Do boards get ICT?

This was the question that leapt to my mind after reading remarks by the ANZ's former head honcho of ICT, David Boyles, that directors were continually asking him if and how they could get ICT costs down.

Not "how can we maximise the contribution ICT makes to our business?" or "how can ICT help drive the innovation we need to stay ahead of our competition" but the old and very limiting "how can we minimise our costs?" chestnut.

Now your writer is not stupid enough to think that ICT should not face the same scrutiny -- and pressure to keep costs as low as possible -- as any other part of an organisation.

However, the attitude identified by Boyles is potentially very dangerous.

Executives who bow to pressure from directors to cut ICT costs to the bone may not only miss opportunities for growth or efficiency, but compromise their organisation's brand by expecting an under-resourced ICT operation to keep everything running while juggling demands from business units for new products.

According to Boyles, directors need to ask themselves "if I cut the [technology] staff to the bone, and the systems stop working for one day, what is the cost to the organisation?"

However, they really need to do more than that. To ensure the organisation in which they hold such a critical position is on the right track, a director without any sort of tech background must have a deep understanding of the role ICT plays in the business. While they can no doubt get well-considered perspectives from C-level executives such as a chief executive officer or chief financial officer, the individual with the most comprehensive view is obviously the chief information officer. That is the person a director should seek out.

Of course, a well-rounded board should really include members with solid ICT experience. However, as Boyles notes, this is not always the case. "How many ex-CIOs do you see on large corporate boards … you get attorneys, HR directors, COOs, but where are the tech people?" he told ZDNet Australia's Steven Deare.

It is a damn good question. One wonders to what extent a lack of board understanding and expertise about ICT is holding back the performance of Australian business.

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BoardsAnonymous -- 03/02/06 (in reply to #120128494)

Hi Iain,

This issue has been around for over forty years to my personal knowledge. During that time, the failure of ICT to deliver the promises, amounting to billions, yes billions, if not trillions of dollars world wide of failures is the fundamental cause of this ongoing situation.

I've yet to meet a CIO who has the 'overall business acumen' to be able to viably contribute to most organisations. Their innate 'need' to be 'involved' in tomorrows technology appears to almost eradicate their business sense. Yes, I have to admit, in the mid sixties, I did succumb to the same problem, but I learnt my lesson forty years ago.

CIO's should stop trying to be the 'leader' of the pack, rather CIO's should be focussing on advising their CEO's and Board about the future potentials that may arise for productivity and profit gains so that they, the CEO and Board, have the skills and knowledge to push it onto the companies priorities at the appropriate time.

If you'd like to look into the massive losses in IT projects that have failed, just look at the banks over the last 20 years. They talk about client management systems but have yet to implement 'client accounting' which I developed in the sixties! It's all a huge rip-off caused by incompetence. For example, I've got seven accounts with my bank; and guess what, they send me seven bits of paper every month! Just in postage + envelope costs at $1.00 each that's $72 per year totally wasted - times say at just 4 million accounts or $28.8 million dollars saved annually - let alone the processing, printing and handling costs plus four copies of the same colour brochure/reply paid envelope! Telstra offers electronic payment systems but no electronic (PDF Format) soft copy accounts, so has to send out millions of 4-6 page documents - Duh!

Another simple example of productivity: most corporations are forced to use more than a single application system for their entire operation, but what technology do you see installed on the admistrator's desk that allows them to view multiple system outputs/results at the same time? A fundamental catastrophe. We were using split (four application plasma displays) in the mid Eighties - but where did they go. Simple, most CIO's of the era did not understand the basics of administrative productivity so did not acquire them for their organisations so the suppliers dropped the technology. A great example of CIO inadequacy/incompetence.

Effective and real ICT does not cost millions, just a few thousands, of effective thought.

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boards and ICTJeff Simpson -- 03/02/06

Iain,

One of the ways ICT can get to the board is through the audit committee. CIOs need to get closer to the external auditor, internal auditor and enterprise risk manager to assist in getting your message across. They also in particular need to develop a good relationship with the Audit Committee chair to enable the right message to be delivered - not second hand (and with bias/ignorance) via a bean counter or CEO that has limited ICT skills. In most instances all should be willing to assist as your message is extremely relevant to enabling them to fulfil their roles properly.

