Hidden Profits Blog

The position of a CIO has traditionally been thought of as only for larger companies.  Indeed when the position first became popular in the 90’s only companies with fairly significant data centers and IT staffs hired a CIO.  In recent years more companies with revenues of less than $1 billion have been hiring CIOs.  However, in many of those situations the position becomes more of a title given to the person at the company that is responsible for IT, regardless of what their actual function.  In many cases the CFO also carries the title of CIO. 

A CIO is no longer just a title to be given as a reward or just to give to another executive as a place holder.  As information technology (IT) has become ubiquitous and ever more important within companies of all sizes, the role of the CIO has become more critical and includes more expanded functionality.  The following are 5 key functions a CIO should perform in all organizations.

1. CIO should be responsible for both the technical components of information technology and business process.  As a company grows the systems it should use include more and more functionality and the company should use more of that functionality to improve the productivity in the company.  Unfortunately, what generally happens is that the company invests in technology that has the capability to significantly improve productivity and controls.  Or the company does not purchase the technology available to them because they do not understand the benefits of the available functionality.  The result is that as the company grows of the ratio of expense to revenue increases and the company becomes less profitable as a percentage of revenue that translates into net income.  A good CIO should understand the technology, the business and lean business processes.  The CIO becomes the key person that guides the company to utilize information technology to the fullest extent and implementing lean business practices to maximize profitability.

2. IT is no longer just about processing accounting transactions and providing management reports.  It is also no longer just about building and maintaining an internal data center at a single location.  IT encompasses customer interface, product/service delivery, marketing and sales and ultimately can be the key to an important competitive advantage or major cost savings.  A savvy CIO who is involved at the C-level executive ranks can help guide the company through technology decisions, educate management and employees regarding different technology options. 

3. CIO should be part of strategic planning process.  Often executive management plans are hampered and information systems are purchased in a crisis mode because no one with a technology background has been involved in the strategic planning process.  I have worked with companies that are struggling with growth because they do not have the systems and processes needed to remain competitive and profitable as they grow.  Having an experienced CIO involved with executive management at that strategic level will not only improve the chances that the company’s information systems and processes will be able to support their growth; they may also be able to provide solutions to competitive pressures.  In addition, if a company is struggling and needs to reduce cost, an experienced CIO will be able to identify opportunities where information systems coupled with revised business process will enable staff reductions.

4.  Information Technology today is much more complex and specialized than ever before. Also, new technology is coming on the market faster than ever. Traditionally, mid-market companies rely on vendors or non-technology executive’s previous experience to keep them informed on what enhancements they need.  This is dangerous for 2 reasons – 1.  vendors are primarily interested in making sure that their clients purchase products/services that fit in their experience. 2. Vendors are not involved in planning so are often unaware of all the factors that should impact a decision.

5.  CIO should be involved in M&A transactions.  Many companies grow by acquisition and as the economy recovers M&A activity will increase.  The CIO needs to ensure that the parent company has the infrastructure and systems to support the acquisitions, perform due diligence on the acquisition targets and plan the transition of systems, infrastructure and processes.  I have worked with several businesses that have grown by acquisition without addressing these areas and after a few years they have a major issue to address.  They are supporting multiple systems and infrastructures, the companies cannot work together, customers are confused and they have not realized the expected ROI. 

Hiring an experienced CIO is expensive and many mid-market companies do not have a need for a full time CIO.  In these situations I recommend using an experienced CIO on a part-time consulting basis and/or adding an experienced CIO to the Board of Directors.  Also, many CIOs are primarily experienced in managing the IT environment and have limited business knowledge.  Utilizing an experienced CIO as a coach/mentor to the corporate CIO or on the Board will provide the needed support for the company CIO. 

Links to additional articles.

Role of CIO in M&A

New Role of CIO

Role of Strategic CIO

Contact LJR Consulting Services for experienced CIOs 818-227-5025 or info@ljrconsultingservices.com

I have spoken with several prospects in the last couple of weeks all of whom are wrestling with how to select an ERP system. 

I am encouraged that they are wrestling with it and contemplating getting professional support.  Selecting and implementing an ERP system is one of the most important and expensive decisions a company will make. Unfortunately, in many cases, over 70%, the projects will fail.  Why such a high rate of failure for such an important business undertaking?  In my over 30 years of experience implementing systems, the 2 biggest reasons for failure are:

1. Selecting the wrong system
2. Selecting the wrong VAR or implementation partner 

Of course, there are many other reasons for the failure rate but these are the most common. 

So the next question is – if a company does an evaluation how is that they so often pick wrong?

The primary reasons are the following:

1. Select a system based on the prior experience of an executive with a system at another company.  That may or may not be a good test of what will work in the current company.  There are several factors that impact whether a system that works well in company A will do the same for Company B.  What works for one does not necessarily work for another.
2. Buy into advertising, popular theory or executive pressure that the company must have the biggest name in the business to be a ‘real’ system.  When ERP systems first started to be developed, it was true that the larger company systems had better functionality.  That is not true today. 
3. Delegate the selection only to the IT department
4. Do not document requirements at all or document requirements based on how the company currently functions not how it will function in the future.  This is a very limiting view and results in selection of systems that will not support a growing company.
5. Select the system with the best demo instead of based on how the system functionality best supports the company’s requirements.
6. Do not use the services of a professional ERP consultant or use a systems integrator that benefits from the selection of a particular system.

The optimum methodology to use to select an ERP or any system is the following:

1. Create a selection team comprised of employees from all key departments and information technology.
2. Define and document system requirements based on the future processes of the company.  Use best business process practices as a guide. Also, use new technological features to redefine processes.  For example, systems today have executive dashboards and real time information access so traditional reports are not needed as much. Also evaluate how wireless and smartphone technology can be used to replace existing manual processes.
3. Determine the technology platform you expect to support.  For example what data base and operating system can your company best support.  Will you use SaaS, outsource the application hosting or host the system in-house.
4. Research systems that support your industry and compare them to your documented requirements and preferred technology platform.  Select the best 3 or 4 applications for demonstrations.
5. Work with the selected vendors to script the demonstration so they will address your key requirements. 
6. After each vendor demonstration, score the vendor based on how well the system performed and how comfortable the team was with the user interface.
7. Obtain cost estimates for total cost of ownership – purchase price, implementation. and ongoing maintenance costs.
8. Make the selection based on the best balanced system.

I also recommend that if your employees do not have experience in systems selection, you should use the services of an objective, vendor agnostic consultant to guide the organization through the evaluation and selection process.

If you would like to learn about our methodology and/or get support during your ERP selection and implementation contact Lynda Roth at 818-709-6583 or info@ljrconsultingservices.com