Managing the CXO's dilemma on cost and growth

It is a centuries old paradox for businessmen. You want to reach out to lot more customers than you have;  with many more partners and suppliers in your network at hand;  to sell a bigger, wider, deeper product portfolio than now – but alas, doing so needs either a smart way or a big muscle. Usually it boils down to cost because understandably growth requires a proportionate back-up of resources, infrastructure, scope and so on.

IT infrastructures rhyme with business expansion, growing, expanding, spreading, supporting new levels of bandwidth and scale as an enterprise progresses. CXOs find themselves standing in the same tight spot – how to aspire for the next level without spending enormous sums on the growth curve. To add to that CMOs have to be a step ahead of the customer’s moments of truth, which now happen more on the virtual fringes before the real world, namely that of social media.

The Economist Intelligence Unit showed in a report that CFOs are struggling to make effective decisions due to inaccurate, out-of-date information and some  63% of respondents say their job entails analyzing all available information, yet 47% say their decision making is slowed down by information overload. Note how 43% say integrating complex data from different sources is a problem.

PriceWaterhouseCoopers, had at one point last year, interestingly argued that much IT spending is focused on upkeep. Its research spotted how IT contributed a great deal to productivity growth in the 1990s but the link between IT spending and productivity gains has weakened after 2000. What emerged was the need to simplify the complexity of IT systems and to accentuate IT's contribution to productivity increases.

This calls for alternative measures of IT with focus on value creation rather than the traditional "necessary evil" or "problem avoidance" measures which have afflicted IT divisions in the past, as PwC had insinuated.

IT’s all about the future

Thankfully the future is swinging towards a breakthrough of sorts, with a possibility of balancing both the extremes of cost and growth. Digital revolution, cloud platforms, mobility trends and associated forces have started paving way for an agile, fast, lean and yet not very expensive IT engine to fuel the businesses of today and tomorrow.

The question is whether this spend is happening at an opportune time, coming from the right source and going towards the right destination?

Another PwC survey of 500 US companies with annual revenues of about $500 million, indicated that between 15% up to 30% of IT spending now occurs outside the standard consolidated budget of the IT department. That means that a lot of the ‘Shadow Spending’ is actually under the carpet and hence beyond routine controls.

Its analyst cautioned that business managers, after their shadow IT decisions for cloud services, later go to the IT department with demands to integrate enterprise data with what has become cloud-based data in order to do analytics or for other purposes.

Cloud understandably evokes mixed views with CMOs and CIOs with the mental blocks revolving around data confidentiality. So unless scalability and business imperatives are taken care of, growth dynamics would not transpire the way it may appear theoretically.

Enterprises have started realizing that defining a well-planned approach towards enterprise mobility deployments can gain maximum user acceptance, reduce time to ROI as well as mitigate security concerns. Gartner has often cited Square, Bitcoin and Kickstarter as examples of companies that have used digital to reframe the way old financial institutions and venture capitalists work.

Every company, a technology company

Even as we speak, cloud technology is enabling companies to optimize business processes and create new business models. This is why every company will become a technology company. So CXOs have to stop ignoring technology as a different department or an after-thought if they were doing so.

More so when 70% of Indian CIOs will report into CEOs by 2016, and as Forrester rightly pointed, technology is increasingly helping to shape the business for a vast majority of Indian companies.

A direction that was echoed by Gartner equally strongly in a survey that showed that CIOs are fully aware that they will need to change in order to succeed in digital business, with 75 percent of respondents saying that they need to adapt their leadership style in the next three years.

What the research firm advised is that CEOs and leadership teams must crystallize what they mean by digital strategy and work with a small subgroup from the executive team to define what 'digital' means and how it manifests in the broader business strategy.

This needs a clear reckoning of all elements of the digital strategy vis a vis the core business strategy, and the right mix of leadership with chief data officers, chief digital officers and new heads of innovation on the way. 

The new era of IT offers that long-awaited recipe that CXOs had been dreaming of, provided they can jump on the wagon before it is too late and steer it properly in the direction of growth for their business. The dilemma is possible to erase and CXOs just need to pencil in some new strategies, especially when it comes to the cloud.