Monthly Archives: November 2011
We would be remiss if we didn’t acknowledge innovate products that we see trending as disruptors…in a good way. Among them are two companies that I am really excited about: Fusion-io (and not because the Woz is their Chief Scientist) and Nutanix.
If you haven’t already heard of these 2 companies, here’s a quick intro:
- Fusion-io is a pioneer of a new storage memory platform that significantly improves the processing capabilities within a data center by moving process-critical, or active data closer to the CPU where it is processed. Called shared data decentralization, this significantly reduces latency while increasing data center efficiency. Fusion’s integrated hardware and software solutions leverage non-volatile memory for enterprise-grade performance, reliability, availability and manageability.
- Nutanix is the first company to offer a radically simple compute and storage infrastructure for implementing enterprise-class virtualization without complex and expensive network storage (SAN or NAS). The company was founded by a team that has built scalable systems like Google File System and enterprise-class systems like Oracle Database/Exadata in the past, and has investment giants like Lightspeed Ventures and Khosla Ventures standing backing them. As a testament to their innovative product, Nutanix won a Best of VMworld 2011 award for their building block technology, even though it was only introduced in August 2011.
More information at the jump:
In Part 1 and Part 2 of this series, we discussed the concept of value traps and showing value for money, 2 principles that are important when measuring the real value of IT. In this third installation, we will look at the virtuous circle, or virtuous cycle, of IT value that should direct your investment activities.
Virtuous Cycle
For those of you not familiar with the term, a virtuous cycle is when a single change or improvement leads to a cascading series of follow-on benefits which both reinforce themselves and add further momentum to the original change (a hyper “one good thing leads to another” scenario, if you will). Virtuous cycles are extremely rare to identify in business, and they are even harder to create. However, when they happen, they have profound implications.
To identify what IT investment activities make up a virtuous cycle, it’s worth exploring a number of the commonly cited IT and non-IT (aka “business”) tasks that are common in today’s enterprises – 18 to be specific. These were published in a research briefing by the MIT Sloan School of Management’s Center for Information Systems Research (CISR):
| IT Tasks | Non-IT/Business Tasks |
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The research concluded that of the 18 common IT and non-IT tasks, only 4 have a statistically significant correlation to the business value (perceived) provided by IT. Now don’t misunderstand what I’m saying here. All of these tasks are important, and effective leaders do well at most of these tasks. However, the other 14 tasks are enablers, not value generators. They focus on running IT and not improving the business. They have relatively little effect on business executives’ perception of business value. In short, they form the foundation of technology, skills, information, and credibility upon which you can produce and harvest value…but they are not value itself.
Those 4 elements, then, form the virtuous cycle of IT value. Once you’ve established value for money, it is more prudent to focus on identifying valuable business changes and getting a better return for each and every change. Does that mean that each of the elements are equally weighted? No. The most important element is effective oversight, and it involves having transparency into the investments being made and harvesting (or measuring) business benefits, or business value, from them.
At W&G, we work with each of our clients to help them achieve business value through technology adoption by employing these principles. You may find that your organization is better at doing needs identification and application development than BPR/organization change or oversight. Or you may not do any of these well at all. Our methodology can help you to increase business value by incrementally improving any of the steps. Even better, because of the dependencies that exist between them, you can achieve significant value by improving all of these elements in concert.
We start by understanding what matters most to your business…which business outcomes are important to business performance and focusing on them. In order to do this, we:
- Clarify the business strategy
- Analyze business processes and their impact to business outcomes
- Determine which key operational metrics that are or should be used to measure and track performance
Once we’ve gathered this information, we use what we’ve learned to develop opportunities for improvement to advance the strategy.
In the last and final installment, we’ll discuss how to find sources of new value.
Learn more: info@williamsgarcia.com
In Part 1 of this 4-part series, we discussed how to avoid the value traps by moving from IT’s old beliefs to the new reality. In this follow up (Part 2), I’ll discuss the next leg of our discussion on how to show that the value returned for the enterprise’s investment in IT exceeds the value invested.
