Archive for October, 2011

Global IT Function

Global IT Function

Given the many potential advantages of increased coordination across the global enterprise, it is essential that the IT function be organized to enable and support global information management, technology infrastructure, and business applications. Deciding how to organize and manage IT in a way that overcomes any natural resistance toward coordination (e.g., local entrepreneurial spirit, the “not invented here” syndrome) can be challenging. For many multinational corporations, attempts to globalize IT have been disappointing. The key to success seems to be in finding the right “hooks” of intrinsic value for the local business entities, as well as the corporation at large – in other words, answering the question, “What’s in it for me?”

The first step in developing the right “hooks” is not in reshuffling the boxes on IT organization charts, but rather organizing IT globalization projects so that the results are clearly understood and committed to. Organizing for results includes two major elements of communication. First, the globalization initiative must progress from a set of clearly defined business outcomes, owned by senior executives, that serve as the strategic rationale for the investment. Second, the project must be owned and staffed jointly among regional IT organizations, the appropriate business process owners, and line executives. A detailed project plan – with all major events, milestones, responsibilities, dependencies, and timelines indicated – is also crucial to success. Characteristics of an effective project plan include:

  • Clearly articulated business outcomes, with metrics and accountabilities.
  • Joint responsibility for business change with business process owners and line executives.
  • Detailed project implementation tasks – with major decision “tollgates” identified.
  • Pilots for operational testing and evaluation of measured business results.
  • Delegation of decision making, with clarity of scope and the process for escalation of issues (e.g., to global process executive sponsors).
  • Continuous communication and collaboration with international counterparts.
  • Executive management actively engaged in defining the outcomes and measuring results.

As a team effort, and a business priority, the IT globalization initiative then has the visibility, the access to expert business resources, and most importantly the legitimacy to proceed to success.

Global IT Management Teams

The CIO plays a key role in the organizational success of IT globalization by ensuring that the proper level of IT leadership is in place across the corporation. Regional or line of business IT executives must contribute to the global initiatives as a team. Ideally, the regional IT executives will report to the regional presidents. At a minimum, the regional IT executive must have access to and be in a position to influence the regional president and his or her direct reports. The global IT council, composed of the senior IT leadership from corporate headquarters and the regions, will then be in a position to play a key role in establishing programs, priorities, standards and support capabilities across the enterprise. Objectives of this global IT council will typically include:

  • Build and promote the global IT vision.
  • Determine the major components of the global applications portfolio.
  • Set technical and process standards for systems implementation.
  • Define responsibilities for implementation and support at the global, regional and local levels.
  • Drive maximum application commonality, balancing unique local requirements with the global business process models.
  • Demonstrate leadership in the transfer of business process models, templates and best practices in system implementation, and other organizational learning.
  • Seek economies of scale in IT, leveraging partnerships with key suppliers globally and pursuing shared services where it makes sense.

Typically, the corporate IT organization will own primary responsibility for IT vendor management, “product management” of the global solutions, applications integration and portfolio management, and IT infrastructure. Technical and user support will typically be marshaled to meet local coverage and service-level needs. Mobile implementation teams are often utilized at both the corporate and regional levels. The global IT council will seek the proper balance in local and regional user support services.

The global IT council also contributes to the “internationalization” of solutions and services by:

  • Recruiting the best business and IT professionals for the global process teams.
  • Ensuring regional representation on global technology teams charged with development of detailed standards (e.g., communications networks, email and collaboration tools, e-commerce technologies).
  • Assessing candidates for advancement in corporate or other regional IT leadership positions.

The members of the global IT council can also play a pivotal role in bringing regional business insight to the IT leadership team, and in influencing regional general management.

