The CIO Is A Big Job

The CIO Is A Big Job

You are a CIO. Let’s face it, your role as CIO is a big job. You are bombarded from all sides. On one side, the rapid technology revolution promises innovative solutions while addressing user adoption challenges push in from the other side. Pressures from business demands drive increase costs while the CFO is asking for budget reductions. No other C-Suite role has an as broad or diverse portfolio as the CIO. Let’s hear more.
4 Steps to Safe Cost Cutting

4 Steps to Safe Cost Cutting

It is no secret that many industries and market’s bottom line profits are being walloped by the COVID-19 impacts. The impact is real. You have been asked to cut a substantial portion of the IT budget and fast. Your challenge is to deliver the reductions needed while maintaining services. Join me in exploring an approach to tackling the challenge as safely as possible.  
 
Let us begin. 

 

1. Start with a solid understanding of the current state of IT Spend:  How much and in what places 

 
Let me share an analogy…You need surgery! Can you imagine allowing a surgeon to start cutting without diagnostic tests identifying the root of your health issue? As scary as that concept might be, you must perform the same diagnostics before you start a cost-cutting initiative.
 
How do you know where to cut unless you know the costs and drivers?
 
I am not talking about the need for a Total Cost of Ownership analysis. I am advocating that you understand your spending from a high level. It is most useful to sort spend into three different views: 
 

IT Spend by Strategic Category 

 
Most IT costs sit in the Run category of spend (average of 65-70% percent of the total budget). Run costs are typically committed contract costs. Unfortunately, we see these costs rising each year unless there has been a continuous program to control run costs. The Grow category focuses on enhancing business processes with new IT-based capabilities, whereas Transform is in support of new business activities. 
The first opportunity here is in the creation of a center of excellence comprised of IT, Finance, and Key business operational representatives tasked with ensuring the continuous improvement in the efficiency of IT services. The need for business representation is strategic. It is also an excellent opportunity to solicit their input into the reduction of Run service delivery expectations.  
 
More important, it is an excellent time to educate the business on the operational impact of IT investment decisions. Without this education and attention, trailing maintenance costs increase the run costs of the business by 15-20% year over year as illustrated in the chart below.   

IT Spend by Cost Component

These days, the most substantial portion of IT costs for most organizations is associated with internal staff and outsourcing. Improving cost-effectiveness and enabling cost reductions will require a detailed look at services by category and identification of duplication of services while exploring alternative delivery models.  

The opportunity here is to look deep into each cost component to understand the opportunities to renegotiate, extend, or eliminate contracts or services. This is also the time to take a deep look, often for the first time, at the organizational design and staff skills inventory in preparation of a likely call to reduce staff or headcount.  

Do you know who your essential team members are?  
 

IT Spend by Technology Domain  

 
IT spending is spread across a combination of infrastructure, application, service desk, and IT management workload areas.
Experience shows us that there are real opportunities for significant cost savings and service improvements in each of these areas. Areas of cost reduction opportunities might include renegotiating service contracts, extending service life, consolidating data centers, or reducing the number of applications.  
 

2. Next, look for opportunities to cut costs.   

  • Quick cost-saving “WINS”: Scrutinize in-flight or planned Grow or Transform initiatives to eliminate or defer anything that does not contribute to immediate cost reductions or profit margin increase.
  • One-time hard savings (current spending or next budget cycle}: Reduce fixed costs by a set amount in the present or future budget cycle/quarter.  
  • Recurring hard savings (current spending or next budget cycle): Reduce variable costs regularly, proportionate to volume, in the present, or next budget cycle/quarter.
  • Reduced future costs: Savings on what would have been spent during out years. For example, renegotiating a three to five-year maintenance contract reduces savings in out years, which should be captured and tracked, but don’t have the same cash-flow impact as savings in the current or next budget cycle.
  • Expense deferral: Taking an action that will result in an expense being due and payable at a future date, rather than during the current time period. Many cost optimization efforts make the mistake of not differentiating between putting off a cost into the future and making structural changes that will reduce the long-term run rate. 
  • Staff/Headcount reductions: Reduction in force is never easy and often results in significant lost productivity. Analyze your skills inventory against critical functions and talk in detail. Without this level of scrutiny, staff reductions represent the highest risk of cutting to the bone. It is essential to have a clear understanding of the functions of every team member.
 As you list your opportunities for cost cutting, keep in mind that not all cost cutting efforts are helpful. There is a downside to attempting the wrong kind of cuts. Some can be quite dangerous to the intended outcome as well as IT’s reputation. Here are a few to consider:

