Sunday, January 3, 2010

The Costs and Benefits of Enterprise Technology

My technology chops lag a bit behind the writers and readers of this blog. While I am taking the Piwowar EBS challenge along with Chet, Floyd and others, my day to day activities are more focused on trying to blow hot air onto the frozen middle of enterprise technology management. Chet recently retweeted a good question that got me thinking, reading and (now) writing. The question was:

RT: @brhubart

That post linked to a super article called Upper Mismanagement from The New Republic. It discusses how many executives, having risen up from finance instead of operational backgrounds, are probably incapable of leading American manufacturing today.

We see many of those same problems in IT. Those leaders who come from a finance background tend to be focused on showing the money (or the savings), while the technical leadership are just as focused on innovative technology. That often leaves the more operational business folks hanging in between, trying to keep the business going - doing more with less.

One problem seems to be that the wrong people are making the decisions - for the wrong reasons. This is an organizational problem: the right people are not in the right place. Technical, financial, and business folks all need to work together to create the solutions that will best advance the organizational mission. Too great a focus on any of those areas will potentially endanger the goals of the others. Jake spoke to part of this divide in his OOW 08 presentation (slide 9):

Jake Kuramoto's 2008 OOW Presentation

What about solutions?

In a recent seminar on financial management for IT, we worked with Intel's Business Value Index model. When you have a few minutes, read this white paper: IT@Intel White Paper Using an IT Business Value Program to Measure Benefits to the Enterprise. I'll provide the first line as a teaser:
Intel's IT business value (ITBV) program has shifted our IT investment decision making process to a customer-focused, data-driven model that demonstrates the impact of IT on Intel’s bottom line.
Yes! Right on! Isn't that what we all do?! I'd argue that if we all did this even half as well as Intel we wouldn't have as many questions about "finance killing IT" or "IT costing too much" or "IT not serving business needs."

I encourage all of us to read this paper. It explains how Intel's model "works by evaluating IT investments along three factors: IT business value, impact on IT efficiency, and the financial attractiveness of an investment." I love how they are ranked.

The key to the success of the Intel model seems to be accurate measurement of all three factors. Cost is frequently measured, but not always accurately. How often have you seen a solution implemented without provisions for its total cost? IT efficiency is measured less often. Business value is typically implied in requirement gathering, but I often see operational metrics missing once a solution goes into production. One example comes from a business intelligence project I am working on. In all of our work to help our business owners develop KPIs, we came up short on defining those metrics that would indicate how well IT was performing. See a good post from CIO magazine on developing metrics for IT.

So, if it is easy and obvious to do the right thing around measuring the benefits of IT to the enterprise, why is it not done consistently? I used to think it was just me, or just my organization, or just my industry (Higher Education and Research). Since I have been in school and doing a bit of consulting, though, I find my peers in all industries are singing the same tune. Perhaps one answer is implied in the New Republic article referenced earlier in this post. Perhaps we are not preparing ourselves and those around us to take the lead in this area.

Here is a good recent publication from my industry highlighting the shifting roles in IT leadership. I would argue it is not that different in other industries. Nor would I argue that any of this is new. Here is a similarly good recent publication from the CIO Executive Council called the State of the CIO 2010. I also recently read some great old school management principles from IBM's heyday. They are enjoyable and still applicable. Check out especially the "IBM management principles and practices" and the "Quintessential quotes."

Please find the comments if you love or hate any of the resources I've included. Please also drop a comment if you have an answer to the question of "will 'show me the money' kill IT?"

Thank you @oraclenerd and @brhubart for getting me thinking, reading, and writing. Now I can shed the slacker tag for a spell and get back to my work on the Piwowar EBS challenge (I am still on hardware and OS, ugh).

Ted [ linkedin | twitter ] is Vice President for Communications at the Higher Education User Group, MBA and MSIS student at the Johns Hopkins University, Director of Administrative Systems at MICA, and slacker at badgerworks.


Chris Muir said...

Thanks for posting this, definitely an interesting read.


Jake said...

Hey Ted, thanks for the shout out, but that's Paul's talk and his slide too. I just sat there, then mumbled for 7 minutes or so :)

Ted Simpson said...

@jkuramot Thank you for the clarification. That must have somehow slipped past the fact checkers. ;)

Thanks, then, to Paul for the talk + slide. Thanks to Jake for the sitting + mumbling.