Running IT as a Business

JoMax Consulting Inc.

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IT Relationships / Organizational Alignment

The disconnect between IT and the other functional business leaders in companies are widening every day due to the misalignment of strategies and lack of communication and business understanding within IT.

There are several layers of relationships that are critical in running an IT department as a business. The obvious one is the relationship internal to the IT staff and understanding the capabilities of the existing staff and the resources internally that can accomplish the projects on hand. The second relationship is the connection to the industry suppliers and vendors who offer added skills and talent that otherwise might be shallow and unable to deliver the specific set of business objectives. The third and most important relationship for IT is the relationship with the other Business leaders in the company. This relationship if successful will drive the strategy and direction of the company.

Application Portfolio / Strategic Alignment

Every company survives day to day by leveraging the information it collects on its Customers, Industry, Competitors, and Internal Processes and Data. The information that supports these activities collectively is referred to as the Application Portfolio. The mix of the different applications that make up the composition of the critical information generally are integrated to add more value in connective systems and maintaining the correct data relationships. Each executive team should understand the systems that are used in the functioning of the business and determine the critical nature of the system and set a risk tolerance to protect the company from a loss of data and valuable competitive information. The strength of the business application portfolio is imperative to executing and aligning the strategic planning processes.

Customer Centric IT

Without understanding the importance of delivering great service to customers and truly taking customer service as a strategy in IT, most business leaders will not have a great opinion of IT and, in the end, will foster an adversarial relationship. The constant struggle within IT is to demonstrate its value to the business leadership. Without focusing on the internal and external customers, IT remains a cost center that should be outsourced. Question: What do you call a company without any customers? An idea. No company can exist without customers, nothing happens. For when IT considers the company employees it supports as customers, the IT strategy can includes wording about IT as a service delivery engine, an enabler creating an expectation that IT understands the business. At a midsize defense company in St.Louis, I was able to eliminate the "helpdesk" and replace that function with Concierge Services. Each employee was considered our highest and most valued customer. Similarly to the company without customers, an IT department without customers is an IT department that does not have a place in the company.

Business Financials

Information Technology is one of the largest budgets in most businesses today. The lack of business acumen and understanding by IT is only offset by the arrogance of IT in the delivery of service. In order to run IT as a business IT must have a complete command of the operations and key business issues and strategies that are important to the company. I have seen some companies include a finance person reporting to the CIO, recommended by the VP of Finance or CFO. To have an organizational alignment between IT and finance is a good start.

There are several elements related to IT / Business Financials. Charge Backs have become an operational necessity to account for IT dollars spent in different departments. The cost to a department budget is directly related to the use of IT resources either by project or allocated cost. The management of operating expense or period cost and the capital budgets are now critical in running IT. The cost of people, training, hardware and software are among the high ticket items that add to the overall cost of IT.

Most IT budgets are being reduced over 5% year after year to allow the company to invest its financial resources in other areas of the business. The capital expenditures must have a realistic ROI to support the spend. The better IT executives can communicate the return on investment, the sooner the company leadership will include the IT input into the strategic planning process. The last element in IT finances is the use of contract resources and consultants. This approach to resource allocation can be beneficial to the company if done correctly, but can be very costly if not done in a way to recover the costs. The pay of consultants is somewhat higher than employees, but if the fringe benefit cost of roughly 40% is included in the rate, then the use of consultants for a project can be controlled based on the time the resource is on the project. When the project ends, the resource goes away, never increasing the SG&A of the company.

IT / Business Empowerment

There has been a real transfer of control in who is driving the technical solutions in companies. Historically, IT has suggested and implemented solutions to problems that may or may not have been on the business radar. According to Gartner, the IT worldwide spending will decline 6% over last year, putting a hold on a lot of technology projects. This reduction in spending changes the IT projects and Priorities. The list of IT projects that are approved are now being proposed by the company leadership with IT developing the service model and customer centric approach to projects and deliver of services. Solving true business challenges is now the mantra, putting IT infrastructure projects at a clear disadvantage due to the nature of the cost and lack of ROI.

More business centric projects will be addressed, whether it includes Payroll systems driven by HR, or Supply Chain systems encouraged by the other departments such as Operations, Manufacturing and Finance departments. IT must articulate the benefit of a solid infrastructure to mitigate company risk, and keep the company's systems up and running. This is the opportunity for senior management to think as a team and decide how best to use technology as a competitive advantage.

Conclusion

There is always good news; and that is IT can deliver value to the business even in the most difficult economy by being part of the business planning. Now is the time for IT leadership to engage in the business and to understand the strategies and direction. The projects should be aligned to what matters in the business such as eliminating cost in processing an order, or eliminating cost in delivering correct information which is accurate, timely and actionable.

By aligning the organization to the business and giving the IT leadership access to the planning and strategy of the company, IT can be better prepared to offer solutions that have a direct impact to the business. The application portfolio can be an important feed into the strategic planning processes. The IT management and staff now have the opportunity to change the model and be customer centric. By treating the company as the customer, service becomes the focus, not technology. The old adage "The customer is always right..." plays a big role here. By offering the highest Service Level Agreement or SLA to its customers, the business financials will also be a key focus in delivering value. The perception of some of the businesses today is that IT is disconnected and unaware what the business does to generate revenue. The overall effectiveness of IT is how it delivers value to the company. It is that value that can take different forms in tools, software, security and, most importantly, Customer Service.

Our Mission is to understand and deliver expertise at a reasonable price with exceptional results. JoMax Consulting has over 85 years experience in multiple industries such as Manufacturing, Aerospace and Defense, Pharmaceuticals, Chemicals and Services. vince.benz@jomaxconsulting.com

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