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A lean and efficient IT Department is a low-cost provider of software and services.

Imagine teaching your kids about money if you have no savings and your credit card debt is mounting. While your advice may be good, your credibility is crap. Do what I say, not what I do is a failed strategy for parenting and leadership. Now imagine talking to a senior executive about using technology to drive improvements while your IT budget is out of control. It's the same credibility problem.

As shown in Figure 7.1, we are moving up the Laudato Hierarchy of IT Needs. After getting the foundation solid, the next step is to make IT cost-effective. Get it right, and then get it cheap. Sometimes you have to spend a lot of money to get things stable. Imagine that your website is down because an engineer misconfigured it and then walked out. If the only person who can fix it bills at $500/hour, you grit your teeth and pay the bill. If you need to hire an offshore team to watch your batch systems at night, you grit your teeth and pay the bill. Unreliable systems are expensive.

Figure 7.1 Laudato Hierarchy of IT Needs

© 2017 Andrew Laudato All Rights Reserved Hierarchy of IT Needs

Place your IT Department on the chart shown in Figure 7.2. If you're in the bottom left, with systems that are both unreliable and expensive, it's time to update your LinkedIn profile. The bottom right—low cost, low reliability—is typical for companies that don't see value in IT. Keeping costs low is the only priority. The CIO probably reports to the CFO in this scenario. Sometimes these companies decide they don't need a CIO, and they turn the function directly over to the CFO.

Figure 7.2 CIO Performance Matrix

In the top left, we see the case where things are running smoothly with reliable systems, but costs are above industry averages. This is where outsourcing talk happens. Be wary; the CFO is definitely having a fancy dinner with a global outsourcing company. In other words, if the systems are stable while your costs are above industry averages, you become fodder for outsourcing talk. The CFO and CEO are being approached on a regular basis with the promise of lower IT costs. Once you're externally benchmarked, things get dicey. Benchmarks compare you to everyone, including companies with low IT costs and low IT capabilities. Whether or not it's a well-run IT department becomes irrelevant.

The holy grail is lean and efficient IT. In the top-right box, your team has the time and funding to work on strategic projects. As a superstar leader, you remember that keeping the lights on remains the most important priority, so you never lose focus on the foundation as you take the next step up the Laudato Hierarchy of IT Needs pyramid and begin to create value.