the cloud.
Once you’re in the cloud, you can take advantage of its capabilities to reduce costs. These can range from managing peak demand scalably, unifying data systems efficiently, investing in security proactively, monitoring cloud spend, and developing new financial management capabilities across the organization.
And leverage the cloud for the future.
Cloud computing isn’t just about savings, of course. It’s the first step in any organization’s digital transformation and offers entirely new opportunities to enhance operational effectiveness. The right cloud deployment can take your data analytics to the next level and bring many other benefits. It becomes easier to onboard artificial intelligence and machine learning for streamlining and optimizing decision points, frees up employees from repetitive tasks, and drives immediate improvements for use cases, such as demand sensing, inventory management, and customer support.
Economic uncertainty can be a tremendous challenge for CIOs, but it can also be an opportunity. By taking a strategic, forward-facing approach to cost-cutting, you can reduce the drag on your organization in the short term while advancing toward a future state in a much smarter way.