The CIO Dilemma – Balancing Tactical and Strategic Projects

December 4, 2009
By Andi

I had an interesting discussion last night on Twitter with Tajeshwar Singh (@tsingh4IT), a thoughtful and experienced IT pro working with a leading IT outsourcing provider,  about the differences and overlaps between strategic and tactical CIO planning. It was triggered by the disdain I have for a new “Top Technologies for 2010” prediction I saw, which included the caveat that these technologies will have a “significant impact in the next 3 years”.

I tweeted that I think such predictions are useless when most CIOs must prove return on investment (ROI) for major IT projects in less than 6 months. Tajeshwar got me thinking more deeply about this idea with his reply:

“cio demanding roi<6 mnths r taking tactical view;3 year tech horizon must for taking strategic view & decisions”

Indeed, this is emblematic of a really interesting challenge for CIOs.

The demand for a rapid ROI, typically less than 6 months, and in some cases shorter, is a fact for today’s CIO – even more so today than before the global economic downturn. I firmly believe that CIOs demanding ROI in less than 6 months are simply realizing and reacting to the modern reality that IT can no longer be a pure cost center. Ask almost any CIO, and you will know that the ‘blue sky’ IT projects that delivered results in 2-3 year timeframes are a thing of the past.

However, as Tajeshwar implied, this demand works directly counter to the mandate for great CIOs to think and act strategically, executing on a long-term corporate vision. The same CIOs that are trying to contain or reduce costs – essentially a ‘cost center’ approach – must also be acting to make IT a strategic asset.

This does not mean that strategic CIOs are dead, or even a dying breed. On the contrary, the ability to accurately envision future trends and get a head start on competitors is perhaps more important than ever, because the rate of change in IT is so much faster, and the barriers to entry for new technology innovations seem to be always decreasing.

So to be a great CIO you need to act tactically, with projects that contain costs and deliver ROI in less than 6 months; yet also provide the business with a strategic launchpad for innovation, competitive advantage, and shareholder value.

What sort of projects can do this?

How about:

Virtualization

This is perhaps low-hanging fruit. My research for EMA clearly shows the key outcomes of virtualization are well divided between short-term ROI and long-term strategic benefits.

For example, in the short-term, virtualization reduces hardware, power, cooling, administration, rent and even software costs. Around 90% of enterprises report that it delivers real, measurable cost savings. Loading up 15 VMs or more on each physical server, allowing admins to manage on average a 10% greater workload, saving an average of $200 per system on administration costs, adding as little as $37 for each new VM in administrator staff costs (up to 28 times less than a physical system), and reducing power costs by an average of 17% are rapid and significant ROI values.

In the long-term, faster system provisioning helps bring products and services to market faster, better DR capabilities provide a strategic defense against disasters and epidemics, and better workload and resource balancing provides faster response times and better customer service – a range of strong strategic opportunities.

IT Process Automation (ITPA)

In the short-term, EMA research has shown that sites with ITPA improve their MTTR, provide almost 65 hours extra availability per year for 24×7 operations, and sites with ITPA (typically larger data centers) save on average around $500,000 more per year on staff costs alone than sites without it (easily offsetting marginally higher staff salaries). These outcomes all provide substantial short-term ROI.

Meanwhile, 95% of enterprises report that ITPA achieves one or more strategic goals, such as improving the ability to adapt to rapid change (like rapidly integrating M&A), freeing up high-level staff, providing better security and compliance, reducing business and IT complexity, reducing human errors, and integrating with best practices. Moreover, 76% report that ITPA helps achieve 2 or more of these goals, and 55% report it helps achieve 3 or more. ITPA also correlates with an overall increase in IT maturity.

Lifecycle Management

In published EMA case studies, automated lifecycle management reduced regular maintenance windows for 50 systems from 2-3 days to just 10 minutes each, and cut the cost of  distribution of a new version of Microsoft Office from $90,000 to just $30,000. It also can help to reduce overall software license costs, allocate and reuse hardware more effectively, improve end user uptime, and reduce or eliminate the (often substantial) travel, staff, and downtime costs of desk-side visits to install new software or fix problems.

EMA research also shows that automated lifecycle management helps to achieve strategic objectives. It provides faster and better service to end users (and ultimately therefore to customers), enables IT and business staff to be more productive, lets business users take advantage of new software and systems much faster, provides essential compliance reporting, and maintains strategic security values.

Part of the reason that these technologies are both tactical and strategic is that they can all be implemented in short, sharp, phases that deliver fast and specific results, while establishing a technology basis that can be leveraged – reused, over and over, in multiple new ways – to deliver strategic benefits with little or no additional cost.

For a great CIO, such technologies are invaluable. They show fast results, justifying budgets and building confidence; yet they deliver technologies they can continue to leverage for better and better strategic outcomes.

All of which meets the needs of today’s CIOs much better than blue-sky, multi-year, technology dreamings.

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14 Responses to “ The CIO Dilemma – Balancing Tactical and Strategic Projects ”

  1. Twitted by JoAnnMoretti on December 9, 2009 at 12:51

    [...] This post was Twitted by JoAnnMoretti [...]

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  2. Tajeshwar Singh on December 29, 2009 at 06:10

    There is no doubt that CIO’s do need to control costs by taking tactical initiatives. To do so, they will exploit matured technology & offerings to give them returns within the short month time frame that Andi has written about. The technologies that have been mentioned like virtualization, ITPA etc are fairly matured technologies with evolved offerings from the vendors.

    IMHO, To provide competitive edge to the business and to enable the business in their strategic objectives, the CIO’s also need to keep track of new and evolving technologies. They need to have a timeline chart (for lack of a better example) to plot the evolution of technologies of interest that are currently on the horizon, map these evolving technologies to business objectives, explore, experiment & select the ones they think can enable business and make plans on using these technologies to provide advantage to the business in this highly competitive market.