Early in any globalization effort, the IT council should resolve the primary responsibilities among corporate, major business units, regions, and local sites. The responsibility “boundaries” will evolve over time, but early classification can prove very productive in speeding discussions



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For Individuals in IT

IT Folks

My research produced a major and disturbing discovery that must be of concern to corporate managers, IT clients, and IT managers if they do regard focusing IT on business results as important. Stated bluntly, our findings are that most IT professionals are not interested in making the change:

  • By and large, they are satisfied with what they do now and prize their autonomy and the opportunity to focus their skills and efforts on traditional areas of IT expertise: development and technology.
  • There’s very little incentive and formal reward for moving into the ambiguous area between the business and IT and few guidelines for what to do to be successful as an Account Manager.
  • The “hybrid” skills do not offer meaningful career paths.

I believe the organizations and individuals I worked with are reasonably representative of IT in large organizations. The following data suggests strongly that the major force against change is IT itself.

  • The top five career interests (from a list of 10 options) for IT professionals as a group: IT management, applications development, IT architecture, business process support, and project management. These are the traditional IT career paths. Client services/relationship management is sixth and Internet service seventh.
  • Self-rating of skills today (from a list of 22): the weakest five skills include electronic commerce, international business, mobile communications, Internet design, and Web design. These are core business results growth areas.
  • Importance of skill areas today: End user support ranks 8 out of 10 and electronic commerce is not on the list.
  • Importance of skill areas tomorrow: No change in the top 7 of 10. End user support drops off the list and EC comes in at number 8.

These findings suggest strongly that most IT professionals simply do not see any meaningful payoff for themselves from becoming more business-oriented. Yet, for IT professionals who are interested in management positions or in Account Management responsibilities, there is little likelihood of their becoming successful without a much deeper knowledge base of how business decisions are made.

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For IT’s Clients within the Business

In spite of the new business realities, the issue of focusing IT on business results does not seem to be a direct or explicit concern of corporate management. If it were, surely we would see business-oriented specific metrics, accountability for those metrics, and commitment to upgrading and rewarding IT business skills. Nevertheless, this issue is very much a concern among IT’s “users.” The very term “user” captures the historical gap between the business and IT; it’s an abstraction that contrasts with, say, “client” or “colleague.” IT’s clients within the business have long been demanding that IT professionals understand the business better, act more responsively, and listen and communicate more effectively with them.


IT's Clients

Most IT organizations have made a genuine effort to respond to these demands, through first the creation of business analyst roles, which contrast with traditional “systems” analysts, through the use of steering committees and related mechanisms for communication and mutual learning, and through more flexible and adaptive approaches to design and development, including prototyping. Most recently, the trend has been towards establishing a meaningful client relationship with the business, with an Account Manager plus service level agreements.

These approaches appear largely to be add-ons to the IT organization rather than a commitment to developing a new mainstream of skills and roles. But Account Management does respond to the IT clients’ main concerns, and in this sense offers plenty of perceived payback.

Clients – those responsible within business units for some element of business that involves IT development or use – appear to be looking for peace of mind and confidence that IT will actually focus on their needs. They also want to build their own self-confidence in the dialogue and be sure that there is business awareness on the part of IT and careful matching of the technology to the business need. They express a frequent insecurity about their own understanding of the technology and worry that IT is more interested in “elegant” technology solutions or in pushing a favorite technology or tool on them.

For these operationally-oriented managers, “business results” really means collaboration and support. It is not at all apparent from our interviews and surveys that IT’s business clients themselves feel much accountability for actual bottom-line results. There seems to be a shifting of the responsibility onto the Account Manager for making sure everything works and everyone is pleased. That is hard to accomplish, and the Account Manager too often seems caught in the middle between an IT organization that is primarily focused on technology results and a client base that wants the IT “problem” off their backs.

For the Managers of the IT Organization

Managers in IT are very actively taking on the problem. Of all the four parties discussed here, CIOs and their key aides have the most active interest in the issue of business results. There are many obvious reasons for this, to which we can add new ones for them to take more radical action fairly urgently.

Basically, the entire issue of business results centers first on the role of the entire IT function, regardless of how it is organized (corporate center, business unit IT groups, etc.) and how much of it is outsourced. What is its purpose and distinctive contribution? There is also a second and growing issue: the variety and scarcity of newly critical IT skills, plus the commoditization of others.

