We Can Be Heroes

Adopting an IT operating model can help forge a more productive relationship with the business.

Keeping track of an entire organization's IT spending and usage is a daunting prospect. However, it is fast becoming necessary - according to consultant Peter Ryan, your organization could be wasting a good deal of money on IT spending and this waste cannot reliably be detected without a unified IT operating model.

Ryan says many IT departments today are riddled with inefficiencies, lacking communications and any coherent ordering of priorities. An operating model can provide a unified view of all the organization's IT components, including processes, human resources and supporting tools.

Ryan, a partner at Deloitte with 17 years of consulting experience, has helped organizations throughout Australia and the rest of the world adopt an IT operating model, including one large organization with an IT department larger than many Australian businesses. He says such models examine IT from an entrepreneurial perspective.

"At a macro level, it's all about the business of IT," he says. "You could call it a business model - it just happens to be for an IT-capable unit within an organization. Right now if you go to virtually any business person, they'll say: 'Well, I sent something off to IT, and haven't seen it for months. I don't know if they're working on it, I don't know where it is in their priority stack'." Adopting an IT operating model can help business units and IT departments agree on a prioritization system that suits everybody.

Businesses without such a model can face the same communication problems when it comes to the budget. Within a business, Ryan says, "everybody thinks IT is a huge black box that they just pour cash into. They don't know what the spend is, they don't know how that spend is being applied, there's no real dashboard view of the activities that are going on."

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Who Does What

The model Ryan uses consists of six core components. The first - overarching - component is the functional view. Executives should cultivate a clear understanding of which functions an IT department should perform.

An organization should develop a similarly detailed picture of all aspects of the financial operations and organizational structure of an IT department. Careful tabs should also be kept on its work sourcing arrangements, as well as its business processes and the services it offers.

"One model won't fit all," Ryan stresses, noting instead that organizations should tailor the model to suit their needs.

The lack of a unified IT operating model can be the cause of much cost-inefficiency as well. Each unit of a business may be using different equipment, such as different brands of desktop computers. An organization that has embraced a unified IT operating model would look at IT investment from a holistic perspective.

Ryan says businesses should endeavour to take advantage of economies of scale. They should be "going to a vendor and saying: 'This is what we want, and we want 10,000 of those', not getting 1000 for a particular business unit."

An organization operating under such a model would also closely monitor the operational and sourcing processes of the entire company. According to Ryan, this is a great way to ferret out cost inefficiencies, which can all too easily remain hidden without a unified view of IT spending.

"You may have one business unit using a big database [sourced] from company X, where some group down the hall is getting it from company Y. Sometimes a business unit doesn't need a particular [software] licence anymore and can give it to another. You don't know about that unless you've got an overall view of your sourcing profile."

Ryan believes an organization with a successful IT operating model can and should be more forward-thinking than those lacking such a framework. "So we're not just thinking about today but we're thinking about the future," he says. "We're actually putting money away for our desktop renewal, or putting it away for the new core systems replacements coming up in the future."

An IT operating model would also address the areas of employee acquisition and retention. "We all know there aren't enough people coming through the pipe from universities," Ryan laments. "So how do you actually look after the people you've got? How do you convert some of the people who don't have bang-on skills but have the desire to [learn]?"

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Walking Through the Minefield

Ryan advises that businesses seeking to adopt an IT operating model need to tread carefully. CIOs, for example, should be cautious when re-arranging the workload of IT techs and administrators. "There's a big demand for IT people out there," he says. "If you start playing with people's careers they'll just move to a competitor."

There may be some opposition from the boardroom as well, although in Ryan's experience, the business end of an organization tends to embrace the model. "They very quickly come to terms with it," he says, noting CEOs and other executives soon realize the potential savings and efficiency increases that can arise from adopting the model.

"It's also treating IT as a business, and as a business unit, so business people very quickly realize, 'IT sells products and services, and this is how they're going to sell it, and this is how they're going to interact with me'," he says.

However, adapting such a model means making structural and operational changes that may not be welcomed by executives disinclined to return to a centralized model of IT. "There are certain scenarios where IT probably hasn't done well by the business in the past," Ryan says. "Based on that, particular business units or the business overall has decided to create its own IT capabilities."

He notes one of the major challenges of adopting such a model lies in "determining how many of those IT capabilities you leave in the business unit, and how much goes back to a centralized group. That, obviously, frankly involves a lot of politics. You're carving up part of your world - should you do that, is it a good thing to lose?"

Ultimately though, an IT operating model can benefit business executives the most. "This is all about IT getting its act together and being a better provider to the business," Ryan says. "We're not redefining the way a business operates, we're actually redefining the IT shop to better interact with how a business operates."

Indeed, given the emphasis on transforming IT departments to be more responsive to the business end of an organization, it could be argued that it is the CIOs' turf being invaded here. But according to Ryan, CIOs generally accept that the changes the model brings are beneficial.

"Most of the CIOs I operate with at the higher levels appreciate the need to be more effective and more efficient," he says. "They look good when the business is happy, because they're essentially an internal service provider.

"If they're prioritizing projects right, if they're providing the right level of support, if they're making their spend visible, if they're actually helping to cut costs around sourcing and interaction, they're going to look like heroes."