When you demonstrate IT value through operational metrics, you risk alienating business stakeholders. Operational metrics simply aren't enough because they don't demonstrate the business value of efficient and agile IT.
Here are seven common CIO mistakes you make by focusing on just operational excellence rather than business value.
No one likes financial surprises, especially you. That's because you're on the hook to explain what caused them and stand behind a response, and your responses come down to a series of unpalatable choices.
Often, spend surprises are discovered late in a quarter or a financial year. With little runway to work with, there isn’t much time to evaluate the best ways to cut spend—leading to emergency cuts in innovation initiatives.
Basic financial metrics such as monthly total spend or variance to a total budget are notable for what they don’t tell you about IT spend.
Though directionally accurate, they are derived from the standard general ledger structure used by all corporate finance departments—and don’t include IT categories or cost centers owners.
Your people have 40 hours a week to work. Why use their time doing work that doesn’t align with their talents?
Instead, optimize your labor resources. High-skilled labor doing low-value project work ties up skills that could have a bigger impact elsewhere. On the other end of the skill spectrum, low-cost labor may lead to lower productivity—the short term saving of labor spend is paid back in spades with extended project timelines and missed SLAs.
An aggregated view of labor costs isn’t enough to make informed staffing decisions—there isn’t granularity into the drivers of labor spend. Only effective labor rates across functions (by cost center, role, and location) connect hiring decisions to financial reality. New hires, turn-over, and re-assignments: you make blind personnel decisions when hiring plans exclude baseline labor rates.
Infrastructure and Operations (I&O) probably know where infrastructure inefficiencies lie but aren’t able to quantify the financial impact.
When you take that same message to the business (by talking about operational rather than financial inefficiencies), you propagate the notion that costing IT is too hard to track and impossible to control.
Infrastructure costs are driven by changes in demand or efficiency. Unless costs are broken down by IT resource type (e.g., network, compute) and cost pools (e.g., labor, software), you can’t point to areas of the infrastructure footprint and say what’s driving costs.
Infrastructure exists to support business capabilities. When infra costs aren’t tied to specific applications, CIOs have infrastructure spend that doesn’t seem to support any business capability. This is (hopefully) more of a mapping issue than straight-up waste, but without validation and tracking, you are blind to the difference.
Public cloud costs are buried in monthly billing detail across multiple accounts and providers, business units, and teams. You struggle to normalize these disparate views to drive an effective use of the public cloud and the business is overwhelmed by cloud choices and their trade-offs.
With fragmented purchasing across the organization, cloud OpEx spend accelerates without warning—leading to budget and resource constraints.
Indirect costs of public cloud (physical labor, software, security, and other non-provider costs) aren’t in a cloud provider’s bill—and neither is consumption data. Without fully burdened public cloud costs and alignment to business unit (BU) usage, you struggle to get the “most bang for the cloud service buck.”
Although cloud providers offer instance tagging to identify business purpose, tags are often poorly structured. When business units are unaccountable for their public cloud spend, they have no incentive to curb usage—leading to waste, sprawl, and consumption.
You often have to make investment trade-off decisions with an incomplete picture of costs, and sometimes those trade-offs are based on who screams the loudest. That’s no way to build your credibility. Projects expand beyond planned staffing and budget levels, tying up labor, vendor, and ongoing run costs.
When more resources are needed for a project, there must be a trade-off with the rest of the project portfolio. Without viewing project spend through the same pane of glass as labor, vendor, and run costs, you don’t have a line of sight into the impact of those trade-offs.
Secondly, business units don’t know their share of the ongoing investment spend—or know the levers they can pull to control them. Fuzzy connections between projects and BUs yield poor accountability for costs.
It is often easier to get buy-in for a new application than it is to standardize on one application from the current portfolio. But you are the CIO—you can’t get distracted by the path of least resistance. A bloated application portfolio hides redundancy and locks innovation spend to legacy apps.
Calculating credible, up-to-date application TCO is difficult. Assigning infrastructure costs to specific applications depends on good server-to-app mapping; alignment of labor costs to applications requires a defensible allocation strategy. Without either, TCO analysis is too simplistic to be believed.
However, TCO analysis that is defensible but too complicated to replicate is stale when a new application is added or a change is made to the underlying infrastructure.
Applications portfolios are the visible output from IT spend. By showing application spend per BU, you present IT costs in the business language of applications.
The business doesn’t care about IT costs shown at a technical level. To resonate with the business, you should align projects and investments with initiatives and sponsors. Benchmarking internally by comparing KPIs such as cost-per-BU-employee across BUs and departments uncovers spend patterns and drives changes in behavior.
There isn't a simple way to show a BU’s share of ongoing IT run costs and IT investments. This pulls at your credibility (no other C-suite peer gets away with “it’s complicated” when explaining their budget) and frustrates BUs who just want to see the alignment of spend to their part of the business.
Simplistic BU allocations methods discourage accountability. Even-spread allocations of infrastructure spend spuriously treats the cost of public cloud compute the same as an aging mainframe—and doesn’t show what the business can do to change their share of IT costs.
These seven mistakes have a common thread of using operational metrics to justify business relevance. Your partners in the business aren’t impressed by the efficiency of your operations—that should be a given. Instead, they appreciate the way you align operational improvements with strategic goals. Learn from these mistakes and watch your credibility rise, maybe even turning some heads along the way.
Recognizing mistakes is one thing, but avoiding them is another. Download recommendations here: 7 killers of CIO credibility e-book.