Moving ICT up the value chain

Pro

The past few years have seen ICT develop to more closely support the business in organisations. The dotcom crash and subsequent lean years have led many to question the role of ICT and how it has been governed in the past. If ICT is to reassert itself in enterprise, it must look at its core functions and strengths and move forward as a partner to the business displaying leadership through technology but ultimately, demonstrating its ability to provide strategic advantage.

“Because it [IT] just works, no one gives it an awful lot of thought until it stops working. That is one of the issues, because IT has become like plumbing, it is taken for granted and to a large extent, is not used anything like as efficiently as it should,” said John Shiels.

Utility provider

Joerg Steegmueller agrees, that ICT can often be seen as merely a utility, “That is one of the problems plumbing isn’t seen to have a very good return on investment (ROI) so how do you sell the value? In many organisations, the CIOs are more CTOs delivering services and devices but they are not seen as strategists. IT is an enabler but very much seen as the poor cousin in a lot of enterprises.”

Barbara White believes that the situation may be changing, “but many in the industry, and particularly the construction industry, are there a long time and don’t realise that IT has become an intricate part of the business and the reliance on it is huge. It is really up to the likes of us to get them to come to terms with this, by infiltrating all of the other areas of the business.”

Tony Conroy supports the idea of ICT participation at the highest levels, “Businesses are realising that IT can contribute at the board level. Changes brought about by Sarbanes [Oxley] are also driving that; it’s forcing people to move into a more structured environment. The business is now starting to see that critical business decisions need to be made by the business and that ownership of the data belongs with the business, not with IT.”

Conroy added that the CIO is now asked “how he can enable the business to use data better and it is driving a different type of CIO”.

“That point is very important, it is driving a different type of CIO. Now it is a completely different skill set required. I look at the letters [of the acronym] ICT and in a way we are moving left. From technology we moved to communications and now we have to move to information to add the value. But it adds a lot of new challenges and demands to the traditional CIO skill set” responded Steegmueller.

Paddy Flynn points out that the nature of ICT is that it is employed and leveraged in varying ways by different sectors, “Considering the value chain, it is a broader thing than it used to be. In financial services, it starts with the customer and then the broker, to us [financial institutions], the investment manager and onward, so the pervasiveness of IT in the value chain is much greater now than it used to be. IT is moving up the value chain whether we like it or not.”

Business expectations

Pat Millar agrees on the inexorable rise of ICT on the value chain, but adds that “the business’s expectation of what IT needs to do is also changing. The challenge for IT managers, heads of IT or IT directors is to see if they have what it takes, and does their department have what it takes to see if they can move up in line with those expectations. In organisations where that is the case, you often will see an IT Director on the board. If not, in the future, what you will see is a CIO will be brought in above you, and you will manage the technology, as the CTO and someone else will manage partnering with the business, adding value, process improvement” said Pat Millar.

The theme of communication between ICT and the business is crucial to the central premise of the discussion according to White, “If you think about the people that you have to convince along the way of the value of IT, they are all business people. You’ve got to convince them in business-related terms, references and knowledge”. Millar agrees indicating that few IT managers in large organisations “who came up the infrastructure route”.

Business knowledge

The gap between the skilled IT staff and those in the business with specific business knowledge is still present though being addressed according to Shiels, “What I have noticed is that all of the staff I’ve taken on over the last two or three years coming from college, their IT courses are now 30 or 40% business.”

“IT has to build the bridges between the technology on one side, which is a given, and the additional knowledge that is required such as company knowledge, industry knowledge and then functional knowledge, as in HR function, finance function” said Steegmueller.

The development of ICT then, in moving up the value chain, has highlighted not only the changing role of the CIO, but also a shift perhaps in the core functions of ICT. According to Steegmueller “it splits IT into two groups, the infrastructure, the basic cabling and PCs, and the other one is the intelligence, the strategic aspects of IT. The cabling and the machinery aspect is still there, it has not gone away, but it is not where the value is added, it is not where the difference is made.” Conroy, goes further in the definition of the functions, citing research from Gartners, “a survey* of IT managers in 2003 came up with six things;

• Lead
• Anticipate
• Strategise
• Organise
• Deliver
• Measure

Leading the business in terms of the direction you want it to go, the strategy comes after you have anticipated what needs to be done. But then once you’ve done that, you have to project manage and measure to see what the total cost of ownership (TCO) is at the end so that the business sees that they are getting a deliverable or that they are getting value. So those six disciplines really capture all of what you need.”
 

