The way in which new IT tools such as the BlackBerry are adopted in corporate IT environments allows those of us who follow the alignment of IT with business value a glimpse into the varying management practices that are used by CIOs to get the best out of their investments.
The functionality of Research In Motion’s hugely successful handheld is well understood of course. At a cost, it is a useful device for those with working patterns that involve them being away from the office without fixed internet access, and who have a demonstrable business need to have unwired access on the move, and to stay in constant touch with their email traffic.
Yet the hidden, dirty fact is that BlackBerries have often been issued on the basis of status rather than any in-depth analysis of business need or potential for productivity gains. That is, they are sometimes more of a fashion item or perk rather than an investment made with classical return-on-investment metrics in mind. Moreover, many organisations have no measures in place for assessing if mobile email is actually enhancing (or indeed hindering) overall productivity. This lack of clarity on how IT provision relates to business need is common to many IT services, extending well beyond mobile email and communications. The dilemma facing today’s CIOs is between the pressure to manage and drive down costs while delivering increased business agility.
IT has achieved extraordinary reductions in unit costs through a combination of strong management and falling hardware costs. For example, in mainframe services, Compass has seen a reduction of 66 per cent in operating costs in the last five years, yet business demands have led to a 268 per cent growth in volumes over the same period. In storage, costs have come down 76 per cent but volumes have gone up a huge 379 per cent. Yet CIOs are still under pressure to deliver increased business value and operate at a competitive cost.
While mature, well-managed IT operations can reduce unit costs, the biggest contributor to growth in overall IT spend is runaway demand from the business for IT services. The emerging opportunity for IT managers is to move from a supply-management role to defining and managing business demand. Rather than merely transforming IT, the CIO is now in a position to help support the transformation of the business through IT.
This fusion of business and IT is a step change. It also reflects an acknowledgement that IT is no longer just a service provider but acts as a critical enabler of change and improved business performance. The best performing organisations differentiate between the type of performance they require from particular elements of their IT infrastructure and the nature of the business relationship required to deliver that performance. By understanding how the business need relates to IT provision, CIOs are specifying a segmented approach to provision and spend.
One approach to controlling the growth of IT demand is through application portfolio alignment, allowing priorities to be defined as follows.
High strategic value, low operational impact. This category includes data warehousing applications such as customer marketing databases. Introducing innovation to these areas is attractive, given the significant potential upside and low cost of failure. These applications have relatively few users, but they are engaged in high-value activities such as business strategy and change.
High strategic value, high operational impact. These are mission- critical applications such as the billing functions of a mobile phone operator, a bank’s ATM network, or the check-in systems of an airline. They are likely have the highest profile in the organisation and innovation can be rewarding. However, uncontrolled innovation in these areas is usually risky. For example, a credit card issuer will not upgrade its payment approval system without lengthy testing. The cost of innovation will therefore be that much higher.
Low strategic value, high operational impact. Examples include payroll, or even general ledger systems. Innovation in these applications will also be carefully scrutinised for risk, and the benefits are likely to be cost reduction rather than increased revenue. For many organisations, this application category is an ideal candidate for commodity software packages, so that the cost of keeping software both up-to-date and reliable can be amortised across the installed base of the software vendor.
Low strategic value, low operational impact. These applications might be departmental databases set up for teams of five or fewer, or ancient applications which are still in operation but are no longer relied upon. They provide little value on either scale. Often the most innovative thing to do with these applications is to ditch them as soon as possible.
Portfolio alignment helps the business to set priorities and plan investments in innovative technologies that will deliver value and increase the productivity gains of existing systems. Used correctly, it becomes a powerful management tool for leveraging the potential productivity benefits of IT and addressing the spiraling demand for IT resources that has been such a feature of the last decade.
Who knows, with the right measures, it may even provide a framework for assessing who in the organisation really needs that latest batch of BlackBerries.
By defining the relative importance of each application in terms of strategic value and operational impact, management attention can be focused on areas where it will deliver most value. Because portfolio alignment assesses the IT estate against business priorities, it can help to control demand, decommission redundant systems, and plan investments in innovative technologies that will deliver value and increase productivity gains from existing systems.