Answering the fundamental questions in one profession often shed new light on another. In this case it is applying marketing questions to IT, not from the perspective of increasing IT’s reputation, but by looking at its market penetration.
In this case thinking about IT market share helps illustrate the need for a new way of thinking about the value, importance and how you manage IT.
IT’s market share can be thought of in terms of the coverage IT provides for your core business processes. This is the degree to which IT supports the enterprise. CIOs asked this question informally respond that IT systems support an average of between 70 and 100% of their core business processes.
In the extreme, some CIOs report 250% coverage — multiple systems supporting the same processes.
IT has a 70% market share or 70% coverage of the business.
Ask a business executive what they would do with a 70% market share and they would talk more about how it was important to make sure that share was profitable, sustainable etc. They would talk less about how they would invest to capture the remaining 30% as they know that it gets more expensive the larger the market share gets.
When CIOs recognize that they have a 70% or grater market share in terms of covering major business processes with IT, they start to recognize that the name of the game changes from focusing on building new technology assets to generating a return on those assets.
Generating a return on IT is a different management mindset for CIOs who are accustomed to securing funds to build new solutions, upgrade functionality or re-platform new technologies. These activities place demands on IT and company resources with diminishing net returns generated from marginal functional enhancements.
Generating a return on IT involves more than ‘sweating assets’ by postponing maintenance, expanding capacity etc. Such moves generate short-term results that last as long as capacity and capability do not run out.
They time of return that leaders are looking to generate is business return measured by changes in business performance. Techniques such as reuse, Internet based services, and integrative innovation all center on using what you have to do more and to do new things. These returns are immediate and if managed properly become enduring parts of company performance.
Reuse generates business returns through decreasing cycle time. Reuse revolves around leveraging existing data, process and technology to address new business issues. Reuse was part of a joint MIT/Sloan/CISR research project that uncovered companies who are effective at reuse have greater sales growth and margin growth than their peers — even during a recession. Those benefits come in part through reducing time to results allowing companies to capture more of the revenue curve.
Internet based services, such as the cloud; SOA and Web Services create a basis for greater efficiency and responsiveness. The use of services and leveraging services via the Internet can turn have a multiplicative effect by reducing cost and resource requirements in operations and turning development times from years to months or even weeks.
Integrative Innovation creates new things via new combinations, consider the case of Deutsche Bank’s FX for Cash capability. The solution, featured as a case study for a recent Gartner Executive Programs report, came about because the bank wanted to take two processes based strengths and combine them to create a new fee based product. They needed IT to do that and offer a product that not only generated new sources of fee based income but also reduced the complexity and cost of customer operations.
Taking these actions changes the nature of IT, placing greater emphasis on responsiveness and innovation. You need both when you have a dominant market share something that most CIOs have but they do not realize.
What percentage of your core business processes is currently covered by information technology solutions?
That percentage is your market share
What is your share and what are you going to do about it?