September 2003

	WHAT'S NEW! Free e-books now available: IT Value Chain Management: Maximizing the ROI from IT Investments- written by Alinean CEO, ROI expert and co-founder Thomas Pisello, and ex-CIO of NASA, Xerox & Kraft Foods and father of information economics Paul Strassmann Financial Reader for IT Executives - written by Editors of Computerworld Provided exclusively by Alinean
	IN THIS ISSUE: FEATURE STORY: In This Issue: CIO Makeover: From Cost Manager to Business Manager » What Matters Most: Operating Efficiency vs. Market Position Modeling The Ideal IT Organization
	Quote of the Month “Systems projects done without the knowledge or oversight of the IT organization, so-called rogue projects, may spring up because users see IT as a source of red tape or excessive cost. Or because they're looking for temporary or quick-and-dirty systems that they see as low-risk. Or they don't see the IT implications of what appear to be non-IT projects. Whatever the reason, rogue projects often have unintended consequences. Things can get hurt - budgets, schedules, business unit operations, careers and sometimes the corporate systems that IT does maintain.” -Gary Anthes, Computerworld Sept. 1, 2003
	SEND TO A FRIEND Email this Newsletter to: ^ Email Address   About Alinean Today’s rapidly changing economic climate supports the renewed need for information technology cost-justification. Alinean aligns IT and business performance through research methodologies and customized software tools, which measure and quantify the value of technology investments. For more information on Alinean and its tools for both vendors, consultants and CIOs, call 407.382.0005 or visit www.alinean.com.

The CIO Makeover: From Cost Manager to Business Manager

Furrowed lines mark CIOs' brows in the month of September - and October, November and December - mostly caused by the struggles to make the budget numbers work and ensure IT investing addresses the neediest areas. During these sessions most CIOs are put on the defensive, and are viewed as operational managers whose budgets must be cut to the bone in order to help achieve business profit goals. Now's the perfect time for these embattled CIOs to step back for a moment, and gain the upper hand via a makeover.

By shifting their outlook to business performance and market leadership opportunities, CIOs can have an immediate and lasting impact on how they're seen by the rest of the organization. Here's some pointed advice from a 'keen eye' on what could be the most important criteria for IT and business success:

1. Know the impact of IT investments on corporate financials. If technology investments truly have a positive impact, the results should be visible in the corporate financials and key financial metrics and ratios. Establish goals for IT targeted at revenue growth, profitability, costs of goods sold, assets, liabilities and operating expenses to measure performance. For example, the investments in supply chain management should be helping to improve inventory turns and reduce days sales outstanding, which in turn should translate to an improvement in the P/L and balance sheet, all of which should be the basis for project presentation, review and approval.
2. Understand the current level of IT spending, and if there are still opportunities for cost savings. Key measurements include IT spending as a percentage of revenue and per employee, as well as the Total Cost of Ownership, a detailed analysis of IT spending and key performance indicators. These will highlight low hanging fruit savings, or that costs have already been reduced to dangerous levels.
3. Take a 360-degree view of spending and performance with competitive benchmarking. Correlate the financial and market performance of the company and peers with IT spending to gauge the efficiency and effectiveness of spending. This correlation helps prioritize business opportunities, determine if expected results are being achieved, and most importantly, ensure that overall competitive positioning is improving. The comparison will also reveal which companies are spending wisely and achieving great performance, which are investing for the future, and which ones are falling behind as spending laggards.
4. Establish a collaborative platform of IT project portfolio management. Track all projects and resources, and most importantly, to plan and monitor risk and reward, competitive positioning, return on investment and bottom-line corporate impact. Not to mention, this discipline will deliver big returns in building credibility with the CFO, CEO and board of directors.
5. Promote or install business-oriented IT leaders to supplement and support your business-oriented efforts. Usually, the best leadership comes from a combination of resources, which often cannot be found within the same person - visionary leadership, business sense and operational management. The organization as a whole will benefit from having two leaders: one operational and technology focused - the CTO, and the other focused on information economics - the CIO. The result is often a classic case of making each other look good.
6. Seek vendor partners committed to ROI. Partner with vendors who will predict achievable and realistic business cases for their solutions, then stand behind the control of project costs and the delivery of tangible benefits with ROI measurement and service level agreement programs.

Taking Action for '04

Although the economy is showing signs of modest recovery, most projections show that IT budgets will remain flat again in 2004. At the same time, demand for IT is increasing, project backlogs are building, and business leaders are pressing for migrations, upgrades and new solutions. Adding to the CIO’s challenge is IT governance as a legislated mandate. The Sarbanes-Oxley Act requires that companies report large investments that are material to corporate financials, placing most large IT projects such as ERP, data warehousing and intelligence, custom application development, infrastructure upgrades and consolidation under intensified scrutiny.

These new realities require a CIO to demonstrably contribute to overall business performance. The mindset shift from this prescribed makeover can be a difficult one to make, especially in organizations that have a certain pre-disposed view of IT as a cost center rather than a profit opportunity. The upside: Becoming a key financial contributor and the de facto “CFO of IT.”

Did You Know?

A recent Empirimetric analysis of 3,000 business units from more than 300 corporations found that operating effectiveness (also known as the ability to run a tight ship) contributes to a company’s financial performance just slightly more than luck and random events: