By Doug Morrison, Director Business Performance Management
Many businesses today are faced with upgrading legacy technology and systems, while reducing risk and strategically aligning IT to business needs. Not so long ago, it was business as usual behavior to run IT as in a silo without regard to business challenges. Today, IT departments should be run as a utility, producing a monthly statement of delivered value and cost.
With limited resources and budgets, companies need a way to improve project intake, supply and demand, and delivery processes. IT needs a clear way to show its value to management and how it is meeting its internal customers’ expectations. By including the line of business (LOB) and decision makers upfront, managing expectations and tracking where time is spent, companies can begin to better align deliverables and priorities.
Running IT like a utility requires LOB owners to receive a clear statement of the total IT costs per project. As a result, the business can better appreciate where they are making IT investments. An IT Cost Statement also helps prioritize which projects are "must have" vs. which are "nice to have." The beauty part is that this doesn't add much additional work to implement, because it is an automated system. In years past, the backend systems of IT weren't cost aware. Today, project costing is a big part of delivering a solution. Companies need to understand how much an average help desk ticket costs. That is a powerful tool both for containing costs and becoming more efficient.
Sometimes, however, it's easy to get sidetracked when you are using something that is "free." No software, process or strategy is ever free, there are always associated costs. Many companies use what I call the "peanut butter method" - they spread costs among various departments and prorate them based on volume of demand. The peanut butter method tends to mask costs, which results in management not understanding the value of the individual services provided.
However, by using the "utility" model, C-level executives can get a handle on costs and see the value IT delivers in detail on, ideally, a single page: "This month this is what we did for you. We closed x change requests, and finished this enhancement request." There is a very powerful, positive effect on how such communication is perceived. IT is seen as a value center, a technical enabler.
Producing a monthly statement of work changes the conversation in many ways. For example, when a business sees how much backup and recovery costs are, management becomes more discerning about what applications and software are required. When costs are spread out, people become less responsible with their spending and may ask for more services than are really needed. We help people be more discerning about what they need and less wasteful with their companies' money by providing a way for IT to track and share the true cost of technology usage. It also lets businesses witness the many hidden ways that IT delivers business success.
Another benefit is that by delineating IT's roles and projects, low-level projects that are "keeping the lights on" are discovered. Technologists don't want to waste their time and talent doing busy work, and companies don't want to waste their investment either. IT people embrace the utility model, because it tends to free them from maintenance work. For instance, the chore of nightly backup is not a great use of time and it is demoralizing. IT wants to work on innovative projects that increase competitiveness.
Like all transformative projects, the C-level must buy-in, and, typically, the CIO is the driver. They see this program as a win-win for their companies: It saves money while providing more innovation.
The pushback comes from business units that are used to IT providing an open checkbook. Now, they must prioritize and show how services are being used. No longer will IT provide solutions to the business without a real need. Instead, IT works with business personnel on specific tasks that directly impact the bottom line. Business people offer process expertise, and IT provides technical expertise, creating a successful, efficient synergy as well as accountability.
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