Author: W. Eric Ledyard
In today’s business world, technology adoption is a much stronger competitive differentiator than it has been in the past. It offers many opportunities for companies to grow their top-line revenue if they’re savvy enough to leverage the power that new cloud technology enablers offer.
Recently, Kotaro Oka, one of our newest Accelerate members based in Japan, and I were having a discussion on VMware Accelerate's views of the IT world and what our primary objectives are when working with organizations. There was a little bit of a language barrier, but because of that, I may have heard the best description ever spoken back to me.
After explaining that most vendors of IT products and services are focused on saving companies money and reducing costs, I then told him that our mission was to change the way IT is perceived within organizations – moving IT from a cost center to a competitive differentiator. I gave him examples and lessons learned that we have seen at our existing customers as well as information garnered from McKinsey around the fact that IT spend represents typically around 4 percent of an organization’s total annual financials. And, if you focus on just cost savings, you are shaving off a percentage of only that 4 percent of the pie. The real impact is made when you leverage IT to affect the top-line revenue of the organization.
As I was relaying this message to Kotaro, he responded: “What you are really doing is making IT the hot new product.”
His understanding of what the Accelerate team is trying to accomplish had never been so eloquently stated before to me, and a choir of angels should have accompanied it. Immediately, my mind started processing how much easier it would be for a CIO or CTO to sell the investment needed to fund a cloud IT project if they approached it as though it was the “next big thing” for the company. I started thinking of projects that I have seen with millions and millions of dollars thrown at them because of the promise of creating market buzz or showing that the company was forward thinking and ahead of its competition.
But those same companies continue to have issues trying to get a few hundred thousand dollars’ of IT budget to support projects that would have far more impact to the business overall. Typically the CIO doesn’t position the project correctly to internal stakeholders, or design the proposed solution using technologies that would lend themselves to differentiation. In many cases, IT projects are seen merely as a cost burden because they are not designed or perceived as offering company-wide innovations.
At the same time, many of these companies compete against technology-savvy upstarts, whose core competitive advantage is their ability to build a company from the ground up taking advantage of modern technology. This allows them to have a much higher level of business agility, and take business away from other companies in droves because they utilize technology enablers that their consumer base wants to use because it makes their lives better (e.g., applications for mobile devices that allow them to access their accounts while on the go).
Meanwhile, CIOs of larger, more established companies are constrained by their legacy applications and technology infrastructure and are unable to keep up competitively. To compound issues, most of their traditional IT organization is so focused on cutting costs and doing more with less that they are unable to proactively focus on projects that would drive top-line revenue and allow the company to grow through the use of cloud technologies.
As I pondered Kotaro’s statement, I imagined how a CIO could present the same technology enabler up to company executives for approval and have it perceived in two entirely different ways. And, because of the difference in approach, would fail in the first presentation and be successful with the other. In the first example, a CIO would approach the board of directors and executive team within the company with a list of products that you wanted to buy and a price tag of a few hundred thousand dollars and a weak business plan that showed a TCO reduction over three to five years. In this world, I imagine the executives perceiving this as “just another IT spend request” and denying it because they need to cut costs and this technology solution wasn’t needed at this time.
In the second example, I imagined what it would be like for the CIO to present the proposed technology enablers “as a product” rather than a cost. In this example, as a CIO, you would create a brand around the IT project, you would do some legwork to quantify the impact the product could have on the company, you would compare your product to that of your competitors and you would discuss how you would use the product to drive top-line revenue and competitive differentiation.
In much the same way that you would do this if you were in R&D or Product Development, as CIO, you would speak in the language of: “If the company invested $10 million in this product, and it will drive $100 million in new/additional revenue over the next three years, why wouldn’t the company do this?”
For most companies, that proposition would be quickly decided upon. The only difference is, “the product” in this example would be the new IT project that will utilize cloud technologies and provide all of the benefits necessary to the company to keep its current customers happy while also attracting new customers and allowing it to enter or create new markets.
My career in IT leadership happened in a time when the industry was mostly focused on cutting costs and squeezing more out of IT with less budget because the technologies we needed to drive true innovation through IT had not been invented yet. While writing this blog, I find myself being envious of today’s modern CIO/CTO and thinking of how much easier they have it than we did.
With this latest cloud technology shift and all of these incredible technology enablers finally making it into existence, savvy CIOs have a much easier time getting the rest of the business to get behind them to accomplish their goals just by changing the way they think about what they are doing as an IT organization. Because the technology enablers are there, if you are truly running your IT environment “as a service” and IT is “the hot new product,” the sky is the limit for getting things funded and done. The first big step is that shift in perception.