Let me get this straight…

Recently, I attended the MIT Sloan CIO / CTO symposium. Naturally, a lot of CIOs were on panels, talking of their great accomplishments, and providing their thoughts on how everything should work. Every time some great accomplishment was mentioned, it was that they had saved some grand amount of money somewhere. It also came out that CIOs spend is roughly 5% of the company budget. Almost all of the sessions brought up the fact that CIOs everywhere need to move to a focus that is more in line with the company’s overall strategy. In other words, focus on making something that actually makes the company money.

So why were all these CIOs patting themselves on the back for saving money? Seriously – one guy was super excited that he’d saved 50% of his budget. I actually do agree that that is a good thing, a very impressive achievement – you probably removed a great deal of inefficiency. However, you didn’t become a CIO by being dumb. Taking a great amount of brain power and only focusing it on 5% of the budget is akin to buying a Ferrari with a 5 MPH governor. Yeah, it’ll manage to get you up to 5 MPH faster than other modes of transport, but you’re missing a whole lot of power.

So here’s the question. Why are all these CIOs so focused on cost? If I had to guess (and I do, since I don’t have a CIO here to answer the question) – because of how they’re compensated. I bet just about every CIO’s bonus depends on how much IT he managed to do with the least cost. The company is promoting the wrong thing. Nobody became successfully by spending less. Everyone became successful by making more.

Seems like the answer is obvious, doesn’t it? Change the compensation structure. CIO – you saved cost… good – you get a small % of that savings. You actually made money – fantastic, you get a huge percentage of that increased revenue. But, you say, you still need to save money. Sure you do – but don’t waste your top executives on such a goal. That’s just short sighted.