In search of value: making IT matter

its perceived value to the business, and how productivity growth will continue to be influenced by innovation from IT.

Mark Parker is not your everyday executive. He is at the forefront of a new generation of corporate leaders who contend that the future will be blazed by individuals who blend IT skill with business savvy to tap the true potential hiding in the layers of IT underneath today’s business infrastructure. It is this powerful combination that led him to his current position as MD of IF, a Scotland-based, groundbreaking telephone and online banking growth arm of HBOS Plc. Infused with a high-level IT skill-set and a strategic vision for the business, Mark energetically took the reigns of this market-leading enterprise earlier this year and continues to keep his fingers on IF’s pulse and his eyes on its horizon.

BearingPoint’s Martin Warner holds a similar belief, albeit from a different perspective. Speaking from the other side of the IT world – the management consulting side – he provides the perfect complement as he shares his compelling views about the future of enterprise IT. This outspoken visionary brings a vast knowledge of the enterprise market and industry players together with a deep understanding of broad IT cultivated from his many years in IT strategy. Today, as Mark drives his vision of IF, Martin likewise drives a global IT management market transformation with a firm belief that technology is at a game-changing moment in time.

CXO. Why do you think IT is often criticised for not showing enough value to the business?

MP. The most common criticism is coming from the boards, as executives feel there is a lack of real depth of understanding of their businesses from the IT team. In too many businesses, the IT function is divorced from the real drivers of business success, with IT not fully relating to the key priorities of the board agenda or acting to address areas of the business that truly need to have IT innovation.

IT teams and CIOs have the opportunity to make much more of an impact with the IT toolset and capabilities at their disposal. Those with the expertise and the vision can really make a step-change in their business’ profitability and its return on equity. Of course, the problem does not begin and end with the IT teams; the board itself should be making changes and opening their minds as well. It’s incumbent upon the CIO to demonstrate to the board the extent to which they can improve the business proposition.

MW. I characterise the challenge as two core problems intertwined; firstly, ‘forefront innovation’, helping the business to grow, and this point drives at the heart of Mark’s view. Knowledge and intimacy of the business is critical, and aligning innovation with business priorities is key to competitive advantage. Secondly, ‘background efficiency’. To explore this point, one must look at how IT infrastructure is run in many large organisations today. As business demand increases, IT complexity also increases, placing more pressure on IT to deliver at a greater pace. This has led to ‘quick’ IT solutions to business needs, but in reality, it has led IT to ‘layer the underlying problem’. In many instances, the enterprise management aspect of IT is still in its infancy. There has been so much promise or hype around what IT infrastructure can deliver.

The reality is that managing infrastructure is getting better, but the business demands better expectation management around level and quality of execution and it needs to increases in tangible ways. CIO tenures are shortening because of poor infrastructure performance – particularly around delivering products and services on time, financial transparency, managing demand and project execution.

CXO. As your business continues to innovate, what role does IT play?

MP. At the highest level, IT plays a fundamental part in delivering our overall profit and volume growth and the value we deliver to our shareholders. And on the ground floor, innovation is fundamental to our success as a major telenet bank. Our customer interfaces are all electronic or online, and having web services up and running 24/7 is imperative.

Customer service is of paramount importance and serves as a key plank of our proposition – in fact, without outstanding service our entire model becomes much less viable. We must therefore be innovative in how we deploy IT to best support our customer base, be it through back office improvements, B2B integration or more flexible solutions through which customers can conduct business with us.

In addition to IF-specific issues, like all large corporations we’re always looking to improve upon our efficiencies and IT helps us to innovate the way we do business. In the back office, we can focus on automating non value-add manual processes; and with our product portfolio IT enhances our speed to market, the flexibility of the tools we offer, and advanced capabilities that we can extend to the customers.

CXO. If organisations are going to increase productivity, to whom do they turn?

MW. Simply put, they will look to IT. Most academics or theorists believe that productivity achieved in corporations in the last 20 years is due to leaps in IT progress over the same period. IT has changed the way we do business in every industry, and played a productive role in our everyday lives. IT continues to advance significantly today, in key areas such as increased remote bandwidth and mobility, web-oriented architecture (WOA) and IT management, to name just a few innovation areas. Smart organisations must balance the adoption and execution of these technologies while assessing time-to-market and risk considerations through development and delivery. The corporation that can aggressively embrace technology innovation and execute well, will capitalise on productivity and increase competitive advantage.

CXO. How aligned is IT in your business, and is the business and IT operating model as you would like it?

MP. Very much so. One of the first things I did when I joined as MD of IF was to look at the IT operation and evaluate whether it was really going to bring the value it was capable of. It wasn’t – not the way it was constructed at that time, with IT simply too divorced from the business to be an effective strategic enabler. So one of the key changes we made was incorporating the IT function into the business strategy and business change teams, in effect making all of that a single function. That delivered a much closer alignment between IT and business professionals. This made that link between and the integration of IT into the business proposition completely seamless, and that really delivered a vast improvement.

CXO. How do you view IT’s ability to execute against a surge in business demand?

MP. We do experience that surge in demand, and in fact are experiencing it at IF at this very moment. How do you apply resources and capabilities to satisfy those demands that are above and beyond your own capabilities? This challenge didn’t sneak up on us, nor should it surprise any strong business; we continually look at the most effective strategies to maximise resources as well as innovative ways to bring extra resources to the party so that we can deliver on that additional demand and always be reactive to the growth of the business. A popular business response to this is offshoring operational tasks, and we approach this with caution and as a strategic business decision to increase our range of resources, not to play catch up to an expanding market. We would, simply put, look to offshoring to supplement our internal resources, but never as an alternative to them.

