Car chase: Chrysler CIO to run treasury dep't.

To reduce costs, Chrysler has combined IT and global finance into a single organization. While the move is not without risk, the company's financial woes require dramatic steps.

Car chase: Chrysler CIO to run treasury depÂ’t.

To reduce costs, Chrysler has combined IT and global finance into a single organization. While the move is not without risk, the company's financial woes require dramatic steps.

From Chrysler's press release:

Chrysler LLC today announced the appointment of Jan A. Bertsch, Senior Vice President Treasurer and Chief Information Officer as part of an on-going effort to streamline functions for greater efficiencies. Bertsch will lead the efforts to consolidate Information Technology Management and Treasury into a new structure.

Under this integrated structure, Bertsch is responsible for the Company's global treasury operations. She continues to direct the Company's systems and computer hardware strategy and planning, systems applications development, data center operations and telecommunications network operations.

THE PROJECT FAILURES ANALYSIS

On the surface, the plan appears a nonsensical attempt to reduce costs by combining unrelated corporate functions. Financial Week quotes an observer stating this view:

The move caught some treasury department watchers by surprise. “It’s not common at all,” said Dan Carmody, managing director with Treasolution. “Generally speaking, companies merge departments to streamline management hierarchy and to reduce overhead costs in order to provide greater value to shareholders.”

[H]e added that “the merger of treasury and IT is unique, mainly because of each department’s different functions.”

Down the road, Mr. Carmody doesn’t see more companies following Chrysler’s lead.

On closer inspection, however, the changes make sense for three reasons:

  1. Chrysler's financial performance has been dismal. According to the Wall Street Journal, the company's sales "have fallen about 25% this year."
  2. Chrysler's existing CIO, rather than the bean counters, is assuming control, ensuring that IT remains a strategic force within the organization.
  3. Bringing finance under IT creates opportunities to drive cost-savings within the context of maintaining successful IT operations. That's smart.

This isn't the first time companies have combined IT with other functions under a single umbrella. Recently, I applauded Bausch & Lomb for merging customer service and information technology under CIO Alan Farnsworth:

Disconnects, gaps, or communication issues that might arise between these important groups now have a built-in resolution mechanism. With a single of point of responsibility, there are fewer cracks into which issues might fall and disappear.

At the same time, not everyone has confidence in Bausch & Lomb's decision. For example, TechTarget's Margaret Rouse offers a less enthusiastic perspective:

Has IT become so integrated into business that the CIO not only doesn’t have to have a technical background — he also has to have a second job within the company?

It's also interesting to note that JetBlue once tried to combine IT and marketing. Larry Dignan, ZDNet's editor-in-chief, described this back in 2004, in a Baseline Magazine article titled Tough Sell.

Negative reactions from Twitter. Many observers will criticize Chrysler for taking steps reminiscent of past failed cost-cutting drives in IT. Ric Hayman, an IT manager, tweeted: "IT and Finance is a bad fit either way ... who guards the guards?" He added:

[M]aybe I should be a developer at Chrysler then, to improve my retirement prospects :')

Similarly, Patrick Moorhead sent this tweet:

The things companies do to "save" money....... Remember the "answer" was outsource all of IT to India? Or customer service?

Consultant and former auditor, Francine McKenna, from whom I learned about this story, twittered an eloquent summary of the case against combining IT and finance:

What's next? Engineering & the Cafeteria?

My take. Chrysler's cost reduction car chase is hitting a stride and IT plays a role. I think it's a smart move.

Update 7/7/08 12:00 PM EDT: I asked CIO Magazine senior editor, Stephanie Overby, for her opinion:

The IT executives I spoke to talked a great deal about the cost savings and efficiencies to be gained by outsourcing IT application and infrastructure services to two main partners – CSC and TCS in India. And clearly the focus is on getting costs down and getting the balance sheet in shape under private equity ownership. They're cutting their in-house IT resources in half.

What they didn’t talk about in any detail were any new projects in IT, any real investment in IT that will help Chrysler innovate and compete. It seems that they’re trying to get through this rough period first. Any really transformational ideas are thoughts for another day.

[Image via SlashGear.]

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