Managing IT as a Business E-Book

Mark D. Lutchen

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 350

Veröffentlichungsjahr: 2011

Beschreibung

With Managing IT as a Business you'll get practical advice on how to unleash the full potential of this critical function so that companies can derive maximum benefit. It offers a proven plan for bridging the gap between CEOs and CIOs that has, until now, impeded their ability to work together in order to craft objectives, establish budget guidelines, and develop metrics for measuring IT value and success. In short, with this book as a guide, business leaders will learn how to manage IT as they would any other functional business unit.

Leseprobe

Table of Contents

Title Page

Copyright Page

Dedication

Foreword

Acknowledgments

Introduction

THE EVOLUTION OF IT

VIEWING IT AS A BUSINESS UNIT

A TECHNOLOGY VALUE OPTIMIZATION LENS

CHAPTER 1 - Get the CIO on the Executive Team

WHAT IS THE ROLE OF THE NEW CIO?

WHAT SKILLS DOES THE NEW CIO NEED?

WHAT ARE THE NEW CIO’S PRIMARY RESPONSIBILITIES?

WHERE DOES THE NEW CIO RESIDE IN THE ORGANIZATION?

WHAT THE CEO CAN DO TO HELP DEVELOP AND NURTURE THE NEW CIO

CHAPTER 2 - Link IT Strategy to Corporate Strategy

DEVELOPING THE IT STRATEGIC PLAN

WHAT THE CEO CAN DO TO HELP LINK IT STRATEGY TO BUSINESS STRATEGY

CHAPTER 3 - IT Management Is about Relationship Management

PERSON IN THE MIDDLE

BUILDING RELATIONSHIPS ONE AT A TIME

MANAGING OUTSOURCING RELATIONSHIPS

WHAT THE CEO CAN DO TO ENSURE THAT THE CIO IS A MASTER OF RELATIONSHIP MANAGEMENT

CHAPTER 4 - Align the IT Organization Structure with Profitability Drivers

A CIO WHO UNDERSTANDS AND LIVES THE BUSINESS

A FLEXIBLE, NETWORKED, VIRTUAL, AND TEAM-BASED ORGANIZATION

AN AGILE, CAPABLE, ADAPTABLE, AND CHANGE-EMBRACING WORKFORCE

ROLES OF MAJOR IT ORGANIZATION PLAYERS

HOW CAN INFORMATION TECHNOLOGY DESTROY SHAREHOLDER VALUE?

WHAT THE CEO CAN DO TO ENSURE THAT THE IT ORGANIZATION IS ALIGNED WITH THE ...

CHAPTER 5 - Understand the Real IT Spend

BUILD THE IT BUDGET

ANALYZE THE CURRENT SPEND

DETERMINE WHO OWNS AND EXECUTES EACH ITEM OF THE SPEND

MAKE CUTS IN SCOPE OR SERVICE LEVEL IF NECESSARY

FOCUS ON TOTAL AND LIFETIME SPEND

RUTHLESSLY PRIORITIZE DESIRES FOR FUTURE IT

THE BOTTOM LINE IN BUDGETING

WHAT THE CEO CAN DO TO ENSURE THAT IT SPEND IS TRANSPARENT TO ALL PARTIES

CHAPTER 6 - Focus on Outcomes, Not Process

A PHILOSOPHY OF MEASUREMENT

MEASURING THE BUSINESS VALUE OF IT

DIFFERENT METRICS FOR DIFFERENT AUDIENCES

DIFFERENT METRICS FOR DIFFERENT CATEGORIES OF IT INVESTMENTS

THE CIO DASHBOARD

WHAT THE CEO CAN DO TO ENSURE THAT IT PERFORMANCE MEASUREMENT IS INTEGRAL TO IT MANAGEMENT

CHAPTER 7 - Leveraging Investment Cycles and the Power of Standardization

A COST OF DOING BUSINESS

LEASING HELPS MANAGE RAPID TECHNOLOGY CHANGE

OUTSOURCING

DRIVING TOWARD STANDARDIZATION

LEVERAGING THE POWER OF STANDARDIZATION

THREE STEPS TO FULL STANDARDIZATION

THE IMPACT OF STANDARDIZATION

WHAT THE CEO CAN DO TO DISENGAGE IT COSTS FROM THE BUSINESS CYCLE AND TO ...

