Tuesday, September 21, 2010

Does your technology platform support your human capital strategy?

A CFO takes the CIO out to lunch.  The CFO asks “how does our technology platform support our business strategy?”  The CIO begins by talking about server uptime, raves about the new cloud storage solution contract that was just signed, and ends by talking about the new upgraded CRM package that will roll out by year end.  You’ve seen this play out.  Most often, the CFO is left scratching their head wondering how important any of that really is. 
I believe that by asking better questions, CFOs can guide the discussion.  Consider this: In China, there is a war for IT talent.  Companies cannot hire good people fast enough, and therefore, cannot scale to meet the market demand.  Thus, the technology platform and IT strategy are hindering the business strategy.  Obviously, the opposite should be true.
The fundamental question for business leaders to ask is this: how does our technology platform reduce our dependence on technical talent?  If you hear your technical leadership team talking about hiring programmers, you need to dig further.  This is one sign that your technology platform is human capital dependent.  As a business leader, you should seek first to purchase software that is configurable.  While there is often a higher upfront cost to purchasing software rather than building it in-house and a slightly longer time to market (but not by much), the long-term hard benefits are often lower and the long-term soft benefits (e.g. ability to scale the business independently of scaling the organization) are greater. 
I see too many organizations hiding under the umbrella of “no one makes software that fits our business need”.  Prior to coming to China, I worked with a company that felt this way.  They had effectively built their own ERP package by building small applications to fit each functional need: pricing, contracting, billing, etc.  Frankly, their IT department and, in particular, the software develop shop was not that good and the often buggy software hurt business.  Here in China, a competitor in the same industry is using SAP for those functions.  The competitor was smaller in market share when they made the decision to purchase SAP which tells me that the decision to invest in a software package versus build their own was even more important for them (they are now the same size in market share with a higher net revenue due to lower cost structure, in part, due to this decision).  The net effect of this is for every 5 programmers that the US company employs, the China company has 1 SAP configuration specialist.   And cost efficiencies don’t stop there: additional efficiency gains are found in a smaller management overhead structure and lower hardware and software licensing costs for IT development
Ultimately, the problem is more than just a software decision.  IT executives need to explain, and business leaders need to demand, how the principles used to build the technology platform support the human capital strategy.  For example, Citigroup announced that they will add 12,000 people in the next 3 years.  If I were in front of the Citigroup leaders today, I would advise the CFO, chief strategist, and other business leaders to ask the technology leaders how their current platforms will support that type of growth and what changes will be needed to reduce the organizational cost to bring each person on board.   

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