Completing the IT Value Equation

In the past 15 years, business executives, consultants and IT trade magazines have hammered IT executives with a crystal-clear mandate: align IT with the business to deliver value.

That being said, most CIOs understand their mission. But the majority of IT departments still do not fully measure or understand how to manage IT value. According to the META Group, 70 percent of IT organizations are still perceived as cost centers rather than value centers, and 52 percent of CEOs question the value their IT departments deliver.

Several miscalculations typically prevent companies from realizing and maximizing IT value — and, by extension, hinder the CIO's ascent to strategic partner, and expose many IT departments to external competition. First, the notion of alignment from an IT-project perspective has been oversold to the point that it masks the need to achieve an accurate view of an IT department's complete workload. The majority of work performed by an IT department — as much as three-quarters of the function's activities — resides outside the scope of projects. Responding to the "alignment" mandate with a projects-only approach will never deliver genuine alignment because doing so neglects the strategic importance of IT systems and the need to manage "lights-on" IT activities in an efficient manner.

Second, more than 80 percent of all IT departments fail to manage IT employees with the same rigor that IT projects are managed. If employee performance is not tied to business goals, there is little chance that the systems, projects and non-project activities IT employees support will be aligned with business goals.

And third, too few IT departments view line of business clients like a customer consuming their services. They fail to measure satisfaction accurately or consistently. When CIOs don't track those numbers, it becomes difficult to keep score of the overall value their departments contribute to the business.

Balancing the Three Jobs of IT

The META Group often references one of the IT department's greatest challenges as the "Three Jobs Problem." The IT department's work can be segmented into three areas: structured projects, "lights-on" process and systems-oriented maintenance activities, and responses to customer requests.

As little as 25 percent of the typical IT department's workload consists of projects, according to The META Group. This is a crucial but understandably difficult bit of information for CIOs to accept. Projects such as ERP implementations and Y2K compliance initiatives once qualified as bet-the-company endeavors. And the perception of large IT projects as a security blanket ("We're spending all this money on IT, so we must be important.") lingers from the bygone era of "buy-or-die" IT management. CIOs who cling to that view turn a blind eye to the majority of their department's workload — the IT systems that have established permanent residence in all corners of the organization.

Unlike five years ago, today's customers rely more on the performance of key business systems (such as ERP, PSA, e-commerce packages, and so forth) than they do on the management of new IT projects. To deliver value to their customers, IT departments must manage the company's portfolio of key business systems in the same way they should manage a portfolio of IT projects. Those systems should be monitored to determine if appropriate IT resources are supporting them. And the management of IT systems should also have the flexibility to be client-focused.

Customer Satisfaction is Key

The most successful IT departments function as internal professional services organizations — their technology offerings and services support, and in some cases drive, the strategic objectives of the business. The most successful professional services firms have mastered the process of delivering, managing, and measuring client satisfaction.

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