Managing IT as a Business.pptx
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During the 1990s, companies spent large amounts on IT investments without clear business cases. This document discusses managing IT as a business to ensure investments are aligned with business goals and deliver value. It argues the CIO must treat IT as a mainstream business, connect IT to corporate strategy, and focus on customer service, quality and performance. The CIO should also demand business units justify IT needs and pay for resources themselves. By integrating IT strategy with overall business strategy and focusing on profitability drivers, companies can better manage IT as a business.
![IT Spending … [continued]Some rationales at the time were:Y2K compliance — Preparing for the millennium and the dreaded obsolescence systems that might not even adjust to the “2000” date.Euro-convergence — Getting ready for European currencies to coalesce as the Euro.Fashion and fad initiatives — These included Enterprise Resource Planning systems, e-business, Customer Resource Management (CRM) and others.Status quo — Maintaining existing IT, often instituted for foggy reasons.](https://image.slidesharecdn.com/managing-it-as-a-businesspptx956/85/Managing-IT-as-a-Business-pptx-3-320.jpg)
Managing IT as a Business.pptx
- 1. Managing IT as a Business – a Book SummaryBook written by: Mark D. LutchenSummarized by: Faisal Yahya
- 2. IT Spending and InvestmentDuring the 1990s, a Fortune 500 company might easily have spent $200 million to $1 billion a year on IT. The business case for IT spending and investment was not exactly ironclad. … continue
- 3. IT Spending … [continued]Some rationales at the time were:Y2K compliance — Preparing for the millennium and the dreaded obsolescence systems that might not even adjust to the “2000” date.Euro-convergence — Getting ready for European currencies to coalesce as the Euro.Fashion and fad initiatives — These included Enterprise Resource Planning systems, e-business, Customer Resource Management (CRM) and others.Status quo — Maintaining existing IT, often instituted for foggy reasons.
- 4. The ProblemAlthough IT is an enormously significant investment, only few executives understand:how much they are spending? why they are spending it?, and what they are getting for their money?
- 5. The Core ProblemCIOs have contributed to the problem by failing to communicate effectively with other managers and by allowing technical concerns to trump business concerns far too often. That has to change!
- 6. Now what …For businesses to get the value they deserve from their IT spending, executives must look at IT as they look at other huge business units.Corporate IT users must start to “pay” for it, perhaps via transfer prices or corporate budget process tradeoffs.
- 7. The FactPeople don’t valueresources they don’t payfor, so many employees have a natural indifference to the value they might derive from IT.
- 8. IT as Business To enable IT to deliver as much benefit as it can, companies should take these six steps:Treat IT as a mainstream business operation.View the IT group as able to help corporate leadership and business units achieve their goals. IT does not have to be a profit center, but it must be a value center.Connect IT to your corporate strategy in practical, pragmatic, executable ways.Mandate that business units must determine, define and communicate the IT they need and why. Turn IT management into relationship management.Focus the corporate culture on customer service, timely material management, quality and performance.Pay IT executives and managers for the value they deliver.
- 9. The New CIOIn the past, the CIO has been a technical specialist, often isolated from the other managers and executives.But the days of the CIO-as-technician are numbered.
- 10. The New CIOTo do the job today and in the future, the CIO needs to:Plan, implement and communicate IT strategy.Deliver IT performance in business terms, by generating revenue, reducing costs and contributing to profits.Train people and turn them into functioning team members.Coordinate and, as needed, standardize IT policies and programs across business units.Be the organization’s unique voice on technology.
- 11. The New CIOIT budgets are big, and poor or wasteful decisions by other business units often make them bigger than necessary. The CIO should demand that every unit make a strong business case for its IT wish list, and pay its own way. Yet, a CIO withoutexecutive status may find it difficult to withstand the pressure from unit managers who get carried away by the latest IT fashion.
- 12. Strategic LinkageThe CEO and CIO can work together to turn IT into a business by integrating the firm’s IT strategy with the company’s overall business strategy.The necessary steps are:Clarify the business strategyCreate a vision for ITDefine objectives for the IT strategyPrepare the strategic plan for IT
- 13. The New CIO FunctionsManage the IT department, which can mean being responsible for a staff numbering from just a few people to thousands.Be the company’s strategist for technology.Provide technological advice to the organization’s leadership.Serve as the architect of the organization’s IT infrastructure.
- 14. The New CIO PositionsThe CIO works at the center of a web of relationships including internal customers, such as fellow executives who need to understand what IT can accomplish for them.In larger organizations, business units may have their own CIOs, who must negotiate their way between the corporate CIO and the business unit leadership. The CIO’s web extends to members of the IT unit, who need to know where they fit in the business and why they are there.CIOs also work with outside vendors and outsource partners, who are becoming increasingly important.
- 15. Outsourcing as an OptionOutsourcing can reduce risks, contain costs and help the organization achieve standardization and implement best practices. Many CIOs fear outsourcing, although they should view it as another IT option. The CIO of the future may expect to be the focal point of a network that includes some internal IT and some outsourced service relationships, with the balance between the two varying from organization to organization.
- 16. IT and Profitability DriversTo make IT an integral part of a business, the CEO and the CIO must plan and implement a strategy to align IT with business drivers.IT must turn to the elements that drive profitability and contribute to shareholder value, including: …. (see the next slide)
- 17. Contribute to shareholder value (1/2)Revenue growth — IT can evolve with organic growth, but growth by acquisition may require IT to take dramatic steps to implement new, standardized systems in order to fold the acquired or merged companies into the broader organization.Capital investment — IT can help companies maximize return on capital. A sound IT strategy may improve productivity and reduce inventory, for example, thereby making it unnecessary to invest additional capital in new plants, storage or the like.Distribution — IT can open new channels of distribution (for example, e-commerce) and can improve the performance of existing channels (for example, IT-enabled shipping and delivery programs).
- 18. Contribute to shareholder value (2/2)Cash flow — IT can save money by reducing unnecessary costs for inventory, headcount and more.Cost cutting — When a company manages IT as a business, it holds the IT unit to the same cost disciplines as other units. It eliminates the feast-or-famine IT investments, which lavish money in flush years and cut spending in lean ones, to the detriment of a sound IT investment program.R&D innovation — IT may facilitate an R&D program, for example, by allowing companies to track and monitor research projects. It may provide a platform for R&D, as e-commerce did in the retail business. IT may also become part of the firm’s innovations, as in using electronic media to distribute music and films.
- 19. IT spending is not merely a matter of quantity but of quality. It is not what you spend, but how you spend it that matters.Managing IT as a business helps bring business discipline to the IT investment process. Because most companies do not manage IT as a business, spending tends to be diffuse.
- 20. SummaryBecause technicians, not business people, often drove IT investments, many IT systems have only peripheral relevance to the ongoing business.The chief information officer (CIO) must be sure that IT advances the firm’s strategy and must keep improving IT, which is a never ending job.This means focusing on results, not on processes, and aligning IT with the firm’s profitability drivers.The CIO must communicate with the IT organization, with internal customers or users, and with outside partners, such as vendors or outsourced service providers.
- 21. Somethin’ about me Faisal Yahya, MM CISSP In-depth knowledge in a Project Management specifically to IT Governance area with over 15 years experience in IT industry. Certified Security Professional with over 8 years experience. Email: [email protected]