Business Operating Model of IT (Part 2)

Wednesday, January 20, 2010 |

In the last post of 2009, I asked business leaders how they can 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. Several of them replied in private, so I'll paraphrase these conversations (along with some very interesting tweets) in this post. In today's world of Information Technology, the question of Business/IT Alignment seems to be asked by lines of business struggling to understand optimal use of technology while, at the same time, the IT departments struggling to justify necessary budget levels, seem obsessed by the issue. In reality, it takes two to tango. Perhaps, if we start with a presumption that IT does indeed have a business model that is sufficiently differentiated from a line of business operating model, perhaps we can shine a bit more light on the subject.
In "Enterprise Architecture as Strategy", Jeanne Ross et al lay out the notion of Business Operating Model. This is not new to regular readers of this blog - we've been exploring this concept and its implications for quite a while! They also provide the four common models - Diversified, Unified, Replicated, and Coordinated. They then provide a set of rough Business/Technology alignment constraints with what they call "Enterprise Architecture States." What's interesting to note is that Business Operating Model types can be applied to the IT Department as well as the business under which they operate. We can see these operating model types in IT Departments regardless of size, type, and vertical. For instance, in a diversified model, separate IT departments will run separate networks, separate mail servers, separate shared drives, separate everything. And yet, if Enterprise Architecture States can be properly applied in this context, it suggests that IT Business Operating Model can be assessed and assured via these states just like any other line of business Operating Model.


As I noted in my last post, our capability models illustrate that there are two inherently competing business models within IT - run the lights (don't rock the boat) and technology as competitive advantage (invent new boats or move the boat around). I see this conflict in the formation and dissolution of Enterprise Architecture, Portfolio Management, Business Architecture and other efforts that collectively define the "Office of the CIO" - a regular occurrence in most large organizations. Some of this is certainly due to a dearth of qualified resources, an issue that several groups (e.g. CAEAP, PMI) are trying to address. However, most of these organizational changes occur within technology groups. So perhaps a lot of this upheaval is due to the inherent conflict between the “run the lights” and “technology as competitive advantage” perspectives? Regardless of root cause, this internal IT fracture regularly contributes to IT/Business misalignment rather than alignment.

Another source of IT organization instability comes from a lack of segregation of duties, a violation of one of the enduring models for organizational stability. A technology organization responsible for both perspectives, governance and execution, will be inherently unstable, and therefore unable to sustainably align with the Business, because the priorities are not just competing - they are polar opposites. This point has not gone unnoticed by others. Chris Curran's concept of IT Czar that sits outside of IT is just the latest in this chain of thought. The flurry of thought activity around Running IT as a Line of Business (RITLAB here, here, and here) on both sides of the debate is also contributing to the conversation. But while the technology management thought leaders argue about the concept, here's the reality on the ground: as our Technology Investment Management practice has evolved, several new engagements follow the model of our technology investment managers reporting directly to the business leaders responsible for profit and loss. Besides being good business practice for our clients, this seems to strike the right organizational alignment cord with my risk management experience: oversight is rarely effective when those who are overseen are conducting it.
AAB

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