Who Really Benefits From Enterprise Efficiency?

Fredric Paul, Editor in Chief / Community Activist | 3/17/2010 | 6 comments
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Please don't call Enterprise Efficiency readers cynical. But judging from the results of our latest poll, the terms "skeptical" and "realistic" come to mind.

To be fair, I kind of stacked the deck when I wrote the Budget Trimming poll question:

If I could save my company 20% on its technology budget this year, that money would most likely...

And like many a veteran pollster, I may also have tilted the playing field with the choices I offered as answers:

  • Be repurposed for technology innovation to help the business

  • Be split between technology innovation and the bottom line

  • Drop right to the bottom line

  • Keep a few people from losing their jobs

  • Vanish in a blizzard of accounting chicanery

Still, the distribution of the approximately 100 responses paints a pretty clear picture -- and isn't a particularly pretty one.

By far the biggest plurality, 38 percent, said any IT efficiency savings would "drop right to the bottom line," where that money could make the difference between corporate profit and loss, or even keep a struggling company afloat.

But in this view, IT's efficiency savings aren't staying in IT, they're being snagged for the company as a whole. I'm sure the CEO and CFO would appreciate the help, but that could be cold comfort for a hard-working CIO trying to make a strategic difference.

And that's not the worst that could happen. More than 18 percent of respondents predicted that IT's hard-won savings would "vanish in a blizzard of accounting chicanery."

Ugh.

Those responses come in an environment where new financial scandals break every day, but it seems clear that almost one in five E2 poll takers really do deserve to be called "cynical."

Fortunately, more-positive answers also garnered support. Some 16 percent thought the IT savings would "Keep a few people from losing their jobs." Hard to argue with that, but hardly the strategic outcome visionary CIOs are looking for.

That happy outcome showed up in the remaining respondents. Just over 14 percent said the efficiency savings would "be repurposed for technology innovation to help the business" and another 13 percent thought the savings would "be split between technology innovation and the bottom line."

Together, more than a quarter of the respondents saw IT efficiency as at least a somewhat direct path to strategic innovation. And that optimistic group managed to slightly outweigh the outright cynics...

Still, the results of the poll once again point up the troubling disconnect between IT and the business (see Do Your Employees Hate the IT Department?). Well over half of respondents don't believe the IT department will reap any direct benefits from its efficiency efforts.

Those perceptions have got to change if we want IT to take its rightful place as a key contributor to enterprise success, not just a cost center to be slashed to the bone whenever possible. (See How 'Cost Take-Out' Crushes IT.)
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Fredric Paul   Who Really Benefits From Enterprise Efficiency?   3/18/2010 2:31:22 PM
Re: Nothing Wrong With The Bottom Line
Great thoughts on this poll.

And you're all correct, there is nothing wrong with efficiency dropping to the bottom line. After all, the bottom line is... well... the bottom line.

But if IT's efficiency does nothing more than save $$$ a few incremental dollars, then I think there is a problem -- or at the very least a missed opportunity.

I don't believe IT is simply a cost center that needs to be squeezed as tightly as possible. You can save money that way, but you can't produce transformative change.

I believe that IT can and should be an engine for business innovation and competitive advantage. And I believe that smart enterprises know that.

So while the basic bread and butter functions of IT must be run as efficiently as possible, that's only the beginning. Some of those efficiencies can and should be repurposed into innovative capablities that can help the enterprise succeed.

That helps the business, and helps the IT department in multiple ways. It energizes staffers who know that their belt tightening is for a higher prupose, and also allows them to contribute to more than just keeping the trains running on time. Those kinds of opportunities are likely to attract the best, most talented, and most ambitious IT starffers, from CIOs on down to help desk operators.

The reason the poll is interesting is that perceptions are the most important thing here. How the money actually gets spent is one thing. The other is how and where CIOs feel their efforts are valued in the enterprise.

In that context, skepticism has a place, but cynicism does not. If you honestly feel that your enterpise doesn't value what you do, you need to change that or find another organization that does value technology.