CHAPTER 8 - Talk about Information Technology and Use IT Appropriately so ...

THE POWER OF COMMUNICATIONS

FROM CAPTIVE TO WILLING USER

COMMUNICATING LIKE BUSINESS LEADERS

THREE WAYS TO GET THE MESSAGE ACROSS

FRAMING THE IT ORGANIZATION MESSAGE

WHAT THE CEO CAN DO TO ENSURE THAT COMMUNICATIONS ARE INTEGRAL TO THE CIO’S ...

CHAPTER 9 - Information Technology Improvement Never Ends

CREATING AN INNOVATIVE ORGANIZATION

BALANCING IT RISKS

DEVELOPING NEW CIOS

CONTROLLING THE PROCESS OF ADDRESSING CHANGE

THE CEO’S ROLE IN SETTING AN IT AGENDA FOR THE TWENTY-FIRST CENTURY

Index

Copyright © 2004 by PricewaterhouseCoopers LLP. PricewaterhouseCoopers refers to the U.S. firm of PricewaterhouseCoopers LLP and the other member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

Lutchen, Mark D.

Managing IT as a business : a survival guide for CEOs / Mark D. Lutchen. p. cm.

Includes index.

ISBN 0-471-47104-6 (cloth)

1. Information technology—Management. 2. Information resources management. I. Title.

HD30.2.L88 2004

004’.068—dc22

2003017893

To my family— You light up my life!

Foreword

On May 22, 2003, CIOs from many of the world’s largest companies convened for the annual MIT CIO Summit. As each CIO spoke, a common theme quickly emerged: CIOs were under unprecedented pressure to deliver measurable productivity benefits. The free-spending days of the late 1990s were over.

There is no question that the current focus on productivity is an essential return to reality. In the past, hundreds of billions of IT dollars have been wasted either because no metrics were used, or, worse, because the wrong metrics were used. Unfortunately, IT productivity has too often been defined by an overly simplistic question: “How can we squeeze the IT budget even further?”

Stephen Norman of Merrill Lynch was one of the CIOs at the Summit. He captured this mind-set evocatively when he told the story of the “Magic Orange”:

On a clear December day, a worried-looking CFO knocked on the door of his harried CIO and said, “Times are tough. We need to squeeze 10% out of the IT budget.” With some effort and with more than a little help from Moore’s law, the CIO managed to squeeze out 10% of costs without causing any appreciable loss in service quality. The following year his CFO returned to say, “That was terrific. However, this year we need to squeeze out another 10%.” Dutifully, with some hard-nosed decision making, the CIO managed to find an additional 10%. However, at the end of the year, the CFO once again said, “Now we need an additional 10%. And, what’s more, you can guess what I’ll be asking for next year.” The CIO took a deep breath. It was getting really difficult to squeeze out more savings. He wondered how often he could wring the same orange and still get drinkable juice. To the CFO, the IT department was a “Magic Orange” that could be squeezed indefinitely.

While achieving cost savings in the IT department is a laudable goal, doing so risks missing the bigger picture. The real productivity benefits from the remarkable increase in computing power per dollar do not come merely from cost savings in the IT budget.

Rather, as Mark Lutchen clearly illustrates in this book, those savings result from thinking of IT more broadly as a business. That means delivering more value to the rest of the organization by increasing the productivity of other business units, of end-users, and of the corporation as a whole.

Indeed, research now clearly shows that on average, firms that are more IT intensive also are more productive over time.1 More interesting, however, are findings that indicate a tremendous disparity in returns. Some very high IT spenders excel while others perform poorly. As an investment, IT may have a positive expected return, but that return is not guaranteed.

What differentiates successful investors from their competitors? As Lutchen argues in this book, to be effective, IT must link to corporate strategy. The IT organization should be aligned with the underlying profitability drivers of the business. At the same time, business systems must be redesigned to take advantage of new, low cost, and more powerful technologies as they become available. To achieve these objectives, CIOs must build strong and trusting relationships with their peers on the executive management team, with business-unit CEOs, and with the key end-users, that is, customers. Also, they must be ready, willing, and able to transform their businesses and workflows so that these truly leverage the technology. Indeed, a whole new digital organization is needed if businesses are to benefit fully from IT.