Some questions for the directors, as you rightly suggest, include:

how can we maximise the contribution ICT makes to our business
how can ICT help drive the innovation we need to stay ahead of our competition
are the level (quantity and skill) of ICT resources compromising the delivery of new products
what would be the cost to the organisation if their was a major delivery or security breakdown of the system
(and are we capable of preventing it from happening)
The Canadian Institute of Chartered Accountants has issued a document titled "20 questions directors should ask about IT". (visit www.cica.ca) It would be useful for CIOs to ensure that the Audit Committee chair asked these questions, and others appropriately worded, in a face to face meeting at least every six months - it would be a learning experience for all. Audit Committee chairs need to get off their chairs and speak directly to the ICT people (and not just the CIO) to get a feel for what is happening. As well CIOs should be using the external auditor, risk manager and internal auditor to help facilitate meaningful discussion between the audit committee and ICT people.

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ictAnonymous -- 04/02/06 (in reply to #120128496)

what the f*** is ICT?

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Is ICT under-resourced?Andy Goss -- 06/02/06

From my experience as an IT worker in a number of large corporations,
the problem is that the resources are consumed in the profligate support and maintenance of vast, ramshackle systems of truly organic complexity.
This grossly inefficient use of resources is excused on the grounds that
a) it would cost too much to fix the systems, and b) the systems will be replaced as soon as upper management, not generally IT management, have identified the best solution.

Once a solution is identified, and The Big Project is under way, maintenance standards on the old systems are abandoned, knowledgeable staff are moved over to the Big Project, and contractors are brought in to cobble up the old systems.

Now the Big Project is found to be more problematic than first thought.
In order to keep to promised time lines, functionalities are dropped - beginning with those that would have made support and enhancement more efficient. More contract staff are hired to work on the project, but this only generates more management reports, and progress still lags.

Then someone moves the goalposts. If there has been a takeover or merger, the Big Project will be found not to meet the new corporate requirement. Or new technologies and new upper management will combine in new a new vision for the company future, which demands a different approach to IT. Or there will be a massive cut to the budget and/or a shortening of the time frame. The Project is killed.

The contractors move on, and the staff coders return to the dungeon, sad, but perhaps relieved that the increasingly hideous Big Project never went into production.

Meanwhile there are increasing demands to integrate new technologies and new commercial realities with old systems that date back to punched cards. As the years pass, the need for change becomes more desperate, but less possible. Change itself becomes bureaucratised and sunk in lethargy. IT management are told to do more with less, and quickly, which they do by pushing the problems into the future.
Some problems, if you ignore them, do go away. Others can be worked around, at a cost. It is in fact very difficult, and very risky, for a large corporation to change its core systems, the financial impact of delay in the conversion could easily be fatal.

If steps had been taken twenty years ago to migrate cumbersome monoliths over to new systems designed to be evolved, there would be fewer "resource" problems today. The problem was widely recognised within the IT community even then, but it seems that the larger the corporation, the less likely it is to act to ensure its own long-term survival.

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IT GovernanceMicheal Axelsen -- 07/02/06

In looking at the issues raised in your commentary, 'Do boards get ICT?' I note that you are saying that boards often remain focussed on 'cutting the costs of IT' rather than 'what can IT do to achieve efficiency'.

An interesting effect of 'cutting the costs of IT' is often an increase in overall costs to the business - IT can't undertake Department X's project (because it cut costs) and Department X does without or finds a hollow log to cobble together an external solution.

The topic really is one of IT governance - corporate governance of the IT business function. You should note that a Director of a listed company has to comply with the corporate governance requirements of the ASE, and although these aren't specifically IT they do discuss the need to recognise opportunity to create value and riskiness of the situation. There is also AS8015-2005 from Standards Australia which outlines a best practice model here.

Australia's leading accounting body, CPA Australia (I chair the IT Centre of Excellence), released a very good and practical guide for Company Directors and Business Executives in October 2005 - see http://michealaxelsen.com/blog/?p=46 and https://www.cpaaustralia.com.au/cps/rde/xchg/SID-3F57FEDF-79F61B28/cpa/hs.xsl/1017_16305_ENA_HTML.htm.

The point is, a board does in fact need to understand its business approach to ICT, and put in specific governance mechanisms particularly where the business is very reliant upon ICT. The CPA Australia publication gives a practical approach for any board that wants to fulfill its duties and legal requirements.

I am happy to discuss with anyone on the topic.

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