Posts Tagged ‘Chief information officer’

When I started this blog more than a year ago, one of the answers I was looking for, was if and why Business/IT Alignment is so different from alignment between for example sales and operations or between business and HR. If it’s not, we could learn more from other domains. If it is, than the question is why. So far, I didn’t find a clear answer to this question. But, maybe I stumbled upon at least a possible answer to this question.

It started when I was thinking about the pros and cons of internal customer/supplier relationships. IT is often perceived as a “supplier”. And, as a result of this, the relationship between business and IT can be seen as a customer/supplier relationship. Question is, why IT is perceived as a supplier? I have read some articles of people discussing the issue of running IT as a business. Several views on this can be found, proponents and opponents. These discussions made me realize, that IT in fact is always seen (and organized) as a separate unit. A unit which is struggling to get and keep connected to the business, which in fact is called the alignment problem. It is not the organizational form, which is relevant, but the fact that it’s been considered a rather isolated unit within an enterprise. And, maybe that could be one of the main reasons behind the alignment problem. Trying to be seen as an integrated department of an enterprise, but in fact not acting as one.

In one blog was stated:  “There is no secret to running IT like a business. It simply means that the IT group must now do whatever is necessary to sell products and services on a competitive basis. While there are a few caveats to this statement, overall it is as simple as knowing your market, giving customers what they want, and doing it at a price that is competitive. This means that CIOs are going to have to think and operate more commercially, using menus of products and services that describe these services with pricing, delivery time, service levels and support options. This can be accomplished with a product and services catalog that provides information about what the individual technology offerings bring to a business unit. This catalog must be based upon direct feedback from internal customers (business units) and state what service levels are included in the offering, the fulfillment interval and support levels. Content in any specific catalog depends on the specific business requirements of a specific project. IT must also step out of the technical realm to develop and communicate performance metrics in business language.” .

Although it all sounds logical, question is, if this really helps in getting more aligned with the business. There is a lot of discussion on this topic of running IT as a business. Some nice statements from opponents are found on http://taosecurity.blogspot.nl/2011/01/it-as-business-train-wreck.html. Some quotes:

“Another unintended consequence of running IT as a business with internal customers, while less tangible, might be even more important: Defining IT’s role this way creates an arm’s-length relationship between IT and the rest of the business…”

“When IT acts as a separate, stand-alone business, the rest of the enterprise will treat it as a vendor. Other than in dysfunctional, highly political environments, business executives don’t trust vendors to the extent they trust each other…”

“When IT is integrated into the heart of the enterprise, its priorities aren’t defined by who has the budget to spend (by chargebacks). Rather, they’re defined by a company leadership team whose members have a shared purpose, who understand what the company must do to achieve that purpose, and who understand the role new technology will play…”

The discussion on how to manage IT clearly is open ended. From an alignment perspective it doesn’t help – to my opinion – to position IT as separate business, because of the negative consequences. Maybe, this is where IT differs from other departments within the enterprise. Although there is also tension between for example sales and operations, they are part of the same value chain. And HR and Finance are different from ‘business’-departments, but clearly fill in a supporting role which is not questioned.

Looking at IT, they are more or less stuck in the middle. They are often not perceived as part of the business, but IT doesn’t act as a supporting department either. So, maybe this is part of the trouble in alignment discussions. How to position IT, and how to interact with business partners?

This question is getting more and more relevant in today’s developments. IT already was struggling with their diminishing role due to the large role of outsourcing and offshoring. But, now there is the impact of consumerization and ‘bring your own device’-trends. In a recent article (source: http://www.computerworld.com/s/article/9226927/The_IT_paradox_A_diminished_role_in_technology_but_greater_clout_in_the_business_) is suggested that IT should become more of an adviser to the business and provide governance over externally procured technologies.

Anyhow, it’s time to rethink your position as IT department, and this will direct how you can and should cope with the long lasting alignment issue.

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The third of the six dimensions of the Strategic Alignment Maturity Model of Luftman (2000) is Governance. Ensuring that the appropriate business and IT participants formally discuss and review the priorities and allocation of IT resources is among the most important enablers/inhibitors of alignment. The decision-making authority needs to be clearly defined. IT Governance is a topic in itself, and widely studied. Sometimes, alignment is presented as part of good governance. Luftman adresses this as one of the six dimensions in his model. In this post I limit myself to Luftman’s description of governance. In later posts I will expand the view on alignment.

