Recession Or Not, CIOs Should Prepare

Tech execs who don’t focus on costs and value as a matter of course will always be blindsided by economic turmoil, says BlueHour Technology’s Robert Dvorak: ‘A reactive leader is an oxymoron.’

What’s the role of IT in preparing an organization for a possible recession? It’s a question Robert Dvorak, president and CEO of enterprise technology and advisory services company BlueHour Technology, says every CIO should be considering today.

That’s not necessarily because he sees a recession on the horizon, however. Dvorak argues that today’s CIOs must be on top of “business fundamentals” at all times to be successful.

What’s the best way for an IT organization to prepare for a possible recession?

Highly effective IT leaders do not need the catalyst or fear of a recession to act on the business fundamentals of running a tight IT ship. IT’s shift from the gravitational pull of “IT inputs” to the business mindset of measuring and managing “IT business outputs” is the foundational change necessary to support every IT cost by business value.

“Valueless costs” are always the enemy, and a recession should not be the event to eradicate these. They should be measured and managed out of the cost structures perpetually, using a process framework like “LOT”—lean, optimize and transform.

IT’s business value and impact on revenues, customer experiences, employee experiences and risk management must never be opaque. When CIOs hear the directive to “take 10 percent out” of their budget/run rates, the argument for value is often too late and appears defensive or, worse, fabricated. When this happens, immediate, imprecise IT cost reductions often damage the organization far worse than any benefits since the reductions are not laser-focused on the “valueless.”

Obvious levers for leaning out IT costs have been around project deferrals, vendor consolidations, further accumulation of tech debt, application and capability rationalizations, and hiring freezes or headcount reductions. All these actions affect costs and impact revenues and risks, creating a mixed bag of business outcomes.

LOT works like this:

Leaning means taking immediate actions on low-hanging fruit that often has little negative effect on service levels. Leaning is essentially moving down the cost curve with smaller impacts on immediate service levels. However, as Southwest Airlines has reminded us recently, accumulating tech debt brings operational risks that eventually show themselves at scale.

Optimizing improves the IT operating model with a flattening of the cost curve, using rationalization, as-a-service, offshore/nearshore, AI-capabilities and cloud models.

Transforming addresses the diminishing returns of moving down or flattening a cost curve and focuses on “shifting” the entire curve to the new operating model with improvements on return on invested capital and a steeper IT yield curve—i.e., outputs/inputs.

CIOs should adopt a process that perpetually leans, optimizes and transforms the information technology operation. If IT inputs are closely tied to valuable business outputs, economic expansion or contraction should have minimal effects on operating budgets. Waste and inefficiency are perpetually eliminated with a LOT process.

What makes this approach effective?

Relentless focus on measuring and delivering business value > cost is sound business. Communicate and validate business impacts/value throughout the enterprise using business data and data visualization. If costs > business value, eradicate these “valueless costs” immediately and well before a recession serves as the catalyst. A “reactive leader” is an oxymoron.

What do you see as AI’s role in an IT organization?

New business operating models will require a blend of AI and HI, or human intelligence. Companies that resist this hybrid operating model will not be able to compete with their much higher labor costs.

It is important to note that I suggest companies eliminate jobs or roles that AI capabilities can displace. However, I firmly believe employees who are performing functions in the crosshairs of AI should be identified early and upskilled to perform the roles that are emerging from AI adoption.

The mundane, data-driven, repetitive, objective roles of companies are well-suited for AI capabilities. The subjective positions, tied to client experiences, client-facing empathy, client relationships, business solution artistry and creativity are likely to use AI as a tool—but never be displaced by AI. These are perpetual roles of business value that upskilling programs should target for the coming waves of AI-displaced workers.

What keeps AI from “taking over” an IT organization?

AI is delivered by data and technology, but adoption rates will be fueled by capitalism. We know capitalism is relentlessly focused on driving efficiencies and steeper yield curves…often simplified to “maximizing shareholder value.”

If AI can execute a business function or job faster, cheaper and better than a traditional employee, most executives and boards will move in that direction. Capitalism will allow them to unleash AI to perform targeted job functions.

However, as I stated, these same leaders need a strategy and execution plan to upskill vulnerable employees and get them to higher ground roles that AI cannot eliminate. The reconfiguration of labor and skills into new AI-HI hybrid business operating models should be a welcome change for all stakeholders—employees, investors, business partners and customers.

It is also the single largest operating challenge companies have ever faced—the rewards are nearly infinite, as are the risks. Doing nothing is simply not an alternative. Laggard companies will see themselves competing at snail pace speeds with bloated selling, general and administrative costs, and that is an unsustainable model.

Every company’s business strategy must define AI’s role, a strategy developed by HR, IT, cybersecurity and C-level leaders. All with special attention on how AI rollouts can improve customer experiences, reduce operating costs, and provide career pathing and upskilling for those employees most vulnerable to AI’s impact on legacy jobs. If this is judiciously followed, AI will free employees from mundane tasks and allow them to flourish in meaningful roles emerging from AI-HI operating models.

AI will and should take over all an organization’s “mundane” roles, not just those in IT. The business opportunity is to move these AI-displaced employees to new, fulfilling roles that deliver business value that AI will never be able to supersede. This is the beauty and opportunity of the new hybrid “AI-HI” operating models.

Get the StrategicCIO360 Briefing

Sign up today to get weekly access to the latest issues affecting CIOs in every industry


Strategy, Insights, Action

In our weekly newsletter, get insight into the biggest issues facing CIOs, along with strategic ideas, solutions, and interviews.

Strategy, Insights, Action

Once a week, get insight into the biggest issues facing CIOs, along with strategic ideas, solutions, and interviews.

Your information is secure – we don’t sell or rent your data to any third-parties.