Tag Archives: recession

IT’s Toxic Assets and Self-Funded Stimulus Plan


ist2_3042772-toxic-wasteOK – so I’m climbing on the latest news headlines – forgive me, but I do see an analogy that is important for IT leaders to be aware of.  Current business conditions mean this is a great time for CIO’s to clean up their back yards, and aggressively “kick the IT legacy problem in the teeth” as one of my Scottish clients used to say.  Also, it’s Spring, and a great time to do some Spring Cleaning of the house of IT.

What Are IT Toxic Assets?

I’m using the term to cover any IT asset or capability that is a net drain on value – i.e., the net cost of keeping it is greater than the business value it delivers.  Toxic IT assets can include:

  1. Hardware (computers, servers, printers, storage, routers, power supply equipment, etc.)
  2. Software (applications, tools, system software, etc.)
  3. People (anyone on the IT budget)
  4. Policies

Toxic Hardware

Let’s take hardware first.  We tend to get lazy when it comes to replacing hardware that is no longer delivering enough value to cover its cost.  Old Fred in accounting likes using the ancient fax machine because he’s never bothered to learn how to use the neat new scanner that sits right next to the fax.  So, rather than fight with Fred, we leave the behemoth machine there, taking up space, consuming electricity and giving off heat the equivalent of a small town, and needing non-standard and expensive paper roll supplies.  Or the old PC’s that nobody is using, or is ever going to use, but that sit around gathering dust because… well because it’s easy to let them sit there.

Just like in our private lives, we accumulate “stuff” and don’t clear it out until we move (perhaps not even then!)  Or until some exceptional event is upon us that motivates the clear out.  And, boy does it feel good when we’ve finished!  And so does the Salvation Army or whatever needy cause you’ve donated the stuff to!

Toxic Software

Software is a similar problem.  First, there’s licences and maintenance fees we are paying for stuff that is not being used.  There’s excess fees we are paying for “premium services” or “extended editions” that aren’t needed.  We put the full MS Office Suite on every PC, whether it is needed or not.  Second, there’s the legacy stuff who’s functionality was replaced long ago by an ERP or whatever, but that still has one or two users of an old report.  Those users could get a virtually identical report using the ERP’s report writer or query tool, but they can’t be bothered to learn it.

Toxic People

Then there’s the people.  Dr. Judy Bardwick, occasional research associate of mine, and noted author, speaker, and management consultant specializing in the psychology of the corporate environment, has written and talked extensively about the “entitlement culture,” and IT is by no means immune to this.  IT professionals sometimes tend to attach themselves to specific systems, feeding and taking care of them.  There’s always tweaks to be made, and end users are always asking for enhancements.  Some of these tweaks and enhancements are essential, but from my experience, many are “nice to haves” rather than “must haves” and nobody is really figuring out the full life cycle costs and value to determine if they are really cost-justified.  I guess that may be OK when times are flush (though I don’t really believe it’s responsible use of resources) but under the current economic climate, it borders on criminal behavior!

Toxic Policies

A classic example of a toxic policy is the “unfunded mandate” from headquarters.

In an effort to streamline accounting, all divisions and functions must align to the new Corporate Chart of Accounts.  Please see the policy document CP10478xPP04921z dated February 1, 2009, and please bring your accounting codes into compliance by June 1, 2009.

To the person in accounting who came up with the policy, it makes all the sense in the world, and will save their department a quarter headcount.  To the IT organization, who is being hit with unfunded mandates such as this from different corporate folk every week of the year, they add significant headcount, and/or detract from higher value generating activities.

Other toxic policies include too liberal a provisioning of personal computing devices (people getting devices that don’t need them, or getting way more device than they need).

So, What’s a Poor CIO To Do?

Rule 1 – be ruthless!  Don’t be a victim!  Take control!  Use the economic climate as air cover to do some serious toxic asset remediation.  One strategy I’ve seen work well is to pick a target – say 15% of the total asset base, for example – to eliminate over a 6 month period.  Enlist your business partners in the effort – it can be a good way to create some goodwill in those key relationships.

Rule 2 – leverage business-IT governance to ensure you really do have the air cover you need to make the changes.

