What does a new CIO do when his CEO says he doesn't know if the company has an IT problem? That, in fact, the business has no idea what the hundreds upon hundreds of IT employees do for it, or how the millions upon millions of IT dollars get spent?
For Allan Hackney (photo left), who joined Boston-based John Hancock Financial Services in 2008 as the life insurance company's first CIO, the answer was pretty clear: focus relentlessly on IT finance management. During his first 15 months on the job -- to the dismay of staff who expected their new CIO to chart a new destiny for IT or at least make some noise about social media, enterprise mobility and the cloud -- he hunkered down with the expense ledger.
"My first hire was a controller," Hackney told an audience of CIOs at the recent CIO Executive Leadership Summit in Boston, in a keynote address titled "Why IT Finance Matters to the CIO."
Since then, IT finance management has "improved a lot" at John Hancock, the U.S. division of Toronto-based Manulife Financial Corp., Hackney said. The financially focused CIO hardly has his head in the sand on new technology, however. The company runs a private cloud after the IT department proved it reduced costs and enabled the business, and is considering launching a hybrid cloud, he said. Three months ago, IT deployed hundreds of iPads to Hancock's sales force. Of course, Hancock's marketing department is "all over social media," he added, but IT is still on the hook for proving its ROI.
In fact, proving the value of IT is only going to get harder for CIOs, Hackney told the conference audience, because such developments as social media; the "extreme personalization" of IT; the rise of the Net generation; and the Internet of things, or sensing devices, continue to shake up corporate computing. His message to the CIOs in the audience: Get IT finance in order now, and be prepared to adapt your IT financial management models, as trends like the cloud and BYOD ("bring your own device") redefine traditional service-level agreements.
Putting IT financial management on track
What are the signs of an operation in need of IT financial management? When Hackney peered into the black box of IT at Hancock, he discovered practices with which many CIOs deal:
- Two sources of truth: one in the ledger and one in the IT tools.
- Metrics stated in machine terms rather than in terms the business understands.
- The IT department closing its books on one timetable, and finance people reconciling theirs on another.
The opacity of IT finance meant that technology was viewed as an expense rather than an enabler, a corporate function to be "squeezed at all times," Hackney said. The business indeed had no appreciation how hard IT worked, as the CEO had acerbically communicated. In this type of environment, raising capital for new technology is near impossible, he added, at least at a place like Hancock, where 250 actuaries calculate the value of assets to four digits: "Unless you can prove there is productivity improvement and expense it, you don't get the bucks, never mind about trying to grow the top line or create capability."
To set IT financial management on course, Hackney focused on improving transparency and benchmarking -- make that benchmarking, benchmarking, benchmarking. "You've got to know whether the products and services you are delivering are really at a point where they need to be," he said. Then you have to provide the data that shows your performance to the business. That does not necessarily mean putting up a flat-panel TV in the company lobby so that employees can read the meters on IT systems, as one of his industry peers did, but IT performance should be an open book. "You don't want the user community to go hunt for metrics," he added.
Proving the value of IT with a little help from MIT
One thing that helped Hackney get IT finance management in order was to focus on function, quality and price: in other words, providing the right services at the right level of quality and at a competitive price. "Not every shoe fits the same foot," he said. While parts of the organization may need high availability, others can weather an eight hour outage and "life goes on," he added.
Another bit of help came courtesy of The Real Business of IT: How CIOs Create and Communicate Value, by George Westerman, an MIT professor across the river from Hancock. According to Hackney, Westerman assumes that IT should both provide value to the business and be a source of change and evolution. IT can do this internally and externally by optimizing processes, as well as reshaping behaviors with data that helps employees make better decisions or that informs or even creates business products.
In fact, Hackney thinks and talks about IT service offerings in terms of product development and product management, "exactly as the product development units at your companies use it," he said. CIOs need to define their customers and know the size of their market and at what price point and quality point they can deliver services.
IT offerings at Hancock are served up in an IT service catalog, "so people will know what they are buying from you," Hackney said. He advises CIOs who want to keep such a catalog current to talk to user communities about the services they want or see in the marketplace, and match up their catalog offerings accordingly. "And if you can't deliver at the right price and quality, you had better find an outside provider to fill in the gaps," he added.
The warning seemed to resonate with the 200-odd CIOs at the conference, and was echoed by other speakers.
At Parexel International Corp., a Waltham, Mass.-based contract research organization that helps large pharmaceutical companies and biotech firms with clinical trials, the IT team focuses on "delivering value early and often," CIO Jo Hoppe said.
IT finance management resources
"We always want to be showing the business that IT is there providing value and adding services or products that make the business successful," Hoppe said. That said, she added, before CIOs start talking about being trusted partners to the business, "you better make sure you have the basics right."
IT value begins with the business, said Rich Adduci, CIO of Natick, Mass.-based Boston Scientific Corp. "If there is a compelling reason why a technology is valuable, then you need to connect the dots with the business and move quickly. If you have a hammer looking for a nail, then you are swimming upstream," he said, apologizing for the mixed metaphor.
As for IT's mandate to change behaviors, Greg Buoncontri, executive vice president and CIO of Stamford, Conn.-based Pitney Bowes Inc., takes a different tack: "I think a more effective approach is to try to paint context for people, whether your own or the business', about what is necessary and what is possible with technology," he said. "What you do, in effect, is change people's world view; and behavioral change flows from that."
Hackney's final caution? Even CIOs with tight IT finance management need to brace themselves for proving IT value in an era where their Net generation employees take computing personally and where BYOD turns asset management on its head. At Hancock, the days of buying thousands of laptops, putting them on the books and depreciating them over time, are going fast. In the BYOD world, devices are an operating expense -- and a volatile one at that. "Those hundreds of sales people issued iPads three months ago?" said Hackney. "Guess what they want."
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Let us know what you think about the story; email Linda Tucci, Senior News Writer.