By the Computerworld Philippines Staff
November 1, 2007

Measuring the value of IT to justify technology investments to top management has always been a major challenge for most CIOs. However this task has become easier over the last decade as the IT department evolved from merely being a technical support group to an enabler of and partner to the business.

At Computerworld Philippines’ 9th monthly CIO Roundtable, three CIOs discussed how IT’s evolution has made investments easier to justify, and how this evolution has changed their roles as technology managers.

The roundtable participants were: Cynthia-Vicente-Javier, executive vice president and chief technology officer of Philippine National Bank; Aurelio Suerte- Felipe, IT manager at Punongbayan & Araullo; and Daniel Yu, chief information officer of Security Bank Corporation.

The roundtable was held at the Regus and was sponsored by HP Philippines.

Excerpts of the roundtable discussion follow:

CWP: How important is IT to your company’s business? What percentage of your company’s yearly budget is regularly allocated for IT?

Vicente-Javier: It’s very important. In fact, it’s one of the pillars of the company. About 70% of the capital expense budget goes to IT. I think everybody acknowledges the importance of IT today; technology has somehow become the battleground.

Yu: Yes, that’s true.

CWP: When did this viewpoint start to take hold in the enterprise?

Vicente-Javier: I think it was around the year 2000 when it started to slowly creep in. But even now, there really still are CEOs that are not IT-literate.

Suerte-Felipe: Yes and that could be really difficult, having a boss who is not IT-inclined. Just as long as the system is running, they do not really care how everything else works.

Vicente-Javier: Well, this could also have a good and a bad side because if your CEO is not IT-literate, he would most likely be hands-off about the IT stuff and leave all the decisions to you. But sometimes it also helps to have the CEO to draw information and opinions from when you make technology decisions.

Daniel Yap: Security Bank is, in a way, more progressive in this area. In fact, top management would often be the one to ask me: “Should we be spending more in this area?” If they hear that other banks are spending a lot on IT, even if they are not IT-literate, they like to know that we are progressive in this area and want to be able to brag about it.

Suerte-Felipe: In today’s rapidly changing world, especially in a fast-moving area like information technology, we make sure that we don’t get left behind. As our firm grows, we believe that technology will play an important role. The firm is very optimistic about how information technology can open up many different opportunities. By using innovative technology such as e-mail, Web sites, printed materials, and others, we can easily market our services. It has also vastly simplified the firm’s processes in delivering high-quality and time-efficient services to the client.

Good information management facilities improve the service to the client, the reputation of your organization, and efficiency of day-to-day operations.

Vicente-Javier: You know they (top management) tend to leave it up to you. At PNB, management knows the value of IT and they would even be the ones to ask: “Do you need this? Do you need that?” On our part, of course, we also consider the budget of the entire company and want to be careful about overspending. Management, on the other hand, does not really care how much we spend.

CWP: When did top management begin thinking this way?

Vicente-Javier: I think it started at the turn of the century.

Yu: Yes, I guess it started just before the Y2K scare.

Suerte-Felipe: Because, at that time, they became aware and, at the same time, intrigued by the impact of technology on their business.

Yu: They started knowing the risk.

Vicente-Javier: And, as a result, everybody is trying to be IT literate now; everybody in the top management especially.

CWP: You mentioned that, at PNB, IT is given about 70% of the budget, what about with the others?

Suerte-Felipe: Actually, with us, there are times when we really spend a lot on IT but it’s not really consistent. I can say that it is a considerable amount because top management believes in keeping both our hardware and software up-to-date.

CWP: So it depends on the need for each year?

Suerte-Felipe: Sometimes there are simultaneous demands from the different user groups. Also, sometimes, there are projects that we need to work on right away so we have to purchase equipment even if they are not included in the budget.

Vicente-Javier: I think it also depends on the maturity of the organization because, for some whose infrastructure is already advanced, they just need to spend on upgrades. But for those like us, PNB has been latent for a long while, so we had to invest on new systems.