CXO. What do you consider IT’s key value areas are?

MW. To be instrumental in revenue growth, drive expense efficiencies and reduce business risk – that is what counts at the macro level. More closely, the CIO can deliver value on many levels to achieve these three goals: 1) develop an alignment with the business unit and open up the IT operating model to ensure partnership and technology alignment happens; 2) drive continual business process automation; 3) simplify the challenge for information access; 4) take on the next wave of web innovation (WOA) to open up new revenue channels; 5) execute proactive security management; and 6) embrace the current IT management convergence in enterprise tools and processes to increase smarter and more successful management of IT infrastructure (the alligator pit for CIO problems). Finally, like most practical CIOs, they know it’s all about execution – value is at the heart of delivering successful change through projects and programs.

MP. IT contributes value across the organisation – but its value is greater as part of the business strategy itself. IT development in the marketplace is constant and fast moving; there are always new tools and innovative products that can be leveraged within the business to make a difference and staying on top of that external marketplace is fundamental to staying ahead of the game. Bringing in depth knowledge of the technology available and a technical skill set to apply to the business proposition and challenges can help drive results on a very high level, transferring a pure technology knowledge base into a true value proposition.

CXO. What is happening in the enterprise IT industry that will help CIOs manage their organisation and drive greater value for the business?

MW. I have briefly touched on this subject – it is called IT management, not a new word in IT, but we are witnessing a fundamental shift in the IT enterprise market today. There is a realisation that silo IT management practices such as service management, asset management, portfolio management and others alike, are indeed inextricably linked from the data and information model, process and workflow and feature/function levels.

This has led IT vendors to integrate applications and functionality across IT management processes. The resulting effect is watching the big players such as HP, IBM and CA engage in an M&A race to create the next ERP – an ERP for IT. A consolidated IT management platform with more automation, smarter reporting and a universal data model creating the need for a different kind IT skill-set in the next two-to-three years.

This is the IT enterprise end-game – and all CIOs should be watching for how they adapt their IT management practices to answer and deliver to age old problems with better technology and smarter use of their resources.

CXO. From your experience of running IT operations, what are the greatest pitfalls for the CIO?

MP. I think the biggest pitfall I’ve encountered in the industry is a general mistaken perspective that they really understand the business and what it requires to make it successful. In reality, I would actually challenge whether a number of CIOs really do understand their business. I think there is a lot more detailed understanding that CIOs need to have in terms of the day-to-day running of the business and daily challenges, because it’s the day to day issues that, if addressed, make a fundamental change in the business operations. Understanding strategy and direction is one context, but actually delivering day-to-day results makes the difference.

This is one of the reasons that IT leaders have such great promise as business leaders. As IT becomes more and more integral to business strategy, understanding the day-to-day realities of technology becomes essential. I can speak from my own experience on this: because of my background, I can see the issues and anticipate when projects are going off the rails. I know what I want to achieve on the business side and I also understand the technical aspects, and this allows me to be well armed to really keep delivering and make an impact.

CXO. How does the CIO increase his influence with the CEO?

MW. Leadership. This in my opinion manifests itself in four ways. Firstly, there is vision and execution, but one can only measure the result – it’s all about proven results. Secondly, delivering visible technology innovation. Thirdly, pragmatic management and successful execution are great transferable general management skills and valued highly by the CEO. Finally, collaborative communication and partnership with the business unit executives - making your peers successful is a game winning approach to increasing influence with the CEO, and demonstrates the right kind of leadership.

MP. It’s quite simple: the CIO needs to bring tangible value propositions to the CEO, demonstrating that he really understands the business and its challenges and bringing practical solutions to bear that make a difference in profit, costs and overall shareholder value. In the end, it’s all about delivery of results.

CXO. So how does the CIO move into Business Unit executive role?

MP. In essence, a strong CIO is a very strong general manager. The GM skills apply to any function you work within. Good CIOs understand the business to such an extent that they naturally evolve into a very skilled general manager with IT expertise.

From my own perspective, I was given the opportunity to be Managing Director at IF because I delivered tangible results to the CEO from a business perspective, rather than just from IT. I provided advances in terms of business performance, efficiency and delivery, and this demonstration of value gave the CEO confidence that I could bring my skill set into a business role.

CXO. Someone recently said “IT doesn’t matter”. What do you say to that?

MW. We have to look at the real meaning behind that already over-explored comment. IT not only matters, it is critical to our lives – at home and at work. Take the mobile phone – can you imagine life without one?

CXO. When you look out at the next five years, what do you see from IT?

MP. I think we’ll see technology playing an ever-increasing role in the operation of commerce and industry. The individuals who can bring knowledge of that technology to bear on their companies’ P&Ls will rise to become prominent figures in the boardroom. Unless CIOs of today grasp an understanding of the business and start to deliver high-level value, they won’t be the CIOs of tomorrow – those jobs will belong to the strong general managers that have aligned IT expertise with business strategy.

MW. I agree with Mark’s points. Also, we will see much more innovation, greater business dependency on IT, shifting skill-sets and the rise and fall (or transformation) of industries and markets due to IT – like stars, new ones get created, and others burn out. Just keep your eyes on the traditional telecoms market.