What Midsize Enterprise CIOs Can Learn From Their Industry Peers

Follow these three steps to capitalize on what they have in common to increase agility and improve IT spending.

When the CIO of a midsize enterprise (MSE) received a request from a business partner in finance about potentially moving some functionality to the cloud, she started by having a conversation with the CFO to determine if this was a project that aligned with bigger business needs. Due to the closeness with which she had worked with the CFO in the past, she was able to have a casual conversation the next day, and eliminate the need for a larger formal meeting. Together, they worked out that the new, expensive system the CFO wanted could be replaced with an already-in-use system.

Every issue at a MSE might not be so easily solved, but this CIO utilized key attributes of her company — agility and relationships — to provide a useful solution. MSEs, despite variations in industry and geography, tend to encounter the same challenges and skills gaps when it comes to areas such as behavior, process, budget, staffing and skills. CIOs can use these attributes, no matter what type of company they’re working in.

“The upshot for MSEs is a high degree of organizational solidarity and pragmatism focused toward a finite list of strategic business outcomes,” says Mike Cisek, research director at Gartner.

This makes it crucial for MSEs to capitalize on the close relationships that exist between business units and technology teams so they can adjust quickly to business conditions. They must also make cost a much bigger factor in their investment decisions, compared to larger competitors. Finally, they must be prepared to “rightsize” their IT spending so that any investment produces tangible operational benefits.

These challenges give MSE CIOs three clear steps to improve IT decision making at their companies.

Step 1: Build on the synergy that comes from dyadic communication

Given the size of MSEs, the communication that leads to important decisions is dyadic — or occurs between two parties. This tends to be between company leaders and small groups of typically two to seven participants. The history that colleagues have of working closely together empowers senior decision making and is core to the inherent agility of MSEs.

Three forms of dyadic conversation dominate the flow of information and decision making between teams and team members:

Conversation: This is the basis of most “run the business” decision making. Flat organizational structures and direct access to decision makers means conversations occur at any time with no definite agenda. Feedback is immediate, and anyone has the right to respond, interrupt or refuse. The success of these conversations is based on a mutual interest of keeping the business running.

Dialogue: This is the primary way to solve problems, manage teams and run project activities. Dialogue is more orderly than conversation, with a definite agenda topic to discuss.

Interview: This is the primary means by which projects are initiated and requests flow into the IT organization.

MSE CIOs should encourage adoption of IT solutions that catalyze this type of information sharing and eliminate rigid IT governance processes that can destroy the inherent benefits of an MSE’s efficient decision-making framework.

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Step 2: Keep IT spending in tune with business economics

MSE IT budget spend typically represents 2% to 4% of revenue. With little flexibility to obtain additional funding and limited ability to shift spend from one project to another, IT investments must be targeted and consistently yield tangible results.

Traditional high-level views of IT spending (such as breakout of hardware, software and staff), won’t be as effective as strategic, business-based conversations with stakeholders. A conversation about reducing spending on mobile cash payment systems and increasing it on automation is much more likely to be productive than one about servers, networks or storage. While business stakeholders might not fully grasp the importance of spending on servers, they will understand the impact of reducing IT spend on a larger projects like cash payment. Framing these conversations from a business perspective ensures IT gets the funding it needs to support the business and get the best return on its spending.

Step 3: Be clear about what constitutes “good enough”

While it can be tempting to give in to vendors selling “must-have” best-of breed solutions or business leaders with little understanding of the implications (technical or budgetary) of a requested move to all-cloud solutions, the MSE CIO needs to avoid rising IT costs that won’t improve the business. Beware of investment choices that unnecessarily increase “run the shop” IT spending and limit the ability to invest or divert resources to projects that will lead to competitive relevance and transformation.

CIOs should establish an objective procurement process that provides accurate and unbiased business and technical requirements, cost analysis and business impact assessments to determine what constitutes “good enough.”

Cisek_Mike

Gartner clients can read more in the full research Three Dynamics That Drive Midsize Enterprises by Mike Cisek, et al.

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