Don’t expect any return on investment in IT Earlier this week, during a short twitter exchange with @dhinchcliffe, I decided to write a more substantial post about why your IT department needs to stop chasing its own agenda. This will be an easier case to make if you realise that IT investments and IT projects generally don’t make any sense. Rather than try to persuade you of this (no doubt you will already have an opinion about this) let me share a tool I use all the time and challenge you to show me where I am going wrong.
I don’t care if you are developing mobile apps or extracting minerals. You might be a young start-up, a national government body or a global corporate - it doesn’t matter. If you make bad decisions about your IT infrastructure you will be saddled with a burden that sucks up money, puts obstacles in the way of innovation and will turn away customers, partners and your best people. You would think that organisations would do all they can to help their CIO avoid such a fate but, unfortunately, you would be wrong.
Is it just me or is there anyone else out there who actually likes developing business cases? Maybe there are a few but I am sure we are outnumbered by the many who find business cases a long-winded, administrative chore. Why on earth would anyone want to get excited about this?
Despite what you might have heard, managing finances for IT is really very simple. Forget the nonsense you may read about “value centres” and “capex vs opex”. Instead, here is a simple story which will illustrate all you need to know.
Have you stopped to think about how the leading cloud computing providers are able to provide enormous quantities of computing resources at the click of a button? Clearly, they have massive data centres around the world filled with racks of high performance IT. If you were their only customer that might be the end of the story but, of course, they serve huge numbers of customers, many with enormously volatile workloads, and are taking on more every minute. Now and again you might get a little reminder that this does not all come about through magic (have you noticed the occasional “our servers are busy” message when trying to use Twitter?). So how does it all work and what risks does this pose to your business? How confident can you be that your next ad-hoc request for a virtual machine will be satisfied? Even worse, how do you know that your existing cloud based services will not be constrained by your cloud provider’s next wave of new customers?
I recently read an interview with Catherine Bessant, CIO of Bank of America (a quick and simple registration on CIO.com is required). Catherine comes across as an impressive CIO role model. She has taken an unusual path to the role and has an unusual approach to some of the challenges which we can all learn from. For this post I have picked out one of Catherine’s key areas of focus. She describes herself as “freakishly focused on simplification.” Given the intricate and fast moving nature of IT, you might think this focus is incompatible with the CIO’s role but it should be near the top of every CIO’s agenda.
Why has IT management become so cursed with Binary Thinking? No. 6: IT is either a cost centre or provides business value Binary Thinking: If the IT department is accounted for as a cost centre then stakeholders in the enterprise will be unable to appreciate what the IT team and its services can do for the enterprise and will not be able to exploit the opportunities IT provides for adding value to the business. Only by changing the accounting treatment of the IT department can its full value be realised.
I am going to start this blog post with a quiz. Which of the following scenarios is the odd one out? A business services organisation did not recover all of the fees it was due because of poor quality customer data A telecommunications firm received a large licence charge from a major enterprise software vendor because they had unwittingly exceeded a key licence metric A transport business continued to provide maintenance services unnecessarily for buildings that it had sold off A government department delayed an expensive but critical applications upgrade in order to reverse engineer a business case for the project A utility company had no software support in place for an application because the two people who had the necessary experience took redundancy in a re-organisation. So which one did you pick?
I regularly see questions in the press and in social networks along the lines of: “What is the right amount to spend on IT?” Often the debate descends into variations of: “It depends.” For years I used to smile quietly to myself as I watched these debates. Why? Because I had the secret formula! Simply count the number of knowledge workers in the organisation (better still the number of full-time equivalents) and multiply by a unit price (until recently £4K - £5K) and you would be pretty much there. Oh, I know there is a lot to challenge with my formula but it was much quicker, easier and no less accurate than all the debate or a benchmark from one of the big analyst firms. Unfortunately, in recent years, my secret formula has stopped working so I turned to some of my trusted advisers to find out what had happened and help me fix it.