Feb 272008

Recently, I had the chance to talk with two CIOs from large, multi-billion and multi-national businesses with names we all recognize. To protect the identities of those involved, let’s call them Firm A and Firm B.

Firm A is a still rapidly growing consumer electronics manufacturing firm. But over the past ten years, this firm went from 1,000+ in IT staff to just over 500. They went from a couple dozen finance systems to one. They went from a dozen marketing systems to one. They went from about ten HR systems to one, seven relational database platforms to one, and a couple dozen data centers to less than a handful.

And now for the kicker. The IT budget went from about 4% of revenue to less than 1%. Along the way, their budget shifted from about 85% of the budget fixed and 15% discretionary to about 50% fixed and 50% discretionary.

Firm B is a large IT outsourcing provider and consultancy with over 100,000 employees. They outsourced a bunch of IT overseas (doctor heal thyself!), cut the number of applications they support from a couple thousand to less than 500. They went from many desktop and back-office platforms to one.

Oh, yes, and over the past six years, this firm cut the IT budget, as a percent of revenue, in half. And they freed up substantially more capital to apply to new initiatives.

As Darth Vader said about Luke Skywalker’s double back flip escape, “Most impressive.”

Both CIOs entered into a tangled mess of IT and drastically simplified it, standardizing on essentially a single core set of infrastructure platforms and a single enterprise application vendor. These more standardized and centralized IT shops have enabled the IT function to be more adaptable and responsive. Let’s call this the strategy of the “One.”

To execute this strategy, it appears both firms had strong executive teams and CEOs on board with the strategy and willing to twist some arms.

Ever the cynic, I asked both of these CIOs a simple question, “What’s next? What will provide you the next great leap forward in productivity?”

In both cases I got a good pause. Firm B’s CIO was honest. “We don’t know,” he said. But he was sure that focusing on how to get IT to contribute to revenue, as opposed to IT cost-cutting, was going to be part of the plan. Firm A’s CIO was a little uncertain, but did suggest that the IT budget as a percent of revenue will have to increase somewhat and they would have to continue to find ways to add to the revenue equation for the firm.

Inside I wept for these CIOs. It must be tough having so much success.

Both CIOs were crystal-clear about what they needed to do to simplify the absurd IT complexity they inherited. And both CIOs were much less clear on how IT will make another equally impressive contribution

The disparity of clarity was disquieting.

A voice went off in the back of my brain. Will both firms have to “recomplexify” to make the next leap forward? And at the scale of these two firms, what would that look like? Will the strategy of the “one” be replaced, yet again, by the strategy of the “many?” Will it be dêjà vu all over again?

Over the long term, walking the tightrope over the hell-fires of complexity and the glaciers of simplicity requires a most impressive and uncanny balance.


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