Matching IT to business wants

CIOs must understand that there is no one type of IT organisation right for all enterprises and all industries, writes Tom McGregor, managing director, Forrester Middle East.

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By  Tom McGregor Published  May 1, 2006

|~|tommcgregor-forrester200.jpg|~|McGregor: One size does not fit all when it comes to IT in organisations.|~|IT organisations appear to have the same reason for being, but there is no one size fits all. Instead, there are three clear archetypes for successful IT organisations: Solid Utilities, Trusted Suppliers, and Partner Players. Understanding which one you are helps articulate IT strategy, dictate tradeoffs, and help IT achieve its goal of running more like a business.

Previous failures, technology commoditisation, more sourcing alternatives, and a growing maintenance load have made IT's business constituents wary. Average spending on maintenance and operations is up to 80% of IT spending and IT execs themselves are often not pleased with their own organisations' performance.

IT executives now have responsibilities for doing three things simultaneously. These are:

• Managing the money - not just spending it. Today, IT execs in mature organisations must explain where the money is going, why it's necessary, and what the result will be - backed by business commitment and the willpower to achieve the results. They must maintain constant vigilance over their maintenance and legacy spending, aware of the fact that this year's new work becomes next year's maintenance headache.

• Getting the projects and services done - or getting out of the way. Business users aren't a captive audience anymore, forced to use the services of corporate IT and like it. In fact, for some organisations, technology-enabled innovation has been moved outside of IT. IT spending on services climbed steadily in past years, especially in the areas of custom application development and integration. In 2006, firms will again boost the percentage of IT budget allocated to consultants and systems integrators.

• Marketing what it does - not just doing the work. IT organisations are now expected to both perform the work and communicate what is provided and why it matters to business users. But there's a gap between expectations and satisfaction: For example, in one Forrester survey, 77% of business users reported that IT was extremely important to improving workforce productivity, but only 39% were satisfied with IT's support in making it happen. And in the Forrester IT Budgets and Spending Survey of 452 IT decision-makers, 46% said that marketing IT internally was either critical or at least on their agenda for the year.

Most IT organisations face pressure to run themselves more professionally, by managing the funds, executing on commitments, and communicating what they've accomplished. But that's where many commonalities end.

Some CIOs focus on operations - others invest in new projects. When senior management wants to know if IT is spending enough or too much, the CIO gets the inevitable question, "How does our IT spend compare as a percent of revenue?" But it's what an IT organisation is expected to provide that determines how much to spend on IT - and what is enough. Three companies can all spend the same percent of revenue on IT, but one allocates it mostly to maintenance and ongoing operations, while another invests in new projects.

Some businesses view IT as strategic - others do not. The more things change, the more some things remain the same. Business execs want more product innovation - but they may not expect IT to provide it.||**|||~||~||~|Some IT organisations seek new technology - others avoid it. IT executives get irritated and dismissive when vendors size them up inappropriately. One organisation may be eager to hear about the next new thing from technology startups - while another CIO views their mission as "keeping new vendors away" while they drive standardisation on a single app environment.

As a result, three persistent business-driven models of IT have emerged, based on how IT is perceived by CXO's and its internal customers, on constraints of the industry to which the company belongs and on the company's mission for IT. These archetypes often persist whether the bulk of IT activities are performed inside or outsourced. And very large enterprises may have all three types represented in various divisions or business units. CIOs, their bosses, and constituents should recognise their organisations' identity and role.

Solid Utility - based on available and cost-effective infrastructure. For cost-conscious organisations in which business processes are relatively stable or where tech innovation occurs in powerful business units, not centrally. Solid Utility IT organisations must provide cost-effective, dial-tone reliability: The network is always there, PCs function, the help desk responds, and the back-office applications are up and working. Finance pays close attention to IT in these environments; hence the CIO typically reports to the CFO, and costs are expected to be transparent and reduced over time.

Trusted Supplier - add project delivery to the Solid Utility model. Some firms need centrally-managed application projects to support process changes in and between functional departments. In these Trusted Supplier IT organisations, where the CIO is likely to report to either the CEO or COO, the enterprise expects to have all the infrastructure capabilities of Solid Utilities - plus application projects managed centrally, delivered on time, and within budget. For this archetype, heads of functional departments like sales, customer service, finance, HR, and marketing steer the IT application software priority list and define functionality requirements. The process is typically facilitated by the CIO.

Partner Player - the business is IT and IT is the business. IT organisations in these firms pour their energy into creating unique and competitive solutions for customers, suppliers, and internal business users. As a result, there is little time for the delay in requirements translation between business groups and IT that occurs with Trusted Suppliers. Although they must have the reliable infrastructure of the Solid Utility and the project discipline of the Trusted Supplier, Partner Player IT organisations have the added dimension of C-level expectations and so, are governed by the executive team.

So Middle Eastern CIOs, where do you fit? Some honest self analysis or even better yet direct feedback from your CXO will help you to avoid some frustration and to get on with providing what is in line with the expectations of your organisation - or at least your senior management!||**||

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