June 23, 2014

Managing scale – a CIO’s dilemma

Flutura is proud to present a series of guest blog posts by Industry stalwarts. 

This first one is by Clif Triplett . Cliff served as the first CIO for the 100 year old, $20 Billion revenue, global oil field services business Baker Hughes. Cliff also held several executive positions at Motorola, General Motors, and other Fortune 200 companies. Cliff also served the US Army between 1980-1990. He writes about Managing scale – a CIO’s dilemma.

One of the challenges most CIOs face today is the cyclic nature of business.  We as IT leaders must devise ways to be nimble and respond to the financial demands and pressures of meeting the expectations of the quarter.  To meet these demands we must plan and prepare.  A top priority is to drive more of our cost to a variable cost structure so that we have the levers we require to respond.    Next, we need to understand just how far we may need to move our cost position to meet the financial valleys demanded sometimes by business conditions.  If we want to be considered a valuable element of the business and a true business partner we must show we can respond to these market pressures and make the sacrifices or better yet, the actions necessary to achieve financial targets.  
What are some of the things we can do to meet this challenge?  First we need to instill in our project managers the practice of managing our projects to hit quarterly financial targets and quickly migrate to managing to the month.  Virtually all of our project and program managers manage to a budget, but perhaps not with the concept of being able to stop the plan on any month end and have delivered associated value.  Key to this begins with the design of the projects.  This is not to say we create a process to just stop the project on demand; it means we design our projects to deliver value on the quarter and can stop additional expenditures at that point if required without stranding past expenditures.   We generally as IT leaders can get at least a one month outlook on whether the business will need us to pull back or can stay on our business plan and need to have the insight and processes to cause our expenditure rate to dramatically shift. 

Part of a project design must be the planning of staffing and infrastructure requirements.   We need to establish contracts that allow us to take a portion of our staff and be able to draw back or even halt expenses on a very short notice; generally less than 30 days.  One of the easiest areas to pull back cost is in the area of development.  Projects should be designed in one month increments of capability that would be of value to the business.  If cost pressures necessitate a slow down, we halt the next unit of deployment.  Deployment is the next area where cost controls can be implemented.  If cost pressures demand it, we can delay deployment and all the associated expenses if we designed it and contracted in a manor to respond to such circumstances. 

Let’s review how this might be possible.  Contract the software license costs such that they are not activated until the system is moved into a production environment.  Second, the infrastructure you require to run the application can be purchased in a manner similar such that it is not paid for unless being used.  This is possible with strategies like Platform as a Service (PaaS) or Infrastructure as a Service (IaaS) or even Software as a Service (SaaS).  Any testing services and deployment services can significantly leverage outsourced services and therefore can also be pulled back on those portions of the system that has been placed under financial suspension. 
The IT market has shifted and it is now possible to buy most IT resources as services, and in a variable cost model.  We must learn how to take advantage of this and begin to migrate to these new financial service models so we can meet the financial challenges placed upon the business. 

Now the previous is scenario is what most of us have facd, but another scenario faces us as well – success.   What if our project is highly successful or popular and the business wants or needs us to go faster;  and what if cost and budget are not an issue?  Business leadership generally does not understand the concept that money can’t fix most things.  I believe it is in our best interest to be able to accept money and be able to accelerate to meet business demand.  When IT says it can’t deliver regardless of cost, this is a major missed opportunity.  This scenario is similar to the challenge of being asked to scale back, but it is one of scaling up to meet demands.   Once again to meet this challenge, one must prepare.  We must plan for success and that the demand for our services will exceed our current plan and available resources.  How do we meet this challenge?  We need to attempt to put in place contracts and processes that allow us to double our capacity in two weeks.  This seems perhaps a bit odd to many IT teams, but whether you exercise this capability or not, it will have a secondary impact of improving service delivery.  To double your capacity, you must have well defined processes, process discipline and a very engaged and open communication process with the key IT suppliers.

The challenge can be met.  You can design your organization to scale back or scale up rapidly, but it does take planning.  The IT services market has now provided us new tools at our disposal to meet these new demands we need to be able to react to.  If you have not begun to prepare, it is now time.  Failure to be nimble can cause great harm to the reputation of the IT organization and the level of partnership you will be able to earn and develop with the senior management of the business.


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