This dimension consists of 7 attributes. Comparing the questionnaire I’ve used with Luftman (2000), one dimension has been changed. Or, in fact, one has been replaced by another one.

The first two attributes are about participation of business and IT in the strategic planning of business and strategic planning of IT. If these processes are isolated, you cannot expect alignment to be mature. The more integrated they are, the better the alignment maturity will be.

The third (original) attribute was about the reporting structure of the CIO. He should report to the CEO to enhance alignment. As said, this attribute didn’t appear in the survey. The new attribute is about the ability of the IT organization to react/resond quickly to changing business needs.

The fourth attribute relates to the way the IT organization is seen, how IT is budgetted. Is IT seen as a cost center, an investment center or even better, a profit center.

The following, fifth, attribute is about how IT investment decisions are made. The more IT investments are seen as value driver, the better it is. The last two attributes are related to this. Number six is about the usage of steering committees. Does your company use steeringcommittees or not, and are the formal and regular or not. The last attribute has to do with the way projects are prioritized. It should be clear by now, that mature alignment consists of a shared prioritization process by business and IT.

As I mentioned earlier, IT Governance, is a topic in itself. Methodologies are provided by several authors and institutions. I will come back to this topic later on.

Reference

Luftman, Jerry: Assessing Business-IT Alignment Maturity, Communications of AIS, Volume 4, Article 14, December 2000

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Last week I found a report which contains some interesting results, and is quite recognizable in my daily practice. It presents the results of a survey under CIOs and CFOs on the effects of the crisis on the way companies manage their IT. The study is done by Vlerick Leuven Gent Management School and Deloitte.

They distilled four main engagement themes which stimulate a more effective kind of engagement:

  1. Bonding at the top
  2. Look for benefits
  3. Serve professionally
  4. Engage respectfully

Bonding at the top

Engagement requires more than one or two visits of the CIO to the companies management team with an overview of next year’s IT budget. What is required, is working side-by-side. The purpose of the engagement remains the same. Setting the right expectations, specifying rules for allocation of resources to fulfill these expectations, and defining a framework to verify the performance. Informal engagement channels are as important as formal channels. As a CIO in the study said: “It would be suicide to go to the executive committee without having worked everything out in advance”, and “We are not making their choices. We guide them (the business) with a roadmap, to have an influence on the order of things, to show interdependencies.” The usage of roadmaps and architecture appeared to be fruitful in discussing scenario’s.

Look for benefits

Especially in a crisis, it’s more accepted that business benefits up-front get challenged. IT can and have to take their role in this. An important mechanism here are ‘post-project reviews’, as we have seen earlier in the work of Fonstad on Engagement mechanisms (see former post).

Serve professionally

To get on speaking terms, IT must perform and deliver. Operational excellence and knowing the ‘cost-to-serve’. This will provide IT with excellent input to start the dialogue with the business and to create engagement. Also important are risks and riskmanagement. “Do not hide risks, make them visible” as one CIO pointed out. Put risks on the radar, before being able to manage them properly. Mitigate risks by avoiding big, long projects. Maximize into six-month (or even better three) projects. Otherwise, you can get trapped, due to unforeseeable challenges.

Engage respectfully

What is needed, is a culture in which business and IT allow eachother to intervene. Talk about execution implications of strategic options. And, this is needed throughout the organisation, not only at C-level. Liaison-roles are mentioned as very important (which was also one of Fonstad’s conclusions). This can take the form of business-analysts or IT account managers, but more important, social skills are required. In places where strategy and operations as well as business and IT meet, people should operate who are able to “sit with their peers and show the ability to listen, learn and influence”.

Two other fundamental trends are also pointed out in the survey. Business IT Fusion is seen as upcoming. The second trend is the fact that IT users are becoming more and more IT savvy. As a result, they expect more and more control on how their money us spend. This puts an extra challenge on IT to perform and deliver, and to approach users in an appropiate way.

 

References

Viaene, Stijn, Jolyon, Olivier, Hertogh, Steven de: Engaging in turbulent times; Direction setting for business and IT alignment, Vlerick Leuven Gent Management School and Deloitte Belgium, October 2009.