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

JoMax Consulting Copyright ©2009 All Rights Reserved.

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Setting IT Priorities in a Difficult Economy

JoMax Consulting Inc.

Staying consistent with a theme, I wanted to continue to focus on setting priorities and identifying the right IT projects in an IT organization. Obviously, nothing is the same as it was 18 months ago. So, it remains a critical element in IT departments in every company to re-evaluate IT projects and more importantly, recognize the old methods and practices are no longer applicable to selecting and executing IT initiatives. In this article, I will describe the key components in their correct order, which metrics IT projects need to include and finally, why communication in this economy and tightening market is an all or nothing proposition.

Critical IT Priorities

Running an IT department is like reading the minds of all the stakeholders and understanding what are the hot buttons of the company strategy. There are several key items that require the attention of IT management that occurs on a regular basis. The top job of every manager, as well as IT, is to keep the company management free of legal problems. In keeping with that thought, there are several other areas that require attention specifically in HR and HR reporting, Subpoenas issued by law enforcement and other 3 letter acronyms, and Audit compliance whether it is SOX or financial reporting. Each of these legal issues carries a far bigger penalty to the senior management than a project not hitting a delivery date. These projects require resources and oversight to ensure the results support the overall health of the company.

The second sets of priorities are related to the security and availability of the computing environment. Without a reliable system, the company suffers. The entire technical stack of components including network, servers, middleware, apps and tools must be operational the majority of the time. System outages must be the exception and be managed such that it reduces the risk exposure to the internal customers. I will talk in more detail about the collection and use of metrics in another section, but the base IT operations need to have qualitative measures to demonstrate the effectiveness of the IT policies and processes that maintain an effective computing system. The protection of information within the applications along with the email and other data sets are the responsibility of IT. Recent news headlines have been filled with references of several companies being so lax in their protection of data, that hackers have stolen millions of customers’ credit and health information. Depending on your industry, some networks are more secure than others, but in the end, no one likes their data on the internet for all to see. HR and HR reporting also include legal reporting issues such as EEOC, AA, and others. The missed reporting has financial implications to the company in the form of fines and other penalties. The arrival of a state or federal subpoena at the IT department takes stress to a new level. Communication here is your best approach. Besides satisfying all requirements, it is vital that the right executives are included in the discussion. The attorneys on staff are also very helpful in these situations and should be consulted before anything is processed. The final legal situation in setting priorities is the audits. Depending on the company status as a public or private enterprise that have outstanding debt that is publicly traded, Sarbanes – Oxley or SOX audits are required. There are more legal requirements that come up during the course of a career, but be forewarned the first priority of any manager in IT is to keep the company and its leadership protected.

System availability and the reliability of the systems, network and applications is second on the top list of IT priorities. If the systems are not online, then the business can not perform the necessary actions to sell product and invoice to generate revenue. One place never to be caught in is between the VP of finance and the month end, quarter end or worse, yearly end close! By setting clear expectations around availability, operational metrics become tools to establish a good reputation and the reputation of the IT team as a whole. So legal first, protection of information assets next, then the overall availability of the system, network and servers comes in a close 3rd.

Customer facing applications either web based or client server is next on the list. This seems to be self evident, but it is not always obvious. As web applications become the standard in customer interfaces to the company, the system connection becomes a mission critical application. If the customer has difficulty finding, ordering, or purchasing the company products, frustrated customers will find another source and stop being a customer. Going back to the protection of the company, losing customers is not protecting the company.

The true IT projects that make the list are directly related to the payback and alignment to the overall company strategy and direction. The heavy capital projects that require many years of work and a boatload of money will run into trouble justifying the project unless it has a clear reduction of people, or replaces a system that reduces the dependency of a legacy application, or most likely, eliminates cost of other systems or maintenance. Return On Investment, ROI, becomes a key measure of the likelihood of putting a project on the list. The higher the ROI, the more likely it is to satisfy the financial approvers. A 15% ROI is a good start to consider the project, the higher the better.

Red Flags

The red flags go up when a project has little business sponsorship and is in direct conflict with the company direction. Pet projects, unapproved projects, and projects that require a higher upfront investment are the projects that draw much more attention from those that might be more critical to IT projects. Consider the effect of cash flow and the timing of payments to consultants and other vendors and suppliers that might have a negative impact on financial reporting. Most companies that I have dealt with have agreed to delay the payment until after the month end close or financial event.

Metrics and Measures

When systems go down, the impact to the user community can be devastating. The loss of work or the impending deadline to get something to a boss is always looming over an outage that seems very short, but none the less, has made a customer dissatisfied. The creation and review of metrics offers several benefits to a company and IT department. First, it broadcasts to the company that IT is aligned with the business and has a good appreciation of the impact an outage to the deliverables, efficiency and productivity of the company. Below are some metrics that were collected and presented every day at 8:30 am for management review and comment.

By establishing daily metrics that accurately describe the computing environment, the user community can build realistic expectations as to how often the system is up and available. In the case of the metrics above, every minute was counted and applied to the measures for reporting purposes. This level of detail is generally not expected from the senior management team, but was important to show IT understood the systems and networks that were important in running the company.