In my own research, I’ve found that for every dollar spent on IT hardware, up to nine dollars go to complementary investments, including organizational and human capital. These investments can create real, if intangible, assets. A CIO who focuses only on IT spending that occurs within the IT budget misses all but the tip of the iceberg. This can have disastrous results. While many of these intangible assets go unmeasured on typical corporate balance sheets, they should not go unmanaged. Taken as a whole, Lutchen’s ideas for understanding the “real” level of IT spending provide a welcome and useful framework for addressing this challenge and opportunity.

This book will prove invaluable to CEOs, CIOs, CTOs, CFOs, business-unit leaders, consultants, and researchers who seek a practical, research-grounded guide to running IT as a business. There was a time when IT in many firms could be relegated to a cost center, but, today, every industry is a high-tech industry. As a result, no successful manager can afford to ignore the lessons that Lutchen provides.

The author’s advice is grounded in a unique combination of careful research and real-world experience that Mark Lutchen brings to all of his work. As one of the Founding Sponsors of the MIT Center for eBusiness, PricewaterhouseCoopers, as represented by Lutchen and his colleagues, consistently challenged us to push the frontiers of research in directions that would create tangible benefits for businesses. That ethos infuses this book and makes it an “essential read” for anyone hoping to achieve such benefits.

The power of IT has been growing exponentially for more than 40 years. Today’s computers literally have 10 million times more processing power than the computers used in the 1960s. This trend is sure to continue for at least another decade. In fact, all signs indicate that it is accelerating. More importantly, the domain of activities affected by IT is vastly larger than it was 40 or even 10 years ago. In short, the impact of IT that we’ve seen during the past decade is only a fraction of what we can expect to see during the decade to come.

The implication is clear. CEOs and CIOs who don’t learn to manage IT as a business will lose their mandate. Those who do will be the business leaders of the next decade. That is why I urge all who aspire to such leadership to read and profit from this book.

ERIK BRYNJOLFSSON

George Schussel Professor of Management and Information Technology

Director, MIT Center for eBusiness MIT Sloan School of Management Cambridge, Massachusetts

Acknowledgments

Authoring a book such as this is analogous to conducting a world-class symphony orchestra. Like the conductor, the author moves to center stage at the end of the performance and takes the bow for the result of the collective work of many individuals. That is how I feel about writing this book. Were it not for the behind-the-scenes work of many people who are unable to take the bow with me, I would not be in a position to do so. I am truly humbled by the amount of talent, intellect, creativity, integrity, and professionalism exhibited during the writing of this book by my clients, partners, colleagues, and other professional associates who toiled alongside me both in substance and in spirit. Thanking specific people is always a risky business because someone is always inadvertently left out. I apologize up front if that occurs here; it is surely not my intent.

First, I would like to gratefully acknowledge a few people whose influence and assistance were invaluable. In a professional services firm, clients always come first, so my initial thanks go to all of the clients who have afforded me the opportunity to be of service to them during the past three decades. Helping many of the world’s top companies to solve some very complex problems has provided me with a wealth of unparalleled experience, some of which I have tried to share in this book. I would particularly like to thank Donard Gaynor, former CFO, SVP-HR, CIO, and reengineering leader of The Seagram Spirits and Wine Group; Nick Henny, vice chairman and CFO of Universal Music Group; and Paul Turner, executive VP and CTO of AMS for applying their unique business insights to their reviews of this manuscript.

Next, I would like to thank a number of people who were instrumental in researching, writing, editing, and publishing this book. These include Gene Zasadinski, my editor at PricewaterhouseCoopers; Mark Friedlich, PwC’s global publisher; and Jon Zonderman, freelance editorial consultant. Gene, Mark, and Jon—your professionalism and steady hands kept this effort on course and on schedule with the highest quality. You are truly all masters at your respective crafts. A special thanks also goes to Denis Picard, a partner of mine who began this literary adventure with me, but who is now breaking new ground in applying the principles discussed here, as well as a few of his own, as a businessman, advisor, and CIO. I would also like to acknowledge the outstanding work of all the people at John Wiley & Sons, especially editor Airie Stuart, publisher Larry Alexander, and associate marketing director Laurie Harting. Thanks for believing in the value of the message contained in this book and for ever so carefully shepherding the manuscript through the publishing process.