Show Value for Money
The waste of money curest itself, for soon there is no more to waste.
~M. W. Harrison
For an organization that already lacks recognition by the business of the value of IT, managing that perception is not an overnight process. You cannot change the thinking of business unit leaders through a fancy PowerPoint with pretty charts and graphs. Regardless of how sincere your intent, professing that IT can actually help the business out in the future with a bit more investment or additional chargeback costs will result in looks of disbelief (or even disgust). If IT is not perceived to be visibly well managed, managing costs and service levels (quality), it will lack the credibility to influence the rest of the organization. The starting point is to manage that perception and show value for money before trying to prove that IT in an investment in future business performance.
We have identified 3 essential steps to delivering value for money:
- Measure and communicate IT’s performance in terms that are meaningful to the business
- Benchmark IT’s performance against internal, market, or industry peers.
- Provide data that will help the rest of the enterprise manage consumption of the services IT provides.
Measure and communicate IT’s performance
There are two reasons to measure and communicate It’s performance. First, if you measuring performance will establish a baseline (if never measured before) and reference point for which IT can be quantifiably scored and monitored, removing the element of false perception. You just can’t deny the numbers. Second, and more importantly, what isn’t measured can’t be improved. Identifying the areas in which IT is lagging and following up with measured improvement will go a long way to win the confidence and respect of the business as an internal partner.
The measurements used to show value for money must communicate that IT is providing the right services, at the right level of quality, at the right price. But the measurements must speak to non-IT leaders, to managers who aren’t or haven’t been engineers. An example of some business-centric measurements include:
| IT Metric | Equivalent Business Metric |
| Uptime | Sales and service channel availability |
| Application performance | Responsiveness; time to respond to a user’s request |
| On-time project delivery | Product availability |
| Workload consolidation | Cost-saving opportunities |
| Software defects | Product quality |
In essence, you have to assess IT through meaningful business metrics, identify issues, and fix the issues…the latter being the most important.
Benchmark IT’s performance against peers
Moving on to the next step, benchmarking, this idea is based on the fact that it is not possible to know whether IT is providing a competitive unit price for any given level of service (or quality) without comparing it to its peers. Is IT’s performance weak or world-class or somewhere in between? No one will know what the measurements mean without something to compare it to. We have found that benchmarking annually or every 2 years is ideal (more frequently doesn’t leave any time to implement actual improvements before the next benchmark). Note that before you can use valuable IT resources to benchmark performance, you will need to ensure at least a minimal level of stability and “maturity” (a four-letter word in some circles) in order to gather data in a feasible manner. In addition, there are a few exceptions and caveats as to whether you should spend time at this juncture to benchmark or how you should benchmark. W&G has a decision process for benchmarking that we share with clients to help them plan for, execute, or skip this step altogether.
Exceptions and caveats aside, we have dozens of benchmarks that we use on engagements, many of which may apply to your business and IT organization. These include:
- Cost and financial controls
- Operational excellence
- Customer satisfaction
- Business impact and alignment
- Capacity planning
The important thing here is to start gathering the data, improving areas that are difficult to measure so they can be measured, even if the numbers aren’t perfect. Start with the best metric available to you to begin the path to improving performance.
Help the rest of the enterprise use IT well
Last, and this is where it gets fun (from IT’s perspective), benchmarking and measurements help the business understand how to make good decisions about how they use IT. In the other steps, IT was on the hot seat; but once you’ve reached this step, the tide turns back to the business. The metrics used to communicate value for money will also help the rest of the business become smart IT consumers.
For those that like the various formulae for grading investment quality, this is not a question of making good investment decision (i.e. ROE, ROI, etc.), but rather a matter of making good decisions about cost. I can’t stress how important it is to have a consumption-based chargeback model, even if only for measuring the consumption of IT services without any real financial exchange between IT and the business. In most cases, chargeback reports will help the business to identify the best opportunities for managing their IT costs and will help them understand why unit costs are what they are.