Rule 3 – create motivation among the IT organization to help find and eliminate the toxic assets.  Create a competition, with some kind of reward (need not be financial) and recognition for (a) finding target opportunities, and (b) eliminating these opportunities.

Rule 4 – this is a great opportunity to experiment with Social Networking – to make the targeting and elimination of toxic IT assets a collaborative exercise!

(Image courtesy of Investorshub)

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Recession and the Crisis of IT Employee Engagement


prp_cartooncopyI’ve been recently working on a multi-company research project on Managing IT in Recessionary Times.  In support of that project, I have taken advantage of every CIO conversation I’ve had lately (probably at least one such conversation per day for the last month or so) to ask about how this recession is impacting their company and their IT organization in ways that are different from prior economic downturns.

The responses have surprised me – not so much for their content, but for the passion and emotion behind the issue, and the degree to which many of these CIO’s highlighted the same issue as the #1 challenge they were facing that felt quite different this time.  To be clear, there were some exceptions, but the majority have told me that their biggest challenge is engaging their IT talent.  It seems that people are so distracted by the economy, and by fear for their jobs and for their retirement savings, that they were having a hard time knuckling down and doing their jobs.

Is Lack of Employee Engagement Counter-intuitive in a Recession?

On the face of it, I think this is counter-intuitive – you might expect people to really work their hardest and ensure they are “invaluable” in their positions, and should be the last ones to be shown the exit door.  But this is not the case in most IT organizations I have probed on this issue.  The reality in most cases is the fear and concerns for their livelihood are so dominant in many people’s minds that they are having a hard time performing – even though they recognize that this might well be self-defeating.

I’ve used motorcycle analogies before (see Zen, Motorcycles and the Art of Organizational Change Management) and another analogy comes to mind here.  There’s a phenomenon well known to motorcyclists (or at least it should be if they want to live to be old motorcyclists!) called Target Fixation.  Simply stated, a motorcycle tends to go where its rider is looking.  If you are overly focused on an obstacle you want to avoid, there’s a very good chance that you will steer right into it!  (As an aside, my wife and I rented Segway’s a couple of years ago on vacation in Puerto Vallarta, Mexico.  It was a great experience, and a wonderful way to cruise the marina – until my wife experienced Target Fixation first hand.  Once she had mastered the Segway (not difficult, but certainly different from just about any other form of transportation) and was feeling comfortable with it, she managed to steer it straight into a tree!  I was a few yards behind her filming our little marina excursion on a camcorder, and I could see exactly what happened – a pure case of Target Fixation, as she saw the tree, and literally steered into it – inexorably fixated on this hard object!)

So, the danger I believe for any of us, is that if you let the economy and the uncertainties dominate your thinking, you will increase your chances of becoming victim to it.  It is what it is – focus on those things you can do, and don’t allow water cooler gossip and the constant drum of recession woes get to you.

(Cartoon courtesy of Zealize Limited.)

IT and Recession: Time to Partner With the CFO?


partnershipI’ve posted before that realizing value from IT-enabled business investments requires both a partnership between IT and the business (duh!), but also a partnership between the CIO and CFO.  This can provide the credibility and linkages necessary to ensure that meaningful metrics are defined and tracked, and that accountabilities, both for costs and value, are identified and taken seriously.

Is Finance Your “Worst Offender” in the IT “Value Leakage” Stakes?

So, yesterday my colleagues and I were working with a global manufacturing client.  We were sharing some of our latest research into Managing IT During Recessionary Times, and looking for ways to apply the findings to their specific situation.   We were talking about the need to revisit the IT portfolio of installed systems, and work with business partners to do almost a ‘zero-based‘ exercise to re-justify legacy systems.  When we have done this with clients in the past, we have typically identified at least 20% IT cost savings by eliminating legacy systems that have been superceded by newer solutions, but that are still kept in the active portfolio, typically because a few individuals “like the reports the old system generates” and have not taken the time to learn the self-service query/reporting tool that came with the new solution.