Project Planning in Difficult Times

This could be a topic all by itself, but I wanted to share just a few ideas as to what types of project issues take a bigger role in this type of economy. For projects that are approved, there will be a bigger demand on the IT team and project team to show why the project was selected in the first place, so metrics similar to what I showed previously need to be incorporated into the communication plan. The milestones and project gateways must be managed to determine any risk to the business or project as early as possible. Most project plans include many tasks that are dependant on other tasks and resources. One area that is often overlooked is the unplanned events such as software bugs, and difficulty in converting data. I have been involved with over 85 ERP implementations and the data shows each issue with the software can add up to 14 days to the project plan. If the System Integration testing is scheduled for 2 weeks, then finding a problem during that stage creates a critical path issue that will delay the project. Even with identifying a reserve, most software / application projects have more than one issue.

The status report and weekly meetings help shed light on problems, but a clear and broad communication plan is most effective in dealing with problems and risk.

Conclusion

The good news, IT can deliver value to the business even in the most difficult economy. There are two main areas that companies can cut cost to save enough money to have an impact on the financials of the company. First is capital and the second is people. The reduction of headcount obviously makes the project resources less and the need to communicate even more important. Once the metrics are established and are being collected, it is critical to document the results on an ongoing basis. By documenting the priorities within IT, other departments have an opportunity to offer insight into their needs and have a discussion about changing what is considered a good project. IT does not set the priorities of a company, each of the departments such as Finance, HR, Engineering, and Business Development are responsible for deciding what is to be addressed to make the company more effective and competitive. In order to have an IT department that adds competitive advantage, there must be a partnership with the other departments to set the priorities.

Protecting your IT Assets in a Down Market

JoMax Consulting May 5, 2009 http://www.jomaxconsulting.com/ In these difficult times every company, especially small and medium size companies need to optimize their IT investments. The JoMax Consulting company provides critical technical resources that compliment your in house Information Technology team. We specialize in Small to Midsize companies that do not have the talent to drive the Strategic Planning, CIO Services, and Project Management required in these difficult economic times. JoMax Consulting has experience in transforming business through successful execution of ERP implementations, development of successful Business Intelligence solutions and Data Integration and Mining. JoMax Consulting company will assist you by providing seasoned expertise in assessments, process analysis in Software Development Life Cycle (SDLC), Change Management, Project Management and improvement services, while offering unique requirements for your company. Our services deliver maximum return on investment. Protecting Your IT Investment in a Down Market Jim Crammer said it best, "cash is king" referring to companies and individuals that have cash on hand to spend in this weakened economy. There are several key considerations in protecting your IT investment in a down market. The business planning process takes on new meaning when the spending of IT, which is usually higher than most other departments, is reduced and the headcount is cut or the payroll expenses are eliminated. As much as people are the most valuable asset, they are also the most expensive. Business IT Planning Now is the time to rethink the IT plan and highlight the key priorities that will facilitate the growth of the company as the economy recovers. There is a related process chain of issues that left unattended causes disruption and a gap in the company's operational processes. The planning phase is connected to visibility into the company key suppliers, inventories, cost and most importantly, your customers and the effect of the down turn on their needs and constraints. Timing Once the planning is revisited, the visibility into the top priorities assists in determining the best places for reductions or further investment without killing the key projects or people that would have had a great result. Timing of the investment is critical as well. To spend or not to spend; it isn't mutually exclusive. The timing of any purchase must be weighed against cash flow. There are good times to buy and to not buy and delaying spending money. At the end of a month, quarter or year, all payments should be held to reserve the cash to close the books. Most suppliers will work with you to delay payment until the first of the next month so not to have a negative impact on the close. Also, the purchase should be timed to align with the month end, quarter or year end of the vendors so to gain the best discount the vendor can offer. The Best Way to Protect Yourself The best protection of your IT investment is to make sure the systems are well maintained and secure. As the IT staff is reduced, the activities that were completed regularly become more sporadic, and in fact, some cease to be done simply because the task was never documented and no one else knows how to do it. Make sure all processes and procedures are well documented so even if an outside consultant is brought in on a short term assignment, the overall operational effectiveness of the IT assets will not be diminished. Conclusion These are uncertain times! The propensity to sit and wait for the economy to improve is outweighed by the risk of your critical systems and life lines to your business cut off or your customers swept away by competitors who have used technology to their advantage. Planning, understanding and evaluating the ROI and impact of IT projects shines a bright light on what is important to your business growth and in some cases the survival of the company. The upside to the current economic situation is the abundance of IT talent available at a reasonable rate combined with vendors and suppliers willing to offer deep discounts for companies with cash to spend. By smartly investing in IT today, your company will be poised to ride the wave of recovery and will be better prepared to compete in a new more competitive market. Our Mission is to understand and deliver expertise at a reasonable price with exceptional results. JoMax Consulting has over 25 years experience in multiple industries such as Manufacturing, Aerospace and Defense, Pharmaceuticals, Chemicals, and Services. vince.benz@jomaxconsulting.com http://www.jomaxconsulting.com/ JoMax Consulting Copyright ©2009 All Rights Reserved.