CIOs and Working Capital Management

Just as centralized and line-of-business finance departments are being seens as strategic players in the corporation, the same is also being considered of IT.  I remember during the 90s and through the dot-com boom how IT was driving a lot of the business decisions and corporate initiatives (anyone remember Y2K?).   Unfortunately what happened back than was that the time pressures to bring about innovation was perceived to be so critical, that IT solutions were brought in without having a fully thought out change management plans tied to business drivers.

The end result - tons of expensive shelfware.  Ask yourself how much supply chain software is out there either not implemented or poorly implemented. Or e-commerce applications, ERP upgrades, etc..

So as a reaction, the last few years have seen very little IT spending from wary corporations.  Now, with new initiatives such as Sarbanes-Oxley pushing business-driven compliance requirements, IT and its CIOs are back in the spotlight.

I think CIOs will be next change agents of working capital management initiatives.  This article from Computerworld  about the New IT Leadership Agenda  clearly points to CIOs being the standard bearers of initiatives like Six Sigma, Sarbanes-Oxley, and process change activities.

Some things to consider:

1. IT departments will definitely be judged on feasibility and ROI of any selected software solutions.  This means payback better occur within 6 months or less!

2. With the currect risk adverse climate, software costs better be "on-demand" and sold as a service.  Here is where a hosting model for software comes in handy complete with subscription services for pricing.  As an example, Textron chose to deploy working capital solutions from Emagia by using a hosted model - this limits Textron's up front investment and ongoing total costs of ownership (e.g. hardware/software/personnel maintenance and support).  It's a harbinger of the future way that companies will buy and deploy software.

3. Business users and IT will be working much more tightly together than ever before.  Look atteh ramifications of Sarbanes-Oxley: process changes have to go hand in hand with software solutions to ensure compliance. 

4. My prediction is that IT budgets will diminish - but budgets for business units will increase to reflect the need for IT spending on business applications.  However, this clearly means that the business units will ultimately determine whether applications are purchased. In turn, the burden will be in the business units to ensure that the ROI materializes, making the entire transition very fair. And this makes perfect sense for business applications.

Comments

[Mike Z]

I am CTO of a SCM company and have been CIO of a fulfillment company. One of the main problems I have seen is the expectation that you can have technical solutions to business problems. SCM can provide great returns on technical problems. But only process improvements, usually with in-kind technology changes, fix business problems. In short, not enough buy in. The problem with technology has more to do with buy in and execution than with bits and bytes