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Operational Efficiency

Lessons from the Old West

By Chris Curran and Jim Quick, Diamond Management and Technology Consultants

How IT Can Tame the Cowboys Who Undermine Cost Control The leader of the centralized IT function in a large, multibusiness enterprise has a lot in common with the sheriff in an Old West frontier town. They both bring law and order to an environment in which most folks would rather call their own shots—at least until something goes wrong and they all look to the "sheriff" to fix things.

It takes a lot to tame out-of-control cowboys, whether they're shooting up the town or spending on IT like there's no tomorrow. But in broad terms we believe that three imperatives can bring order to the chaos:

  • A set of laws that everyone understands
  • The right level of enforcement authority
  • A means of measuring performance

Enterprise Architecture: Laws That Everyone Understands

How often do business leaders and IT leaders disagree on the implementation of transformational business strategies? A sound enterprise architecture (EA) describes the entire organization in terms and views that are mutually agreed upon by both business executives and technologists within the organization. EA can be the broker between the business and IT. It provides the benefit of knowing why an enterprise needs to build something, what to build, when to build it, and how to build it.

With an enterprise architecture in place, the following questions intersect at all levels of business strategy, IT leadership, and technical staff:

  • How can the business innovate?
  • How quickly can the business implement technology-based innovations?
  • Has IT done this before?
  • How can IT help ensure innovations are developed correctly?
  • What does IT use to build it?

Enterprise architecture helps the enterprise manage IT complexity and supports investment decisions within the IT portfolio management discipline. It can help an enterprise to:

  • Ensure architectural alignment with business goals and across enterprise initiatives
  • Realize savings through optimal usage of the organization's architecture
  • Maintain and track the long-term health of the architecture and the quality standards that are applied across enterprise initiatives

IT Portfolio Management: A Means of Measuring Performance

Broadly speaking, IT portfolio management measures, controls, and improves the return on (while minimizing the risk of) individual and portfolio IT investments. It's similar to the way a portfolio manager balances risk and return of various financial instruments for an investor group. IT portfolio management uses processes and tools to analyze and report on the enterprise IT investments to both IT and business executives, balancing the risk and return on investment of all things IT:

  • Fixed IT assets, such as infrastructure
  • Business and IT applications
  • Internal and external human capital
  • Maintenance costs versus discretionary spending trends
  • Project information and tracking
  • Contractual information

Through intelligent information definition and analytics, the IT portfolio management function in a large enterprise provides the information required to manage IT spending to meet business objectives. Whether it be a cost-containment year for the enterprise or a time to focus on growth, portfolio management allows IT to stay on pace with corporate objectives.

IT Governance: The Tools of Enforcement

Large multibusiness enterprises are vast and complex. They require many decision makers to operate the business and IT. It is inevitable that decisions in one part of the organization will cross boundaries and cause conflicts for other decision makers. An IT governance model provides the framework for addressing and reconciling issues before they become crises.

  • What IT standards and policies are mandated across the enterprise?
  • What decisions need to be made collectively and which can be delegated elsewhere in the organization?
  • Who is authorized to make specific decisions?
  • Who implements each decision?
  • How is each decision implemented?

The following are examples of the issues that should be documented within an IT governance model:

  • Mandates: Sarbanes-Oxley, audit principles, corporate ethics and values, regulatory requirements
  • Decision types: IT principles, IT infrastructure, IT investment, and prioritization
  • Decision makers: Chief operating officer, vice president of architecture, chief information officer, vice president of infrastructure
  • Implementation teams: infrastructure, application development, IT portfolio management office, architecture
  • Implementation methods: project management methodology, enterprise architecture, steering committee review

Research—most notably that conducted by the Center for Information Systems Research (CISR) at the Massachusetts Institute of Technology—suggests that IT should apply a governance model to most decisions. It is important to note that different decisions likely require different styles of decision making. CISR documented a number of different archetypes, including business monarchy, IT monarchy, federal, IT duopoly, feudal, and anarchy. These archetypes mapped across major IT decisions provide a useful decision-making matrix.

In summary, critical decision making is an important facet to spending IT dollars appropriately through separation of duties, assignment of decision-making power, and enterprise decision-making styles.

What does this really mean to the business? Just as the frontier sheriff needed respect and support to a tame a town, IT leadership in today's large enterprise needs to prove itself to the rest of the business. In our experience the best way to earn that respect is to structure and run IT as a business that spends its money wisely for the benefit of the business today and tomorrow. By implementing these three processes, IT can provide:

  • A forward-looking architecture that facilitates nimble IT solutions to new and complex business changes
  • Transparency into IT spending and the ability to provide a true view into coordinated business and technology risk/value trade-off decisions
  • A structured approach to making critical enterprise decisions in a timely manner

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