    For example, way back in 2003 (I think) when server virtualization especially on wintel platform hit the headlines, it was still a new technology & product vendors were still evolving their offerings. A strategically thinking CIO would have kept this technology on their radar, experimented early and by 2006-2007 when the vendor offerings reached a fairly matured stage, deployed it and reaped the benefits. There are so many cases that I have dealt with where the organizations are beginning to move into the space of server virtualization now.

    Similarly, last year when cloud computing starting making the internet chatter, some of the CIO’s and their teams would have noticed and evaluated its potential in a much broader sense than simply as means to contain costs. Similarly, evolving concepts like web 2.0 etc should have been on the radar of CIO’s. Some of these have actually experimented with the use of these technologies to enable the business users like research & development teams (as a pilot projects), sales force etc and explore if these technologies can improve agility and cut down time to market of new products etc. As and when these technologies mature (we are aware of shortcomings of cloud in its current form), these CIOs will be ready to exploit these technologies for enabling business objectives. An early recognition of the potential of a technology can help CIO’s reduce the time to deploy while increasing the potential benefit (strategic, financial, competitive etc).

    By this I don’t mean to suggest that all new technologies can provide benefits that are relevant to a business environment and hence need to be adopted. Like I mentioned earlier, ‘relevant technologies that have the potential to enable strategic objectives’ need to be tracked, experimented and if found favorable, planned for adoption in the long run.

    Reply
  3. sam on December 29, 2009 at 12:46

    Virtualization is expensive, despite what VMware fanboys tell you. It is not a low hanging fruit, its a slippery slope. Virtualization requires that you buy a license, you hire/train a virtualization admin, you maintain the virtual layer and you often end up buying more powerful hardware, because the hardware vendor told you that you can get more juice out of virtualization if you use a powerful hardware.

    On contrary, expanding your capacity into a public cloud is lot more cost effective. You don’t pay for VMware or Xen licenses, you don’t need a virtualization expert on your payrolls and you can actually STOP buying new hardware.

    There is no excuse for non mission critical apps and servers to not move to the public cloud and reduce both CAPEX and OPEX.

    Reply
  4. Jay Fry on December 29, 2009 at 15:42

    I think what Tajeshwar Singh suggests above is indeed ideal for a CIO — watch technology trends, experiment with them, and then expand your use of ones that show promise from the early dabbling. I’m hoping that the tight economics of this recession still make that possible. I’m not sure it’s an option for everyone, though. The result is the type of short-term thinking and approach that I heard mentioned in a recent (unnamed analyst group’s) :) data center conference: http://bit.ly/4AuR7A

    In the end, that depresses me. So, instead, I like your take, Andi. Find tactical projects that can be a launch pad for bigger, more strategic things. But don’t lose site of the needed short-term ROI. The longer your list becomes, the better for CIOs (and, frankly, their businesses). We’re certainly working on doing that…

    The other thing customers react very well to is finding ways to make those initial projects self-funding if at all possible.

    Reply
  5. Andi on December 29, 2009 at 17:48

    @ sam:

    Thanks for the comment. It is true that virtualization can cost, but do you think the enterprises doing it (96% by EMA’s research) are losing money because of those costs? My research shows that around 90% experience a measurable cost reduction from virtualization. So I don’t think that is the big problem.

    I do believe that cloud (public and private) can have positive financial benefits. My upcoming research (‘The Responsible Cloud’) will show this very clearly. However, it will also show skills, management, and even license costs continue to be an issue with cloud computing. Plus, of course, how public cloud especially raises a lot of other issues. Cloud can actually end up more expensive than internal IT, at least for some.

    On balance, I actually think there is a place for both, but in the short term I maintain that consolidation with virtualization is low-hanging fruit to achieve real, measurable cost savings. And it doesn’t need to be expensive – there are plenty of free options out there.

    Reply
  6. sam on December 30, 2009 at 13:03

    Andy, agreed in theory, but in reality, many IT execs are asking for higher budget so they can buy better hardware suited for virtualization. This has an impact on data center costs and also on the environment in increased energy consumption. It doesn’t help that VMware is owned by a hardware vendor with a clear agenda of selling more hardware.

    Public clouds would do a much better job of securing your infrastructure than your own IT can ever do. Private clouds are a non starter, IMO. Its a marketing term with no technical merits behind it, and I wish analysts would stop buying the vendor hype on private clouds.

    Reply
  7. Andi on December 30, 2009 at 13:19

    Yes, cost control is still a major concern in the real world of virtualization. And new hardware POs certainly are the costly outcome of unmanaged sprawl – for servers and storage both (and OS/app licences, mgmt tools,. and a whole lot more). Good point.

    Re: private cloud – IMHO it is not just vendor hype. There is a lot of that, no doubt, and it is certainly the job of analysts to cut through the hyper, and not just regurgitate it like I have seen some doing.

    But in my upcoming research I found over 60% of enterprises that have adopted or are planning for cloud usage in the next 12 months (still a relatively small population overall, of course) are adopting a private cloud. Public cloud is well behind.

    Maybe they are all being led astray by vendors and analysts? I don’t think so, because other data points show they have many reasons to avoid public clouds.

    Still, I do think there is a place for public cloud – the non-critical apps you mentioned are an ideal starting point, as are areas like test/dev or data backup. But most public cloud providers (perhaps all?) will need better manageability, security, audit, control, etc. – and SLAs with teeth to back them up – before you will convince most CIOs to put much of anything in the public cloud.

    Reply

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