Use the right measurements
If you want top executives to value IT's efforts, it's important to communicate those efforts in terms business executives care about. That means learning which metrics those executives are watching.
"For our CFO, an important metric is EBITDA," says Kevin Broadway, CIO of MetroPCS, a wireless carrier acquired by T-Mobile in 2012 for $1.5 billion. (EBITDA, an acronym for earnings before interest, taxes, depreciation and amortisation, is a metric commonly used by companies with large debt obligations or expensive assets that depreciate over time. It measures how profitable their operations are, irrespective of financing and tax issues.) "IT contributes to EBITDA one way or another," Broadway says. "As we invest over time and our expenditures change, we make it worse when we're spending money. So if we twist the metric to invest more in IT, in theory you should see a positive effect on EBITDA over time."
How does this differ from return on investment, or ROI, a much more commonly used measure in IT departments everywhere? It doesn't, or not very much. In both cases, the key challenge for IT and finance is to go back and measure the economic effects of a project after it's completed and has been in place for a while. Broadway adds one extra step by figuring out how those effects accrue to MetroPCS's general profitability. "The one-to-one relationship isn't necessarily there," he concedes. "But it's another way to look at IT's contribution at a macro level."
In fact, Chris Curran, principal and chief technologist at PwC, says that you should alert the CEO to IT's accomplishments only when there's a specific benefit the CEO would value. "It will seem interesting to the business only if you can, say, demonstrate that integration after a merger saved 20% of operating expenses," he says.
When bad things don't happen
Explaining business value to CFOs and CEOs gets more challenging when that value is the reduced or eliminated risk of a business-impacting technology failure. But it's important to make the effort. "The onus is on the CIO to translate those risks you've identified and make a compelling case as to what the risk is to the business," Dolisy says. "What is the impact to the rest of the organisation if these things are not taken care of?"
Dolisy notes that as a CTO who also functions as CIO, he's in a good position to understand the direct financial impact on SolarWinds if an IT system fails. "I have a rough estimate of the costs in terms of downloads and conversions if some of those systems are down," he says. "That's the only successful strategy -- to really understand what the value of the technology working is to the business so you can translate those technical risks and express them in the business's language."
Whatever the benefit you're trying to convey, Vitale advises seeking professional help in getting your message across. "You can leverage your existing assets internally," he says. "The corporate communications group within an organisation is very powerful, and I would encourage IT leaders to be very familiar with the people in it," he says. "They usually handle internal as well as external communications, and they're only a step away from the C-level executives."
To take full advantage of this communication channel, Vitale recommends submitting regular "pseudo news releases" to the corporate communications department telling them about IT's activities. "Any mature organisation has a number of ways to distribute this information internally, including intranet sites and even email blasts," he says. "If your company uses social intranet software such as Jive, Salesforce Company Communities, Podio, etc., it's a no-brainer that you should stay active on these sites."
What if your company doesn't have an intranet or internal social network? "Sounds like a great project for IT," he says.
Meeting higher expectations
While it's important to highlight the value of infrastructure maintenance and keep-the-lights-on projects that prevent bad things from happening, today's CIOs must also recognise that the rules of the game have changed. The great CIO that Handler was asked to help fire because everything was working fine? "That was the story circa 1994," he says. "In 2000, about 70% of IT organisations were viewed as a necessary evil. Today, only 7% are seen that way, and 90% of senior non-IT leaders view IT as important to the business. People expect you to deliver change."
Unfortunately, not all technology leaders see themselves as change agents, says Robert Handler. "Some CIOs think if they can do project delivery well they should be heralded. CEOs think, 'No, that's your job.' Being able to deliver projects is table stakes."
IT being taken for granted is "a very common problem," Curran says. "I think it comes from a lack of recognition of the two potential roles for IT. One is an internal-facing role about keeping the lights on, supporting the infrastructure and processing transactions. The second is a market-facing role to create new value around products and services."
Not understanding that second role gets IT organisations in trouble, he says. "There's a lot of confusion about roles and responsibilities, and partnering across business functions is harder. But it's how IT can bring potential value to the business."
The most successful CIOs understand both roles, and initiate customer-facing projects. "My team knows the business. We are not order-takers," Brady says. "We create new ideas and let the business know what we've come up with. We say, 'We think it will make a difference, what do you think?' We don't wait for them to come to us."
That approach made a huge difference to NextGear's fortunes when the economic downturn hit in 2008. IT had recently launched predictive analytics for its loan portfolio, and the analysis turned up a troubling trend: Car dealers who borrowed from the company were keeping inventory in their lots longer and paying back loans more slowly than they had in the past. After discovering that, NextGear determined that it could help keep its borrowers in business (and paying their loans) by encouraging them to sell hard-to-move cars at auction and avoid being overstocked. "We were able to spot warning trends six months earlier than our competitors," Brady says.
You should always be part of the conversation -- whether it's about IT or not. Kevin Broadway, CIO, MetroPCS
It all goes along with the philosophy of continuous improvement, she adds. "Just because a process is working well doesn't mean you should be happy with it."
Besides, Broadway notes, if you content yourself with keeping things running smoothly, you risk taking yourself out of the top management loop. "You're not actively applying your acumen to the business problems of the day, so you're not part of the conversation," he says. "And you should always be part of the conversation -- whether it's about IT or not."
Zetlin is a technology writer and co-author of The Geek Gap: Why Business And Technology Professionals Don't Understand Each Other And Why They Need Each Other to Survive. Contact her at [email protected].
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