Posted by: Sandy Purbrick

Not everything about Information Technology in organisations should be the responsibility of the IT department!

The IT department has taken the brunt of the business’ frustration with the way that Information Technology has been delivered over the past decade. CEO’s and CFO’s, are concerned about the performance of Information Technology in their organisation, this has been exacerbated by King III, which now makes the performance of Information Technology the responsibility of the Board.

Typically the Chief Executive has turned to his or her CIO to deal with the issues concerning the organisation’s investment in Information Technology.   We continue to hear about the pressure the CIO is under to reduce costs – do more with less – and deal with the increasing IT governance load. CIOs have achieved limited success in meeting these challenges. We also continue to hear general management dissatisfaction with IT and its performance.

There are a number of reasons for the limited success that CIO’s have enjoyed;

• IT is now an integral part of doing business. As such, any decision that is made at the business level impacts on Information Technology to some degree. Business decisions often introduce risks and costs to IT Management that are not apparent to decision makers in the business.
• ·IT departments are finding it impossible to muster the skills necessary to address technology initiatives while addressing business initiatives with the same skill set.   IT departments don’t seem to be able to source and manage all the business domain skills necessary for IT to have a positive impact on the success of the business. 
• There is a lack of appreciation and understanding from business executives and line managers as to what IT actually does – they often fail to appreciate the complexity and the resourcing requirements needed to achieve their expectations of their IT Department. Consequently we see that IT budgets are often underfunded or the funds are allocated incorrectly to meet these expectations.
• IT Departments are usually extremely poor at communicating and marketing to the business. Consequently there is a massive gap in understanding between the business and the IT department about what IT does and should do, compounding the problem-and management’s frustration.
• IT Departments are thought to be Technology centres by executives. Their understanding of the role that IT should play in their organisations, a role we call ACT (Applied Competitive Technologies) is flawed, and often mistrustful. This perpetuates the misconception that the management team of IT should be populated with technologists rather than business oriented managers.
• IT Departments’ management practices are often focused on the technology alone. While this is still an essential element of technology management, it often comes at the expense of having business focussed management practices and processes in place. For example how many IT departments understand their real costs, based on the service they deliver to the business? Can they explain to business units what the IT cost drivers are in terms that enable these managers to control their costs?  For that matter how many CFO’s and CEO’s really understand their IT budget and how it relates to their business strategy?    

These compelling and enduring misconceptions set IT Departments up for failure. It is CXO Advisor’s opinion that it is time to change the way its role is viewed, understood and managed in organisations if we are to improve the perceived performance of IT and satisfy the CEO, CFO and Board. It is time to transform the way IT is managed in a holistic manner.

It is critical for the survival of IT as a key player in the organisation to move away from old dogmas and perceptions of what Information Technology is all about. We need a fresh look at the way we manage our investments in IT and its people.  To this end we can start with a few key principles that can guide us through transforming the way businesses manage IT.

Here are some critical realisations for all parties in this debate:
The performance of IT in an organisation is not the sole responsibility of the IT Department.

• The performance of Information Technology in the business must be measured - as opposed to the performance of the IT department - and these measures should be part of the   business set of measures.
• The IT strategy and associated scorecard is the responsibility of the Board - according to King III Chapter 5 – and must be a part responsibility of all business executives, line managers and service department managers. A separate IT department score card does still need to be developed to deal with the specifics of that department. This will immediately start to align the business with IT and get the right behaviour from all areas of the business.
• The IT strategy is no longer the sole domain of the IT Department. In fact the IT department will have to, like other areas of the business, integrate their strategic thinking fully with business activities.
• The CIO must of course play a leadership role and be responsible for large parts of both the strategy and the budget, but IT Strategy is no-longer his or her sole domain.  

The role of the IT department and the other business stakeholders must be defined in terms of what the business wants to achieve with Information Technology.

(Traditionally, only the IT Department defines the role of Information Technology in the business and the main management control mechanism is the budget!)

• Business Executives need to understand and define what they want to achieve from their investment in IT,  in terms of business impact – for example: cost cutting per transaction or client satisfaction etc. This then should drive IT investment. IT management’s role is to help the business to achieve this by applying appropriate technology to the solution. This often does not mean new technology, but helping line management to better utilise the technology they already have.   Roles and responsibilities for the business’ Information Technology performance must be re-defined. For example, line management should be responsible for any return on business investments in technology together with the IT department. The goals defined for the solution are not in the control of the IT department. However, IT can be responsible for assisting business in achieving their technology benefit goals. On the other hand IT can be held solely responsible for the achievement of benefits that are entirely within IT’s control,  such as infrastructure outsourcing or virtualisation, for example.
• This principle also raises the question of whether the IT Department should operate and service commodity technologies that provide no competitive differentiation to the organisation. These can often be delivered more effectively via an outsourcing arrangement.
• Understanding the appropriate role of IT in the organisation will necessarily impact on the IT leadership profile, the IT organisational structure and the IT skills-set.
• Line and department management must take more responsibility for the deployment and application of technology in their business area including innovation from technology. This raises the question whether line- and department managers have the right skills sets to achieve this.

