What happens in an organization when executives do not prioritize IT correctly?

In a constantly evolving world where IT is the cornerstone and enabler for growth, one would think that IT would be given priority and be an integral part of the business. Still, until this day that is not necessarily the case, which might seem odd from an outsider’s perspective. But to understand why one would have to acknowledge the struggles and culture still present in many companies and board rooms.

Priorities amongst executive leadership teams span the whole spectrum of the business, where IT  is often the subtle component making things actually happen. It is therefore of utmost importance to acknowledge what the impact could be if the role of IT is downplayed and not prioritized.

Where IT fits in the organization

Historically IT was considered a cost structured under the CFO and was expected to deliver a superior service without taking part in any corporate strategy or project work. Keeping IT part of a finance department might mean that cost aspects overshadow the potential of IT. Some companies acknowledged that and restructured the organization to have the person ultimately responsible for IT reporting directly to the CEO. In fact, in some cases the pendulum swung the other way to the point where IT was given such a high priority that too many IT-related executive roles were introduced (typically CIO, CTO and CDO) with overlapping responsibilities. This created more harm than good since without clear mandates they were cannibalizing on each other’s areas, creating even more confusion than before. Having a clear strategy and mandate for IT is therefore of utmost importance in order to create a high performing organization.

Executive management vs. reality

Having a company strategy and roadmap are one of the main tasks for the executive management to maintain, often cheered on by the board. Working together with a management consultancy firm is also common practice: it is usually very helpful and can provide useful market insights. Management often fall into a trap of thinking that their competitors are far further ahead technology-wise than they actually are. When you then combine this thinking with executives who spout any number of buzzwords in the meetings (“Digitalization!”…”Big Data!”), IT executives may feel pressured into over-stating the effect of given projects on the roadmap.  This will lead to frustration from the rest of the executive team: the bar is simply being set too high. The truth is, your competitors probably aren´t much better at implementing new IT than you are, so if you can get the basics right then you will start to out-perform them. Apply a “shift left” approach to IT (e.g. including IT early in a new business strategy), and there will be greater transparency and linkage between what the corporate strategy is and what the IT roadmap is delivering.

Technical debt

It is not uncommon for companies who have been operating for five years or more to start building up a technical debt with software and applications nearing end of life or becoming outdated. A constant catch-up to maintain a modern and updated IT environment is challenging but can be achieved if the IT organization is given the right prerequisites and budget. A typical directive from the board is to focus on product development, but every so often profitability and costs are on the table as well. These aspects do not marry very well since accelerating innovation and offering new products costs money and resources. This is a dilemma for the IT executive; Do I please the executive management and focus to deliver according to the roadmap? Ask for more resources and budget? Update the IT environment to ascertain it is refreshed and up to date? The latter one easily slips to the bottom of the priority list because resources and budget are almost never sufficient. Making sure that the IT environment is up to date is therefore of great importance, otherwise the technical debt will build up over time and eventually require a significant investment which will not go down as a popular topic at a board meeting.

Key man risk and documentation

Companies that have been operating for a decade or so have usually moved on from the IT infrastructure, software and applications they had at inception. They have matured, scaled up and are now able to cope with current volumes, although some of the IT environment might not consist of cutting-edge technology. The person(s) in the IT department which have enabled the company to grow are not necessarily the same as the person in the spotlight who receives recognition. There could be a number of persons within the IT department who are hard to replace due to their specific knowledge about an application or legacy technology. This is a risk which should be highlighted and there is a chance that IT management already is aware of the situation. In case technical documentation is missing the risk is even higher since the only source of information would then be the specific person in the IT department who possesses knowledge about the IT environment. Documenting a legacy system is tedious and not something at the top of priority lists, even though it should be. Having a high standard of technical documentation and no dependency on one person reduces the risk significantly and makes the decommissioning of legacy IT environments a controlled process with reduced risk when the time comes.

To sum up

Any IT executive recognizing the scenarios above can hear the alarm bells ringing, although the concerns might not be funneled up to the executive management or the board. Taking accountability of inherited risks from predecessors or escalating IT investments because they are not in line with the roadmap could damage your own personal brand. Who wants to be the IT executive asking for additional funds without adding value to the roadmap or strategy? Being sidetracked by major IT projects such as an ERP or integration platform implementation will easily take up the majority of resources available, halting other initiatives. But this is the responsibility that an honest IT executive must shoulder to stay relevant. Being responsible for IT sometimes means making unpopular but necessary decisions. If you are criticized for this, realize it is not personal and argue sensibly that your actions are for the good of the company. Refraining from being transparent and not escalating emerging problems in their infancy will create a snowball effect and make the time, effort and costs exponentially larger to rectify at a later stage. BearingPoint offers Technology Review and Due Diligence services to address these kinds of scenarios and assist executive management, investors and other stakeholders to get all the facts on the table to make the right decisions. Feel free to reach out to us and we will help you to get a better understanding of your IT.

 

 

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