With all budgets under scrutiny, In-house IT operations can expect to come under greater scrutiny and pressure.  In November’s Baseline Magazine, Michael Vizard argues that the only way for an internal IT organization can avoid being usurped by an external IT Service company is run itself like a business.  Vizard says, “The challenge facing most internal IT organizations is that they never really learned to operate as  businesses.  Instead, they are usually viewed as an opaque cost center that most business executives dont understand:  These execs don’t know how much money is invested in what technologies or how many people are needed to deliver what level of service.”

I agree wholeheartedly.  The solution is for IT organizations to think in terms of the value they deliver through the products and services that their customers (the business execs) consume.  This is why it is vital for IT organizations to measure their operations, provide value visualization for their customers and make improvements based on the decisions and priorities that their customers establish from the value visualization ( VVF ).

For Vizard’s full article go to:

IT Needs to run like a Business

Since our book was published, I am seeing the phrase “Business Value of Technology/IT” more and more.  I guess it’s a sort of affirmation or maybe even a compliment. I saw the above title on a short article by Faisal Hoque in the November issue of Baseline magazine.  Faisal asserts that “using the right metrics to assess the business value derived from technology is critical in demonstrating the effectiveness of business technology investments.”  I agree completely.  So what are they?  Unfortunately, while Faisal gives us some excellent pointer for a process to find the metrics, there are no examples of what the metrics might be.  Check it out for yourself at the link below:

Assessing-the-Business-Value-of-Technology

I was recently referred to a vlog (yes, that’s a video blog!) featuring an interview with Howard Rubin on Eric Chabrow’s CIO Insight Blog “Parallax View.”  In this very short interview, Howard perfectly captures the issues that drove us to write our book, “The Business Value of IT.”  Kudos to Howard and Eric!

You can see the interview yourself at:

vlog_are_cios_degrading_their_jobs.html

A recent report by the National Association of State CIOs highlights 10 areas in which IT has delivered value to state governments:

• Business continuity and disaster recovery
• Cross-boundary collaboration and partnerships
• Data, information and knowledge management
• Digital government: government to business (g to b)
• Digital government: government to citizen (g to c)
• Digital government: government to government (g to g)
• Enterprise it management initiatives
• Information communications technology (ict) innovations
• Information security and privacy
• IT project and portfolio management

I really like this report because it is attractively presented, features real people working in state governments (with their photos) and describes simple ways to deliver value.  You can read it or download it at:

http://www.nascio.org/publications/documents/NASCIO-2008Awards.pdf

Here at the David Consulting Group, we preach that “Value Visualization” is a necessary step in the cycle of operations, measurement and improvement in IT organizations because it presents information in a way that enables senior management to make business decisions - both strategic and tactical. For more information, check out www.davidconsultinggroup.com/vvf/.

So imagine my delight at seeing a news story in InformationWeek about the IT department at General Motors using visualization software to reate mock-ups of software for business users in the same way as they create mock-ups of cars!  My Dad worked at the Ford Research & Development Centre at Dunton, England, and I still remember seeing the clay models of cars they used to make when we were allowed in for open days.  Interestingly, Mary Hayes Weier, who wrote the print article commented that, “Its the pressure of globalization and outsourcing that makes visualization particularly well suited for IT work at GM.”  I couldn’t have put it better myself in the context of our VVF.

The relevant InformationWeek article can be found at

showArticle.jhtml?articleID=211200920#community

I just realized that I haven’t posted a link to our book yet …

If you have read it, I would welcome some feedback.  If you haven’t read it, please buy it and let me have your feedback or tell me why you won’t be buying it.

ref=sr_1_40?ie=UTF8&s=books&qid=1225243195&sr=8-40

Thanks

I’m not going to go into the details of this Standish report because I think that, if you are reading this blog, you will probably want to geta copy of the report at:

http://www1.standishgroup.com/newsroom/it_value.php

To whet your appetite, the ten drivers that Standish identify (along with 3 sub-drivers for each category) are:

1. Lowering the Infrastructure Cost
2. Increasing Application Features
3. Reducing the Cost of Downtime
4. Maintaining Suitable Risk
5. Commoditization
6. Higher Readiness
7. Project Management Leadership
8. SOA
9. Service Delivery
10. Vendor Consolidation

Do you agree with these? Have they missed something? 

My own perspective is that there is a lot that is right with the Standish top ten, particular when they are talking about cost drivers. 

While I agree that “Increasing Application Features” is a big driver of value, the Standish report misses the important point that Application changes should not be about features but about business benefits embodied in business cases (if you don’t think there is a difference between features and benefits talk to a marketing person).  While innovation can be realized through any of the top 10, it will be through enhancing the Applications that innovation impacts business processes, services and products. 