I mentioned that I have found that enrolling the CFO in this exercise can help provide the “air cover” to get the portfolio “work-out” accomplished, when the client CIO laughed and said, “But finance is the worst offender in terms of keeping redundant systems on the books!”  I guess I should not have been surprised.  Sometimes, the so-called support functions (e.g., finance, HR, facilities, legal) are not among the most responsible consumers of IT capabilities and assets.  Exacerbating this, I often find that the IT relationships with the other support functions are not the most healthy and constructive.  Perhaps, the current economic climate is a great opportunity to forge stronger partnerships with the support functions, and take out some IT costs?

Social Networking for IT Organizations in a Recession


social_networking3

I’ve been thinking about a couple of things my CIO clients are wrestling with, and how these might be better approached jointly rather than as separate challenges.  These are:

  1. How to strengthen Business-IT Relationships in the context of the current economic climate.
  2. How to experiment with, learn from and foster Social Networking in the business context (rather than the more common “Facebook-like” personal context.
  3. How to sharpen and refocus the role of IT for the global recession.

Business-IT Relationships and the Current Economy

The abstract notion of “business-IT relationships” becomes more tangible when we thing in terms of role.  The CIO can be thought of as the “über-relationship manager” - responsible for the relationship between IT and the Executive Leadership.  The good news is that this relationship is key to shaping, understanding and enabling the overarching enterprise strategy.  The bad news is that there is often a large gap between this strategic intent and the actual strategy as enacted by business unit management.

A second layer of business-IT relationship management is needed at this second layer – seasoned IT executives (often on a CIO succession track) who face off with business unit leaders and, just like their CIO bosses, are responsible for shaping and understanding their business unit’s strategy.  The role responsible for this management layer is the IT Relationship Manager (actual titles vary considerably).  They are also responsible, with the CIO, for reconciling between strategic intent at the top executive layer, and current strategy at the business unit management layer.

From my experience, this Business Unit Relationship Manager role typically does not work very effectively.  The competencies essential for this role to thrive include:

  • Deep business knowledge and insight
  • Analytical skills
  • Sufficient IT expertise to keep it all real and current
  • Strong communications and change management
  • A goodly dose of innovation
  • Decent level of finance and accounting

This is a rare combination, with limited training and development sources available.  (I must plug my company, nGenera, here for being a pioneer with our highly regarded Relationship Management Professional Development Programs).

In a down economy, the Relationship Manager role is even more important.  They have to surface and “sell” innovative opportunities that can grow market share in a recession, create new top line growth, and innovate products, services and processes that provide exceptional customer experiences.  At the same time, they have to deflect all the low value demand for system tweaks and enhancements that don’t lead to these types of growth oriented opportunities, and actually add cost while consuming scarce resources without adding much value.

Experiment with, Learn from and Foster Social Networking

I’ve posted before that many of the more innovative and visionary CIOs are driving Social Networking and Web 2.0 into their IT organizations and their businesses.  Some are still struggling with this, looking for the “killer application” that becomes the tipping point for this brave new world of IT possibilities.  I believe that strengthening Relationship Management performance might be an ideal “killer app” for social networking.

Imagine a community of Relationship Management practitioners, sharing war stories, ideas and applications of their art.  Imagine Wiki’s containing internal (and external) best Relationship Management practices, pointing to tools and templates such as customer profiling, business case development, strategic account management and so on.

Imagine this community expanding over time to incorporate IT savvy business leaders, building on each other’s ideas and creating momentum for innovative and high value IT-enabling opportunities.

Sharpen and Refocus the Role of IT for the Global Recession

So, three separate challenges – converged, might make for a potent brew.  I believe there’s a potential “virtuous cycle” here – one that can be initiated relatively easily, inexpensively, and with very little risk.  In fact, I bet for many organizations, this is already happening – it’s just not be channeled and amplified into critical mass.

What do you think?  Are you doing any of this?  How’s it working out?  How could it be amplified?  As alway, comments are most welcome!

Increasing Business Value Through Demand Shaping


walk-past-no-coffeeA key role for IT leaders, especially during recessionary times, is Demand Shaping.   A perennial reality in the business-IT world is that demand seems to exceed supply.

