Leading CIOs in Global 2000 enterprises and government agencies have shifted senior management`s perception of IT from a cost centre focused on increasing organisational efficiency to a value provider focused on winning competitive advantage for the organisation.
During the past 18 months, an informal META Group survey has indicated that a key tool for making this transition is IT portfolio management, which enables CIOs to present IT expenditures and projects in business terms that resonate with senior executives and line-of-business management.
META Group`s METAmorphosis conference, to be held from 27 to 29 May at Caesars Gauteng, focuses on the challenges of delivering the integrated portfolio.
"Optimising expenditures is definitely the first priority of CIOs," says META Group analyst Al Passori. "But CIOs who focus solely on that and do not also capture and communicate the value of IT products and services are missing half the value equation."
The key to converting the IT organisation (ITO) from a cost centre to a value centre, and changing senior management perception of IT, is a strong CIO focus on four priorities:
. In inculcating value, cost, and risk management into the IT culture.
. Using IT portfolio management as a communication and investment optimisation vehicle.
. Deploying human capital management processes to increase IT employee productivity.
. Ensuring that core IT processes are operationally excellent - singular and repeatable, well understood, consistent, measured, scalable, and constantly improving.
When it comes to transforming ITO culture and winning senior executive buy-in, perception is reality. CIOs need to change the perception of the ITO, both inside it and externally throughout the business - particularly at the senior management level.
"The key to transforming the ITO into a value centre is to remember the three Cs," says META Group analyst Louis Boyle. "The CIO must communicate value, as defined by the CIO`s audience. Communicating value requires it to be captured, and before that to be categorised, all in business terms."
The first priority - inculcating value, cost, and risk management into the IT culture - requires a change of focus for the CIOs and their direct reports. "Cost management remains important," says Boyle, "but best-of-breed IT organisations have identified a clear business value in terms of their organisations` needs for each IT product and service. The ability to do this is a sign of strong IT/business alignment, which our survey identified as the top priority of CIOs around the world."
Focusing the ITO on value also requires a strong risk management programme, covering regulatory risk (the need to meet specific regulatory and legal reporting and financial monitoring requirements, such as HIPAA in US healthcare or Gramm-Leach-Bliley in the US financial industry), financial risks (mostly traditional insurance-related risks), and business risks (the risks associated with gaining and maintaining competitive advantage and identifying and capitalising on new opportunities). Control Objectives for Information and related Technologies (COBIT) is one of the tools leading ITO`s use to manage risk.
The second major focus, using portfolio management as the language to categorise, manage and communicate the value of IT programs and services, speaks directly to the issue of changing the business`s perception of the ITO. Regardless of how closely IT products and services are tied to the real needs of the business, if senior management does not clearly understand what the ITO is doing, it will be treated as a cost centre.
IT portfolio management is the key communications and risk management vehicle for dialogue between the ITO and the business. "IT executives who have implemented portfolio management have unanimously told us that it works outstandingly well at getting the business to understand where IT investments are being made in business value terms," says Passori. "Once the business has agreed to the appropriate categorisation of IT investments, any further discussion about why some things cost too much or why amounts need to be spent disappear. IT portfolio management is a superb balancing vehicle for ensuring that cost, value, and risk are appropriately balanced and deployed."
The third priority refocuses CIO thinking away from technology and onto optimal management of the most important ITO resource - people. CIOs and their IT leadership team often give this vital area less attention than it deserves, due to their strong technology focus. Optimising ITO value requires that CIOs focus on creating, maintaining, and supporting highly productive workgroups in the ITO, and on supporting the workgroups in the business with appropriate collaboration and other tools. To accomplish this, best-practice ITOs establish proactive human capital management centres of excellence within their organisations.
The fourth priority is ITO operational (or IT organisation wide process) excellence. The goal of having "singular and repeatable" operational processes refers to pattern-matching concepts. Just as an organisation needs a standard desktop environment that is well defined and repeatable on every desktop, it also needs to have a single process to accomplish each task. Every process needs to be fully documented so it can be duplicated wherever that task needs to be accomplished. An organisation with 10 regional help desks worldwide, for instance, should have a single help desk procedure that is repeated in each help desk - not 10 different ones.
As technology becomes more central to business success, CIOs need to transform their ITOs from order-takers to value-creators. To accomplish this, they should focus on developing an organisation that creates, measures, and communicates business value. Such transformation should build on a foundation of effective lifecycle cost management that includes disposal of non-performing assets. To maximise the value of IT to the business, CIOs should leverage appropriate processes, such as value management, COBIT, and IT portfolio management.
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