Mark McDonald

A member of the Gartner Blog Network

Mark P. McDonald
GVP EXP
8 years at Gartner
24 years IT industry

Mark McDonald, Ph.D., is a former group vice president and head of research in Gartner Executive Programs. He is the co-author of The Social Organization with Anthony Bradley. Read Full Bio

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How do you know its time to change IT?

by Mark P. McDonald  |  November 11, 2010  |  1 Comment

Every leader needs to know when its time for change, or they will be the ones who face the change.  This requires that CIOs lead from the front in terms of looking at the current state of IT in a clear and balanced way.   Recognizing the need to change is hard, because change essentially means that what you are doing now is not the best you can be do.  That realization runs counter to our self-image, values and often times the way we feel.

We all work hard and by in large we all accomplish much – but things change and therefore we need to be ready to recognize the need to change as well.   Here are three questions that may indicate that its time to change IT.

Do you have a potent IT strategy?

This may seem a strange question – potency – but it reflects the criteria of an effective strategy.  A strategy should be a powerful statement of the decisions; actions and way your organization will create value.  In the case of the CIO those resources are IT’s people, business solutions, technologies, operations etc.   Unfortunately many IT strategies are little more than technology spending plans or lists of initiatives rather than a statement of how the CIO applies its resources to create value across the enterprise.

The IT strategy needs to not only describe how your organization wins, but also the decisions and resources the CIO needs to strengthen the enterprise. A good strategy says what it is and more importantly, what it is not.  It is something that shapes the decisions and actions throughout the year rather than being a document to secure the year’s funding.

Whether it stands alone or it is an integral part of your enterprise strategy, your company needs to make decisions, set direction and define the contribution of IT resources.  You know that your IT strategy is losing its potency when the primary question it answers is how you are going to spend money rather than how you will use technology to strengthen your core capabilities or address strategic challenges.  Assigning strategic importance based on time is another sign of weak strategy.

Time is not a valid reason for an initiative being strategic.  The longer something takes has nothing to do with the contribution to competitive advantage – the yardstick for measuring strategic impact.  IT has traditionally connected multi-year time-frames with the idea of strategic value which actually warps business perceptions IT relevance and reinforces the idea that IT is a back office function that has an incomplete view of strategic relevant or the pace of change.

Can I demonstrate the business value of IT in a way the business recognizes?

This question is perhaps the most persistent issue facing CIOs around the world. In the quest for business relevance, many CIOs have tried just about every measure possible.  They have created ‘balanced scorecards’, annual reports and the like to help the business see the value of IT.  Some are successful – like Intel’s annual IT report–  and others face continued challenge.

Business peers challenge your metrics program when they cannot see the value of IT outputs or position their role in business success.  This is often the case when IT metrics that report on what IT is doing rather than the value it creates.  The resulting focus puts activities above results strengthening the view that IT is a cost center managed as a comparative commodity rather than a source of capability and competitive advantage.   Another factor is the metrics themselves.  Measures such as IT as percent of revenue or the request for benchmark comparisons are all signs that people do not see the value of IT – they only see the cost.

While every CIO can produce a metrics by measuring something, in order to have the business recognize business value based on what you measure and how you communicate those measures.

What you measure. The metrics measures changes in business performance that is the Real business of IT ( book review) and the subject of Richard Hunter and George Westerman’s book.  Measure business performance in terms of productivity, cost, time or quality metrics.  Choose the measure business leaders use to assess the health of their business because those are the metrics that matter.

Start to think about IT as a percent of margin and you will begin to see why the business is paying such attention to IT spend. Is there one metric that best communicates the value of IT? well there are a few including measuring EBITDA/ IT Full Time Employees or the relationship between IT spend and free cash flow.

How you communicate the measure. The value of IT exists over time, not at any point in time – this means that you need to show how business performance changes over time to make the connection between IT and business improvement.  The way the business reports its metrics should be the way you report IT’s metrics, otherwise the business needs to translate your view of performance into their own.

Do you have the right resources and organization to deliver results?

This is the last and perhaps most important question of the three as people power your IT organization – they are your most important assets.

Your organization chart tells others a lot about your view of IT and its capabilities.

However, we often lock people into technical silos that restrict their flexibility as well as career potential.  You know that your organization is insufficient if you see cycle times for solution development falling, the balance of work moving more toward maintenance and the business bringing in outside resources of solutions because you do not have the skills or have the skills at sufficient scale.

CIOs will require new structuresto address the challenges they face in the future.  The sign that you do not have the right resources or the concern that those resources may not be organized in the right way all point to a need to change IT.

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