3. Finally, inform and negotiate cost-cutting targets

 
Most often, IT cost reduction goals are dictated by the CEO or CFO with directives such as “Cut your total cost by X%.” This is understood. At the same time, the CIO will demonstrate managerial courage in clearly articulating and informing the business of both the positive and negative impact of that directive.  When opportunities and risks are articulated in clear business terms, the CIO can earn the right to negotiate the goal in partnership with the business leadership.  
 

4. Last, execute against the plan  

 
Seriously, this is hard stuff. By putting the extra effort in the analysis, you will be better positioned to manage costs and be prepared for the next time. There is always a next time. 
 
Feel free to contact us with questions we left unanswered or if you could use help in getting started.   
 
Stay Safe, 
Mary Patry and Martha Hein

Mary Patry
IT Executive Advisor and Leadership Coach  
 480.393.0722 (AZ)
 Mary.Patry@iteffectivity.com
LinkedIn: Linkedin.com/in/mleonardopatry 

Let’s Talk sponsored by ITeffectivity.com an IT Executive Coaching and Advisory practice targeting CIO’s challenge of leading and delivering business solutions with a focus on effective people and process capabilities. Discover the possibilities by scheduling a complimentary strategy session with Mary Patry. 

IT Executives Are Facing Unprecedented Times

IT Executives Are Facing Unprecedented Times

IT Executives share a lot in common with the best athletes. They play on a team that is always working hard to gain success after success. They’re motivated by the need to improve and broaden their skills and play more consistently. At the same time, they face pressure from all sides, even during regular times. The added weight of supporting remote working requirements caused by COVID-19 may feel overwhelming. Overnight their focus pivoted from strategic thinking as the CIO to tactical needs thinking as the CCO – Chief Connectivity Officer. The game changed under their feet.

How are effective IT Leaders performing during this time of unprecedented impact as more is expected of them and their teams than ever before?

Highly Competitive – The best IT executives are very competitive, especially with themselves! They take pride in having the best, most-efficiently operating IT department. They take pride in achieving faster development cycle times, in adopting the latest technologies and methodologies first, in enjoying the gratitude of the departments they serve.

Must know their stuff and be very well trained and conditioned – Beyond high proficiency with technologies that are core to their enterprise, IT executives must also be continually conditioning themselves to successfully manage the many diverse talents and personalities that form any IT organization. The tremendously intelligent people involved in most IT teams require a sophisticated leader who can bring out the best in them.

To lead the team, they must be part of the team – Legendary symphony conductor Leonard Bernstein observed that to be a great conductor, one must be able to play each instrument in the orchestra, mostly. Hence, that conductor would understand and appreciate what each musician was experiencing. Just like a sports team, IT teams respect and admire a leader who truly comprehends their expertise, and themselves.

The more coaching they get, the better they perform, and the better the results they produce! – Even the most proficient high performing athletes will readily share praise for what their coach does for them. Similarly, executive coaches are most often engaged to focus on those with high potential to improve from wherever they currently are.

While many CIOs are going it alone, others are finding great value in calling on trusted relationships with their Executive Coach.

What to Look for in Your IT Executive Coach

Credibility – The first thing most leaders seek an IT executive coach is credibility. It’s one thing to have training and certification in professional coaching and advisory, that’s certainly very valuable. But, IT executives also want and need someone who truly understands and appreciates their world and what they experience each day. Someone who has invested years working as an IT executive comes with a level of credibility that is priceless.

Objectivity – IT Executive coaching is not like consulting or therapy. Despite their practical executive experience, you don’t go to them to share your feelings or ask them how to do anything or to validate how you do things. You look to them to be the objective outsider who looks at the challenges you present with no hidden agenda. You are looking for someone who can help you self-evaluate your performance, identify where you may have weaknesses that require correction, and establish areas where improvement will take you from merely good to truly great, best-in-class.

