Our viewpoints

Over the last 40 years, Information Technology, and  the ways in which it has been deployed and managed have gone through several discontinuous eras in which significant changes to the business model and IT leadership have been made. They are discontinuous because they did not grow naturally out of the previous era, but emerged often due to the development of some new technology that was not predicted. The next era we are seeing will also require a dramatically different approach and rethink.

Will businesses and CIO’s be prepared and able to rise to the challenge of this major transformation? What’s changing and why?

You're an outstanding CIO in a quality firm, running the business of IT. You have a lot of good people in your organisation. So why are you still getting it in the neck from the board? Why do they keep telling you that IT isn't delivering? Why isn't IT as good as they expect for such a quality firm?

Dick Nolan and Dave Norton, founders of their eponymous IT strategy firm in the 1970’s were the first people we knew who talked of IT as being a business within a business, when CIOs began to seek seats on the Board, but as they pointed out, CIOs often lack a language to talk about their business.

Operations could talk about throughput, efficiency, quality, investment and maintenance; HR could talk about turnover, pay, management succession, and compliance; Finance could talk about cash flow, the P&L, and tax, and so on. But when the CIO talks of incidents and upgrades and operating systems, the room goes silent. What CIOs need, said Nolan, was an “IT Chart of Accounts” that would allow them to describe what they provided.

When fully worked through, this comprises scorecards and targets in respect of things worth measuring and improving and which (internal) customers can find relevant – Products and Services.

Last time we talked about needing an IT equivalent of a chart of accounts – and suggested that you needed a matrix to represent the cost of resources by activity (and vice versa) if you were serious about understanding what costs money. There is much more we could say about the cost structures – what drives cost and how they operate – which become essential when you are contemplating change (new development, retiring applications, re-platforming services, or outsourcing).

However, before that happens you need to understand and demonstrate how well your services meet the needs of the business. We’ve argued before that thinking of IT as a business within a business is a very helpful (if simplified) analogy; the basis of every successful business is understanding how well it is delivering its services to its customers. How can you start to do that?

We've argued before that thinking of IT as a business within a business is a helpful (if simplified) analogy. In Part 1 of this series - dealing with costs - we argued that no successful business can avoid understanding its costs and cost structures for long, and proposed that they be represented in a matrix of resources and activities. In Part 2 we further argued that knowing the costs without understanding the value doesn't get us very far, and as a first step to understanding value we looked at application quality, distinguishing between Functional and Technical Quality.

Useful as it is to understand these elements, they do not, on their own, determine the application portfolio strategy because quality, as we have so far defined it, does not address how well the applications contribute to business success. A rich IS chart of accounts would need the "demand side" (the business) to be segmented in some way, so that priorities might be made. Evidently, not all parts of a business require the same investment or support, and one size most emphatically does not fit all. But what's a reasonable way of thinking about this segmentation? In this note we talk about using process and application mapping to aid segmentation and prioritisation;

You’re on the board of a serious company and you’re aware that among the many IT initiatives that run every year maybe three or four would have a critical business impact on the firm, for better or worse. You’ve got your best people running them, so why the niggling worry?

You may be thinking about getting your internal audit folk to give these programmes a once over. You’re aware though that they have no more experience of big complex programmes than the people you have running them. You’re also aware that by the time a problem becomes self-evident it may be too late.

If getting it right is the only option, timely objective insight could keep you on the front foot.

Information Technology is only a small portion of corporate costs and since the last recession it has become cheaper but more embedded in the business. A general prescription to “cut discretionary IT spend” across the company is perhaps unwise (if understandable). It’s much better to take a careful look at the IT portfolio and cut the least attractive elements, rather than decelerate or stop sound IT investments that could yield value quickly

CIOs have a challenging fiscal responsibility to their company. During times of growth it has been to invest in business-technology innovation to support profitable expansion over a multi year horizon. Today they must focus on demonstrating tangible business value from IT in short order at a time when budgets are tightly constrained.

Now the stark challenge is to deliver demonstrable business value fast or have IT budgets further cut as “overhead.” This is not a new dilemma but it has never been so urgent or harsh. Even in the business growth years, many executives were uneasy about the payoffs of big IT investments, but now they inevitably begin with “No – let’s wait” rather than “OK, let’s look at it.”

CIOs must make it their mission to make a Return on Investment by finding the “R” without asking for the “I”. But how ?