Providing and proving value for money are the essential first steps in creating and demonstrating the business value of IT. By providing uncontested value for money, you can then begin to have the real conversations that we know you want to have: what investments in IT best improve business performance. By creating transparent, ongoing reporting about the performance of IT services, you can change the nature of the conversation about IT spend from “Why am I spending so much on IT?” to discussion focused on improving business outcomes with IT. And isn’t that the whole point?
Definition
Value for money (IT) – providing the right services, at the right level of quality, at a competitive price – and the rest of the business knows it.
During the past decade, the pendulum has swung all the way from abundant IT spending through to IT being seen as a significant business cost. This perceived lack of benefit delivered to the business compared to the size of investment in IT has resulted in a spate of cost cutting and outsourcing, rationalization of IT spending and the beginning of business owners holding IT responsible for costs and quality of services.
With the perception of IT now starting to inch back towards a more reasonable and balanced position – one where its value to the business is, albeit sometimes grudgingly, being recognized – IT needs to reposition itself as a trusted partner with the ability to quantify that value to the business. The introduction of governance and compliance requirements is also contributing to the need for IT to turn up the dial on its role as a business service enabler.
But how do we measure the value IT has to the business? The answer can be summed up simply be measuring the contributions IT makes to efforts to RUN, GROW, and TRANSFORM the business. IT organizations that show their value to the business take specific steps in a specific order, as follows:
- Change the way they think
- Show value for the money, meaning the right services at the right level of quality at the right price
- Position IT as an investment in near and long term business performance
These steps entrench IT into the value proposition of any business, regardless of size or industry. In this first part of a 4-part series, we will discuss the new way of thinking about IT.
Change Your Thinking to Avoid the Value Traps
"The road to hell is paved with good intentions," says George Westerman, research scientist at the MIT Sloan School of Management's Center of Information Systems Research (MIT CISR). According to Westerman, we should avoid the value traps: practices that seem to be good ones but actually prevent IT from delivering and communicating value.
Value traps, simply defined, are beliefs and habits that seem to be good but actually lead to trouble. They are not obvious failures. In fact, they appear to be great wins in the eyes of the business in the short term, but have long term repercussions as they prevent real value attainment. For example, "the customer is already right" or "the business it IT's customer" will do wonders for an IT organization during heightened times of dissatisfaction. But over the time, those value traps will set IT up for failure, because the customer is wrong most of the time and calling peers "customers" will inevitably drive a wedge between IT and the rest of the business.
Now we've all seen more than our share of value traps in organizations that we have been a part of. I believe that all companies have them to some degree. They are usually ingrained into the minds of both IT and business leaders as assumptions about the relationship between IT and the rest of the business. This is because IT organizations that are suffering from value traps have been too focused on themselves. Instead, they should always be focused on business performance, not just about IT. In order to overcome the value trap, IT organizations must have an epiphany, if you will, about their environment…a constantly changing one…one that requires new ways of thinking, behaviors, and skills or competencies. Even the terms and concepts used by IT tied them down further in the value trap.
Escaping the value traps requires breaking old habits and developing new ones that produce (and this is important) real and perceived value. In other words, escaping value traps requires a new way of thinking (or communicating) and a new set of rules, a new playbook if you will, for the management of IT.
Value traps can be placed into one of three categories:
- Visibility Traps: how you conceive and communicate the value of services IT provides to the rest of the organization.
- Excuse Traps: how your execution and delivery are perceived by users, or end-consumers.
- Role Traps: your relationships and what role you IT plays in your organization.
W&G consulting engagement are geared around helping our clients to avoid these traps through New Thinking™. All of our services have been designed to help measure and promote IT's value to the business. We can help you to think differently in order to visibly create and communicate IT value.
In the next part, we will discuss how IT shows value for the money.
Learn more: info@williamsgarcia.com