Clarity – Companies often invest in their most promising executives for coaching to accelerate their progress. Individuals also seek coaching when they want to accelerate the growth of their career, and when they have specific challenges, they’re not sure how to address. Their Executive Coach provides clarity in the process of improvement, helping to overcome the obstructions we often put in our way to avoid confronting uncomfortable truths about our actions.

Mutual Respect – A healthy coaching relationship requires mutual respect and trust. If these two elements are not part of the relationship, nobody is going to benefit. An executive must be able to trust they can confide in their coach without fear of judgment.

Motivation – Great coaches take an honest interest in the businesses they help and the executives they coach. If you want to see me get excited, talk to me about past or current successes, and watch me light up with enthusiasm. A good coach is motivated to discover who you are beyond your role as a leader and executive. They take an interest in why your business exists, how the business is run, and what they do to serve their customers. Once your prospective coach gets to know you and your business, that’s the kind of interest and motivation you should expect to see.

Vocation – For the genuinely excellent business or executive coach, coaching is never a job; it is a vocation. My journey into coaching provides me proof of this truth. Grant you, it took me over fifty years to discover my real purpose. And it took a coach to help me find it. When I did, my stars aligned. More importantly, I don’t regret my years as an IT practitioner, leader, and executive. These experiences provided me with the foundation and context to understand the world my clients live in without a great explanation.

What to Expect from a Quality Executive Coaching Experience

Your Executive Coach will begin by developing a clear understanding of your individual “current state,” focusing on where you see yourself positioned right now both from an organizational and personal performance perspective. Next, they’ll work with you to establish a clear definition of your “desired future state” and then structure a series of interactions to help you achieve that improvement.

Certified Executive Coaches will also provide structured experience assessments such as the BATES EXPI Executive Presence Assessment to dive deeper into your self-perceptions and provide more insight. And don’t worry about finding a qualified, certified executive coach near you…most are!!

Your engagement will continue beyond the scheduled interactions to include ad-hoc access to your Executive Advisor for answers to questions and clarifications on specific topics and points.

Anticipate Great Outcomes

Of those who’ve enjoyed Executive Coaching experiences, most appreciate the apparent improvements in communication and leadership skills they’ve achieved, saying it has improved their confidence and broadened their understanding of the executive experience. Ready to grow in their careers, they’ve taken the bold step of preparing a qualified successor and defined desirable growth paths for all their key team members. Most of all, they feel more a part of their company’s leadership team.

In Closing

An athlete does not get off the bench without the core capabilities. The coach helps them to find the inner strength and skills to excel. The same applies to the IT Executive. The life of the IT executive is wrought with challenges and setbacks. I predict the fallout from COVID-19 will have a lasting impact on how IT looks and the impression they leave. You don’t have to figure it out on your own. You may know where you want to go, and perhaps even have a good idea on how to get there, but a professional coach can offer the untarnished insight, feedback, and guidance you need to become a star player.

I am offering to help a limited number of CIO’s on a complimentary basis if you find you need a trusted colleague to bounce ideas around with or if you want to share in order to help solve a problem.

Regards,
Mary

Mary Patry
IT Executive Advisor and Leadership Coach  
 480.393.0722 (AZ)
 Mary.Patry@iteffectivity.com
LinkedIn: Linkedin.com/in/mleonardopatry 

Let’s Talk sponsored by ITeffectivity.com an IT Executive Coaching and Advisory practice targeting CIO’s challenge of leading and delivering business solutions with a focus on effective people and process capabilities. Discover the possibilities by scheduling a complimentary strategy session with Mary Patry. 

Tech Refresh – Yes, it is still a requirement

Tech Refresh – Yes, it is still a requirement

Just like your car, just like your home, just like everything physical you own – IT Infrastructure will wear out, and it will break. I can’t tell you the number of times I’ve stepped into the head of IT Infrastructure role to find hardware upwards of 10 plus years old installed and supporting mission-critical applications with the business suffering under far too frequent Sev 1 outages.  Nothing erodes confidence in IT more than critical service outages. No one is interested in talking strategy or innovation with the CIO when core IT Services are not on solid footing.

