These are not times for careless spending in any area of a business. Unfortunately, while everyone agrees businesses must cut careless spending, the problem is defining “careless.” Too often, executives want to make cuts in exactly the kinds of programs and projects that realize greater profitability—they save 2 percent by cutting something that saves (or profits) the company 10 percent. It’s two steps forward and four back. We all see this happening in many places. In the current global economic climate, companies are trying to run off the extra fat. Across corporate America and other economies, the business news clearly details that productivity is at an all-time high, employees are working more, and laid-off workers have not been replaced. Liposuction may be good, but only to a point. This kind of economic climate also hovers over Information Technology (IT) organizations and their budgets, which are being squeezed even as IT roles are being switched to “keep the lights on” roles that focus on operations instead of innovation. Several IT initiatives are becoming focused on the bottom line rather than innovative top-line growth. It’s all about reducing technology costs, managing enterprise risks, reducing enterprise-wide business costs, and so on. Many executives (CIOs, CFOs, and even COOs) are looking at optimizing their IT asset portfolio, and the questions they are asking are misguided. They ask:
- Is the IT organization really doing what the business wants from a corporate and business unit strategy perspective? Are we doing the right things?
- How can I reduce costs and inefficiencies in my IT operations? How can I reduce complexity within the IT environment? How can I do those things correctly?
- And lastly, if I am able to achieve the above-mentioned goals, how can I ensure that the chaos, once under control, does not return? Once I gain some IT portfolio health, how do I stay healthy over the long run?
The typical problem IT organizations face is that their IT spending level is usually based on historical or competitive benchmark levels, which is a lagging metric (more like driving by only looking into the rearview mirror) instead of a forward-looking metric (leading indicators, such as where growth will be, what capabilities we will need, etc.). Consequently, there is often a lack of recognition for IT’s contribution to the business top line or bottom line. Compounding this problem, IT cost-cutting further drives down the value-adding and innovative IT initiatives. As a result, IT capabilities deteriorate and midterm IT operating costs rise.
This leads to a vicious circle that begins with business executives who do not understand the real need for IT strategic planning. The business dictates a solution, IT accepts it, and then IT resources are consumed by the complexity of a nonoptimal solution. There is pressure to deliver and consequently a high failure rate, rework rate, and, hence, low confidence in IT. This leads to a further breakdown in IT business relationships and fuels more misaligned initiatives from an IT perspective. This misaligned spiral just tends to get bigger with time and worsening economic cycles. At the end of the day, it’s like tying a runner’s legs together, loading him with weights, and then berating him for running too slowly. One imagines the whole approach could be best summed up by the corporate declaration, “The beatings will continue until morale improves.”
Depending on the industry and company size, the key is surely to focus on costs and optimize the IT spend. But some structured thinking is needed to decide the difference between what should be discretionary IT spend and what is truly nondiscretionary IT spend. This book delves into the relationship of business value and Information Systems and will help you define a framework for your company, specific to your industry and your position within that industry, to achieve both effectiveness and efficiency in the IT organization. If that sounds like a big promise, it is. Somewhere in the past, some business forefathers looked at employees and decided that on the general ledger that item needs to be listed as a cost. It was only in the late twentieth and early twenty-first centuries that we reexamined this axiom, finally learning that employees were investments and, more importantly, assets to be groomed and nurtured as such to increase the return they bring. Now it’s time to turn that same eye toward IT so that we increase returns far in excess of the savings we would get from simply cutting IT to the bone. Thus, the goal of this book is to show what value really is and then show how IT can target value to enhance this objective rather than detract from it. Since you took the time to look at this book, this book will help you:
- Focus the IT debate on creating business value—Using relevant metrics and recognized diagnostic tools, this book will help shift the IT debate from “utility” to “value creation.”
- Optimize the IT investment agenda—Are we investing the right amount? Have we targeted and prioritized the right opportunities to pursue? Are we executing most effectively? Is the IT budget really strategy-aligned and business case–supported to maximize ROI and create a strategic advantage?
- Transform your IT organization and capabilities therein—Have we industrialized key operational processes? Are we achieving necessary business service levels?