Mahler told the CIO 2003 conference the CIO was no longer a technology person, but a business leader and an equal player with executive management. Despite, or perhaps because of this, the CIO needs to partner with other management leaders, and the most important of these is the chief financial officer.
"This is something I've learned the hard way about the CFO, you have to make him your ally," said Mahler. "I know he comes down on IT, he looks at cost, he looks at trying to squeeze every dollar out of, but you have to align his objectives with yours."
"And the thing is, you're the one who's going to have to adjust, because his job is to look at the books for the company, his job is to make sure it's a profitable company". In the past, the goals of the two executives have clashed, according to Mahler, with the CFO looking at short term objectives, while the CIO looked at the longer term. The good news is that is beginning to change.
Mahler quoted CFO Research Services as saying; "CFOs are looking at the total value of ownership rather than the total cost of ownership when considering IT investment." The research also found 95 percent of CFOs cite IT as a fundamental player in business process improvement, while 80 percent see IT as a way to improve operating processes and customer services.
Mahler divides IT spending into two budgets; a fixed budget and a variable budget. The fixed budget encompasses areas such as infrastructure engineering and operations. "It's the part of the budget that keeps the lights on, that keeps the business running," explained Mahler.
"I'll be very clear to management. Once a year I'll come ask for the budget, you can tear, slice it apart, tear me apart but once we leave that room that's it, that's my budget, and I'm not going to answer any more to where it goes. I will then bill out 12 equal portions [for the IT dept]," said Mahler, adding that this way the IT department remains in charge of its own projects.
The variable part of the IT spend is for special projects for business units. "If the business has a need for a project, that's their money," said Mahler. "The business must take ownership to justify its costs. Any major project that is not an IT project...[the business unit that wants it] has to sponsor it, they have to do the business case."
Mahler claims that any major project needs a business sponsor outside the IT department. "If the business doesn't have time to come to that monthly steering committee, and that means an MD or GM, if [he] doesn't have time to do that because he's too busy, we haven't got time for his project, we stop it," he said.
If the project isn't stopped in that situation, then if it goes off the rails, when it is delivered a few years later, the CIO will be blamed.
Mahler said a big problem faced by the IT department was the conflict with market forces, which are driven by quarterly results.
"If we don't show quarterly improvement in our five-year strategic plan, then the market will hammer us - irrelevant of what our strategy is. That's a fact, and we can't get away from it," said Mahler. "The problem is that doesn't work with IT, because our big projects are normally one year, two year, three year projects. So how do we get around that?"
"We have to be able to show incremental advantages. I've made it a rule, every three months the business has to see some benefit," he added, saying this process also kept the project in line with business expectations.
"The business cannot and should not accept IT projects with a first deliverable at 12 or 18 months. The days of strategic investment are gone. My advice to you is do not use that phrase, get that out of your vocabulary, there's no such thing as a strategic investment. You'll get shot, you'll get blown out of the water. You've got to show some return, some benefit, and it's not a strategic investment."
Mahler points out that IT transformation is business transformation, and in this way the CIO is often an agent of change. "People don't like change, people are comfortable, but you're the one who's expected to provide changes," he said. "So expect the road blocks."
"You need to make sure the business MDs, who are in charge of different brands or business units, understand their roles, and you understand your role. That's got to be very clear," said Mahler.
"You report to the CEO, he has given you a mandate," said Mahler, saying it is important that mandate is communicated to the other MDs or business leaders within the company. "You've got to be very clear, because you are going to step on people's toes."