CIOs (like their business colleagues) want their IT units to be value-added. They can’t accomplish that without at least the following:

  • Internal client satisfaction. Again, this is what is driving the trend towards Account Management.
  • Talent base. This may well be the main barrier to organizing for business results – it’s hard enough to organize for basic technology results. One of ten advertised IT jobs goes unfilled today, and the talent scarcity is a primary reason that many IT functions have been outsourced, or turned over to consultants and contractors.
  • A core role in the growth areas of IT application and use. This is a constant race against time, scarce resources and legacy system demands. In the past few years, the growth areas have been ERP, Internet/intranet/extranet development and middleware. Today, the growth areas are CRM, IP, supply chain management, and object-based development tools and SOA. Tomorrow’s agenda looks like it will include wireless telecommunications, and more and more innovations in electronic commerce technologies, tools, and applications.

Here, there is some conflict between the focus on business results and the focus on technical delivery. The obvious reasons for CIOs to emphasize the first of these, business results, is simply their need to establish and maintain credibility within the business and to ensure client satisfaction. Increasingly, they must rely on contractors, systems integrators, consulting firms, vendors, outsourcers, and hosting services, both for talent and for handling large-scale initiatives in the key growth areas.

In addition, more and more electronic commerce innovation is being led from outside IT, especially from Marketing. In many areas of Internet use, design is replacing programming as the core development skill, with small firms using new “front-end” tools to create Web sites, dynamic catalogs, links to logistics hubs, etc. These specialist firms are often brought in to work directly with IT’s clients; IT often plays a very peripheral role in these ventures.

All of these emerging practices displace many traditional IT development responsibilities. In particular, the explosive growth of Cloud providers will, over the next year or so, entirely transform the nature of much of “systems” design and implementation, in the same way that spreadsheet and other PC software eliminated reliance on COBOL programmers for producing ad hoc reports (but we expect the Cloud revolution to happen even faster and to a far greater degree). salesforce.com, for instance, turns CRM from a large capital investment (where IT managed the lengthy and complex process of installation and customization) into a variable cost, on-demand – “apps-on-tap” – incremental purchase.

These trends point to the non-obvious reason for CIOs to focus IT on business results: the commoditization of many traditional roles and skills. In an era when electronic commerce is becoming a rapidly emerging, urgent, and large-scale priority for the business, it is not at all apparent where the value-added elements of IT will be in the future. My research suggests, however, that the critical contributions of IT will surely be in communication, coordination, and collaboration – relationships. IT has to create new value-added capabilities as the old ones become commodities. To compound the challenge, the new role for IT demands specialized skills and experience that usually must be brought in from the outside.

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At one level, it is obvious that IT should focus on providing business results. In practice, though, the complexities of systems development and operations, and the nature of the IT profession, skills, careers and organization push in the other direction, towards IT remaining strongly centered on its core mission of delivering technical results. My interviews, surveys, and case studies carried out in this project show that the case for focusing IT on business results has not been effectively made to most IT professionals. In addition, our findings are clear that the efforts of IT organizations to bridge the business-IT gap, mainly through the creation of account management roles, have been limited and only partially successful.

Business Results

Business Results

Unless the case is convincingly made, then there is obviously little momentum or leverage for real change. How important is it that focusing IT on the business really should be a core priority for both IT and the business itself? Who should the case be made to? There are four parties who need to be convinced and become part of the solution – if this really is accepted as a problem: (1) corporate management, (2) IT’s clients within the business, (3) the managers of the IT organization, and (4) individuals in IT. The following is our assessment of the payoffs for each of them:

For Corporate Management

In general, senior business executives do not appear much involved in issues of IT organization (for an extended discussion of IT governance practices and the knowledge base required if senior business executives are to exercise effective leadership of IT, see Project TL: Developing Technology Leadership in Business Executives). They are, however, deeply concerned with its costs and performance.

