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2 lessons from business school that can transform your IT organization

charlesbetz.jpgBy Charlie Betz


Charlie Betz is research director for IT portfolio management at Enterprise Management Associates (EMA) and author of the white paper, “Business Intelligence for the Business of IT.”


One thing I’ve seen over and over again throughout my career is that IT is undermanaged. When you compare it to disciplines such as retail merchandising and supply chain, IT’s management capabilities are immature and underdeveloped. It’s the deepest irony that IT, which enables the business, is managed by spreadsheets even within the largest organizations.


Why is this? IT leaders typically rise through the ranks. They typically don’t have MBAs. In order to be competent with computers, you don’t have much time left over for business school. Now, I don’t think that MBAs are the answer to all IT’s problems – far from it! But people who get a degree in operations management or industrial engineering, for instance, learn important principles in school. They learn about Six Sigma, Lean, and Total Quality Management (TQM). They learn about measurement and statistics. And I think these kinds of skills are noticeably missing in IT management.


If IT leaders could apply these management techniques to IT, they could transform their organizations. Here are two examples of how IT leaders could apply industrial thinking to better manage the business of IT:


  • Managing for realized asset value
  • Get a handle on decommissioning costs

Opportunity 1: Getting to realized asset value

For IT one of the most important business-school principles is to start managing for an asset’s full lifecycle.


For instance, if you look at a server as a five-year lifecycle, you want to figure out how much of that lifecycle is value-added work, versus non-value-add waste. Consider the following as points on the lifecycle:


  • The need for the server and how far in advance you know about it
  • Obtaining the server
  • Racking, stacking and configuring
  • The moment the server is live
  • Patching and maintenance
  • Decommissioning
  • Asset disposal and system retirement

For a $50,000 server, the only time it is adding value to the business is when it is live. Everything else is non-value-add waste. The metric you’re trying to get at is the percentage of time it’s adding value: realized asset value. If you spend $2 billion a year on your infrastructure, what is that metric?


Once you understand that, you can look for ways to improve.


Opportunity 2: Get a handle on decommissioning costs

Looking at value-add versus non-value-add activity is especially important when you look at the end of a system’s lifecycle.


If you’re looking at non-value-add waste, the time you spend decommissioning is critical. IT needs to start turning off systems with more confidence. First, understanding you have redundant systems is hard; systems tend to take root and grow organically, and evolve and interact in unexpected ways. Some objective, empirical means for identifying redundancy in an application portfolio is essential. However, many vendors and architects recommend lengthy classification approaches that in my experience don’t scale. I think there is more promise in taking a lesson from the HP/Compaq merger, where text analytics were used to identify redundancy and merge those two massive product catalogs. 


Second, there is always concern around dependencies. If system B depends on system A, you can’t turn off system A until either system B or at least the dependency is gone. This is where having a rich CMDB can add real value. Finally, the disposal of hardware, software, and data all have particular concerns. There are data security and environmental issues if you are going to actually discard that device. Are there legal records on the device that may need to be archived? What if you also have to keep the software needed to read them? What if the data is, or may be, the subject of litigation? All these issues can add surprising cost and risk to decommissioning. Can you measure that cost and feed it back into full lifecycle service costing, so you truly understand the total cost of application ownership?


These are only a couple of examples where the IT organization finds itself handicapped by both a lack of management maturity, and lack of basic data needed to measure and control its activities.     


For more information, see the white paper, “Business Intelligence for the Business of IT” and the Discover Performance article “Management intelligence: The key to modern IT.”


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