A CEO-CIO strategic partnership is needed to enable quick pivots amid instability

Companies are experiencing unprecedented business dynamics in which global disruption and global competition are creating complex, rapidly changing technology investment priorities. It’s business as unusual for most companies as they find themselves in constant response mode. There is no more status quo in the business world – companies must either grow or they will likely die as an entity.

For many CIOs, operating the data center is now the least of their priorities. Their investment roadmaps have been side-railed by disruptive global events, and non-essential projects are being put on hold.  To survive and thrive, companies must have a digital core. Almost overnight, CIOs have shifted focus to investing in solutions that serve customers primarily on digital platforms. For many companies, their digital infrastructure must be able to handle 100% remote work.  Those that are already digitally platformed will make this adjustment much more nimbly than those that haven’t invested or have under-invested in digital infrastructure.

What CEOs really need from their CIOs is adaptable strategic guidance that will help them pivot very quickly when disruption occurs. CEOs also need their CIOs to make wise IT investment decisions that optimize costs, save jobs, stabilize operations, and shift IT resources to these strategic initiatives. In order to do this, CIOs need to be at the table with the CFO, CEO, and CPO in setting the broader business strategy that drives the IT roadmap.

CIOs must innovate on limited budgets  

Today, nearly every company in the world has a financial problem. Either revenue streams have been disrupted on the front end or cash supplies are tighter on the back end. This happened in 2000 with the dot com meltdown and again with the mortgage crisis in 2008. However, those scenarios were not the same as the shock that has happened today in such a very short period of time.  Every business and every market segment are being impacted by the current global disruption. Governments are spending more money to keep their economies going than they can ever hope to repay. When there is revenue disruption, everything changes. Unfortunately, it takes longer for a company to cut costs than it takes for revenue to fall.

The first order of business then is survival. In order to survive, companies must be focused on cash. Many companies are slow-paying or trying to renegotiate with every vendor they have. Scrutiny is being put on ‘need to have’ versus ‘like to have’ or ‘nice to have’ projects and services. Companies are competing for a smaller pool of cash and prioritization is top of mind for CIOs who must innovate while keeping current systems operational. Many IT projects are being cancelled. For example, ERP refreshes that don’t bring real value in terms of competitive advantage or growth are being pushed off a year or more until companies rebuild their cash supplies.

The CIO can be the most influential person right now when it comes to IT purchasing decisions. To survive, and ultimately thrive, CIOs need to look at their spending pool and immediately make changes that align revenue on the front end with costs on the back end. In the current market, this means shifting budgets to investments in digital technologies and services that support the company’s innovation strategy even amid uncertainty. When as much as 90% of the CIO’s budget is spent on ongoing operations and enhancements to back-end systems, this leaves as little as 10% of the budget for investments in the company’s innovation strategy.  

The goal should be to change back-end systems as little as possible; their level of maturity makes them low-risk for breaking, so the support services needed are primarily tax and regulatory updates, and advice and counsel which can all be obtained from independent, third-party providers at a fraction of the cost paid to the enterprise software vendors.

CIOs instead should optimize the operating costs of back-end systems like ERP and shift those funds to an IT innovation investment strategy that supports the CEO’s digital priorities. Investments in front-end systems of engagement (where important interactions with customers occur), will more likely address the CEO’s business strategies. These dynamic, customer-facing systems are where constant change is needed in order to remain competitive and where digitalization will help attract and retain customers — keys to surviving and thriving.