Of Backlogs and Early Cloud Computing

When I entered the field of IT back in the 1960′s, the term “backlog” was pervasive – that huge list of requests we could not get to until supply resources freed up.  Around the same time, and partially as a result of these huge backlogs (often measured in months or even years!) time-sharing and service bureau’s were the rage.  Often they would install terminals for you for free, provide access to so-called Fourth Generation Languages, data analytics, simulation and modeling tools, and let you “pay by the drink.”

Long term, this may not have been the most cost effective approach, but it let “end users” (as we called them back then) get access to the tools and computing power they may not have otherwise had access too.   I remember doing some work for a large enterprise that ran movie theaters.  I needed to model the economics of dividing up cinemas from single screen (which was the only model in the UK back then) into mutli-screen theaters – an approach called ‘multiplexing’ today.  I used a financial modeling tool called PROSPER through a service bureau.  I was learning the tool while I was building the model, so it took me a while to get it all working.  I remember getting to my 30th iteration of the model before I saw the first service bureau invoice, and on seeing all the zeroes following the pound sign, realizing that, “I had some splainin’ to do” as Ricky Ricardo would have said at the time!

But the results were important to the company, and they were happy to pay the invoice without complaint as it validated a major strategic shift for them, and they became one of the pioneers of the new movie theater model in the UK, capturing significant market share from competitors, and driving great profits for many years.  Had I responded to their request for the analysis with, “IT does not have the capacity just now, we’ll get to it in 18 months,” at best, I’d have had an unhappy customer.  At worst, we’d have watched a competitor beat them to the punch!  On-demand, cloud computing (in its earliest form) provided me the flexibility to satisfy demand without capital investment or undue delays.

Shaping Demand Rather Than Accepting It

Perhaps the more interesting story behind the cinema multiplexing modeling story above is how it came about.  I was at the time a Systems Engineer for ICL – then the leading British computer company.  I was working with a Sales Engineer.  The movie theater enterprise (actually, this was just one business in a broad range of consumer businesses) was his key account, and he was working hard to convince them to buy a larger computer.  He came up with the strategy of multiplexing (I think he’d been to the US and had first seen it there) and took the idea to his customer with the offer to find a free resource (yours truly!) and do the necessary modeling to analyze the financial implications.  (Note the irony here that we both worked for Britain’s largest computer company and that I had to go to a service bureau to get access to the computer cycles!)

The point is, that sales executive was shaping demand for his customer – bringing ideas to create demand.

Two Ways to Drive Business Value Through Demand Shaping

In the example above, demand shaping was through the relationship manager bringing ideas to his customer.  This is a technique familiar to all of us (at least, in the US) used by pharmaceutical companies to let us know about medical conditions we may not even be aware of and for which they have a potential remedy – even if we can’t go out any by those remedies.  We have to ask our doctors whether the treatment is appropriate for us.

The second method those in relationship management roles use demand shaping is when the customer tells us their ‘demand’ and we deflect it by suggesting a solution that might be of higher value, or, at least, pointing out that the requested ‘demand’ may not deliver value sufficient to justify the need.  This is the more common opportunity for demand shaping, and typically the trickier role to successfully pull off.  If we are not careful, it can be seen as being unresponsive or uncooperative.  It might mean elevating a one-off and/or siloed need to a more enterprise-wide solution.

Anne, that’s an interesting request, but perhaps we can kill several birds with one stone if we provide a solution that addresses more than the needs of your department?”

To the customer, that might mean delays as we work through enterprise-wide governance processes, or work the politics to enroll other departments in the solution.  In these cases, pushing back by the relationship manager requires intestinal fortitude, skills in the art of persuasion, and political savvy.  But such is the lot of relationship manager – shifting from ‘order taker’ to ‘valued business partner’, from ‘account executive’ to ‘agent of enterprise solutions and business value.’

How often are you simply in the role of order taker?  What could you do differently to position IT capability for value realization?

IT in a Recession – What’s Different this Time?


dolphin Like most of us, I’ve been thinking about the current economic climate and its implications for IT leaders.  I posted back in early September in The Economy, Information Technology and Opportunity Creation that it is now more important than ever to find creative and constructive ways to drive growth and innovation by whatever means.  I’ve also bemoaned the fact that many CIO’s have taken an alternate approach – that now is the time to hunker down and lay low.  In my post A Tale of 2 CIO’s: Proactive Innovator vs. Reactive Operator I drew the distinction between two types of IT leader – “Cecil the Controller” and “Ivan the Innovator.”  The former essentially is inclined to hunker down and “do no harm” when the financial conditions get tough, while the latter sees the financial conditions as a challenge that is best addressed head-on – proactively looking for ways to stimulate growth and innovation.  For them it’s a time for IT to shine, not to retreat deeper into the shadows!

We’ve been in recessions before, and the innovator versus controller behaviors – ever present – do tend to stand out during such times.  I guess the appropriate variation on the old cliche is “When the going gets tough, tough CIO’s innovate!”  Anyway, the question I’ve been pondering lately is, “Is there anything different with this recession that should influence IT leadership behaviors?”  The familiar knee jerk reaction of “take out costs” – stop discretionary spending and be the responsible corporate citizen by cutting IT costs might deserve a second look.  Here’s what I’ve come up with so far.  What’s different this time?

  • If you have been a responsible IT leader, you’ve already done the reasonable cost cutting and cost take-out measures, and run an efficient IT operation.  Cutting any further is likely to cut into bone and muscle rather than fat.  Is the best thing we can say about IT that when money is tight, we should do less of it?  My problem with the knee jerk reaction is it reinforces the perennial perspective that IT is only a cost to be contained, rather than an investment to be leveraged.  This time, and under current global economic climate, it seems to me that finding growth and business innovation (be it process, product or service innovation) is a better strategy – a more constructive IT response.
  • But, you’d better be able to prove the investments are going to pay back in a time frame that is consistent with business needs.  Therefore, robust business cases, a clear business-driven IT portfolio strategy and ongoing portfolio management are essential.  Similarly, superb program management and a real focus on value realization become key.  As is rapid business experimentation and analytics.
  • This time you might be able to get into or accelerate the use of SaaS and Cloud Computing – these approaches are inherently less capital-intensive, and, arguably, lead to lower operating costs.
  • For those that have not already done so, you might need to get more serious about global sourcing – not just as in outsourcing, but as in leveraging temporary and contract workers, retirees, and the growing body of unemployed who will be happy to work for lower rates than might have been the case 6 months ago.  Unlike in other recessions where the IT ranks felt almost immune, this time around there are many well qualified people out there in the unemployment lines – and with life saving perhaps seriously depleted, they are hungry for work.
  • This is a great time to take advantage of the “air cover” that the economic climate provides and get really aggressive and focused on ‘weeding and pruning’ – rationalizing and consolidating the legacy environment.
  • This time most companies have the basic infrastructure (broad band web access, desktop videoconferencing, services such as WebEx and LiveMeeting to support virtual work arrangements.  Given that much of the IT operating cost base is people, it might be worth getting creative about not only facilitating, but proactively encouraging alternate work arrangements (e.g., work from home, work part time).  People may be willing to give up some base pay to take advantage (including cost savings plus green benefits) of work-at-home arrangements.
  • Some IT expense is depreciation – with many companies coming off several years of capital investments, you might need to get creative about moving assets off the books. This was one of the forces driving outsourcing 15 years (or so) ago, and it may be worth exploring some creative (though legitimate) financial schemes.
  • Some organizations have been improving IT service levels year over year, and are now in a situation where service levels are higher than is truly needed.  You may therefore need to reassess and re-balance service levels/demand constraints. (e.g., take help desk response times from 15 min guarantee to 1 hour.
  • Lastly, Web 2.0 and all that it means (cloud computing, SaaS, etc.) promise a relatively quick and easy way to find and conduct experiments in business innovation and collaboration, without the investment and effort of building all the infrastructure and developing a whole bunch of code.  For many companies there is a potential gold mine in the application of social networking to business growth and innovation.  Now is a great time to look hard and identify opportunities to connect with employees, customers and the company ecosystem in new and productive ways.

Social Networking in a Downturn…


My esteemed colleague Susan Scrupski had a great post the other day entitled “The trouble with social media is, well, people” where she captured something quite important.  It has always been clear that social networking can be both a positive and negative force – but Susan nicely connected the potential and impact of social media to global mindsets, and how our attitudes to social networking (and ways to use it) might shift in a recession.

