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Managing IT in 2003

• By John D. Williams
• February 28, 2003

Thank goodness 2002 is over. The sun is shining, birds are chirping and IT spending is back, right? Unfortunately, the economy continues to drive IT behavior in 2003. So, how did you respond to the budget crunch of 2002? Did you hunker down, hoping for better times, or did you try to make bits of progress where you could? Many just hoped to keep the lights on and basic services running. Will 2003 be any different? A study by Boston-based consulting firm Aberdeen Group predicts a 4% increase in spending. However, a report by New York investment banking firm Goldman Sachs predicts a 1% drop in IT spending. The truth probably lies somewhere in between. What remains clear is that 2003 will continue to present its share of challenges.

But what happens when the economy turns around? How will you scale up and help the business? Can you do more than just survive? The business will want to take advantage of new opportunities. If you act smart, you can do more than just survive today's downturn. You can help ready the business to take advantage of new opportunities.

In today's economic climate, it's results that count for both business and IT. Results are measured in three ways: revenue, cost and quality. Software vendors, in particular, have been hard hit by the economic slump. As we've seen recently, the next opportunity may be a merger or acquisition. With revenues tight, companies will focus on cash flow and cost containment, and sizeable budget cutbacks have slowed IT progress to a crawl. Amid all this pressure, quality has become an issue that needs more than lip service. With the current marketplace stresses, companies have to get it right the first time or they're out of business. Quality is critical in helping companies take advantage of today's opportunities.

One place to start meeting the challenges of revenue, cost and quality is to look for alignment with the business. This has been a hot issue with CIOs for some time. Are you spending your time and effort on projects that directly and immediately benefit the business? IT has had to become better at this during the past year. When money is tight, it is important to make every dollar count. I know of one CFO who began his evaluation of IT projects by demanding that the IT team show how a project would add value to the business. If the team did that, he would then demand to know how much value and when the company could expect to see it. Projects with an ROI of more than 12 months need not apply. Was this unreasonable? I think not. When the business is under pressure to demonstrate results, the IT department should expect no less.

This approach to selecting projects will focus on those with an immediate value to the business. But directly demonstrating value can be problematic. Needed infrastructure projects typically get put on the shelf. Projects that appear tangential to the immediate needs of the business need close scrutiny and a clear connection to business value before they will be accepted. A holistic enterprise architecture can help to show clear links between the customers and markets served, the business capabilities needed to reach those customers and markets, and the systems and underlying technologies necessary to support those capabilities.

Unfortunately, if you don't have an enterprise architecture in place, creating one could be viewed as a tangential, non-essential project. One approach to this is to construct a high-level enterprise architecture and flesh out the details a bit at a time as you work on linkages for particular projects. This doesn't give you a base for evaluating all projects immediately, but it does answer the linkages question, and it gives you a better chance of demonstrating how the project will add value to the firm. It also provides a base for future development.

Much of IT's focus in the past year has been on understanding and managing costs, and it continues to be a concern. While many shops have a charge-back structure to cover costs, understanding the true costs of managing and operating a shop can be difficult. This is one area where an enterprise architecture can pay for itself. For example, if you use something like the Zachman framework, you have a context for understanding your systems, infrastructure, people and operational requirements. The architecture can also help you to understand how important any given system or operation is to the business. This is the alignment issue once again. Let's face it, not everything we do is of equal value to the business. Though we are masters of self-justification, current times demand that we take a hard look at all our IT capabilities and focus on those that add the most value to the business.

One way to do this is to use our architecture to evaluate how well we support the business. This is opportunity identification. We may find processes or systems that are not as efficient or effective as they should be. By identifying these opportunities for improvement, we can select projects that are both aligned with the business and prioritized to deliver the greatest value. For example, CRM projects often address both revenue and cost issues. Businesses need more revenue, and CRM systems can help to identify customers with the greatest potential for generating additional revenue. This is 1:1 marketing at work. CRM can also help to manage costs by helping the company focus on using its resources to its best advantage. This type of project is fairly easy to justify in terms of delivering business value.

Opportunity identification also allows us to evaluate or re-evaluate technology. While many companies are not investing in new technology, a careful review may be able to identify appropriate technology that will add additional value to a project. For example, I've seen a company adopt Web services as a way to create more flexible systems. The driving factor: The business was changing processes as quickly as possible to meet changing market conditions. Flexibility in using existing systems was required to meet this goal.

Quality often gets verbal support, but not the focus it needs to be taken seriously. When the business operates on razor-thin margins or at a loss, there is no place for miscues and ''do-overs.'' Quality of execution is critical. Likewise, quality in the systems delivered and maintained by IT is critical for current and future needs. Delivering systems that don't work right the first time can kill a business. I've seen a number of shops that were woefully unprepared for this focus on quality. In the past, software development life-cycle (SDLC) methods and processes were often ignored, glossed over or treated cavalierly. Solid, well thought out SDLC methods and processes are critical to delivering quality systems time after time. Fortunately, there's no need to start from scratch. There are a number of methods available. If you don't already have one, or if the one you have is insufficient, select an existing one that is the closest fit to your needs. It should provide a complete framework for helping you to consistently deliver quality systems.

Will these approaches to meeting revenue, cost and quality goals still be helpful when the turnaround comes? I think so. For example, when IT is aligned with business, the business will be able to respond with more agility to the changing demands of the marketplace. The current focus on demonstrating business value helps us to achieve this alignment. Even when the economy turns around, a focus on making people more effective and processes more efficient will still be needed. Creating quality systems will also help us to prepare to scale up when necessary. Although it is true that not all systems are scalable, you stand a better chance of scaling one of good quality than you do of scaling one so poorly constructed that it needs to be thrown away. And selecting appropriate technologies can help. For example, Web-based systems scale more economically than client/server systems.

What do you think? How will you face the challenges of 2003?