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Have you heard the one about the systems engineers who decided to inventory their hardware? They trotted down to the data centre and began counting black boxes and after a while came across a rack of servers they couldn’t account for.

They checked their files and their purchase orders but nowhere could they find reference to these servers, and therefore could not work out exactly whose needs they were serving.

And so they followed the only remaining course of action. They unplugged the rack, and waited to see who called the help desk...

It is possible that this story is apocryphal but it is not difficult to believe it could be true.

From the mid-1990s through to the first years of the new century there was an orgy of technology spending that filled the coffers of grateful vendors with billions of dollars.

These dollars bought business the promise of a quantum leap through high speed networks offering new communication channels, vast processing power, huge data storage capacity and the functionality and flexibility of sophisticated enterprise software systems.

It is now widely accepted that much of the spending during this gold rush was reckless and ill directed, as companies followed fashions they didn’t fully understand to buy systems their businesses were not ready for.

“You undoubtedly had a toys-for-the-chief-information-officer mentality,” says David Leigh, head of strategy at Xansa, the systems integrator and outsourcing specialist.

Marc Benioff, chief executive of Salesforce.com, the on-demand software group, puts it even more colourfully: “Tech buyers seven years ago were buying like they were getting out of the bar at two in the morning. It was unbelievable, there were no trials, no pilots, no referrals. It was ridiculous.”

The legacy was a great many failed projects and huge over-capacity across every element of enterprise systems.

The reaction was immediate and, for a great many vendors, life threatening. Broken promises transformed corporate attitudes to technology. Where just a few years before almost any new technology could be sold as the dynamic tool that could revitalise business overnight, suddenly the next big thing was regarded with suspicion.

And as economies faltered, spending flatlined. Where technology had so recently been the centre of the drive for growth, suddenly it was at the heart of every company’s cost-cutting programme.

But while few CIOs will have enjoyed the stomach-turning rollercoaster ride, the sudden and violent shift from boom to bust has confirmed that both they and their technology have significant roles in many organisations.

“One interesting thing is that IT and the CIO have been shown to be crucial both at times of growth and austerity,” says Tim Murfet, head of global technology consulting for Accenture in Europe. He explains: “In difficult times, the chief executive looks to the CIO as the person who is going to cut the most staff and save costs. In the time of growth, he will be asked: ‘Actually, how the hell do we use this stuff to do something different?’

“The CIO is more important because he is always on the leading edge of what the company wants to do.”

And while being at the cutting edge may not be the quite as uncomfortable a place for CIOs as the path of the hurricane they have occupied for much of the last decade, the pressure on them remains considerable.

“Historically, what has tended to happen is that people have driven their businesses in a kind of economic cycle,” says Likhit Wagle, partner in IBM Business Consulting Services.

“So you made a choice between expanding the business or battening down the hatches and being tight on costs. But now for the first time we’re getting into an environment where you’ve actually got to try to do both things at the same time.

“This is an environment where things are quite difficult because, economically, things are not growing fast and there’s no inflation that will help you to 5 or 6 per cent headline growth. Basic growth is about half that, and what’s more, in many industries, there’s an increase in competition.”

The lessons of 10 years of boom and bust and the more sober economic environment have in turn led to technology buying becoming a more rational and considered activity.

In spite of past disappointments, few doubt that information technology is one of the key drivers that can help businesses to achieve their ambitions, whether they are related to increasing efficiency or productivity or adding flexibility, agility and dynamism.

But the age of the blank cheque for the IT department is a fond memory and senior executives are becoming far more exacting in their demands for technology. “There is a more aggressive view in the boardroom,” says Mr Wagle. “Chief executives are now expressly saying: ‘Show me how technology is going to enable our business agenda. Show me how it is going to give us competitive advantage’.”

And that demand encapsulates the key to success: the engagement of the technology department with the business, so the dog controls the IT tail, a mutual understanding of ambitions and activities.

And finally all of this is being conducted in an atmosphere of financial sanity: where technology costs can be controlled at the same time as resources are found for critical technology investments.

Accenture’s Mr Murfet says that if the rationale behind technology investment is to improve a company’s share price, which he argues it should be, then an IT strategy should aim to align business drivers with tech spend.

“The high-performing companies are always thinking about those drivers and matching investments to them. But what we have seen when we map investments is a big mismatch. Too many companies are focusing on back office operational-type activities, which are not aligned to share price growth,” he says.

Nick Caplan, chief executive of international lines of business at systems integrator LogicaCMG, says that, compared with 10 years ago, buying decisions are being more heavily influenced by business, rather than technology, managers.

None the less, he says there is no room for complacency: “Vendors are still much better at selling technology than customers are at buying it. You still see a lot of things being sold that are not required or in a form that is not appropriate. “To me, the key thing is that the person whom you are buying from needs to understand your business. Not just at the top line level but in some detail.”

Vendors have unquestionably understood the shift that has taken place in the boardroom and have adjusted their marketing pitch accordingly. So, pure technology is no longer on the menu, but the “business solution”.

Svan Lambke, SAP’s quality director, says vendors have a responsibility to help smooth the fusion of technology and business aims. “IT projects can be a lot like personal relationships – they take good communication between interested parties to be successful.”

“To make the most of technology, companies need to bridge the divide between business and technology functions by making a plan for working together that aligns all parties and ensures effective, focused management of all activities, even beyond an individual supplier’s responsibilities.”

And if you get it right, you should ensure that the next time you run an inventory, every black box is serving a purpose.

Copyright The Financial Times Limited 2017. All rights reserved.
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