Infrastructure value

Flynn sees a slightly different side to the point of infrastructure and value, “One of the questions we all face is what is the role of IT people? And there are a few more dimensions to it. Such as risk management, even with the infrastructure side, there is still value to be had out of that. The whole area of integration is huge now and data management from a risk point of view, but the integration aspects and mobile computing enable a whole lot more things to happen, so there is still a role for infrastructure to be seen as strategic rather than operational. The other side to it is that the role of IT people and IT managers, is in strategic management of business issues, that are not necessarily IT projects, but they are business change, so business change management and that may lead to process change, IT change, data change etc. Managing that strategically within an organisation is a key role because IT traditionally have that expertise. These are some new dimensions that are emerging and that are probably opportunities that will be taken by someone else if not by IT.”

“We [Clarion] operate across a number of sectors and we are seeing more and more IT not being called ‘IT’, but being called things such as ‘IT and process improvement’. IT is looking at project management skill sets and methodologies, business change and BPR skills, going out to the business and saying we’ve got experience in these projects. That is something we can now bring as an IT organisation into a particular area and help you to drive business projects” said Millar.

Non-tech capabilities

These capabilities in IT departments can bring value to the business, outside of the pure technology aspects. However, if the business is not aware of these capabilities, IT in the organisation, perhaps, needs to more effectively market itself to the business.

“I think some of that is dependent on the alignment of IT with the business. But also it comes down to the people in IT, the relationships and I think that a key skill for IT is strong relationship management where you are working with people to make changes as opposed to selling them. If you are in the selling game, you are already starting from behind,” said Flynn. Shiels agrees but points out that ICT has work to do on past conceptions, “Traditionally, IT was seen as saying we won’t give you something. We have to change that around from what we don’t give them to what we do give them. If you are serving a negative message, it doesn’t help.”

“It comes back to governance as well. For the progressive director of IT, they are looking at the situation and are saying the business is making the decision about the projects, the business is making the decision about the services, what we are doing is are partnering on that, but the board, or the steering committee is deciding whether we do project A or project B, its not IT that is saying no to you. I think IT in many companies has moved away from being seen as defensive about saying ‘no’ to saying ‘if you want this, these are the people you need to convince, but if you want it, then we can help on you’” said Millar.

Value message

Steegmueller supports positioning to convey the value message, “You have to position yourself in some areas appropriately, so that people see all the value that you can add.” White agrees but goes further, “Yes, you have to position yourself, but then you have to be brave enough to prove it, particularly to the doubting guy, usually the financial guy. By convincing them that you can do that and prove it, when you go to them again after 18 months with a new proposal, you are driving it.”

Conroy is quick to point out that the relationship with the business needs careful management, “But it is difficult in so far as you have built all this PR and you have convinced the business that you have built all this value, and then the first time you have a network problem and a CEO can’t get e-mail, it’s all gone.”

“Well there is a bit of management of expectations there too, in telling them how long things will be down and being realistic about the fix time,” said White.

Conroy continued that is it this precariousness that “is what drives the perception talked about earlier of being a service provider, rather than a value add; as soon as you have a problem, you are back to the service provider again.”

Flynn argues that the nature of the relationship has much to bear on the matter, “The real question is though, is your relationship a transactional one or is it a business one. If it is a transactional one then that is the game you are going to be in and it is a ‘no win’ situation. If you are in a more business oriented one, then there is room for manoeuvre, you get a bit of leverage when things go wrong and a bit of recognition when things go right.”

Rounded professionals

As IT organisations more closely identify with the business, it highlights the need for more than pure technological skills among IT professionals. This poses the question of whether ICT is doing enough to gain or train professionals with those skills. Flynn suggests it is indeed being addressed, “With graduates coming out of IT, if the courses are good, then you still get a reasonable quality and they would tend to be a bit more rounded than they traditionally would, in terms of understanding that there are more aspects to IT than just networks or programming. I think the challenge though, remains the same, no matter what role you play in an organisation, and it is not just in IT, in having a rounded professional that has people skills, technical skills, customer service skills, work and task management skills.”

