Team With Business Management to Drive Out IT Cost
- July 25, 2002
Does it cost more to run an IT Department that uses two relational database
management systems than only one? How about three? How about a company
that uses twenty-one different shop floor control systems or a state government
that has more than thirty purchasing systems? Let's throw out the infinitesimal
percentage of companies who do benefit from having multiple variants of
the same information technology and admit that it will cost more to have
This note first appeared in a column by James F. Dowling in Mid-Range
Computing. Look for other previously published Mid-Range
Computing columns by Mr. Dowling at this site or visit Midrange
Showcase at www.midrangecomputing.com/showcase/.
Technology Aligned with Business
Every business manager knows that duplication of work or resources increases
operating costs. At the highest level of business operation, companies
are buying each other in a frenzy to combine sales forces, share manufacturing
capacity and in any way possible leverage infrastructure investments through
why is it that when the merger is approved, the CIO is asked how the two
sales systems can be tied together? If shared infrastructure is the goal,
the question should be "which of the two sales systems will the combined
entity go with." "Well, umm err, you know that Charlie was CEO of a big
operation and now he is only President of the widgetwhacker division.
His products are really different from ours so we umm decided that we'll
bring all of the products together through the new web site storefront
and split them out on the back end."
and by the way we also bought MegaShip. All of the orders will be shipped
through their brand new, custom designed warehousing, picking and packing
system. You know they just put that system in and we've got ten years
of depreciation left to run before we can economically swap it out."
the CEO rattles on about how the CIOs life is about to become even more
complex than it already is, the CIO sees bullet after bullet on the quarterly
financial review slide show containing the words IT, Cost, Time and Reduction.
Does the CIO Manage This?
For years, CIOs perfected the art of hiding IT costs. They no longer ran
IT projects, they partnered with business managers to execute their business
plans. They itemized, allocated and otherwise smeared IT spending over
hundreds of accounts through decentralization and charge-back under the
code name of project "Get Closer To The Customer." Even such programs
that were well-intended frequently failed to deliver the desired outcome
of higher performance business operations. At best, they shared accountability
for cost of operations and at worst, they turned the hen house over to
the fox. Some foxes were smart and others sold the chickens for a trip
to the English Countryside where they learned to avoid bugles.
can IT managers guide business management on the application of IT and
wise investments? The answer is not too complicated but it is somewhat
painful to execute.
IT, Business and Executive managers must commit themselves to a simple
doctrine. The only reason for using IT is to enable business process improvement.
If improvement goals are not crystal clear and quantified, there is no
justification for an investment.
All parties must agree to the Business Goals and how process improvements
will achieve those goals. With these two elements in place, we have everyone
in the same church, now lets get them each a copy of the same hymn book.
Every IT project whether in execution or under consideration must be mapped
to the processes that they enable and more importantly to the capabilities
that they bring to the company.
Life Cost of Ownership and Operation as well as the Business Value of
each capability must be known, shared and used to drive investment decisions.
Now the IT investment plan is linked to the business development plan.
We all have the same hymn book.
Every part of the company (HR, IT, Finance, Sales) must be able to explain
what they are doing to deliver their part of each capability. We have
unanimity on the song.
and finally, every executive and operating committee must review measures
one through five at each meeting. We have harmony!
The Plan Is Executed
Why is this so painful to execute? Because it is an engine that needs
to have energy pumped into it continually. Everyone involved needs to
be continually reminded of the goals and capabilities that they are working
towards. All parties need to be watchful of diversions from the program.
The Enterprise, Human Resources, Information Technology, Facilities Management
and Financial Management are the principle benefactors but they are not
the ones that control daily action.
if you can any business change that could get by all four of these groups
for any length of time and then imagine how much easier it would be to
respond with each of the four looking out for the others when they get
involved in planning activities. With a good collaborative network, visibility
of each other's plans and understanding of what will impact each other's
functions, such a collaboration is very powerful. Don't kid yourself into
thinking that all of the right people will be involved as early as they
would like. That will not happen. Rather, what should be expected is that
the one or two who do get involved will work to get the others into the
program as early as practical, and when they do, the rest of the planning
team will have already given their needs some consideration.
of Maximizing Enterprise Value
In practice such a program will limit the rate of complexity increase
to the extent that enterprise value can be maximized. Enterprise value,
being measured in terms of contribution to the bottom line now and in
the future, therefore includes an agility factor. This is what leads IT
Architects to focus solutions on adaptable platforms and virtual integration
rather than on single systems. Let's look at two extremes.
company is in the entertainment broadcast industry. Radio stations are
bought and sold all of the time. Most stations are small but numbers of
them are bundled into networks. When a network is bought, several of the
stations are the real target and the rest of them are likely to be resold
soon after purchase. Such a company must build an IT architecture that
enables rapid integration and divestiture of businesses. Virtual Integration
is also the case for banking where purchase, cherry-picking and divestiture
company is growing through vertical integration. It starts off as a manufacturer
then adds an internet sales division, then storefronts, then a manufacturer
of a key set of components used in the core product. Operating in a market
that yields low sales margins, this company must not just integrate the
businesses, it must assimilate both operations and information systems
to remain competitive. The IT architecture for this company would more
likely map to an integrated suite of applications with broad functionality.
the process described above is applied to these situations two very different
IT management plans would also result. The broadcast company would have
to focus on technology and technologists whereas the manufacturer would
be better served focusing on business applications and business integrators.
If either chooses the opposite management approach, increased IT complexity
will result from having more people than necessary and having more technology
to deal with.
Small to midsize companies suffer the same pains as these larger ones.
The only difference is that the integration versus assimilation issues
lie between departments or divisions who are left to choose their own
systems and suppliers. Ultimately, IT Management will be held accountable
for the cost and value of IT systems whether or not they chose or implemented
them. Take the leap and team up with the other enabling organizations
in the company to choose the hymn book and point out the most appropriate
hymns to match the current and future agenda.
to our conversation between the CIO and CEO - "Happy Thanksgiving. When
you get in on Monday, let me tell you about the Christmas promotion? We
want to have the ability to bring products from all of the sales order
systems together into a single box with customer-selected gift wrap, a
personalized letter and a single invoice."
column will continue to explore the change/size paradox-big companies
desiring speed and growing companies desiring stability. The author would
appreciate feedback on material presented as well as suggestions for future
study and reporting. The general theme is IT management and the goal is
to make it easier to get clients what they want and what they need to
Jim Dowling is VP of the Alignment Consulting Practice at TechnologyEvaluation.Com,
Inc. located in Woburn, Massachusetts. TEC researches IT products and
suppliers as well as the ways companies obtain business value from IT.
TEC's consulting services remove time, risk and ultimately cost from IT
Jim can be reached at jdowling@TechnologyEvaluation.COM.