Before you say, “That does not happen these days, everyone hosts their servers at AWS, Azure, Google, etc. “, please read the February 26 Tending the Plumbing article. According to a 2019 Spiceworks State of IT Budgets  article, 20 percent of IT budgets are spent on IT infrastructure. The 2019 Spiceworks research also shows the current reality is that 98 percent of businesses are running server hardware on-premise. (That is not to say 98 percent of servers are on-premise. It does not matter if you have one or two servers, or hundreds, if you are an organization of any size, you will have network equipment.)


What is IT Infrastructure again? 

IT infrastructure is the shared technology resources that provide the platform for the firm’s specific information system applications. IT infrastructure includes hardware, software, and services that are shared across the entire firm as well as access to external services such as web-hosted applications and services. Major IT infrastructure components include computer hardware platforms, operating system platforms, enterprise software platforms, networking and telecommunications platforms, database management software, Internet platforms, and consulting services and systems integrators, including desktop and mobile devices and software. Virtually, everything digital requires direct support or access supported by IT infrastructure. It is often the largest area of spending by an IT department.
 
There are four significant steps to an infrastructure roadmap approach:
  1. Established IT infrastructure lifecycle refresh strategy
  2. Identify current IT Infrastructure inventory
  3. Risk assessment
  4. Prioritizing IT Infrastructure Roadmap

IT Infrastructure Lifecycle Refresh Strategy

IT Infrastructure is comprised of hardware, software, and services shared across all platforms.
 
The hardware and software lifecycle is dependent on the supplier’s support plans and the company’s needs and wants to adopt the functionality and capability of more current versions.
 
Hardware is typically refreshed based on acquisition strategies (capital versus expense) against risk tolerance, resource capacity, and expense management requirements and will vary based on hardware categories. I’ve always used a general rule of thumb for budget planning:
  • PC’s: 36 months
  • Servers: 60 months
  • Routers/Switches 72 months
Like all rules of thumb, rules will be broken based on business growth and variables not always under IT controls.   A  sophisticated perspective of hardware refresh cycles can be found at https://www.computereconomics.com/article.cfm?id=2580


IT Infrastructure Inventory

First and foremost, your IT strategy and roadmap should include Infrastructure.   A good plan starts with understanding the current state, including an inventory of all things managed.  We want to hope that everyone has a robust configuration management database in place, but we know all too well that is often not the case.  At minimal, an asset inventory is required. If you don’t have one, you will need to create one utilizing a series of tools such as Microsoft’s SCCM, Solarwinds, and other asset management tools.

 

Fortunately, asset management tools such as Snow, Flexera, and ServiceNow are being challenged by many newcomers to the asset management space    https://www.gartner.com/reviews/market/software-asset-management-tools

 

Unfortunately, in some environments, there may be mission-critical IT equipment not attached to the network requiring a physical inventory exercise.  I’ve found this to be the norm in a manufacturing environment.  At a minimum, it is essential to research.

 
While gathering the physical attributes of the hardware will require identifying the services hosted, the install date and installed OS, utilities, and application software versions.  The service support lifecycle of both the hardware and OS should also be noted.  (Heads Up: Most of the time, this level of inventory rigor reveals configuration items underutilized, no longer relevant or never fully implemented.  That in itself is an excellent reason to build the inventory)
 
Once you have a substantial inventory, the next step will be to assess the risks associated with the individual pieces of hardware and software.


Risk Assessment 

Prioritization for executing refresh will be based on the risk associated with each inventory item.  Assessing the risk is a bit of art combine with science. Your assessment should take into consideration the business risk and technology risks of the current state. From a business risk perspective, you will want to weigh and assess the capacity and  maintenance cost.  Regulator compliance, and any health and safety risks the age and state of the hardware may imply.

From a technical perspective, vendor support quality, availability, service reliability. The complexity of support, including skill sets required, security, performance, standards conformations, and overall vendor security and performance characteristics, weigh into your overall assessment.

To add to this already multi-dimensional assessment, application projects in process as well as planned layered onto critical business calendar events must be identified as they will influence the timing and order of refresh activities.

