From Cost Cutting to Value Addition

At a recent meeting a CIO asked me how it is possible for him to become a
business leader. "I have spent nearly twenty years in understanding technology,

now I have to understand business," he said. It should be possible, I told him.

Politicians do not always understand governance but they understand the people

who vote. Therefore, they govern. So, if you understand technology-and

technology is the business-there is no reason why you should not be the CEO.

Indeed, for many industries today, technology and business are a seamless whole.

And this trend is only likely to increase. Therefore, it becomes imperative that

the CIO thinks about making this happen as the big challenge. Yet, in a recent

survey by PC Quest, only 20% CIOs indicated this as their biggest challenge. By

contrast, 43% felt that deploying new products and technologies was their

biggest challenge. And, 37% thought that it was managing service providers and

vendors. This indicates that a mindset change among CIOs is the call of the day.

Take the banking industry. It still manages money but more and more functions

are technology dependent, and it is technology that is opening new business

opportunities. The travel and tourism industry still moves people around, but

all its functions, from selling to bookings to billings, are technology driven.

Telecom business opportunities like SMS and ring tones are completely driven by

technology. So, the real challenge is to dream of new business options that are

possible with the aid of technology, and not figuring out how technology can

make the existing businesses work better. Not that the latter is irrelevant. It

is just that the real value-add to an organization comes with the former. IT

enabled products and services provide the competitive edge that all

organizations are striving for.

Operational excellence in IT, for the existing businesses, is the hygiene

factor. It is no more the distinguishing or the critical factor. An AT Kearney

report indicates that operational excellence in IT impacts the margins of a

company by only 3-5%, whereas adding value by product innovations, supply chain

management, customer relationships and the whole set of new tools and techniques

impacts the margins by 20-30%.

If that is accepted, the mind game acquires a new paradigm.

In the services industry the growth options are obvious-more and more

services that are IT based. The whole BPO industry is an example of that.

Similarly, banking, insurance, stocks, tourism, education and many other such

sectors, are rapidly creating new service offerings, which give them a lead over

competition. In the manufacturing and allied industries it is more difficult to

imagine services that would create new revenue streams. Here, the focus has to

be on quick product innovations that are possible through IT.

The two emerging areas in which growth will happen and that can be used to

gain competitive advantage are: the Internet and its associate technologies like

broadband, and wireless and mobility. From these will emerge many new business

models that will give organizations the growth engines and the competitive edge

creators over the next 3-5 years. .

The author is Editor-in-Chief of CyberMedia, the publishers of Dataquest

(Based on the opening address at CIOL's C-Change, held in January 2005).