 
Matthew McKenzie   Who Really Benefits From Enterprise Efficiency?   3/18/2010 10:56:52 AM
Re: Nothing Wrong With The Bottom Line
I think that incentives to perform are important here. If an IT department can get the funding it needs to pursue long-term projects and to innovate, then it has a powerful incentive to contribute to the bottom line. If not, then it's simply caught in a vicious cycle; every time it proves its ability to tighten its belt, that belt just gets yanked one notch tighter.

I realize that this isn't really a matter of a "department" feeling motivated -- we're talking about people here. But all of those people can see what is happening, and that collective sensation of being slowly strangled must be devastating.
zerox203   Who Really Benefits From Enterprise Efficiency?   3/18/2010 8:16:38 AM
Re: Nothing Wrong With The Bottom Line
I think the results of the poll and the use of terms like 'cynical' and even 'skeptical' tell a different story.

No doubt the average user answered 'Drops straight to the bottom line' with disdain and resentment for that likely truth. This is to be expected, the average employee, the average person, always feels like they're getting shafted in that situation; the impression they may get is something like 'excellent job, you and your department saved the enterprise a lot of money. Now, do it again. Wait no, do it even better this time. A raise/budget increase? oh, I think a pat on the shoulder will do just fine.' whether that's true or not, whether it's acceptable or not aside, this is the thought process you'd get from the average person working an IT department (probably working any department), and they'd be none too happy about it.

But even on a site like EE, where it might as well say on the front page 'talk about what's best for business, or go somewhere else.', the results STILL looked that way? Even though Fred admitted that the question and answer selection was a bit loaded, it's still a little surprising the results were that lopsided. You could say it's the result of misunderstanding; that the majority of people who see 'the bottom line' as something they should resent don't understand what is fiscally plain and normal, and that's absolutely true - to an extent. However, I think even the pessimist deserves more credit than that sometimes; that if he really answered how he felt, and he really felt there was something not right about that perceived fact, and if there were enough who shared that thought, that maybe there IS something wrong with the reality.


MrSteveC   Who Really Benefits From Enterprise Efficiency?   3/18/2010 4:02:44 AM
Nothing Wrong With The Bottom Line
If an IT department gets a budget from the Enterprise based on need, then why isn't it reasonable that its budget should shrink if efficiency reduces the need? OK, maybe that assumes that IT is fully funded, which it often is not.

A manager might say, hey I saved so much on storage costs by doing project X that I can now spend on project Y which was underfunded. That's fine.

On the other hand, if I said we need X to do this job and we get X, and I figure out how to make the real cost only 95% of X, then I think 5% fairly goes to the bottom line. Managers who operate efficiently and improve the bottom line are also serving the Enterprise well, yes?
fbpmt   Who Really Benefits From Enterprise Efficiency?   3/17/2010 9:46:42 PM
Re: The Power Behind the Throne--from the other side
i have to comment that, as a ceo and cfo, i struggled with the answer to the poll. i did NOT go directly to the popular answer. i have always been a big fan of the IT folks and what they bring to the table to help the rest of our lives a little more bearable. i am painfully aware i am in the minority. so i revisited the poll several times -- trying to justify a more positive answer.. my true colors as a financial person won out. But it was not an easy choice!
Paul Geffen   Who Really Benefits From Enterprise Efficiency?   3/17/2010 9:18:19 PM
The Power Behind the Throne
Just like the plumbing, few users stop to think about the infrastructure as long as it's working.  That's a common view - many of us don't go to doctors unless we're sick - but is it sensible?

Some of us are more proactive than others in taking care of ourselves and I would bet that the statistics show that the active group lives longer, happier lives because they don't take their personal infrastructure for granted.  They don't wait for something to go wrong before they actively manage their health.

The relationship of a given company to its IT department is a good predictor of the company's long-term health.  If the department is well-funded then the future is under control.
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