April 18, 2009, 11:34 AM — The news over the past few years has had a stream of stories about business disruption as a result of faulty information technology (IT), where dysfunctions have a cascading effect throughout the business. Clearly, success in today's technology-centric climate is increasingly dependent upon an efficient and effective IT activity. However, IT operations are often opaque and not easily understood.
That said, there are symptoms that portend deeper problems for which management should be on the lookout: Constant cost overruns and delayed project completions are sure-fire signs, but less obvious signs can range from a lack of involvement from senior level management, bloated vendor contracts, or improper staffing (both high and low employee turnover rates can signal trouble).
Once a departmental problem is evident, by implementing what we call the "4-S" strategy, companies can regain control over failing IT departments, and transform dysfunction into an operationally streamlined business process that drives bottom-line results. Naturally, this is a large undertaking that cannot be executed successfully without leadership commitment. And more often than not, the magnitude of the task requires management to engage third parties that have the experience in turnaround management. Once there is leadership buy-in on a transformation strategy and the appropriate resources, it is time to begin implementing the steps involved in each stage.
The 4-S strategy involves four phases:
Stop the bleeding. This phase is simple in its intent: determine where the department is floundering and immediately emergency-correct the problems to reduce or eliminate business disruption. At a minimum, this will stop the internal IT problems from further metastasizing.
Stabilize operations. Once the bleeding has stopped, now is the time to concentrate on the operations and get them functioning properly to continue supporting the business. Here is where the foundation of the IT department is corrected. The Technical Architecture is strengthened or rebuilt. The department is reorganized into a lean and effective operating unit, all IT processes and methodologies for good (or best) practices are introduced, and staff training commences. Governance and performance metrics are installed.
Structure the IT department. In this phase, technical and management skills are enhanced and contractors performing routine tasks are replaced with existing staff and new hires. The new organization and processes are refined and adjusted to achieve maximum value, and training continues. Management and users become proactively involved in the IT governance process.
Support the ongoing success of IT operations. All previous steps are for naught if IT leadership does not chart a course for the future. Otherwise, a relapse back into dysfunction is probable. Here an IT strategy is defined to align the IT department with corporate goals and continue the journey to becoming a high-performing IT department. Contractors are replaced with existing staff and new hires. The staff is trained and departmental responsibilities are transitioned to them. Periodic follow-up assessments are scheduled.
A key to any successful turn-around is governance. Establishing an IT governance process will lay a solid foundation for IT strategy, which will answer questions including: How will IT be used to address the needs of the business? Which projects will get done and which ones will not? What is total spending on IT?
This governance process ensures that the IT department has all the right processes and risk management systems in place and that it is delivering business value. According to the MIT Sloan School's Center for Information Systems Research, companies with mature, strong IT Governance earn at least a 20 percent higher return on assets than organizations with little or no governance.
Stemming from a solid governance structure, the other key to a successful turn-around - and a theme that should run through every step of the 4-S strategy - is the creation of a high-value IT department. Developing a plan in specific phases, such as project size, time allocation, cost estimating, and spending plans and forecasting lets a company identify where funds are mis-allocated.
A thorough review of IT projects, systems, and expenditures including services, technology licensing agreements and asset databases, gives IT leaders insight into where to allocate resources for optimum results. Once individual aspects are reviewed, an objective review of the entire IT organization will ensure that IT strategy and project priorities are consistent with business strategy and all is operating effectively and efficiently.
The 4-S strategy, with emphasis on governance and value-creation, in combination with IT department restructuring will lead to proper use of company finances and employee time, which will eventually result in cost savings and maximum return on IT investment. The department will run smoother, the business will perform better, and the C-suite will be happier.