 

Prioritization and Refresh Roadmap

This big picture holistic approach of identifying the landscape and assessing risk will prepare you for defining your technology refresh roadmap.  The roadmap will be a series of projects laid out across multiple years.  I have found managing the refresh projects grouped by technology as a program to be the best practice as the interdependencies can become unwieldy.  If the organization does not have an infrastructure project management life cycle, one can typically be developed using the existing waterfall systems development lifecycle.  The point here is the necessity of establishing the rigor of requirements, phase gates, resources management, change management, timelines, and success factors.


In Closing

It is simple, at the same time hard. Hard because it is not fun, often results in unplanned work and expense, and most importantly does not offer an apparent return to the business – until something critical breaks.  My advice to you is: Don’t be that CIO or IT Infrastructure leader left to account for allowing the company to be put at risk.  Call me if you want to discuss more or are looking for hands-on help in addressing your refresh requirements. That is not me, but I am sure I can recommend qualified resources.

Until March 25, have a great two weeks!

 
Mary
CEO-CIO Alignment is Not A Guessing Game

CEO-CIO Alignment is Not A Guessing Game

It was 2002 and I had been asked to step up into the CIO seat. At the time, I was the head of Infrastructure. I had built an excellent reputation as a “get it done” leader which had resulted from a very effective technology integration of two equal-sized merged companies. It was a tough decision. I knew I was not ready, and I wasn’t confident I wanted the job. I accepted the position to prevent someone from coming in from the outside.
 

Oh, how I often wish for a do-over. Though I was a member of the senior executive leadership, I was not accepted as a partner. I did not deserve to be. I was frustrated on many fronts as I knew I needed to step it up. As such, I requested funding to subscribe to what was then the elite CIO “training” opportunity under the Meta Group CIO mentoring program. My assigned CIO Coach, Louis Boyle, saved me big time. As my coach and mentor, he helped me to see beyond my experience and taught me to look at business problems strategically as solutions to be solved. At that time, mobile computing and business intelligence were promising technologies and I got lucky with vendor and business partners willing to work with us on some pretty leading-edge technology solutions. It helped that I had a fantastic IT team on my side.

Fast forward to today and the technology solutions back then appear to be out of an old science fiction movie. The capabilities coming out of the digital transformation are driving the integration of technology into all areas of the business. They are changing how companies operate and deliver to their customers. The hardest part is the cultural change requirements that require leaders to continuously challenge the status quo, experiment with courage, and grow comfortable with failure.

All these things have elevated the CIO role, yet I still see IT leaders struggle to collaborate with business units at a strategic level effectively. Too many times, CIO’s and their IT organization are thought to be a barrier to change and sadly in some cases they are believed to be order takers. To add to the challenge is the breadth of expectations of the IT leadership. Fundamentally, they must make sure they are delivering on core services like email and network access. If the core services are not working, no one will be interested in hearing their innovative strategic ideas.

While some challenges still exist, a 2018 State of the CIO survey reported stronger alignment between IT and their business partners. Almost three-quarters of the survey responses said IT and the business engage more frequently when there is shared oversight.

CIOs have the opportunity to play a significant role in assisting the business in driving innovation. This opportunity is greatly enhanced when the CIO is looked at as a strategic advisor.

How do you find out where you stand? It is best to ASK.

You can ask through conversation. It is not very time-consuming on both the CEO and the CIO. Unfortunately, there is a tendency for the CIO not to ask and it is not the priority of the CEO to tell.

You can ask through a survey tool. Fortunately, two InfoTech diagnostic tools have proven very helpful in both measuring and identifying opportunities to improve – the CEO-CIO Alignment Diagnostic and the CIO Business Vision diagnostic.  

 

CEO-CIO Alignment Diagnostic

The CEO-CIO Alignment Diagnostic measures six critical areas of IT performance to enable the prioritization of improvement initiatives. The survey questionnaire is only 20 questions that can be completed in less than 20 minutes. Areas addressed include the CEO’s overall satisfaction of IT, IT budget, staffing, business needs for technology, performance measurements, project portfolio progress, and stakeholder alignment.

