March 24, 2009, 9:50 AM — After years of being considered cost centers, IT organizations and service providers have evolved into profit makers. And alas, this evolution have put many IT departments and their CIOs under tremendous pressures, from cost-savings to increasing profit margins to faster innovations and managing workloads.
Technology providers used to measure their success only in terms of the classic adage, “on time, within budget, and according to clients’ expectations.” However, because of the need to be profitable and manage steep competition from both within and outside the enterprise, it is nearly impossible to stay afloat by delivering the bare necessities; barely functional does not cut it anymore. Success is now measured primarily by improvements in the bottom line, such as increasing revenue, reducing product defects, minimizing capital, and having a shorter time-to-market for products. And yes, add to the long list, innovations that result in long-term benefits to the computing landscape, employee productivity, and greater market share.
In the words of Erik Brynjolfsson and Lorin Hitt in their 1998 paper Beyond the Productivity Paradox: Computers are the Catalyst for Bigger Changes, “the success of a business generally depends on its ability to deliver more real value for consumers without using more labor, capital or other inputs.”
Martin Curley, Director for IT Innovation at Intel and author of Managing Information Technology for Business Value: Practical Strategies for IT and Business Managers, provides a five-point framework for optimizing IT for business value:
Manage the IT budget. It still takes money to make IT organizations operate and become profitable. However, the money spent on acquisition, management, or delivery of new technologies must be tied to current and future value, especially in the light of a more competitive business landscape.
The upside of having financial pressures on any technology landscape is that they oftentimes result in greater innovations in products and processes. Driving down costs also inspire reengineering of what is already available, or maximizing the use of what has already been purchased, or better yet, what is free. For example, it is not rare to hear about adjustments in SLAs, price negotiations, expanding IT functions, and adoption of cost-saving technologies.
Manage for IT business value. The days of “IT as cost centers” are over. Businesses and IT organizations now expect operational and financial rewards from their investments in technology, infrastructure, and people. However, these rewards can only be realized if organizations measure the returns on their investments, manage project portfolios, and analyze project performance according to business goals.
Manage the IT capability. IT organizations should study their existing processes and identify which ones are at least repeatable, as any process that are already established throughout the organization can provide greater business value to IT ventures. According to the author, managing capability covers asset management and maximizing core competencies, as well as systematic approaches to delivering services to the market.
Manage IT like a business. Running IT like a business means that IT staff must play the part of a consultant and give customers what they need, on top of what they want. As with most businesses, IT organizations should promote accurate billing methods to ensure that clients pay for the benefits of enlisting IT services.
At the end of the day, long-term business value is achieved when organizations invest in technologies and a workforce that has the aptitude for both technology and business. IT leaders cannot expect technology to achieve business objectives by relying on technology alone; they also need workers who understand the technology landscape and how it gives a significant contribution to the bottom line.
By ExecutiveBrief Technology Management Resource for Business Leaders
http://www.executivebrief.com
