How to wow CXOs with IT value

CIOs often have trouble communicating to senior management the value IT investments can deliver to their organizations. After an upgrade to his company’s global network infrastructure last year, Baxter International Inc. CIO John Moon decided to take matters into his own hands — literally.

After the networking project was done, Moon handed each of the business leaders at a postproduction senior management meeting a yellow cable. He then told them that “no matter where you are in the world [at any of the company’s 300 offices], plug this into the wall, and you’ll be connected” to the Deerfield, Ill.-based health care company’s global network.

The tactic — as well as the message — “was really eye-opening for them,” said Moon, whose company has a US$350 million IT budget set aside for 2003.

Moon was one of a handful of IT leaders who discussed IT investment and value strategies at the Computerworld Premier 100 conference here yesterday.

Moon and other technology leaders on the panel pointed to various projects within their organizations that achieved significant cost savings and production efficiencies in recent years. In some instances, those savings were reinvested into other revenue-generating business/IT projects.

For example, Global eXchange Services Inc. (GXS), which provides transaction management services to more than 60,000 retail partners throughout the world, has shifted a growing portion of IT support for its low-revenue-generating services to 220 IT workers in Bangalore, India, and Manilla, in the Philippines.

By moving 70 percent of its internal IT projects and 40 percent of its external, customer-facing IT work offshore, the company has freed up $16 million in annual savings over the past three to four years, some of which has been reinvested in developing revenue-enhancing value-added services for its customers, said Tasos Tsolakis, senior vice president of global technology at Gaithersburg, Md.-based GXS.

At Avon Products Inc., Senior Vice President and CIO Harriet Edelman has squeezed business value out of optimizing systems and business processes in critical areas such as procurement and merchandising. Those moves have yielded $10 million in annualized benefits to the New York-based beauty products giant, she said, thanks in large part to her group’s use of IT portfolio management techniques.

Still, Edelman is quick to acknowledge that it’s important for CIOs and other IT leaders to avoid being both arrogant and evasive when it comes to communicating the value of IT to senior management. “It’s an area that’s rife with some danger,” she said. Even when IT initiatives deliver huge returns, the trick is to “stay humble and stay within their [business] point of view.”

CIOs also make the mistake sometimes of “overselling” IT projects to top brass, said Baxter’s Moon. That’s one reason why his organization has a person whose role is to communicate the value that IT can deliver, he said.

Another way of getting senior management to invest more in IT is by collaborating more closely with business-unit leaders on specific projects. By convincing her business peers to take the lead on more IT/business initiatives, Avon’s Edelman has helped increase spending on strategic and transformational IT efforts by 30 percent during the past two years.

Compare that with other organizations that are struggling to wrest more than 10 percent from their total IT budgets on discretionary spending.

“The only way to get money from CEOs and CFOs is by demonstrating that for every dollar spent, you’ll get back $1.10, $1.20,” said Henry Volkman, director of IT and CIO at Del Taco Inc., a Lake Forest, Calif.-based restaurant chain with 450 outlets.