The rise of digital technologies has disrupted everything from the pace of innovation to the operating model, and CIOs have found themselves at the center of this transformation. As technology continues to permeate every area of the business, many organizations are embarking upon their own quest to innovate and invest in digital solutions. While this creates a wealth of opportunity for companies across all sectors, it is fraught with twists and turns that must be carefully negotiated, especially when large budgets are involved.

With the CIO at the helm of digital transformation, IT has the opportunity to guide the company’s path towards becoming a fully-fledged digital business. However, requests for digital transformation often originate from outside the IT department, as other business units look to keep up with customer demands for improved and more convenient services. The rise of the always-on customer means companies of all types are developing their own apps and digital services to provide a seamless experience, often leveraging the latest technologies like cloud and AI to power these tools.

Gartner’s 2018 CIO Agenda report highlights that CIOs are having to take on greater responsibility for revenue generation, something they must balance with the increased demand for investment. As a result, the CIO needs to be able to understand these motivations, and come equipped with accurate information on IT spending to lay out an effective transformation path with various business stakeholders.

A cultural shift

A main role of any effective CIO is to shift the culture within the IT organization and fundamentally improve the way the business interacts with IT. In the era of digital transformation, the CIO is responsible for helping business units better understand the business implications and tradeoffs needed for each decision around technology, leading to more comprehensive IT conversations across the business. This can help to align overall objectives and move IT away from simply being a cost center, and towards being a true partner and guiding hand as organizations embrace digital transformation.

To achieve this, the CIO needs to create a holistic approach to monitoring and provide a transparent view of all IT costs. Spreadsheets are not an effective method for managing these increasing budgets, with various licenses, service agreements, and micro-billing from cloud companies adding to the complexity, not to mention version control issues.

It is imperative for IT to embrace a management system, similar to what has been standard practice for sales with CRM and finance with ERP, to ensure digital transformation can take place effectively. Doing so ensures that not only does the CIO have a better understanding of costs, but also that they are able to illustrate the quality and value of IT to the rest of the business.

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Finding the fuel for digital innovation

Increased visibility into spend can be used to understand redundancy, optimize investment, and assist in an effective digital innovation strategy in a number of ways.

First, while business units may be keen to move ahead with implementing new digital services, it is important to take stock and identify where change is truly needed, and where the fuel for it can be found. As IT grows increasingly complex, it becomes important for business units to understand where to find savings, recover costs, and/or reprioritize IT projects to fund new initiatives.

This is especially true when IT doesn’t have a full view of each business units’ IT decisions. There may be under-utilized data centers and cloud instances. Software licenses are another common issue, in that companies often have numerous licenses for the same software resulting from individual requests and initiatives from different areas of the business. This could be a necessity, due to differing requirements, or it could be another example of wasted IT spend. Opportunities to rationalize applications, prioritize migrations, and influence consumption behavior are all great places to look for funds that can be reallocated.

It is up to the CIO and the IT department, armed with a full overview of IT spending, to explore optimization and cost reduction/recovery initiatives with business units before moving ahead with digital transformation. This helps identify extra spending which can be repurposed to assist innovation.

Lighting up the shadows

Once conversations on current IT costs have taken place, CIOs can provide practical advice for the implementation of new services.

The cloud can fuel business processes during digital transformation, providing a scalable and agile platform with which business units can access storage and processing power to improve their service. In the age of digital transformation, cloud has proved an important resource.

While the adaptability and accessibility provided by cloud is a huge benefit, it can also cause problems for the business. When IT is unable to maintain oversight of organization-wide IT spend, it is far too easy for individual areas of the business to set up their own cloud instances and services, perhaps without even realizing they are doing so. The associated costs can quickly spiral out of control, leading to the rise of “shadow IT” that creates a black hole in budgets.

Therefore, it is vital that the CIO and IT department provide the rest of the business with a clear picture of current IT spend, demonstrating where associated costs lie, and highlighting where new initiatives may result in costs that other areas of the business aren’t usually aware of. Providing transparency opens a dialogue that helps IT guide business units toward more efficient cloud spend.

Ultimately, digital transformation is largely motivated by demands across the business, rather than from inside IT. Improving cost transparency helps businesses understand where they can make the most impact with digital transformation. The CIO plays an active and critical role in promoting understanding and managing this process.

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Editor's note: Colin Rowland is Senior Vice President, EMEA, at Apptio. This article was originally published in InterContinental Finance & Law Magazine. See the original article here.