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CIOs focus on the business case while facing 'authority erosion'

Leslie Hearn
Madison, Wis. - The total cost of ownership often is overlooked when making the business case for a software implementation, but it might just be the key factor for chief technologists who are defending their turf.

The ability to establish and continually re-evaluate the business case, which implies a fundamental understanding of the business, might be the difference between success and failure, according the CIO of a prominent telecommunications company.

It also might be the difference between a CIO maintaining or losing authority, according a Wisconsin attorney who advises companies on information technology.

The TDS way

Leslie Hearn, vice president and CIO of TDS Telecom, made the case for constant business case evaluation - before, during, and after implementation. Her vision of the perfect business case is one that compares what a company was paying for an old application before the change, and what it is paying for a new application after implementation.
Hearn said TDS evaluates each application in terms cost and revenue. She described a structured process that includes early analysis of the business case long before the company actually buys any software. The data TDS looks at pertains to the kind of human (labor) savings it can introduce into its environment, including licensing and hardware savings from options like virtualization technology, plus ongoing maintenance costs, resource costs, and other out-of-pocket recurring costs.

The trick is to be as precise as possible, knowing that 100 percent accuracy is beyond the grasp. “You're never as good at this as you want to be,” Hearn said. “We have to accept a certain margin of error.”

Once the business case is made, an important evaluation should occur. What if the savings are less than half of what was projected? Is the software application still worth the investment?

The evaluation of the business case doesn't stop there. In fact, it continues throughout the project. Among the reasons Hearn believes in constantly updating the business case as a project evolves is that sometimes the results can exceed expectations, that it can lead to business process improvements (including better project estimating), and that encouraging results may lead to an accelerated timetable.

It also fosters relationship building with IT vendors, who should be willing to participate in proof-of-concept testing in your business environment, Hearn said.

“It used to be that you looked at the business case when you were done (with the project),” she said. “I don't think you can afford do that anymore.”

Losing their stripes

One reason for that is that more CEOs, especially those who have lost their patience with problematic information technology implementations, have stripped their chief technologists of some authority.

Tim Nuckles, owner of Nuckles Law Firm in Wausau, a member of the Assembly Speaker's Task Force on Information Technology Failures, advises clients in their acquisition of technology products and in the remediation of troubled projects. He has detected a clear trend toward CIO authority erosion.

“We are somewhere in the middle of a trend that involves divesting CIOs and CTOs of their decision-making authority,” Nuckles said. “In many organizations, CIOs and CTOs and the IT functions they oversee are taking on more of an advisory and maintenance role.”

In these organizations, Nuckles said chief financial officers are being vested with technology buying authority and accountability. He thinks it began when many CEOs and CFOs found themselves spending a lot of money for technology changes and new technologies based on promised full-time employee reductions and other financial benefits. Over time, they realized they weren't seeing those financial benefits, or at least not to the degree promised.

Nuckles has seen CFOs step up to the challenge, a development that could reshuffle the management deck chairs - especially for CIOs that lack a fundamental understanding of the business.

With CFOs having an increased role in technology buying decisions, Nuckles envisions more and better use of cost-benefit and return-on-investment analyses, more attention paid to controlling functionality - even if a piece of functionality is good for a given project, is it cost-justified? - and better management of overall project spend.

In addition, he said CFOs are much more likely to pull the plug early for a project that has encountered problems.

“Whatever the reasons for this trend, it is very real,” Nuckles said. “Think about how often you read a CIO/CTO interview, and the CIO/CTO speaks about the importance of understanding his or her firm's business and the bottom line.

“Even when the interview has another focus, the CIO/CTO will try to weave in that sound byte. To me, this is evidence of the CIOs'/CTOs' awareness of this trend and perhaps a pre-emptive strike to ward off the transfer of authority in their own organization.”

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Robert Merrill responded 8 years ago: #1

If Tim Nuckles is right about the trend, I hope CEOs and CFOs are also looking at HOW (and not just WHO) when it comes to technology project decisions. If CIOs failed because they didn't understand business, what will keep CFOs from failing if they don't understand technology?

I'm not concerned if the CFO can't write a SQL query, but I am concerned if the CFO doesn't rightly understand the drivers of IT project success and failure, and cost and benefit, and get the right information to make sound decisions.

Look carefully at "The TDS Way" as described. Projects are evaluated from both the business (benefit) and IT (cost) perspectives, early and often. They know early estimates are uncertain, so they consider hurdle rates and options. And they re-evaluate the estimates and adjust course as they go, using new information about both the technology and the business.

It's not about who decides, it's about how decisions are made, and the understanding and information they're based on.

Robert Merrill
uFunctional LLC

Michael Krigsman responded 7 years ago: #2

The impact of project delays on ROI is material and must be addressed. I have blogged about this here:

Michael Krigsman

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