The job of the CIO is not what it used to be. No longer are well-run data centers and solid uptime metrics the measures of success - now CIOs run the business process and technology is the tool. The metric a company should use to measure the performance of its CIO these days is agility, and companies that don't-or that limit the ability of their CIOs to maximize agility-will struggle to compete in today's market.
Here's what I mean by agility. A few years ago Dell wanted to add a new payment type to the list of options on Dell.com. Not a major request, right? Just another button on the site. But it wasn't only the matter of adding a button. Dell's business at that time was organized geographically, with different systems in every region for the same business process. Thus adding a payment type was a layered, complex change that required synchronizing seven order-entry systems globally with five order-management platforms, then tying them into multiple regional Dell.com sites as well as the back-end financial system - and roughly 10 different customer databases.
In short, this "simple request" would take almost a year to implement.
What would be lost in that year? What is lost today every time your company's IT infrastructure can't quickly incorporate a new business process that would give you a competitive edge? That's what a lack of agility can cost you. I call it the agility tax.
It's been years since we received that request, but that scenario is still unfolding at companies everywhere. Let's say you want to roll out a new kind of product that your business has never sold before, and it needs to be sold online as a subscription. You'll first have to modify your billing systems to process subscription payments, then work the interface from the subscription payment system into your customer database. Your financial systems will need tweaking to recognize recurring revenue, and you'll require a manual order-entry process for phone orders.
Last but not least, you have to add some additional parameters to your Website because this new product is configurable. Now multiply all that by two or five or nine, because that's how many Websites you operate in the U.S. Why do you have so many? Because your company grew organically. Each time you added a new region or acquired a company, you added another site on a new server cluster in a new data center.
Then the company went global. Now you have an array of sites in several languages in Europe and Asia. It takes months to make the item available on each of them. The shiny new product never gets to Latin America; by the time you've completed the arduous rollout process elsewhere, your product group has released its shinier, newer successor.
Survival for the CIO in that kind of environment means keeping the business happy and fulfilling its requests - the "order taker" IT model. The CIO can see the entire business process but isn't empowered to do anything about it except point out the potential pitfalls and functional disconnects. It's a no-win situation at best and an efficiency-killer at worst.
The agility so many companies lack is elusive because it requires investment in streamlining your systems. Eliminating regional variations of the same application. Reducing their number. Virtualizing servers. And streamlining isn't sexy. In a tough economy, it doesn't seem pressing. It can wait until next year. Then the day comes when it would be nice to add a new payment option or roll out a new product, and the IT department can't accommodate a request that would make a real difference to the bottom line.
Deferring the IT investment that increases agility isn't a way to curb costs, it's a means of subsidizing inefficiency. It used to be that a company would decide to implement a new business process and then cobble together the systems to make it work. But that's not possible any longer. The systems must be nimble enough to accommodate new business processes as they come along, immediately.
It's no coincidence that the examples I've given touch on the company Website and its ability to incorporate new products or processes. Online is the perfect illustration of the degree to which the distinction between business and technology is vanishing. Technology was once a tool that facilitated business functions, but now it's embedded in every aspect of the business. We can no longer separate technology from the business process it enables.
Online doesn't exist without technology; online is technology. So are social media and your company's effort to monitor and respond to conversations about your brand that are happening on the Web. Nearly all the functions that are critical to marketing are technology- driven-forecasting demand for products, generating leads, delivering your message. And on and on. Sales, service, communication-all are inextricably linked to technology. The data center is the very least of it.
When Dell recognized this paradigm shift several years ago, we realized that we had 8,000 applications on our servers, many of which duplicated the functions of the others. As Dell grew, each department had chosen its own software and housed it on a dedicated server. So we worked with each division to choose standards and we've reduced the number of applications to 2,200 and counting (down). We automated processes like resetting a user password or reimaging a client system, freeing up the service desk to focus on more-critical issues.
We were also running 24,000 physical servers when virtualizing would eliminate the need for a whopping 6,000. Our environment was relying on the most expensive storage for every piece of data, when tiering our data and reducing duplication could lower our storage costs by 50 percent. Some applications were running on expensive Unix platforms, even while open standards were five or 10 times cheaper. Now we're saving more than $300 million per year-all of which leaves budget dollars that can be allocated to innovation rather than maintenance.
And of course all of this work to increase our data centers' efficiency is good for the planet, since we no longer needed to build the new data center we were planning. (While many companies are building new so-called "earth-friendly" data centers, we believe that the greenest data center is the one you never build.)
As of today we're about 70 percent of the way there, and we expect to finish standardizing and streamlining our systems in late 2012. We aren't devoting our resources to this project with a specific goal-to make a particular change or release an upcoming product. That's the point. Rationalizing the underpinnings of every technology that Dell uses to conduct business will increase our agility and speed, and speed is the goal.
When speed is the goal, you have to ensure you're measuring the right things to get you there. Many IT leaders focus on development timelines and delivery metrics, while business people tend to measure time to launch. But when or whether a project meets its delivery timeline really isn't relevant in the end. The purpose of IT is to create new value streams for the enterprise, so the question you must ask and answer is whether a given project achieved the benefits promised.
That's why it's not enough for today's CIO to understand the role of technology in business - he or she must understand and enable the business itself. Technology and the business are the same thing. Saving money is too expensive; the agility tax is too high. Delaying it will only raise it, probably at a moment when your company can least afford the bill.
Read more about it organization in CIO's IT Organization Drilldown.