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September 20, 2011

The 4 Dimensions of Running IT Like A Business

Running_businessIT executives, particularly those at large Global 2000 IT organizations and large government entities, find themselves faced with a number of challenges and pressures, both internal and external, and these pressures are what has been driving the charge behind running IT like a business. Very broadly, all of these drivers really aim to improve the IT organization along one of four critical dimensions that every IT executive should be able to identify with to various degrees -- doing things cheaper, better, with less risk, and in a more strategic manner. It turns out that running IT like a business goes a long way toward improving the IT organization along all four of these dimensions.

  • Cheaper: "IT costs too much. How do we make it cheaper?" This is a question that executives at every IT organization struggle with, particularly in tough economic times, and there is no single right answer to this -- each organization is different. Our IT organization may do a great job with operational efficiency across the board, but have demand numbers that are spiraling out of control. Or maybe we are very efficient with data center services, but need some help with client services. Or perhaps our business customers are demanding higher service levels than they really need. Running IT like a business introduces the framework necessary to figure out where exactly our organization's inefficiencies and cost sinks lie, as well as the tools and organizational structure necessary to address these financial liabilities.
  • Better: "Business customers are not happy with the service delivered by IT. How do we make it better?" IT is often seen by the business customer as difficult to work with, unresponsive, inaccessible, and overpriced -- and with good reason. IT service delivery is often slow and error-prone, its support structure difficult to navigate, and its costs not tied to business value. As a result, many business customers view IT as part of the problem, not part of the solution. Running IT like a business makes sure that IT is better aligned with the business, its operations more streamlined and its costs better understood by introducing a customer-facing Service Catalog, a transparent cost model, a service-centric organizational structure, and a customer-first mindset. This addresses a lot of the quality and customer satisfaction issues plaguing IT organizations today.
  • Lower risk: "There are countless external and internal regulations that IT needs to comply with. How do we keep up?" IT executives are hit with regulations from all sides these days -- Sarbanes-Oxley, Basel II, FISMA, HIPAA, internal corporate rules, you name it. Most of these regulations are focused on financial accountability, data access control, and information security. In other words, the driving force behind the regulations is risk management -- IT is implicitly charged with managing the enterprise's risks associated with technology and data, and these regulations explicitly define what that means. The keys to complying with these regulations, making IT auditable against them, and managing these risks effectively lie in measurability (gathering relevant performance and financial metrics), process standardization (establishing repeatable, trackable ways of doing things), and financial transparency (making sure IT costs are linked to business value). Running IT like a business facilitates these three components by introducing standard services and processes, financial transparency, business-focused performance metrics, and benchmarkable financial metrics.
  • More strategic: "IT is constantly faced with integrating new technologies, accommodating fluctuations in demand, etc. How do we plan intelligently for these business scenarios?" How will switching from an internally hosted CRM application to a SaaS CRM application affect your bottom line and the per-user costs of CRM software? How much will IT save by introducing virtualization and cloud computing technologies? How will fluctuations in the demand for various client services affect overall IT spend? How much will a recent acquisition raise IT spend? IT executives are frequently faced with questions like these. Having a well-developed cost model, budgeting process, and demand management framework -- all of which are part of the running IT like a business paradigm -- makes it much easier to answer questions like these in an intelligent and structured way.

As we think about these four critical dimensions that IT executives have to address and the associated challenges, it becomes clear that these are fundamentally the same types of challenges that executives running any business face. These dimensions -- cost, quality, risk management, and business strategy -- are really fundamental business dimensions; they are not specific to IT. And if the challenges are the same then the response should be the same too -- namely, we must run IT like a business.


Posted on September 20, 2011 | Permalink


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