When you're chairman and CEO of a $US4 billion software company, you talk to a lot of executives about information technology and business. Charles Wang, head honcho at New York-based Computer Associates International, has parlayed that experience into a book, Techno Vision II. Wang says the emergence of the Internet spurred him to update Techno Vision, published in 1994.
The goal of Techno Vision II is to identify and eliminate the disconnection between business executives and IS managers. The following excerpt is from Chapter 9, "Foundations for Realignment".
For at least the last 10 years, senior business and information systems executives have struggled with how to bring information technology and business into closer alignment. As business needs multiplied and the gap widened between the solutions IT offered and the business challenges facing managers, enlightened representatives of both camps redoubled their commitment. The ideal is an alignment strategy that will optimise the provision of IT and service to the user community.
The focus of IS has changed from automating internal (back-office) processes to enabling multifaceted mechanisms for directly delivering products or services to the customer. The increased complexity of these systems is compounded by the fact that many are used for competitive advantage, giving them life-or-death urgency. The central argument now becomes how to organise IT to achieve higher levels of competitive advantage.
With today's shorter product cycles, the old IT culture leads inevitably to large development backlogs and missed delivery targets. Corporate efforts to hold down total IT costs are also symptomatic of the old mentality and can be problematic, given strenuous business unit competition for available, sometimes even scarce, IT resources.
Notwithstanding a greater melding of IT and business units, alignment efforts must maintain professional IT work and systems standards and allow IT professionals practical career options.
If you can offer opportunity and technology together, you have a better chance of identifying competitive-advantage systems.
Companies that have internalised these new realities have substantially eliminated the disconnect. These companies have the ability to access and process information on global competitive intelligence, new product information, research and development, market trends and environmental and regulatory impacts. Having done so, they can act quickly and then move on to the next challenge. Eliminating the disconnect removes many of the obstacles that paralyse organisations.
Many methods for aligning IT resources and business goals are already in use. I am privileged to visit hundreds of companies every year; my conclusion is that there are as many strategies as there are companies. Every organisation presents a unique set of constraints and opportunities. Yet I have found that a core set of business strategies is common to the most successful companies. I have identified five key strategies that organisations can adopt to eliminate the disconnect. A combination of these methods is probably best, because each is accompanied by risks.
1. Select the right CIO
I am convinced that while most chief executive officers are keen judges of character, most don't have a clue about how to recruit a chief information officer. Two things need to be kept in mind.
First, selecting the chief IT executive is a job a CEO cannot delegate. If you're going to have a CIO as one of your top-echelon managers, if you're committed to having a close working partnership, then you have to select the CIO yourself.
Second, there is one fundamental question you have to ask yourself about each CIO candidate: is this person CEO material? If this key question can be answered affirmatively, there is a good chance for the beginning of a true partnership between the CEO and the CIO.
Too many CEOs still perceive IT as automating manual processes. Until they see it as a tool to be more competitive, they will be tempted to ask their chief financial officers to pick the CIO. Most companies have IT reporting to the financial executive.
The disconnect cannot be eliminated until this practice is retired.
The bottom line is that eliminating the disconnect requires a change of attitude. Both the CEO and CIO have to accept a new outlook. The CEO's responsibility is to learn some technology and open up the decision-making process. The CIO's contract is to accept the role of the businessperson chiefly responsible for making the technology serve the business.
2. Decentralise and disperse IT resourcesMany companies have begun to decentralise or disperse IT resources to better align business and technical objectives. In solving some problems, decentralisation and dispersal introduce others just as troublesome.
"Decentralisation" is a broadly used term. I use it to refer to the process whereby a large, central IT group is broken up and physically placed with the business groups they support, but still report to a central IT unit. Thus, while they are physically decentralised, there is no decentralisation of management authority. While these groups are still managed by IT professionals, the IT resource is brought closer to the business units and their customers. This can only be good for the company.
"Dispersed" IT decentralises management responsibility as well as physically relocating people. The IT professionals generally report to managers in the business departments and workgroups they serve. The result can be a very tight integration of technology and business applications.
There are a number of very problematic downsides to decentralisation. In many cases, it does not address alignment, because systems are still developed according to traditional methodologies. Instead of one big disconnect, the company has created a number of smaller disconnects. Another downside is enforcing discipline and standards among the autonomous business units. For all its limitations, the centralised data processing function did develop an impressive record for maintaining data integrity, data security, the enforcement of standards and backup.
