Surviving the first 100 days as a new CIO

Alex Blues, Head of IT Sourcing, at PA Consulting Group

In the second part of his series of blogs on his first 100 days as a new CIO, Alex Blues, Head of IT Sourcing at PA Consulting Group, discusses the need to demonstrate value for money.

Over the past five years, there has been an increasing focus on improving service and more recently, due to the economic downturn, on cutting costs. Unless you look at these two issues holistically and promote the prospect of creating Value for Money (VFM), you will end up promising a service you cannot deliver.

Traditionally, the board is always told to look at the big picture. However, with IT the big picture is always one large lump of money. The first step in creating VFM is to get the business to understand the detail around the IT budget and more importantly understand the costs that the CIO has control over. The IT budget is always the worst kept secret in any organisation. Everyone seems to be able to tell you the total spend, and that figure is ingrained in peoples’ minds.

However, it is typical for a CIO’s budget to contain over 60 per cent in capital expenditure and business-driven projects. These were not your choice but the business’, but it is your responsibility to ensure they are delivered efficiently. There are also likely to be long term investment items and depreciation – again decisions and commitments made before you arrived, an example of this is data centres.

Once you have identified what the ‘controllable’ aspect of your budget is, the next step is to give as much control of that as possible to the business units. This is where the VFM argument really comes in. Detail the services provided to each business unit, both in terms of volumes, quality and cost. Highlight which services can be changed and the corresponding cost and service charges associated with these choices. The idea here is to give complete transparency to the business and give them the levers which they can use to change their cost or their service levels – albeit recognising that certain changes may require involvement of more than one business unit; or even the whole organisation.

This ensures that the business unit is choosing the right level of service required, at the right cost. This can only be effective if the business unit receives the benefit of making changes, or feels the pain of not making changes. It is therefore vital for IT to be charged to the business units and not as a central overhead.

In the third of this four part series next week, Alex Blues will discuss the requisite sourcing strategy that needs to be put in place.