Here is a snapshot view of the CEO-CIO alignment with the business goals view:
 
A feature of the report that resonates with both the CEO and CIO is the comparison of the CEO and CIO’s performance perceptions. A snapshot of the report is portrayed here. The gap in perceptions enables the CIO to provoke what may be the most candid conversation across the life of the CIO career. The visibility into the gaps between the CIO and CEO perception is priceless in providing the basis for the CIO focus and direction.


CIO Business Vision Diagnostic

The second tool I use is the Info-Tech CIO Business Vision Diagnostic. The insights and benefits of this diagnostic are broad. It looks at the needs of the stakeholders, enables getting beyond rumor and opinion to facts, and provides a baseline performance and capacity measurement at both the organization and the department level. An outcome of the report is the insight that enables a focus on what is essential to the business. The CIO Business Vision is most effective when it is executed periodically. CIO’s find the overall performance and capacity metrics will play an essential role in governance and strategy decisions and action plans.

IN CLOSING

 
To assure the success and effectiveness of their IT organization, CIO’s cannot leave their relationship with the CEO to chance:
  • As investment in technology continues to increase, management and control of the IT budget rests on internal IT leadership AND CIO’s need the trust of the CEO to retain that control.
  • The need for collaboration between heads of IT and LOB leaders continues to increase.
  • Availability of skilled resources will continue to plague the CIO, requiring an even greater need to measure performance.
  • As the focus continues to shift to digital transformation, there’s a high potential for more technology decisions to be made outside of IT, driving a higher need for collaboration between IT, CEO, and business peer. CIO’s cannot leave their relationship with the CEO to chance.

Even though a CIO benefits from focusing on stakeholder management and relationship building, there is value in measuring the perception of the CEO and business peers against your own.

I am providing you a link to the InfoTech CEO-CIO Alignment and the CIO Business Vision sample reports. If either sparks your interest, give me a call to discuss how diagnostics might ensure your success.

Until next time – I am here if you have questions or want to talk!

Regards,
Mary

 
 

Mary Patry
IT Executive Advisor and Leadership Coach  
 480.393.0722 (AZ)
 Mary.Patry@iteffectivity.com
LinkedIn: Linkedin.com/in/mleonardopatry 

Let’s Talk sponsored by ITeffectivity.com an IT Executive Coaching and Advisory practice targeting CIO’s challenge of leading and delivering business solutions with a focus on effective people and process capabilities. Discover the possibilities by scheduling a complimentary strategy session with Mary Patry. 

Four IT Spend Questions in Need of Answers

Four IT Spend Questions in Need of Answers

Effective IT management is not necessarily about spending less – or more; it’s about allocating dollars, resources, and talent wisely and monitoring for benefits realization on many fronts.

Surprisingly, many IT organizations do not harvest the data nor have disciplines in place to readily answer a few seemingly easy questions about their IT investments:

  1. Where are our IT dollars, resources, and talent deployed today?
  2. Do we have the data and processes in place to present a business view of IT investments?
  3. How do our IT resource allocations, costs, and performance compare to others in the industry, especially top performers?
  4. Are our IT investments aligned to business objectives?

Although closing in on the answers may be a never-ending journey, Martha Hein, one of ITeffectivity’s Executive Advisors and a Cost Management extraordinaire, outlines the steps you can take to get there

Let’s get started!

1. Where are our IT dollars, resources, and talent deployed today?

Running the Business of IT depends on the timely availability, analysis, and understanding of quantifiable IT financial and operations data. To demonstrate benefits realization and the value being delivered to the business, IT must first be able to communicate what services are being provided, at what cost and for what return. The first step to answering this question is to compile your data into a scalable model. Data sources include extracts from your financial systems (actual spend by GL and Cost Center, fixed asset registers, prepaid services balance sheets, Purchase Orders, etc.), HR, Payroll and Timekeeping systems as well as IT systems (Active Directory, CMDB, Infrastructure and Applications Monitoring, Service Ticketing, etc.).

Data models are useful tools to measure how your dollars, resources, and talent are being spent today and may elucidate how these might be more profitably spent tomorrow. Data models and taxonomies vary, but the Technology Business Management (TBM) Council1 provides an excellent public domain example of the inputs required to gather the foundational data necessary to answer this question.

This data provides the first building blocks required for transparent fact-based communications between IT and business leaders.

