Performance
My recent piece in the Financial Times (click here) focuses on the fact that most businesses do not have clear performance goals, which in turn causes the IT leadership to lack direction.
In this chaotic market the default goal is most likely to be ‘keep the IT infrastructure working as before but now with less budget’. Under such stressful conditions it is unlikely that the CIO’s primary goal will extend further than “keep my job”.
Fear works as a short-term adrenaline shot. Over time its effect is corrosive. Not just for the IT leadership but for those that are subjected to the associated management-by-headless-chicken style.
Many business leaders have unilaterally imposed budget cuts on their IT functions. CIOs who are keen to remain in employment know that now is not the time to put up a fight. However the strain that this puts the IT function under is likely to lead to the ‘ball being dropped’.
Business leaders may find themselves facing a serious business issue, eg. a major customer service failure) caused by a a stressed out IT function. The initial budget cuts will pale into insignificance compared to the associated costs.
Somehow we need to get this message through to senior executives. Or perhaps the best option is to wait? An Enron scale scandal is maybe what is needed to help business leaders make the connection.
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Hi Ade,
You are right, this an issue that must be addressed, sooner rather than later.
The danger of waiting for a ‘serious business issue’ to emerge under today’s conditions is that the consequences of such a failure could impact much more than the balance sheet or reputation of a single company.
In particular, the complexity of today’s banks, and the lack of understanding of that complexity and the vulnerability it causes, is one of the major problems facing the the financial services industry, and by extension, the world economy.
Yet it barely registers among journalists and finance industry commentators. In fact, I’m not even sure how aware the banks are of the potential problem.
The “Tax Research UK” blog recently posted that, “About 3% of the cash in the UK economy is actually issued by the Bank of England. The rest is electronic money.”
https://www.taxresearch.org.uk/Blog/2008/10/20/network-banking-a-radical-solution-for-the-uks-banking-crisis/
Billions, if not trillions of electronic “currency” flow around the globe every week.
Financial institutions today can be thought of as data refineries (which is to say money refineries) processing and optimising these flows. But unlike the refineries of the Oil & Gas world they are not subject to the same level of regulation when it comes to how the assets are put together, which means it is only a matter of time before there is a major disaster involving a bank.
Despite performing highly dangerous operations 24/7, Oil & Gas refineries rarely suffer catastrophic accidents. This is because they are legally required to accurately document and understand how the assets of the business interact to enable the flow of product through the assets of the plant.
There is no such requirement in the financial world, or indeed in most sectors of the economy, despite our routine reliance on IT and flows of data between business assets to perform business tasks (“business assets” includes people).
As complexity has built up over time, with systems and technology being piled on top of other systems and technology, the need to understand vulnerabilities is becoming ever more acute. A failure may not cause a physical explosion but it could certainly cause an economic one. (for brevity, I’ll leave aside the dangers of critical data flowing through “The Cloud”).
During the past couple of decades there have been many mergers in the global banking industry. There is at least one major European bank that, after many years, still has not been able to successfully consolidate the systems from the original separate businesses.
Recently experts had to fly-in from around the globe to fix the systems of a leading Israeli bank after they went down for a couple of days. Customers were unable to withdraw cash or access their accounts electronically. The cost of the incident will run to millions.
https://www.haaretz.com/hasen/spages/1040833.html
Given that we are in a period of ‘forced’ bank mergers and consolidations, I believe this will be the first of a number of such incidents in this already complex industry.
Barclays and others have recently cut large numbers of IT staff. Corporate memory retention is weakened as knowledge walks out the door. The likelihood of a major IT problem increases.
With the global economy teetering, we have to hope that the breadth and depth of likely bank system failures will be insufficient to cause a major economic dislocation.
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Nice piece, Ade.
I agree wholeheartedly that “dropping the ball” is a very likely outcome for those organisations and managers that look to the quick fix in hard times.
I am concerned that the inevitable downsizing of staff, contractors and service providers will create even more risk, rather than simply trimming the bottom line. I blogged about this last week and I am pleased that other voices are shouting equally loud.
But will the audience listen?
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Hi Paul,
Thank you for your comment. The analogy with the oil and gas industry is a powerful one. I share your concerns regarding the poor governance and even poor awareness out there.
What makes it even worse is that unlike the O&G industry we don’t even have standard pipes and interfaces! And the quality of the platorms from a robustness perspective is another area where teh IT industry could learn a thing or two.
Ade
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Hi Ral,
Thanks for the feedback. Much appreciated.
Ade
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Hi Colin,
Thanks for the feedback.
Unfortunately I think most business leaders are not conscious of the risks they are taking in cutting IT spend. Herd members don’t tend to reflect they simply follow the group even if there is a fast approaching cliff edge. This has to be seen as poor governance and should be a concern to shareholders.
The broad issue of the IT service industry shedding talent is simply moving the European Union several steps closer to becoming an economic backwater.
I imagine very few governmental leaders in the West realise what is happening. If necessary IT service providers should be given tax relief to encourage staff development and retention.
With the imminent collapse of the UK’s Financial Services sector, the Government needs to get plan B in place in respect of where the UK sits in the value chain.
Perhaps many of us will be migrating from IT into tourism once the dust settles as that will be the only game in town (apart from the public sector).
Ade