Charles A. Araujo, Jr.

Are You an Operator or an Innovator?

Following is an article I originally published on castlepointe.com in June of 2005.  It is still very much relevant today and I thought it was worthy of reprinting.

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Is your IT organization more like a building architect or a building maintenance crew? Both are very important. Without the architect, nothing gets built in the first place. But without the maintenance crew, the great building will begin falling apart almost as soon as it is built.

Most IT organizations are maintenance crews. We spend the vast majority of our time "keeping the lights on." We work very hard at maintaining and extending our systems and applications - and it takes a lot of very smart people a lot of time to do it.

Finding Balance
But to be truly effective, IT organizations must live in both realms. They need to be part maintenance crew and part architect. In a recent study, 72% of respondents, including 60% of IT management, felt that the best ideas for leveraging technology to a business advantage come from groups other than IT! Sixty percent of IT management felt this!

There is no organization better equipped to "connect the dots" between business needs and technology that can meet those needs than IT. But too often, IT organizations allow themselves to be relegated to the role of maintenance crew.

There are really two reasons for this. First, keeping systems and applications running efficiently is no easy task in and of itself. Many IT organizations feel that to do it well is enough. Second, moving into a role of "technology innovator" requires a new, strategic perspective and political element that IT executives don't always find tasteful. But the IT organization that reliquinshes the role of technology innovator to other groups in the company leaves itself open to strategic irrelevance, never-ending budget battles and the ever present specter of outsourcing.

Making the Transition
Ironically enough, the first step to fully embracing an "innovators role" is to become highly efficient at your "operators role." The goal should be to require no more than 70% of your resources (both financial and human) to be consumed maintaining operations - leaving at least 30% available for innovative initiatives. (Many organizations have been able to reduce operational costs to as little as 45-65% of their IT budget!)

The first step may be the most mundane - understand exactly what you do. Document, organize, validate and improve every process, policy and procedure that you use to manage your day-to-day operations. You will inevitably find redundancies and inefficiencies. Eliminate them and roll those resources into innovative functions.

The next step is to stabilize your systems. Ensure the highest level of redundancy and plan your reactions to outages. How much of your team's time is presently spent putting out fires? What would happen if you could instead utilize those resources on your "innovative initiatives"?

The final step is to start communicating everything that IT does in business terms. Forget "5 9's reliability" - that's IT speak. Start talking about the reliability of your organization's financial transactions. Begin building SLA's that tie IT's performance to the ability of the business units to do their job. Understand what your "customers" care about when they assess IT's performance and then measure yourself against those metrics.

Becoming an Innovator
Once you have streamlined and refined your operations and begin to communicate to your business unit "customers" in their terms, you will begin to be seen as your organization's technology innovator. They will turn to you during the early stages of strategic business planning and will rely on you to provide strategic business advantage through the effective use of technology. And after you have proven that you can deliver sustained business value to the organization, you will no longer be viewed as merely the maintenance crew - a mere afterthought to business operations. You will have a seat at the table, your strategic relevance will be understood and you will find much greater budget support for all of your efforts.

But perhaps most importantly, you will be contributing real value to your organization and you and your team will have a great time helping to lead your organization into a new and brighter future.

Must Read Books for IT Leaders

The Society for Information Managemet has released their annual list of 30 Top Books for IT Leaders.  One of the more interesting points is that it doesn't include any books on IT itself.  This goes to the point that has been made rececently by Gary Hamel in his new book, 'The Future of Management', that IT leaders should be investing more in management innovation than in technology innovation.  So, here's the list - and in case anyone is thinking about a gift for me, I've already read, books #10 & #18 (2 down, 28 to go!):

http://www.cioinsight.com/article2/0,1540,2171829,00.asp

The Abolition of the IT Allocation

There's an old saying that goes something like this,

"Don't tell me what you value.  Let me see how you spend your money and I'll tell you what you value."

It's a very true observation that we can apply to IT and its relationship to the business.  In most businesses, IT is 'funded' as a cost center through some form of a cost allocation.  So for most companies, a quick look at their budget will tell you how they value IT - as a non-strategic, ill understood cost line item.

In part, this is because this is the way that IT has always wanted it.  Just take all of those costs, bundle them together and spread them across the enterprise.  It was easy and expedient, but hopelessly flawed.

The concept of an IT allocation has two primary flaws:

1. It disconnects the payment from the service being provided
2. It disconnects the service from the value being provided

In the first case, the budget allocation process disconnects the payment for services from the recipient of those services.  In most cases, the person "paying the bill" has only a fleeting understanding of what those payments or costs represent.  While they may be ultimately responsible, they are likely to be at the top of the food chain and therefore have little direct interaction with the services they are paying for.  It's like if I'm providing services to Joe, but Sue is paying the bill.  Because allocated costs get bundled together at such a high level, they become disconnected from the services they represent and that will always create an environment in which those costs are not understood and are undervalued.

In the second case, allocations completely disconnect the service being provided from the value being received by the recipient of the service.  If IT was a restaurant, using the allocation model makes IT the "All You Can Eat Buffet."  And at the "All You Can Eat Buffet" the quality is generally sub par and your customers are driven to take everything they can because they're paying the same no matter what.  The 'buffet' of services become commoditized with all services having the same cost basis irrespective of the value they may provide to the user of the service.

These two flaws are a major cause of the 'dysfunction' often found in the relationship between IT and the business.  They lead to the feelings often expressed in IT shops that IT doesn't get the respect it deserves, that IT is being commoditized and that IT has to fight tooth and nail for every budget dollar.  So, why doesn't it change?

The challenge is that in order to fix this, IT has to fundamentally change how it does business.  It needs to take a service oriented approach to its operations and it must develop financial rigor around everything it does.  Doing so will enable IT to calculate, defend and 'charge' specific costs for specific services - which are described and measured in terms the business understands.  (This is the Service Catalog concept as presented in ITIL.)

This change isn't easy.  It means that every person in IT must focus as much on finance as they do on technology.  It means that everything that IT does must be measured in dollars.  And it will require significant financial and process rigor to make it work.  But the IT shop that can successfully complete this transformation will be able to abolish the IT allocation model forever and deliver value-driven services to its customers.