The Business of Information Technology (Part 1)

Saturday, December 26, 2009 |

As a difficult 2009 comes to an end and a brighter 2010 dawns, organizations that have weathered the storms must now re-factor more objectives than just short-term survival into their plans. Prior to the tumultuous fall of 2008, one of the more common objectives for Information Technology departments was to "run IT as a business." Many interpretations of this objective exist, but by far the most common and familiar to anyone who spent any time in organizations whose business is non-technology oriented is the following statement:

"We're not in business of technology, we're in business to ... fill in primary business focus here ..."
This mantra has become a standard slogan for IT leaders to show they are in tune with the business imperatives. Business and IT alignment, however, has proven itself to be a challenge that's not easily solved with a slogan. And what if the slogan itself is wrong? After all, it's not common to hear heads of HR or Legal, or any other enabling business unit, to apply this slogan to their focus - as in, "don't worry about the legal ramifications, we're just trying to sell ..." or "don't worry about following standards in preparing our statements..." In every other profession, it is rarely presumed that professional standards can be relaxed if that professional is working for an organization that is not providing those professional services. Information Technology is not quite as mature as law or accounting, but if it's not a profession, then what is it?

As we compile capability maps for various business models and operating models, the cross section of capability maps for Information Technology has a very interesting story to tell. Effective alignment of Business and Technology objectives requires a certain formality of Business and Technology Architectures as organizational scale increases. That formality, in turn, provides a glimpse into basic building blocks of IT. Turns out that the business of IT is to advise their business partners on their technology options (both pro's and con's) and then deliver on the technology options their business partners in a way that does not preclude future business needs from being effectively satisfied. One might summarize the business of IT as a technology advice and delivery organization - directly opposite to the mantra quoted in the beginning of this post.

With several new disruptors to business as usual for technology already here (e.g. Cloud Computing and growth of alternate usage platforms) and on the horizon (e.g. nanotechnology, quantum computing,) business leaders can no longer afford their technology leaders to be anything but a trusted partner. Days of IT as order taker only have been waning since 1990's, but the pace of change and comparative competitive advantage that can be gained with appropriate adoption of new technology paradigms have made it completely obsolete. The question now is not what technology leaders need to do to show value. The real question is how can business leaders be proactive in assuring that their technology leadership is properly aligned and delivering the decision-grade information they need to make the optimal technology investments?

It starts with the first question to ask any prospective CIO or CTO: "What is the business of IT?"

AAB

3 comments:

Bala said...

Brilliant thoughts Aleks!. I couldn't agree more.

As of today, the IT is run as a business, using General Management principles. Pretty much close to managing the balance sheet, not really worried about the business value.

However, I would say, the CEOs, the business leaders are also contributing to the problem. They treat IT as a cost center and challenge them to cut costs rather than deliver value for their competitive advantage. If that is the expectation, What can you expect from IT leadership?

bc cunningham said...

While I would agree that enterprises cannot afford IT to be anything less than a 'trusted partner' of business, I do believe that IT needs to follow the RITLAB (run IT like a business) model. IT needs to demonstrate its contribution to enterprise profitability and to the customer experience. Without these tie-ins, IT is just another cost center, and thus, subject to dicta from the CFO, without regard to long-term impact.

AAB said...

Bala -

Like I always say, it takes two to tango. IT leadership is usually responding to stimuli from their business partners, so their 'normal' predicament is almost expected. The trouble is, instead of striving to understand their internal business model and aligning it to that of the business, most IT leaders bypass this crucial step and simply repeat the mantra of 'we're in business of ...' - which is generally anything but IT.

BC-

I think we're in agreement there, except I'm worried that most people interpret RITLAB as nothing more than financial management that boils down to cost containment. A business-based model would have sales, marketing, strategy/profitability, content management, communications, etc., etc. From what we're seeing in the market, it is to find IT departments that follow RITLAB beyond financial management.

AAB