Explaining IT to the CEO

CEOs who do their homework -- and study the benefits of IT -- are proving that technology can benefit the bottom line.

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Each time I talk to a CEO about IT, I get a different response. When I told one CEO that his IT organization wasn't really doing what it could for his business, he told me that he was too busy with other critical matters and to come back in six months. I must not have been very compelling.

The hard truth is that most CEOs have too many other pressing matters at hand -- demanding shareholders, fierce competitors and persistent regulators -- to pay much attention to what's going on with IT. And if they are reading the popular business press, they are being told that IT is no longer "strategic" because information technology has become ubiquitous. Academic strategists argue that when something is ubiquitous, it cannot be a differentiator. Relegate IT's management and oversight to the depths of your organization, the pundits say. Of course, many of us in the trenches know that a more valuable and accurate assessment is that IT is more strategic than ever. It's the very ubiquity of technology that allows businesses to operate in fundamentally new -- and distinctive -- ways.

But occasionally I encounter a thoughtful CEO who has taken the time to ask some intelligent questions about how IT operates in the company. One CEO asked three compelling questions: Is my company's IT function properly structured? Do I have the information technology infrastructure that doing business requires? and does my company have a sound IT strategy? There is only one other question that I would add: Is my company getting value for what it's spending? I prefer this last question to the declarative statement that I often get from CEOs: IT costs me too much.

Centralized vs. decentralized

The structure of IT has been debated for the last 30 years -- moving back and forth from centralized control, to distributed operations, to mixed models of centralization of some functions and decentralization of others. It's time to stop this debate. There will never be a perfect structure that answers all the CEO's questions about how IT should be organized. The most important question today is how IT should be governed. Because IT has moved operationally into the business -- from collaborative engineering and design work, to supply chain management, to sales and delivery, to customer service functions -- no single person or organization can or should control IT. A combination of line business managers and technology-savvy professionals must now oversee what IT does. This is a critical requirement for companies that are undergoing the massive process changes enabled by IT, like the changes enabled through ERP systems.

IT infrastructure

Questions of the adequacy of a company's IT infrastructure -- its networks, servers and associated help desks -- are often raised when a CEO cannot get email because of nonstandard, nonintegrated technologies. It's an unexpected way to get to an important issue: Does the company have the infrastructure to support how business will get done in the electronic age? For most companies, the answer is "no". Years of undisciplined spending on technology and, for some companies, growth by acquisitions has resulted in complex architectures that are creaking under their current level of use. I am struck by the number of CEOs who are now mandating that IT infrastructures get rebuilt, with a heavy dose of standardization.

IT strategy

An IT strategy cannot stand alone from the company's operating strategy. A CEO should be asking how his or her company must operate differently to compete in an age of hyperproductivity improvement and what processes, systems, technologies and information must it have in place. IT, as a business function, must lend its expertise to how a company will move from manual to digitized processes.

IT spending

Finally, a CEO wants to hear from IT that it's operating in the most cost-effective way. This is a demanding but reasonable requirement. All companies are under extreme cost pressure as technology itself forces improvements in productivity and global competition kicks in.

If your CEO is not asking these questions, don't worry. Even for the currently disinterested, the importance of IT will eventually become visible. Hopefully, it will not be too late.

James Champy is chairman of Perot Systems Corp.'s consulting practice and head of strategy for the company. He is also the author of the best-selling books Reengineering the Corporation, Reengineering Management, The Arc of Ambition and X-Engineering the Corporation.

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