Decentralised IT units establish their own standards and procedures, often without regard to the rest of the enterprise. Without a strong CIO, communication between the decentralised units breaks down. Turnover in IT can also become more of a problem in decentralised units. IT groups relocated to business units are some- times ostracised and bypassed by increasingly sophisticated end users.
Consequently, this kind of reorganisation, without explicit attention to the culture, actually worsens the alignment situation.
Providing practical career options for decentralised IT professionals may be the most difficult issue. In some decentralised organisations, many IT professionals feel lost in the business units. Decentralisation limits or terminates as many technical careers as it forges. Technical professionals know this. As a result, turnover can be high in the first few months following decentralisation. On the other hand, some technical professionals really learn the business and make a home for themselves on the business side.
The key items for successful dispersion involve managing the migration to a business culture, which includes preparing both the IT people and their new business unit management. When preparation is not adequate, business unit management sometimes asks central IT to "Take these people back!"
3. Transform IT into a profit centre
Another method for alignment is the conversion of the IT resource into a profit centre. The idea here is to make the service nature of the IT resource explicit. In theory, the IT department has to provide its value to the other business units.
This strategy can, unfortunately, create a new set of contractual walls between IT and the user. But if the contracting process is managed well, user departments are much better off than before, when they were the captive customers of an often indifferent IT centre.
An extension to this approach is to spin off IT as a separate business entity altogether. This sink-or-swim approach can transform inefficient data centres into models of productivity and can even return a profit to the parent company. The downside is that it forces the data centre to focus much more energy on marketing as it pursues business opportunities.
I haven't seen making IT an independent profit centre done well. [Management author and expert] Peter F Drucker regrets coining the term "profit centre". His well-taken point is that in the context of the business isolated from the customer, the very concept of the profit centre is suspicious. "Profit comes only from the outside," he writes. "When the customer returns with a repeat order and his cheque doesn't bounce, then you have a profit centre. Until then you have only cost centres." Spinning off IT accomplishes little unless rigorous commitments to marketing, customer service, quality and other business objectives accompany the spin-off.
4. Advance end-user computing
An emphasis on end-user computing helps align business goals with IT because it puts both decisions into the hands of the people with the most intimate understanding of the business challenges. The benefits are immediate: users get the systems they want because they themselves have built them. Since they are totally invested in the process, the resulting systems have a greater chance of being on target and are more likely to stay on time and on budget.
The principal problem with end-user computing is that end-user groups have not developed the data centre disciplines that result in reliable, secure and robust applications. Systems developed by end users frequently suffer from data security and integrity flaws.
The good news is that emerging system software will help end users prepare applications that are as reliable and maintainable as those developed by professional programmers. The key is to determine what kinds of systems end users can be expected to develop reasonably well, and how best to help them develop those systems. The goal is not to turn end users into programmers. Rather, the goal is to give end users tools they can use to access the information they need more easily. A side benefit is that end users learn more about IT, and the programming staff learns more about business goals.
Success depends on being able to move the IT professional into a consulting role to deal with cleanup and documentation requirements for business-critical systems. In any case, it does not seem likely or desirable that end-user computing can manage large, real-time, host-based operational systems, so it addresses only part of the business unit performance issue.
5. Promote evolution, not revolution
One consequence of the disconnect is an unthinking preference for revolution. I hope you will resist it. I believe it is almost criminal to destroy existing technology simply because something new comes along.
There will always be something new coming along. But it will rarely be in the best interests of your business to abandon what is working well and risk replacing it with something that might work better.
The approach I favour is called "intelligent evolution", or building on what we know. It involves taking the technology that we know works as a foundation, and building on that foundation by adding the new technology.
The most important aspect of this approach is that it respects and lets you leverage the significant investments you have already made in existing technology.
Think evolution, not revolution. Rethink how you can use existing technology, and you may find that you don't need to discard the old after all. Evolution limits risk while enabling the introduction of new technologies integrated with existing systems, so your company can continue to be responsive to the competitive demands of the market.
From Techno Vision II: Every Executive's Guide to Understanding and Mastering Technology and the Internet, by Charles Wang. Copyright 1997 by Computer Associates International. Reprinted by permission of McGraw-Hill Cos. Hardcover, 286 pages; $44.95. ISBN 0-07-068169-4.