IT Alignment Dialog - Failure Factor #2

We will continue to post a list of factors that in our experience contribute to the failure to implement or maintain IT Alignment with business goals. To see all the factors listed to date, review previous posts.

IT Alignment Failure reason #2: Belief that IT is only a cost center and cannot make a difference in business outcomes (profit, market share, ROE, ROA, mission accomplishment).

I admit that this one baffles me and I sense it baffles some of those posting comments to this blog. But, in the almost 25 years of working in this domain I am forced to recognize its reality. I hark back to a presentation made at one of the top IT research organizations where CIO's from most of the largest organizations were in attendance. When presented with evidence that IT can make a significant impact on profitability they expressly refused to believe it. A direct quote from one of the top CIO's in the nation was: "How can we make such a big difference in profit margin when we cost only 1-2% of revenue." I was stunned. How could an expert in any field desire to deny that they have an impact on outcomes? How could any top manager fail to understand that leverage on revenue, profit, and profit margin can or is in many cases disproportionate to its cost - that is in fact the basis of profitability (Revenue minus Expense)?

Even managers in businesses we have worked with that have become aligned, can fall prey to "cost center" thinking. The CEO of one company we worked with that enjoyed tremendous success in aligning IT with business goals which resulted in improved profit margins asked the following question of his CIO: "When will we be able to cut IT spending while we keep the competitive advantage generated by IT?" "Never." responded the CIO. "Only by managing IT based on contribution which means funding the IT projects in support of the top prioritized business goals, can we keep our competitive advantage - we can't just set some artificial level of IT spending and expect to remain an industry leader." Both we and the CIO were mystified since the spending on IT had resulted in many times its cost in increased profit. But it illustrates that "cost center" thinking, even for those that have seen the results of managing IT based on contribution, is a tough mind set to break.

If CIO's (CEO's, CFO's etc) do not believe that aligning IT with business will make an impact on profitability or any other outcome measure, then where is the incentive to align.