I have always posed the point that IT management has a much greater impact on the bottom line than a company’s management ever realizes. That's because the decisions they make today have a tail impact that may not be evident for years—by which time the impact will be unavoidable. A good CIO has to recognize this, and needs to weigh the future risks involved in the decisions and the strategies they make now, as these will become a part of the makings of a future cost structure which has limited or no room for reduction.
This can be seen in many ways, but a good example would be the choices of technology infrastructure and programming languages. There are constant waves of new arrivals in this space, and assessing the appropriateness and effectiveness of any of these is in itself a function that has to be managed, although in many cases it is not, and skunk works efforts set the direction(s). Not to say that these efforts are completely bad, but the technology choices have to be weighed on a lifetime basis, so the implications can be understood—you may make very different decisions if you know that the lifetime is only a year, rather than 10 years.
These technology-associated waves have differing levels of impact, but they tend to travel along the same inverted bell curve path. This curve is built around the fact that early adopters, perceiving benefit, are willing to pay the real and the time costs associated, as you are drawing from a smaller market and real knowledge and experience comes at a price.
Over time, if the wave is seen as a successful general direction, then the market will broaden and commoditize, lowering costs (if it doesn’t, then you will be left with an infrastructure locking you into a small marketplace with a resulting high-cost model). All waves over time will be replaced by newer incoming waves, so that those who stay too long on one technology will begin to climb to the other side of the bell curve as the marketplace reduces in size. Like surfing, it's a matter of picking the right wave, bearing in mind that not picking any wave will get you nowhere, you will just tread water before the sharks of obsolescence eat you.
There are too many examples of this to discuss here, but one that exemplifies the process would be Cobol (yes, it’s not dead!). And once upon a time, around 55 years ago, it was the new thing. Expertise was initially lacking, but given that the alternatives were largely machine code, its uptake and move to commodity was quite quick. Many of the key systems were built with it—some of which are still lurking around. People who know those systems and the language can now extract a premium (before they retire). This was probably an acceptable idea in the 1960s, given the alternatives available. Also, it was difficult to tell at that time that there would be tsunami-sized waves coming—yet, somewhere down the line, the signals were ignored.
Every layer of the stack is affected—hardware platforms, operating systems, etc.— as they come and go, with each one demanding specialized skills. Being cutting edge, or an early adopter, costs quite a bit, so benefits and longevity have to be weighing factors.
Creating a competitive business edge is an obvious factor. Arriving at a business opportunity before anyone else can provide huge bottom-line impacts, and thus can justify large leaps in the application of leading-edge technology.
There were those in the aughts who had their algorithms burned onto custom chips to gain an advantage, before others worked out that they could do the same with gangs of cheap GPUs. It wasn’t that making custom chips was necessarily a bad decision, as it could create some advantages (assuming many other variables were in place), but at some point it became an untenable one. Identifying this, and then transitioning to take advantage of a commodity approach, is at the core.
One of the other ways that decisions by the CIO can have a huge impact, one that is largely under-recognized by senior business management, is that as firms become more and more reliant on technology (and integrated into the web for intra- and inter-business activity) choices of how IT uses the capital (people and infrastructure) they have at hand, and how effectively said capital is used to the ends of a real ROI, is key. In many cases, these efforts may involve the expenditure of a significant amount of that capital, and therefore take long periods of time to realize.
For strategic efforts, it is possible to be years down the road before there is an ability to measure the level of success or failure, by which time it’s not only the expenditure of capital that’s a concern, but also the time that has been lost and the opening that has been given to competitors. Simply put: it’s a huge and expensive lost opportunity.
These lost opportunities can stem from the original choices of technology used, or from how well the effort was watched and managed (to be a subject of a following blog), but even if it is successful (or declared as such), there is the issue of longevity.
Even riding a good wave comes to an end at some point, and in the multi-faceted process of IT portfolio management, choices have to be made about what the next wave should be, and when to ride it.
In making these types of decisions, the CIO not only owns the risks associated with doing the wrong thing the wrong way with the wrong technology and the costs associated with that (as the CIO also has the chance to do the right thing the right way with the right technology), but also owns the business tail, which actually is much larger, and this makes the CIO an unnamed risk manager with real bottom-line impact.