By Seth A. Ravin, co-founder and CEO, Rimini Street
Few CIOs could have predicted a crisis like the COVID-19 pandemic, yet they are playing a central role in navigating the global disruption, working closely with their CEO and Board to help right-size the organization and set it up for future success. Even organizations that haven’t experienced market disruption had to scramble to accommodate remote work and adjust business models. During any period of economic uncertainty and global disruption, organizations will likely be operating in one or more of three modes: survive, stabilize or thrive.
In survival mode, an organization is focused on putting out fires to protect the business and preserve cash. CIOs will need to take drastic measures to slash costs across the board to stay alive. Stabilize mode is where an organization focuses on optimizing core systems and applications and restarts derailed plans. In this mode, the CIO is shifting from crisis response to optimizing the must-haves (remote communication, security), and deprioritizing the nice-to-haves (transformation, modernization). Thrive mode is where a company is focused on accelerating growth.
Along the continuum, an organization may move between stages or could be in multiple stages at the same time. The key is knowing where the organization is now and preparing for what’s next. Today, most organizations spend an average of 90% of their IT budget on ongoing maintenance and operations costs. Ideally, the IT budget allocation goal should be to invest 60% in operations and 40% in innovation. To achieve this rebalancing, IT leaders need to free up people, time, and funds to embark on a business-driven roadmap based on business priorities that support the CEO’s goals and vision for the organization.
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The Power of Prioritization
With proper prioritization, the CIO has the power to shift the budget equation and steer his/her organization into a thriving future. However, reacting without evaluating the entire picture, could leave the organization bleeding cash.
- The CIO should be asking the tough questions — both of their team and of executives — to be able to come back to their CEO and the Board with a proactive plan of attack. These questions provide a guide for prioritization decisions:
- What will be the organizational impact of this initiative?
- Does this initiative drive competitive advantage and/or business growth?
- Are there more important initiatives to tackle right now to help us right size?
- Can this initiative be deferred?
- Are there alternative strategies to eliminate the need for this initiative?
As the CIO evaluates IT initiatives, they need to be ruthless. If it doesn’t increase revenue, decrease costs or gain market share, they should not waste resources on it.
Prioritization Framework for the Business-Driven Roadmap
Digital dominance is poised to separate the winners from the losers in the new normal, however, CIOs struggle to find ways to fund operations and growth today. It’s more important than ever that CIO’s bring their prioritization superpowers to the table to gain alignment with their CEO.
Using this framework, CIOs can optimize IT investments and shift more budgets toward following a prioritized business-driven roadmap. This approach can help CIOs narrow their strategic focus and fund what’s important.
- Reduce software support and operating costs. Use third-party support and AMS providers to reduce support costs. Avoid or delay expensive, low-value application upgrades. By replacing over-priced vendor support, organizations can dramatically cut costs and reallocate funds to strategic initiatives.
- Improve application management outcomes. Take a unified approach to application management and support, consolidating providers and reducing complexity. With a single-provider source, CIOs can reduce operational disruptions, finger-pointing, and support gaps between vendors.
- Leverage public cloud. CIOs, generally, shouldn’t be in the data center business. Instead of managing infrastructure, vendor agnostic public cloud providers like AWS, Azure or GCP, allow CIOs to focus resources on business value, not operations. Employing a pure public cloud or hybrid model, can help CIOs achieve strategic flexibility, avoid vendor lock-in and take – control of their IT roadmap based on the business objectives of the organization.
- Manage public cloud usage. Once the infrastructure is on the cloud, don’t treat it like it’s just another data center. Concentrate on continually improving performance, scalability, and security using cloud-native tools to drive down spend and extend functionality.
- Optimize software licenses. Review software licenses for underutilization and compliance to improve ROI and reduce risk. By avoiding potential compliance issues and optimizing license positions, CIOs can get more value out of vendor agreements, be better prepared for audits and help avoid hefty penalties.
As the current crisis lingers, knowing where the budget priorities lie, in lockstep with the CEO and other key stakeholders, will be essential to staying afloat. Employing these strategies now will help the CIO proactively manage volatile conditions and emerge stronger on the other side of turbulent moments.