COMPUTER BUSINESS REVIEW

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Issue Date: November 2007

Managing IT like a business

November 2007

There is a Value Maturity Matrix published by the IVI (Innovation Value Institute) in Ireland (http://ivi.nuim.ie) which defines four areas in which IT has to follow specific maturity curves if it is to advance to being seen as a value adding function within their business. These four areas are:
* Managing IT like a business.


* Managing IT for business value.


* Managing the IT capability.


* Managing the IT budget.

The IVI provides a table in which five stages of maturity are mapped out for each of the above areas, with the first stage of maturity being a very much ad-hoc IT service, dependent on a few techie wiz-kids doing IT ‘stuff’. The last stage is probably too mature for most IT functions, because IT becomes a self-funded, customer-facing unit providing services direct to customers and accruing profits accordingly.
Terry White
Terry White
We normally recommend that IT shoots for level three of value maturity, in which the IT department has a strong business focus, is constantly working out how it can provide its services at lower cost to the company and are seen as expert technological partners to the business. Moving above this level requires a significant shift in IT and indeed in the business strategic thinking about the role of IT in the business.
What interests me though is the IVI notion of 'Managing IT like a business'. It is important to note the phrase ‘like a business’ rather than ‘as a business’. At level five of the IVI maturity scale, IT does largely manage itself as a business, but that, as I have said, is probably a bridge too far for most IT departments.
In a previous article I talked about the constant issue of trust between IT and the business, and I believe that a significant element of the lack of trust, (or more likely a niggling antipathy towards IT), owes its origin to the 'managing IT like a business' factor. How can we expect business to trust or even appreciate IT’s efforts if the business (which by definition must manage itself like a business, or go out of business), does not see the same business like disciplines in IT.
So what does 'managing IT like a business' entail? Guess what: it entails looking at how business manages itself and doing the same in IT. Before I start, let me say this: It is very easy to write this stuff, it is a whole lot harder to implement it – the companies we have worked with on the business-like management angle have to do a whole lot of planning and workshopping before they initiate their business-like programme. And then resources and effort has to be applied in a structured way, with goals and measures all along the way. But as John Thorp the head of the Val IT initiative for COBIT said at a recent conference: “Where in your job description does it say this is easy?” Or as my boss once said to me: “I do not pay you to do the easy stuff – you would probably work for free if that was the case. I pay you to do the difficult stuff.”
Let us start at the strategy and planning stage of business. When business starts up it develops a business model for itself: What do we do? How do we do it? What services and products will customers pay for? How will they pay? What must we budget to achieve this? And so on. IT needs to do the same. They need to focus on the business strategy and then say: 'Given the business strategy, what do we do? How do we do it? and so on'. I have seen too many IT strategies published as if they were not part of the business that pays their salaries. IT needs to develop a tiered approach to projects – at the base of which is project management; then programme management (the set of projects and their impacts in a specific area); then portfolio management, which includes the management of IT and business supply and demand across the whole organisation. In short IT understands the environment in which it operates and the impact that it has on that environment.
Managing IT production like a business requires us to adopt and adapt a number of factory-like management principles and techniques. Factories have sophisticated stock management and control systems – and so it should be with IT. The CMDB (configuration management database) is the first step in this direction. And IT also has to manage its production performance in a factory-like way – throughputs, availability, reliability and the performance of individual production units is part of this production management. Also life-cycle management becomes an essential part of performance and factory management.
Just as businesses are fanatical about service (or not, if you are my cellphone network), the IT department needs to adopt the same fanaticism. IT needs to have a service catalogue, which includes the usual IT services related to applications and systems that they provide, but it also includes IT’s involvement in business improvements and the leadership services that IT brings to the table. One managing director said to me that IT leadership was about three things only: new products, new markets and new channels – so unless IT is offering services in helping develop these, it cannot claim to be providing leadership. And offering a bunch of services is only the first 10% of the service game. You have to deliver the services according to expectations, and fix service problems fast and efficiently – but you knew that. And your SLA has very little to do with service delivery – it is just the supply side of IT. Proper service delivery regards services as perceived from the business perspective – the demand side.
Then businesses market themselves. Running a business without marketing is like winking in the dark – you know what you are doing but no-one else does. It is an ongoing refrain that I hear from the many IT people: 'Business does not understand us!' Of course my automatic response is: “And whose fault is that?” Because I know that you cannot set up a cool new business that offers unique services and expect everyone to flock to your door – you actually have to explain your service to customers. (I still remember TV adverts years ago explaining what fax machines did, and why it was a good idea to have one). But IT, bless them, see the technology as being such an obvious and critical part of the business that they do not need to explain anything to anybody. I have not yet seen an IT department with a 'marketing' function. Most IT people say they do communicate, but then again I suspect they are being disingenuous (fancy speak for: 'they lie like cheap carpets'). So if you want to manage IT like a business, then get serious about communication and marketing in IT.
Finally, IT needs to manage its finances like a business. I have been bashing on for three years now about budgeting in IT, but only now are we starting to get serious with some IT departments about their budgeting and financial management. We are helping many IT departments prepare their budgets in a way that their business actually understands. And helping with the financial controls and governance needed to manage IT finances properly. I mean what were they thinking? How can you expect IT to be taken seriously if they walk into the budgeting session and speak a language that business does not understand.
So if IT wants to be a trusted partner of the business (as I have seen in a number of IT vision statements), then strategise, deliver services, market and manage your finances properly. Or remain the outsiders who have to fight for every cent, defend your every action, and constantly be misunderstood. Because business understands business – they will only understand IT if it manages itself like a business.


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