COMDEXvirtual: The New CIOs (And How To Sell To Them)

Spike Lee once made a movie titled "Do the Right Thing." Sounds simple, but for many CIOs and IT managers, just what "the right thing" is may not always be clear.

And yet knowing what's important, what are the right things to focus attention and resources on, can mean the difference between success and failure for a CIO and the business he or she works for, said Niel Nickolaisen, vice president of strategy and innovation at Energy Solutions, Wednesday in a keynote address at COMDEXvirtual, the online conference hosted by CRN parent company Everything Channel. The show takes place November 16 - 17, and sessions are available on-demand until May 17, 2011.

For solution providers, understanding the new role of today's CIOs can help close sales, he said.

"This role has changed pretty dramatically over the last few years," he said. "We used to be primarily involved with data processing, but now it's become a much more strategic role." Nickolaisen, who previously served as CIO and head of strategic planning at Headwaters, and before that as CIO at Deseret Book and Franklin Covey, is a noted speaker on the role of the CIO in today's business organizations.

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Nickolaisen offered IT executives a plan for succeeding in what he said has become "a fairly high-risk position." The question CIOs must ask themselves is, "What can I do to be indispensable rather than replaceable?"

Finding answers to that very same question is equally critical for IT solution and service providers.

The two goals for a CIO are to become "a strategic enabler for the business" to help a company succeed competitively and "achieve operational excellence" by delivering IT services in a cost-effective way.

The core of Nickolaisen's speech was demonstrating how IT executives can determine what IT and business processes give a company its competitive advantage. These market differentiating processes and the IT that supports them are where CIOs should devote most of their attention because it's what a company must do better than anyone else.

If a business is renowned for its customer service or its rapid shipping, for example, that's where the IT executive's focus should be, Nickolaisen said. "These are the things I do that make me indispensable rather than replaceable," he said.

NEXT: Why 'Mission Critical' Isn't So Critical

Other business processes may be deemed "mission critical." They must run effectively (and cost-effectively) for a business to be successful, but they don't provide a competitive advantage. Nickolaisen called these processes and the IT that supports them "parity activities" because they only have to run as good as competitors' mission critical systems -- but not better.

A company may not be known for its invoicing operation, for example, and there's no reason to be better at it than everyone else. But if a company falls below parity and the invoicing system is subpar, the result can be angry customers, reduced cash flow and other problems. "There's no economic value generated from doing these better than they have to be done," he said, "but there's a strong economic reason for not doing them poorly."

CIOs often fall into the trap of devoting too much time and resources to these parity activities, Nickolaisen said. That's because managers often ask the IT department to design, build and implement complex systems for processes that don’t generate real business value.

So how does an IT executive determine which business processes (and the IT that supports them) are market-differentiating and provide competitive advantage, and which ones are mission-critical parity activities? Nickolaisen said executives should ask themselves four questions: Whom does the company serve and what is the target market? What do they want and need the most? What capabilities must a company have to meet those needs? And what’s the best way to deliver goods and services to meet those needs?

Nickolaisen cited the example of a specialty retailer with whom he once worked. Going through the exercise, the company concluded that it was really good at identifying categories of customers through customer segmentation analysis and providing those segments with the specific products they wanted. The retailer aligned its IT around that competency, Nickolaisen said, and everything else became a parity activity. The company adopted industry-standard best practices for those activities, reducing their costs by 40 percent and the time spent on them by 50 percent.

What does this mean for VARs, MSPs and other solution and service providers? Nickolaisen said they should ask themselves the same four questions in regards to what they do and how they support their business customers' differentiating activities and fill gaps customers may have in their IT parity activities.

NEXT: Achieving Operational Excellence

Nickolaisen said his rule-of-thumb is that he won't ever outsource a differentiating activity. "I will, however, outsource parity [activities]. But because parity is mission critical, I don't outsource it based on price or cost. I have to outsource in order to fill a parity [technology] gap or reduce an opportunity cost," he said. That's why solution providers should always make sales pitches based on cost, rather than on how they can help reduce an IT manager's opportunity costs and free up IT resources for differentiating activities.

To achieve the goal of operational excellence, Nickolaisen recommends adherence to three principles: A solid process for managing changes in IT production systems; thinking "small and short," doing things in an iterative manner, and emphasizing pilot projects and rapid prototypes; and stratifying IT systems into categories based on their importance.

"IT departments cause about 70 percent of their own downtime," Nickolaisen said, usually because of botched IT changes done without proper testing and quality assurance. And solution providers looking for business opportunities here must be as good as the IT manager wants or better, he said.

On the smaller-is-better philosophy, Nickolaisen said bigger, more complex projects are more likely to fail and are best done as smaller pilot projects. And that's an approach solution providers must adopt as well.

Nickolaisen said a cloud service provider he once worked with insisted on deploying services to all users within a company at once because that's how they operated. Since that didn't match his philosophy, the service provider lost the job. "As a [solution] provider, think small, think short, and make sure you support my philosophy," he urged.

As for system stratification, Nickolaisen suggested categorizing IT according to "A systems" that put the business at risk if they are down for even a short time, "B systems" that can be down for a few hours or even days before causing real problems, and "C systems" that "can be down nearly forever before anyone notices."

Those categorizations should form the basis of an IT department's budgeting priorities, IT portfolio management strategy, and plans for service level agreements and disaster recovery, Nickolaisen said. And solution providers must understand how the products and services they offer line up with their customers’ IT stratification.

Register now to attend COMDEXvirtual or to access on-demand sessions.