Clearly, development productivity must improve dramatically. A survey by Computerworld in early 2010 identified the “Premium 100” IT organizations – the 100 best-managed IT groups in the United States. The data describing these companies lists the percent of projects delivered on time and within budget for each organization. The average is less than 30% – and these were the best of the best! In a separate study, Forrester Research reported several years ago that over $85 billion of IT systems projects had been cancelled in one calendar year for failure to meet business needs or because the systems were incapable of performing as designed.

Historically, poor development productivity has been one of the biggest complaints about IT from business managers. Given that for many companies today information technology accounts for close to half of their capital investment, an obvious question to ask is what a 20% improvement in delivery time and cost performance would be worth.

There are many reasons for the long historical track record of budget and time overruns. The two main ones most widely reported are weaknesses in project management and poor coordination and communication between IT and its “users.” This latter concern is what lies behind the efforts of many IT organizations, including most of the members in this project, to establish an account management role. In this way, IT takes on responsibility for dialogue in the belief that will lead to better business results.

But it’s not clear that this is in fact happening. I found in this study is that there is virtually no operational conception of what “business results” actually means. There is no general agreement on metrics by which, for example, IT Account Managers can be evaluated or can evaluate themselves. If anything, corporate management seems to reinforce the focus for IT on its technical role and responsibilities by defining IT’s results primarily in budgetary and technical performance terms.

To my surprise, I found very little interest among the IT professionals we surveyed in one subject that is all about business results: electronic commerce. For most business executives, e-commerce is now a critical priority, and it is a major topic in the mainstream business press, including Business Week, The Financial Times, The Wall Street Journal, and Fortune Magazine. Universities are racing to establish MBA degree programs in EC and a major, conservative and meticulous research study recently demonstrated that the Internet economy in 2009 amounted to $500 million, a growth of close to 70% over the previous year.

Internet-based electronic commerce has become very much a matter of betting on the company’s business future through information technology. The new business models require complex coordination of technology design and operations, business processes, marketing, finance and operations. This is apparent in the experiences of online retailers over the past two Christmas seasons. They discovered, often at the cost of escalating customer dissatisfaction, that it is not enough just to implement the technology elements of a Web presence. Customer service, fulfillment processes, handling of returns, ensuring advertised goods are in stock, and making deliveries as promised – all these processes require major attention and impeccable performance. In other words, the IT component of electronic commerce must be focused on business results, not on Web site development and operation.

Who will be in charge of ensuring the business results for electronic commerce? We can summarize the situation in most of the Project BR members, and in other companies that we reviewed, as one where no one is really in charge. Surely, that must change. The stakes are now too high. Electronic commerce is really not about “electronic” business, but about business – the new technologies are enabling fundamentally new ways of conducting all business; online retailing is just a very small part of what the new economy is all about. A 30% on-time and within budget track record would be a disaster in this new context.

Thus, there is a new business imperative for an IT organization that is deeply focused on fundamental business results. To be blunt, the payoff for senior business executives is business survival. In the economy of today and the foreseeable future no business can afford an IT organization whose only measures of success are technical proficiency and cost control.

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Most information systems and technologies, once installed, are treated as sunk costs – and as assets to be milked indefinitely to recover those sunk costs. This leads to retaining technology and applications far beyond their original purpose and design. Along the way, the systems lose touch with business needs, and the queue of maintenance and enhancement requests grow endless. In extreme cases, prolonging the lives of obsolete systems consumes the majority of available IT resources, yet delivering minimal business return and in fact robbing the business of resources that could be deployed profitably. It’s like running on a treadmill instead of toward a destination.

Lifecycle Management

Lifecycle Management

Instead, the business and IT must together adopt an asset management approach. Start with the expected life cycle of an application or technology, and then along the way determine when to repair, repurpose, replace or retire it – and when to reallocate IT resources. And let sunk costs be sunk: if the resources used to maintain the old asset can generate higher business return doing something else, then redeploy them. Effective asset management results in a continuous focus of IT resources on business value.