2. Do we have the data and processes in place to present a business view of IT investments?

As stated above, the IT Financial and IT Functional views of your IT investments are the first building blocks used for running the Business of IT. The endgame, however, is to have a clear Business view of IT investments. To create a Business view, you must reframe IT investments from a business perspective. Arriving at a Business view requires additional analysis of the above data and may require other inputs.

Business leaders are interested in achieving operational excellence and realizing profitable growth, innovation, and transformation for their organizations. To deliver optimal value to the businesses they serve, IT organizations must proactively manage their investments and services portfolios to become enablers, or better yet, drivers of these business objectives. From a Business perspective, running effective and efficient day-to-day IT operations is merely to provide a commodity service.

Demonstrate you do more than keep the lights on by enhancing your data model to enable you to report on IT investments along business dimensions.

  • Business partners are often not aware of the Total Cost of Ownership (TCO) of a given IT business service, the full price tag to implement, or the support cost of the technology for a given business capability. Develop a Bill of IT to provide a view of your IT investment portfolio that reveals TCO by business service and/or Line of Business. Help your business partners understand the cost drivers (without burdening them with the details of all the moving parts under the IT hood). Ideally, you understand the cost components well enough to be able to provide counsel on how to favorably impact cost without adversely impacting service levels or creating undue risk. For example, is business demand commensurate with business value? Can you move away from Tier 1 storage or reduce the number of user application licenses without impacting productivity?  
                                                                                                                             
  • Demonstrating return on investments requires that you identify the criteria that will be used to measure benefits realization and then establish a baseline against which to measure outcomes. Work with your business partners to define criteria and baselines, then implement on-going monitoring of benefits realization based on agreed-upon measures.

3. How do our IT resource allocations, costs, and performance compare to others in the industry, especially top performers?

Measuring your cost and service performance against industry benchmarks can uncover opportunities for efficiency improvements, thus allowing you to do more with less. Or, more of what is profitable, less of what is marginal, and none of what is just plain wasteful. You will use the data gathered to answer the above questions and simple arithmetic to answer question No. 3. Total IT spend divided by Corporate Revenue equals IT Cost as Percent of Revenue. IT Dollars spent divided by Units supported/produced equals Unit Cost. Setting up the formulas for performance measures may be trickier and the results may not be as objective, but is still relatively uncomplicated. You meet or exceed your Service Level Agreements ##% of the time. On average, you get either an X or a Y on Customer Satisfaction Surveys.

As an important caveat, industry benchmark data typically provides averages. When put in context, there may be legitimate business-driven reasons why your organization’s results vary from others in the industry. For example, if your business strategy is to pursue aggressive growth through Mergers and Acquisitions, you will need to funnel resources from Run the Business and Transform/Innovate the Business to Grow the Business and/or accept a higher cost of IT as a percent of Revenue. In another example, if you are aggressively pursuing rapid innovations in your product R&D pipeline, you may want to overlook typical storage costs in favor of being able to model and readily access every permutation of promising molecular structures.

4. Are our IT investments aligned to business objectives?

Start with an easy top-down mapping exercise. Utilize your organization’s core business strategies. Ideally, IT leadership was at the table when these were defined. Identify the core competencies2 and specific Business and IT capabilities that are required to support the strategy. Map the IT programs that support each of the pillars of the strategy.

In Closing

It is difficult to know with any degree of certainty if your IT investments are aligned to your business objectives until you have at least preliminary answers to the previous questions. Do not allow a possible lack of a comprehensive data set to detract from taking proactive action.

We will cover additional aspects of running the “Business of IT” in future articles. We welcome your feedback on what has worked well for your organization and where you continue to feel pain points.

Until next time – we are here if you have questions or want to talk!

Martha and Mary

Mary Patry
IT Executive Advisor and Leadership Coach  
 480.393.0722 (AZ)
 Mary.Patry@iteffectivity.com
LinkedIn: Linkedin.com/in/mleonardopatry 

Let’s Talk sponsored by ITeffectivity.com an IT Executive Coaching and Advisory practice targeting CIO’s challenge of leading and delivering business solutions with a focus on effective people and process capabilities. Discover the possibilities by scheduling a complimentary strategy session with Mary Patry.