As Susan says, “Social media was great when it ran on positive mental attitude and a go-go economy, but now that people (the stuff networks are made of) are acting like humans, well, harrumph, it’s time to re-examine this social media phenomenon, eh?”

My take on this is that ultimately, you have to believe that increased transparency is positive – though there will be a period while companies and individuals adjust to the facts that:

  • Anyone can say just about anything – whether you like it or not!
  • Anything you do say (or is said about you), anywhere on the web, might come back to haunt you!
  • Expect a free flowing and open dialog – now how are you going to (a) live with it, and (b) take advantage of it?

A Tale of 2 CIO’s: Proactive Innovator vs. Reactive Operator


I had the privilege of participating as both a speaker and an attendee at one of nGenera’s joint IT/HR Summits in Austin last week on ‘Next Generation Technologies for Next Generation Enterprises.’  These are 3-day sessions where CIO’s and VP’s of HR come together to share and learn about key business issues on their joint agendas.  It truly was a privilege to be part of this event which included presentations by Andrew McAfee (Harvard Business School), Don Tapscott (nGenera Insight), David Ulrich (University of Michigan), Tammy Erickson (nGenera Insight) and yours truly.  I got a lot out of the speaker sessions, but also found the dialog and networking to be highly stimulating and informative.  Inevitably, many of the conversations steered to the global economy and the role of IT leadership in a recessionary climate.

With a nod to Professor John Henderson’s old joke (“there are two kinds of people – those who believe there are two kinds of people, and those that do not”), I did find two sharply divided worldviews among the many engaging CIO conversations I was involved in.  I will, with some poetic license, represent those opposing worldviews below.  These represent the extremes – most of the CIO’s I spoke to at the event were closer to a middle ground – but examining the extremes may stimulate your own thinking about this issue.  What do you believe is the proper role of IT leadership today?

I will refer to the opposing views as Ivan Innovator and Cecil Controller.  Here are their contrasting positions:

Ivan Innovator

A recession is a time for the IT function to shine by showing leadership and fostering innovation.  To do that, and to buy ourselves both business credibility and IT bandwidth, we have to aggressively cut costs, but also need to shift IT resources from low to higher value activity.   The cost cutting actions are something we’ve wanted to do for some time, but now the economic climate provides the air cover we need.  So, our value proposition to the business is double-edged:  we are going to agressively retire IT systems and assets that are no longer critical to running or growing the business, and will redirect the resources that are freed up by this rationalization and consolidation of our technology platform and focus them on more innovative and higher value initiatives.

We recognize that some people are going to be inconvenienced by the cost-cutting – they are on the obsolete systems because of a particular report or function they like to use.  Unfortunately, we can no longer afford the luxury of keeping old, redundant systems around.  While they were written down long ago, they are a drain on resources – keeping them running and the constant need to build and maintain interfaces with other systems.

The other side of this is that our business partners have never needed us to focus on growth and innovation more than they do today.  There’s been a literal sea change in available technologies, and we have to find value-producing ways to tap these new technologies.  If we can beat our competitors to the punch, we can turn the economic climate to our advantage.  And that is our focus.

Cecil Controller

Economic conditions spell a period of retrenchment for IT.  We have to take out costs to help the business weather this downturn.  As such, many of the initiatives we have started or were planning are being put on hold.  This is hunker down time – we don’t know how long it will last, but we’re betting at least a year.  Optics are all important here – I need to show my business partners that I understand the economic climate, and that this is a time for IT to take a low profile, cut back its spending, and do our part to help the company weather the down market.

I find it interesting to think about the drivers of these opposing views.  Are some CIO’s inherently more optimistic, and therefore proactive?  Or is it the company and its leadership that sets the tone – either empowering the optimists to grow and innovate their way out of a recession, or scaring the pessimists to step into the shadows and idle till the clouds pass by?  Like the nature/nurture arguments, there is no simple answer.  But I feel the energy and sense a more positive outcome around the proactive innovators compared with the reactive controllers.  I know who I’d sooner be around and work with, and, if I were a CEO, who I’d like to have on my team as CIO.