Many projects that have consumed many IT organizations for the past several years represent a failure in asset management – the applications were neither kept healthy nor retired until doing so became an absolute business necessity under a fixed deadline. In a sense, more information technology asset management has been done in the last few years in the name of reducing costs than had been done in the previous 30. The good news is that these culling cost efforts have given many corporations a relatively fresh foundation of assets, plus recent experience in the value and challenges of asset management. Don’t lose this momentum. Instead, asset management must be an ongoing business activity. That way, precious IT supply will not be wasted on the false demand of obsolete assets.

Article by Shaun White http://www.sacherpartners.eu Contact Shaun for more information

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Paradoxically, one of the reasons for lack of business-IT alignment is that IT, often under the influence of quality management doctrine, adopts a “business as customer” mindset. The attitude is: “We’re here to serve. If you’re my customer, you must be right!” The problem is that the “customer” IT is always trying to please tends to be the same relatively small number of mid-level mangers with whom they have established productive relationships. Sometimes, due to current or historical reporting relationships, the most influential customers are in Finance and other staff functions. But “right” for these customers may not mean right for the business at large. Meanwhile, who is focusing on the real customer – the ultimate consumer of the business’s products or services?

Business Owner

Business Owner

Instead, business managers, both corporate and line, must recognize themselves as the owners of IT capability, with direct responsibility for leveraging that capability for maximum business value. To build this sense of ownership, senior IT staff must work with these business owners regularly as a partner rather than an order-taker. The issues they discuss together are: “How are we going to deploy IT capability to help realize your business goals?” and “How can we improve the delivery and effective use of the technology resources and services that you own and pay for?”

The sign of progress: Technology initiatives are measured by the business improvement and value they help deliver, not just on the timely and cost-effective generation of technical product. Accountability for success is owned by the sponsoring business executive and shared with IT and other participating staff.

Article by Shaun White http://www.sacherpartners.eu Contact Shaun for more information

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As an unfortunate by-product of responding day-by-day to individual requests from individual “customers,” IT too often creates a patchwork of point solutions and islands of automation. Every new request is handled in isolation, with insufficient attention to the new request’s effects on hardware, applications, and information infrastructure. This doesn’t happen because IT professionals want it that way. On the contrary, IT people are generally very attuned to the value of coherent infrastructure and sharable solutions (if anything, they may be too idealistic in this regard). The problem stems from a combination of customer attitudes and project funding mechanisms that add up to: “We only want to pay for what we locally want to use.” But the additive effect of these decisions is that the corporation as a whole spends too much for information technology while still suffering with an incoherent backbone infrastructure that limits flexibility and new business initiatives.

Infrastructure Management

Infrastructure Management

The alternative approach is to look at all information technology resources as corporate infrastructure. Every systems initiative must be evaluated based on its total risk and return within the overall infrastructure: its local business return, its potential use by other business units, and its contribution to the quality and usefulness of the overall portfolio. Every systems initiative must draw as many of its components as possible from existing infrastructure, and must be structured to contribute as much as possible to that infrastructure. This isn’t a question of adding unwanted overhead to each systems project; it’s a matter of continuously enriching the corporation’s portfolio of useful and flexible technological capability. And once infrastructure management takes hold, and people become adept at leveraging existing infrastructure, the time and money required for every systems initiative is reduced, often by an order of magnitude.

Under pressure of competitive, budget, and time constraints, local business managers faced with immediate spending decisions are not going to be motivated to adopt this portfolio management perspective. They must be enabled and encouraged by three forces:

  • Executive commitment (and if necessary mandate) to implement portfolio management of technology resources.
  • Partnership consulting by IT that stresses the short as well as long-term advantages of leveraging infrastructure rather than building new point solutions.
  • Technology funding procedures, such as corporate contribution to local projects to motivate enlightened behavior at the local level.

Some corporations have established highly influential “portfolio management committees” for specific subsets of technology assets, such as supply chain applications and telecommunications infrastructure. With cross-functional and cross-organizational representation, and senior IT staff a minority membership, these committees can steer local technology investment decisions toward the corporation’s better interests. They can also curtail debate and grant exceptions when a local business need is crucial and the portfolio must adjust its mix.

Article by Shaun White http://www.sacherpartners.eu Contact Shaun for more information

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