Information Technology is part of the fabric of doing business.

In the same way that people management is a core competency of a manager’s role today, the ability to apply technology to achieve business results is fast becoming a core competency of line- and departmental management.

• Selection criteria for line managers need to take this competency requirement into account. If the business can up-skill their managers to understand how to execute on business process management, modeling and optimisation for example, the pressure will be taken off the IT department to address each business domain with specialist skills. This will also assist businesses to move to an adaptable and client-centric organisation.   
• In turn the deployment of a technology architecture that supports this ‘business enablement’ approach becomes a requirement. This is supported by the trend towards SOA architectures and BPM solutions in forward-thinking organisations.
• Governance through policies, procedures and automation will play a vital role in ensuring the manageability of this technology environment that a business will operate in. Responsibility for the stability, security, and manageability of the environment will remain with the CIO and their department.  Change management and training programmes are vital in assisting this transformation.

IT Management needs to move from the management of technology, to the application of the technology to improve the results of the business.

• Many IT organisations have invested heavily in good technology management practices like COBIT and ITIL. However these practices tend to be inwardly focused on technology management, deployment and control. But what is the real benefit when viewed in terms of the performance of the business? At best these sorts of technology management practices tend to meet audit expectations in the IT governance process, rather than a deliberate strategy for value. Indeed these same practices can be implemented far quicker, with more certainty, and at a lower cost by importing more mature processes and practices through outsourcing.
• Technical resources are now highly specialised, often driven by product certification needs. These skills are unaffordable to the average in-house IT department. In-house IT departments struggle to afford the salaries and training to keep their skill-sets current. They are also in competition with the vendors who can offer these technologists more satisfying career paths. The consequence of this specialisation is that technical skills are being concentrated in the hands of the vendors. Companies are coming to the realisation that outsourcing is a skills mitigation strategy as much as any other reason for outsourcing.
• Technology trends are also assisting with the move toward outsourcing.  Cloud computing, software as a service etc., are all forms of outsourcing! The important thing is how the organisation benefits from their sourcing choices, rather than from the sourcing strategy itself. This supports our argument that IT departments must shift their focus from the management of the technology to the management of ACT – the competitive application of technology solutions.  The move to outsourcing is inevitable, driven by the economics of consolidation, skills scarcity and economies of scale. This trend will allow IT management to refocus on the manner in which the organisation uses technology to improve the results of their business (ACT).
• The governance of the use of IT in the organisation should never be delegated to the vendor of IT services. The business must always be in control of the management and use of its IT investments and strategy. The choice of software, technical architecture and the way it is managed through policy and procedure must be retained by the CIO.  

The transition to ACT (Applied Competitive Technology) is a journey, not a project. There should however be a map on how to get there complete with short-term destinations .

• The speed at which the transition from being technologists to providing ACT services can be achieved depends on the speed at which the organisation can deal with the change. This should not be seen as revolution but as something the organisation must evolve to. Much of this thinking has been around for a long time, but has not often been put into action.
• A good starting point in the South African context is King III (Chapter 5) as it deals with good IT Governance and with taking responsibility for IT performance outside of the IT department. Both of these issues are fundamental to supporting the transition to ACT.  King III provides CIOs with sound reasons to begin the journey to ACT.

Fundamental concepts for the transition from IT to ACT;

• The role of IT, in an organisation does not change, but the responsibility and accountability for these roles does change. These new accountabilities need to be clearly defined and agreed by the business before setting out on the journey.  
• ·This transition is a long-term IT Strategy:Adopting an ACT mind-set and organisational capability will mean that business strategy drives the change in direction. So while moving IT to ACT is largely the responsibility of IT, giving effect to the results of the transition becomes by definition, a combined business – ACT initiative. 
• The fundamental change in roles and responsibilities of moving to ACT must be understood by all stakeholders in the transition: Executive Management, Line Management, individuals and the IT department.

Conclusion

Without this fundamental re-positioning of Information Technology Management, the perennial problems facing IT and its performance will continue. This is not a step into the unknown, IT professionals and business have alluded to this need for some time, -  ’IT must be more business focussed-, -infrastructure is a commodity’, ‘the CIO must be more relevant to the business’,  - however what is new is the call to action and the fact that Executive Management  needs to take greater ownership.

CXO-Advisor has developed a number of  interventions based on our 3Role Model™ IT Business Management Framework  that enables business to start managing their Transformation. Theses interventions are practical and self- funding but help kick start this journey of transformation.