Gone are the days when the IT department exercised complete control over IT spending, experts say.
According to META Group’s most recent benchmarking survey, individual business units now control 52 percent of IT spending. (For more on this trend, see “Experts say technology spending shift is positive for IT.”)
How can a CIO align the IT division to respond to this shift in financial control?
IT should align its goals with the goals of the business, according to analysts from four leading IT research firms—META Group, Gartner, Giga Information Group and Cutter Consortium. Specifically, they recommended that today’s IT division:
- Become an internal consultant.
- Become an outsourcing guru.
- Use business metrics to measure what IT does.
IT as internal consultant
Too often, IT mainly views itself as just the custodian of technology, said Chris Pickering, a senior consultant with Cutter Consortium. But IT exists to serve the business goals of the company, even when that is inconvenient or complicates the technological framework.
“IT tends to be working toward neat solutions…a homogenous environment, whereas business tends to be ‘messy’,” Pickering said. “The business is just interested in getting support for its actions, its initiatives—and IT often brings other issues to the plate that may not really have a lot of business relevance.”
One way for IT to focus on the business is to switch from an authoritative role to a consultative role, Pickering said.
Shifting to a consultative role means IT must be expert in various technology solutions, including ASPs, in-house development capabilities, and packaged solutions.
What does it mean to be an in-house IT consultant, and what steps have you taken to adopt this model? Is this even a useful model? Share your opinions and concerns by e-mail or start a discussion below.
“IT needs to be versed in all these options and then needs to help business bring in the best solution possible, regardless of whether IT ultimately controls it or not,” Pickering said. “The error that IT has made most frequently historically is to try to control various things too closely through standards, with the result being that IT becomes inflexible and nonresponsive, and that’s what frustrates business more than anything else.”
How do you shift into the role of consultant? Chip Gliedman advised that CIOs and CTOs spend some time talking with business managers about their objectives.
“My favorite question whenever you’re dealing with somebody else is ‘What does this person need to do to make their bonus?’” Gliedman said. Once you learn what that something is, you build your recommendations around that, he added. “You’ll find that if you do that, you have a lot of friends,” he said.
IT as an outsourcing guru
A related role for IT divisions is to become an expert in outsourcing, analysts said. In companies where outsourcing is a corporate strategy, IT should even add legal and financial expertise so it can be the source for dealing with technology contracts.
“IT should have expertise in outsourcing,” Pickering said. “[Then they] would function as consultants to the rest of the organization.”
Mike Gerrard, a Gartner analyst who studies IT strategic investments and management, agreed.
“One of the services that IT should provide to the business is ESP [Extranal Service Provider] management, which means knowing which ESPs are appropriate for what kind of service, how to contract with them, and then how to manage that [ongoing] relationship,” Gerrard advised.
Pickering suggests that IT divisions establish standards for outsourcing that the rest of the organization can use. But be careful that the standards aren’t too confining, the analysts advised.
“We tell people to think [of] the Constitution of the United Sates,” said Jonathon Poe, a vice president with META Group’s Executive Directions. “[Even] for such a complex organization like the nation of the United States, all the principles of governance are included on one page.”
Use business metrics to quantify IT accomplishments
Finally, measure what you do, suggested Chip Gliedman of Giga. Measuring your work will give you, by definition, a better understanding of it, he said. Numbers provide you with ammunition to communicate your accomplishments and give you the tools for realignment when you fall short of goals.
However, IT too often uses different measurements than the rest of the business. Instead of looking at project-completion deadlines and uptime, measure IT in the metrics used by the business.
“The way you ensure alignment, especially for new projects, is you make sure that the metrics are the same for both the IT department and the department that’s getting the project,” Gliedman said.
For example: Let’s say your project is to reduce the defect rate. You plan to develop an application that will monitor and improve product quality. The unit by which you measure the success of that application should be defect rate, not budget-versus-actual or whether the project is on time or on budget, said Gliedman.
“You have to deal with it in terms of revenue and customers, and defect rates and retention rates, and available business hours,” he said. “But IT never makes those translations.”
A pendulum swing?
Gliedman and Gerrard both said that in some ways, the shift in IT spending is a pendulum swinging, and at some point, it may swing back. But that doesn’t change the fact that IT needs to shift toward more of a business focus.
“You don’t see a whole lot of CIOs becoming top managers,” Gliedman said. “They don’t know the language of business, so they talk about MIPS and terabytes, and when you’re a CFO or a CEO, the only thing a MIP or a terabyte is is a bill from IBM.”