The report gives a good treatment of “Higher Readiness”.  I would have exteneded it to include responsiveness.  One of the big complaints that i hear about IT from business people is that IT operates on its own timetable (or a different clock frequency if you prefer) and is unable to respond quickly to business needs.  Of course, there are always good reasons for not being distracted by continual changes - its very inefficient and drives up costs.  However, there are no excuses for not being tightly aligned with the businesses current needs.  It was partly this separation of clock frequencies that led to the sprint-driven agile methodology which focuses on reprirotizing at the end of each sprint.

One final comment on the Standish report. They include a defintion of “Value” which I will not repeat here other than to mention their suggestion that one way to think of the value of IT is as the difference between the cost of the IT Service and the cost of providing the service manually.   This really struck me as strange.  My reactions, in quick succession, were: “That seems reasonable,”  “Surely, value is in the eye of the beholder?” and “Hang on, haven’t we moved way beyond comparing IT solutions to manual solutions?”  What do you think?

Paul B. Carroll and Chunka Mui wrote an interesting article in the September edition of the Harvard Business Review on lessons from the most inexcusable business failures of the past 25 years.  The magnificent 7 identified were:

1. Roll-ups of almost any kind - taking large numbers of smaller business ( or IT systems?) and rolling them up into a larger systems for economies of scale/efficiency/easier management/whatever.
2. Bets on the wrong technology - I dont need to put this into the IT context for you, do I?
3. Rushing to consolidate - In IT, this is the same as #1.
4. Pseudo-Adjacencies - in business, this is about selling the same product to new customers/markets or new products to your existing customers but the “pseudo-” part refers to the fact that the fast path to failure is not knowing enough about the new thing you are stepping into.  The IT examples are legion but I will limit myself to those porr souls like me who assumed that because their new laptop was sold with Vista on it, it would work.
5. Stubbornly Staying the Course - Oh yes - these are Ed Yourdan’s death march projects - check out his book or try http://www.yourdonreport.com/index.php/2007/11/27/death-march-presentation-download/
6. The Synergy Mirage - two IT companies partner together because it seems that their products and services are complementary.  A lot of heat and light is generate but no benefit to either of them or any potential customers because their cultures are too different.  For example, software license sales people do not necessarily make good consulting sales people and vice versa.
7. Faulty Financial Engineering - Here is the delivery date and here is the budget.  What do you need estimates for?

A copy of the Carroll/Mui article is available for purchase at this location.

IT spend as % of revenue is a frustrating metric because it places IT firmly in the sphere of costs that cannot be avoided and must be managed rather than an investment that should yield beneficial value.  Being above or below the average % revenue line is no great indicator of success other than the feeling that, as a CIO, you are doing are doing better or worse than your peers in the eyes of your boss (especially if your boss is the CFO).  Looking at the chart below (if you click on it you will get a version that’s easier to read), you can see that, for the mash of all industries, the percentage has stayed remarkably stable between 3% and 4% over the past eight years.  What does this tell us?  Two things:

1. I think its a number that business and IT need to be aware of (about 3.5% - more on the industry specific numbers soon)

2. Because this variable has been held steady, we can look at the other variables in a different light.  For example, have all the contributions to better performance over the past eight years (SOA, web services, ITIL, CMMI) been a waste of time or are the improvements perfectly cancelled out by the cost of the extra work we are able to do now?  What do you think?

The above chart was created from data provided in the InformationWeek 500 published on September 15, 2008.  (reprints of that article which includes the data but not the chart are available at www.magprints.com/informationweek500

If you work in financial services, it may be that you already have some idea what your future will be like but, if you are like me, you may be sitting there wondering how all of this is going to impact the more general IT world.  In their 9/22 edition (seems like a long time ago at the moment), Information Week reported that Forrester Research has revised its predictions for IT spending for the rest of 2008 and 2009.  Interestingly, Forrester has raised its 2008 estimates for US IT spending up from 3.4% to 5.4 % higher than 2007 spending.  The 2009 forecast was 9.4% over 2008 but is now 6.1%.  Taken over the two years, the new forecast are definitely lower but not by much.  In the same article, IW reports that Gartner is sticking with its mid-August 2008 forecast of 4.5% growth in global IT spending.

All of this information and more was in the “Newsfilter” section (by Chris Murphy and Marianne Kolbasuk McGee) of the paper version of IW but I have been unable to find it online to provide you with a link.  Sorry.  If anyone can find the link, please add it in a comment.  Thanks.