What every business leader should know about IT management

Most business leaders increasingly need to interact with IT management. However, for many, the inputs and outputs to IT management are foreign territory. In a recent post, I suggested that the outputs of IT should be actively measured and managed—namely, delivery against business services, business initiatives, and suppliers.

 

While this is good in its own right, you can take your relationship with IT a step further by becoming directly involved in IT’s value chains and, in particular, how your IT organization measures its performance against them. First popularized in Michael Porter’s book, “Competitive Advantage: Creating and Sustaining Superior Performance,” a value chain is the interlinking activities that a firm performs to deliver a valuable product or service to the marketplace. If your memory of value chains from business strategy courses is fuzzy, there is some good news! IT organizations have only the following five value chains:

 

  • strategy to portfolio
  • requirement to deploy
  • request to fulfill
  • detect to correct
  • data to information

 To do the chains justice, I will review them individually in my next five posts. For this post, let’s start at the top of the list.

 

Strategy to portfolio

Strategy to portfolio is about how well IT’s portfolio of services matches the enterprise’s businessesstrategy. I heard a thought leader once tell a group of IT professionals that they are not in the IT business, but the business of their firm—banking, insurance, manufacturing, etc. Do you feel this is the case with your firm’s IT leaders? For the strategy to portfolio value chain, I am concerned with the portfolio’s quality of management, the innovation that is being produced for the portfolio, the quality of new solutions being identified, the management of their instantiation within programs and projects, and the effectiveness and efficiency of spend for services and innovation.

What are the goals for strategy to portfolio?

 

To consider your organization as being successful with this value chain, you need to be able to see month-over-month improvement in each of the aforementioned areas. You want to see that initiatives are prioritized more and more against enterprise need. Want a clue as to whether this is happening? First, determine what the three to six distinctive capabilities are that set your company apart from its rivals. Next, ask your IT organization to relate its investments to these capabilities. From a total-picture perspective, you want to know that the entire mix of investments (services and new investments) are aligned to business strategy—those three to six distinctive capabilities. If not, start asking hard questions of your IT organization. With this completed, you want to know that services perform to business requirements. Ask your IT organization how well it performs against service-level agreements. At this point, you will hear about “the nines” of availability. Don’t feel vexed in this conversation. All you need to know is that the more nines, the less downtime is acceptable during the year. As a businessperson, you have to know that all services are not created equal. For this reason, IT needs your help to know where to invest time and money on availability. Speaking about this, IT budgets need to be transparent and allocated fairly. This means that costs need to be tallied by business initiatives or services. Here’s a clue: If your bill from IT is harder than your cell phone bill to understand, then you have no financial transparency.

 

Measuring whether improvement is indeed happening

Your IT organization should be “continually improving” how it operates. It should be actively measuring its improvement. To do this, industry-based practice recommends a balanced scorecard be used for IT management. This is how most businesses measure themselves too. Here are some key performance indicators (KPIs) to measure whether the improvement is taking place in the strategy to portfolio value chain. Look first at the number of applications by lifecycle category. If applications tend to be later in their lifecycle, then your IT organization is not investing in extending your business’ competitive advantages. At the same time, I would look at the number of applications in the service portfolio. If this number is high, then you have IT sprawl and, eventually, ballooning costs. You’ll recognize sprawl if you find thousands of applications. One IT organization I know of could blame itself and the business for this. They kept two versions back of Siebel running, even though the new version had been running smoothly for 16 months. Each unneeded app is a sinkhole for millions of dollars. Ask your IT organization, how much its applications cost from end to end. Every year these sinkholes prevent your IT organization from driving to you additional competitive advantage. With this, you want to make sure projects are aligned with business objectives—and as important, that business service costs are being reduced quarter over quarter.

 

Where do you go from here?

Start by asking your business about its strategy to portfolio value chain. And then make sure you are involved in reviewing progress. This way you can help drive them to improve your business processes in general, and in particular, your differentiated business capabilities.

 

Related links:

Blog post: Making COBIT 5 part of your IT strategy

Solution page: IT Performance Management

Twitter: @MylesSuer

Labels: IT management
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About the Author
Mr. Suer is a senior manager for IT Performance Management. Prior to this role, Mr. Suer headed IT Performance Management Analytics Product ...
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