How Compliance And Cost Reduction Are Funding Data Transformation
As much as Chief Information Officers (CIO) and Chief Data Officers (CDO) would like to be perceived as revenue generators and growth enablers within their organizations, the reality is that they control and account for a significant proportion of corporate expense. At a moment when firms are embarking on data-driven transformation initiatives — often in response to fears of disruption from AI and data-driven FinTech and big tech competitors — legacy firms face a paradox. For these firms, data transformation efforts are largely being funded under the auspices of compliance and cost reduction mandates. Although CIO’s and CDO’s aspire to be on the offensive in using data to drive revenue generation and business growth, it is defensive initiatives that are providing cover for forward-looking transformation ambitions.
How do technology and data leaders ensure that non-revenue generating data-driven transformation efforts receive the commitment and funding that are required to sustain these efforts? Today, there are two critical business imperatives that are impacting corporations and provide the impetus for data transformation initiatives. The first imperative is compliance and regulatory mandates. The second imperative is cost reduction. Paradoxically, it is these two defensive causes that are providing a CIO or CDO with the opportunity and mandate to embark on offensive data management and architectural transformational initiatives.
When a company faces financial pressures which prompt cost reduction mandates, Information Technology is usually targeted to deliver significant cost savings. Unfortunately, it is too often transformational initiatives, such as data infrastructure and data architecture modernization efforts, that are among the first initiatives to be eliminated. These data transformation initiatives deliver a multi-year impact, but often without an immediate and definable return on investment (ROI). The net result is that organizations too often respond with a short-term view that undercuts their long-term interests.
What is the first thing that a CIO considers when asked to reduce expenses? Ideally, it would be to determine which systems and infrastructure they can eliminate along with the associated hardware, software, and personnel expenses. They would also want to explore how best to replace inefficient technology assets with new assets that are not only less expensive to operate, but also provide greater business flexibility and agility.
Almost all IT organizations operate redundant systems which they would like to consolidate, legacy systems they would like to turn off, and outdated infrastructure that are widely recognized as costing too much to run. Why then do so many organizations continue business as usual, finding elimination of redundancies extremely difficult to achieve? Perhaps the answer lies in the realization that undertaking these efforts requires investment and carries risk. When asked to cut costs, technology leaders are too often forced to reduce or eliminate transformational initiatives with less measurable near-term outcomes. The consequence is that organizations frequently sideline transformational initiatives which will deliver long term, sustainable benefits to the company – albeit not immediately.
Why is it so hard to eliminate or consolidate systems? Why do banks continue to maintain multiple checking account systems? Why does an insurance company run several claim systems for the same product? Of course, there are potential technical challenges, such as particular software not working on a new operating system.