Yu: I think in our case we have to balance those out. We are already in the second generation so the investments would vary. There will be years when I have to focus on the servers; there will be years when I have to focus on the computers. That is also the reason why it is important for us to have a five-year IT plan, at the very least, for us to be able to plan out, say for this year I’m going to buy this, and the rest I would have to plan for in 2009.

CWP: So planning is your job, basically, at Security Bank?

Yu: Actually, we plan together with the business managers. In fact, if you ask me how much the total IT expenditure is, it would be difficult for me to come up with numbers because these are distributed costs that are directly charged to the different units. The philosophy of management is that Security Bank is still a business at the end of the day so, with all these investments, we always aim to have a return. There is so much information available for us to be able to say that IT expenditures were really put into good use or if there was indeed an ROI. So to sort of balance those things, management tells us: “Users will have to support you. You have to present your case, why you need to do this, why you need to do that, to validate it in a certain way.”

We then act like a gate keeper and we also give them (the different units) reminders, say their servers need to be replaced soon or we need to upgrade this or that or else we will go offline. If you explain the implications to them, their job now is to translate those implications into what makes business sense and to support why they want to buy it. So, in our case, the users are usually the ones who justify the need for IT purchases.

Vicente-Javier: At PNB, I always say that there are no technology projects; these are always business-driven projects. You have to align the business strategies with technology; you should know the thrusts of the business. In our case, the business dominates the projects, we identify which projects can fit with the CAPEX budget, then they (the business managers) will be the ones to prioritize. That way, the business takes ownership of the project; they will be the ones to justify the purchases to the board.

Yu: But we are the ones who sign the vouchers so there is still control, and we can we make sure that we pay only for those items that are really needed. Sometimes, we also hold technology briefings to inform them (the business units) of the products that are available.

CWP: How open is top management today to spending on IT?

Daniel Yu: They are very open because, at the end of the day, it’s their business. If they do not catch up, they are not going to make their numbers. At the end of the day, the board becomes responsible should things go wrong, which is very different from our past perception of the board that just invests and invests. Now, they even take technology courses.

Vicente-Javier: They dominate the decision-making and they actually plan with us.

Suerte-Felipe: Having state-of-the-art IT systems is important at P&A, especially to our Business Support Services unit, our business process outsourcing department, which has been growing at a phenomenal pace. We use advanced technology not only for the benefit of clients but also for the convenience of our staff members.

CWP: While expenses related to the standard IT equipment are now a fixed item in the annual budget of most companies, getting top management to approve IT purchases that go beyond the usual is still one of the toughest jobs of the CIO. As your company’s CIO, how do you “sell” such “unusual” – and, often, expensive – IT investments to top management?

Yu: First, you yourself have to be convinced if it is really needed or not. If you are not convinced and it just happens to be the buzz word out there, you trash it. If you are convinced that you need it, then you have to think about how to sell the idea; that’s the business sense in IT. So you ask yourself: If I were the user, why would I subscribe to buying this equipment? There must be a reason. After finding that, that’s where you develop the plan. You do not expect top management to approve it on the first presentation. So there are background meetings or presentations that you need to make for them to first appreciate their need for such a tool and then you need to translate that to what makes business sense. For instance, if it’s a compliant thing, you will get no return but it’s a requirement; if you don’t follow this, you close your shop, and you get no income.

Suerte-Felipe: I’m proud to say that our firm’s top management is on the techie side. They understand and appreciate the value of investing in new technology. They also understand the opportunities that new technology can offer, which I believe is a terrific advantage. As long as it’s about technology, you just have to explain its purpose well, and the firm is willing to invest.

In other companies, the Chief Financial Officer and Chief Information Officer are, often, at each other’s necks because of budget issues. At P&A, once you agree on something at the IT committee meeting level and the committee approves the upgrade path, we go straight to implementation.

Vicente-Javier: To give you a specific example, let’s take monitoring tools. The IT department needs those but they have no value to the business units, so you have to translate it to something they will understand. So you tell them, if we don’t have this, when you have complaints we will not be able to know where the problem is coming from so this will slow you down. It’s a question of justifying the investment from the business perspective.

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