Steegmueller prefers a different approach, “That is one way, in which the challenge can be approached, but there is also a justification for getting people into an IT department that have nothing to do with IT. The IT skills can be acquired, but they might need the business skills more than the IT skills to start with.” Millar suggests, “If you are in an organisation where people in IT can go out and take up positions in the business that says good things about your IT organisation.”

White thinks that the loss of skilled IT people may be unsustainable, “I don’t think in my situation that I could afford to loose people with application knowledge back out to the business.”

Millar closes the point, “That may be the case, but if you can say ‘would the business be happy to get their hands on these people?’, then that proves business knowledge, that proves interpersonal skills etc” and Conroy agrees on the principle, “If it is the right business decision, then it should happen”.

Metrics for success
As ICT endeavours to demonstrate its value to the business, evidence is required. Metrics provide a measure for service levels and success in both the project and the operational aspects of ICT. Conroy explains his organisation’s approach, “I have to provide a service level agreement (SLA) to every area in the business and they have to sign off on that, as they have with every other service provider within our business.” Conroy goes on to say that those metrics “may be industry standards like the five nines for your network, but that apart from project work, on a day to day basis we are tied down to that.” Extending to projects, Conroy continues that a project “has to have a full business case, a return on investment (ROI) and all through out the project it has to be measured as whether it is delivering on that against both budget, and afterward, against the ROI. That may come from the fact that we are a Six Sigma organisation, and we build a lot of structure around that. So there is structure there to assist in terms of how you manage your projects, which helps.”Flynn reiterates the need to differentiate metric focus. “The differentiation is between project metrics and operational metrics. So there is development-based, change-based versus system availability or application availability and it means different things to different businesses.”

“I think that there are a lot of IT organisations out there who still don’t measure how many calls were taken, how many were solved, what type of timeframe for resolution, normal SLA stuff. If you are in an IT organisation and you want to move up the value chain, you have to do the basics. People often feel that ‘if I do that, I’ll always be on the back foot’ and you can understand that to a point. But it is also, like an SLA, a two way street” said Millar.

Double edged
Conroy agrees on the two way nature, “metrics if they are present can diffuse situations very quickly. If you have a CEO or a director who is saying, this network is never up’ you can come along and show him, that actually it is up, 99.95% of the time”.

While all present agreed on metrics and their value, all agreed that the adoption of extensive metrics is less than ubiquitous. “I was at a recent roundtable discussion with 10 companies, and every one of them agreed, that none of them measured the value of the ROI after a project. Once they come in on budget and everything else, they just go onto the next thing,” said White.

Flynn urges caution on the use of metrics and refocuses on overall value to the business. “The projects themselves will always have to deliver against the time and the budget and probably the specification, but the real question is ‘did that make any real difference to the business at large?’ That is where the real challenge is, do projects make a real difference to the business at large in the long run, and that often can take two or three years.”

Strategic advantage
To bring ICT beyond the level of utility service provider, ICT organisations can do more to bring strategic advantage to the business. “Part of that comes back to where IT can be strategically used. If the business cannot operate, or you cannot make sales, or you cannot deliver your product or service without IT then you are in a place where you can meet that requirement [giving the business strategic advantage],” said Flynn. Conroy regards education of the business as a key role, “I think a lot of it is educating the business in what you can deliver.”

White indicated that annual report sessions allow the presentation of new technologies that could serve the business but that the process was not formalised. The concept of continuous improvement though was recognised as a driver.

“Continuous improvement is what we all strive for, and you can formalise that to a certain extent, but there may be layers where you hear about ideas and technologies in the industry and you try and turn those into proposals. Again, they become issues that you present for funding. But what you can’t legislate for is step change that comes along and you just have to do it quickly or there is a big change in the company,” said Flynn

Looking for value add
In the current climate, IT departments have new and challenging roles to support the business. From technology leaders and facilitators, to educators and enablers, everyone from the CIO down to the helpdesk technicians can play a role in managing relationships, expectations and aligning with the business direction. By focusing on these key areas, through better business knowledge with IT departments and thus better communication with the business up to the board level ICT can be a value adding aspect of business not just ca cost centre that swallows funds without tangible benefits. These developments may see in the future, ICT becoming so inextricably aligned with the business that IT departments no longer exist outside of there respective business units.

Note: (* Gartner EXP Annual CIO Agenda Survey 2003)

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