While this book was being written, I was also in the process of building and leading an IT Business Risk Management practice for PricewaterhouseCoopers. The core team of people involved in that effort deserves a big thank you for helping me to codify and simplify much of what is discussed in this text into a service that can be provided to our clients on a much broader and consistent basis than ever before. Thank you, Jonathan Lawrence, Sam Tobin, Dries Bredenkamp, Anu Sahi, and Ellen Fang. And thank you, Paul Kennedy, for your constructive insights and input along the way.

During the past several years, I have been a member of the executive board of the MIT/Sloan Center for eBusiness, which is very ably led by its chairman, Dean Emeritus Glen Urban, and its director, Schussel Professor of Management Erik Brynjolfsson. I have developed the highest respect and admiration for both of these gentlemen as I have watched them build one of MIT/Sloan School’s flagships of intellectual pursuit and practical business application.

My thanks must also go to individuals with whom I worked when I had the pleasure of co-leading PricewaterhouseCoopers’ Multinational Corporation (MNC) Network. If it were not for my partners, including Pat Kiernan, Dick Rossi, Bill Glimour, Bob Leach, George Barbee, Howard Aycock, and Paul Turner, who is currently executive vice president and CTO of AMS, and for outside expert advisors such as Ken Roman, former chairman and CEO of Ogilvy & Mather Worldwide, the client service and teaming principles created, established, and followed within the Network would not have flourished and become cornerstones of this book.

It is often easy to overlook the outstanding executive and administrative support and assistance that hard-working individuals provide selflessly and without fail day in and day out. Thank you to my executive assistant, Catherine Zadroga, who, for the past 21 years, has, with professionalism and good humor, faithfully kept things on track and in order.

I would also like to thank a few groups of special people who worked long and hard to prove to many skeptics that the principles espoused in this book really do deliver results. To people on the TSSLT: Even though I cannot name everyone, each of you knows who you are and what your contributions were to the team, and for that I cannot thank you enough. Thank you to Larry Phelan, Joe DeTullio, and Rich Poshpeck—you know all too well what it really took to turn the ship with speed and passion. I would also like to thank Kathy Leach and Mary Linda Denton for making communicating so easy; Brian Moxey for always making the logistics work out; Stacey Foster and Roberta Perry for taking HR to new levels; Bob Brick and Jim Holloway for your strategic and technology insights; Jennifer Eckler, Pat Straughn, Nancy Browning, Cindy Cole, Bud Murphy, Sheryl Mills, Dave Goodman, Daryl Mattson, Marty Porea, Lee Robinson, and a host of others for always rising to the challenge; Robert Kight and Mike Drosdowski for establishing a security organization that is second to none; Bob Buttacavoli, Mark McGovern, Roy Ogura, Mike Williams, Sean D’Souza, Shawn Connors, and the rest of the Genesis team for creating a platform that continues to thrive; and Bill Yant, for your insightful and steady guidance. Thanks also to Gregg Ward of Orlando-Ward & Associates for your unique communications creativity and to all of my international colleagues around the world who clearly demonstrated how diversity and multinational capabilities always make a team better and stronger.

Finally, to the hundreds of outstanding people who comprised Team TSS around the world, you are truly the ones who made it all happen on the ground. You learned to embrace change; you successfully addressed some of the most complex, global IT management and technical problems; and you created an unparalleled world-class, high-performance, and top-quality team. To each of you—and you know who you are—I respectfully tip my hat and want you all to know, once again, how inspirational and rewarding it was to work with you.

MARK D. LUTCHEN

Introduction

To: The Executive Leadership Team The Board of Directors

From: The New CIO

For years now, our company’s information technology (IT) organization has mirrored the way the company itself has evolved—decentralized, fragmented, and underleveraged. While significant sums of money have been spent, lack of focus and vision has lessened the potential impact of those expenditures. Specifically:

• IT has never had a global vision or strategy.

• IT expenditures have not been effectively leveraged across the company.

• IT has been managed as a cost center rather than as a strategic competitive enabler and revenue enhancer.

• IT has not been an integral part of our business planning and execution; at best, IT has been a less than effectively managed afterthought.

• IT leadership has been fragmented and diffused within the company, severely limiting the IT organization’s ability to drive and leverage standards to benefit the business.