Run IT as a responsive business, beat the cloud vendors at their own game

IT departments are increasingly competing with cloud providers, but are hamstrung by maintenance and upkeep costs. A new CIO consortium wants to change that, and help IT run as a business.
Written by Joe McKendrick, Contributing Writer

The days of information technology departments as cost centers are fading fast. These days, IT is either playing a role as full partner in growth (ideally with the CIO on the executive committee), or as a potentially profitable busienss-within-a-business that is competitively selling and supporting its services to internal and external customers. Or, in same cases, IT has becomethe business -- or the business has become IT -- as enterprises re-align themselves around data and online services.

World Financial Center NYC-2004 by Joe McKendrick


No matter how you look at it, IT needs all the business savvy needed for any productive enterprise to advance and grow within its chosen markets. To that end, The Technology Business Management Council (TBM Council), a non-profit group of Fortune 500 leaders dedicated to helping CIOs "run IT as a business," announced the availability of an interactive ebook book titled, “Technology Business Management: How Innovative Technology Leaders Apply Business Acumen to Drive Value.”

The TBM Book was written by the TBM Council including board members such as the CIOs of DIRECTV, Facebook, First American, Cox Enterprises, T-Mobile and Xerox. The first chapter is now available for download online or in the iTunes Bookstore.
Why now for such a book? The authors explain that IT budgets have been cut to the bone, leaving little room for further imporvement in IT optimization. "Now, hardware and software refreshes, which are mostly run-the-business costs, are eating into potential grow/transform investments. In fact, from the second quarter of 2009 (when the recovery began) through the third quarter of 2011, 94 percent of capital outlays in the United States were used to replace aging high-tech equipment, machinery, and buildings. Only 6 percent was spent on business expansion."

Consider the challenges presented by the cloud computing world. "More than ever before, we face real competition," the book states. "Cloud providers market directly to our business partners who are savvier than ever about technology. As a result, our business partners expect to order services at a published price over the web. They want near-instant access from almost anywhere. They want an intuitive application with round-the-clock support. If we can't meet these expectations, they are more willing than ever to build the business case and source those services directly through the cloud."

The bottom line is that if IT is to compete against SaaSy and cloudy types, it needs to be a part of the business expansion story.

The book makes the following recommendations:
1)  Optimize IT cost for performance.  "To get the right quality for the best possible price, we must balance our cost, quality and risk based upon the needs of our business partners. Balance is the operative word, as reducing cost is not always the right answer. Indeed, sometimes our business partners are willing to pay more for better quality."

2) Rationalize to sustain value creation. "Over time, our portfolios of services, applications, technologies, infrastructures and suppliers become more complex. To sustain our capacity to create value, we must identify when, where and how to simplify, modernize, or consolidate our portfolios and their resource components. We must appropriately trade diversity and complexity for cost reduction and simplicity."
3) Improve the ability to change the business. "Running our business more cost effectively increases our capacity to change our business. Not only does it free up budget for growth and transformational investments, but it helps us demonstrate credibility to our business partners. Credibility is as essential to our success as the capacity to spend on innovation."
4) Be a force of innovation. "Innovation largely stems from the projects we undertake. Unfortunately, we often make portfolio decisions based on limited visibility into the total investments being made in our projects and services.... We need to make decisions regarding our total investments, including the impact of projects on our longer-term run-the-business spending."
5) Prepare to transform the business by enabling agility. "Because [transformation] opportunities are difficult to predict, our businesses must quickly respond to take advantage of them. Agility makes this possible. Part of our challenge is that so much of our technology investments have been fixed. Another part is that many of our improvement projects are long-term—applications or infrastructures that take quarters or years to build. Somehow, we've got to change this so that when the business needs to change, we can not only adapt our technologies but leverage them to accelerate the change."

(Photo by Joe McKendrick.)

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