Cracking the Unsolved Mystery of IT

Cracking the Unsolved
Mystery of IT
IT is more important than ever to business success,
but realizing its full potential remains a dilemma for
many organizations. What can business and IT teams
do to get better results?
Cracking the Unsolved Mystery of IT
1
In a complex and rapidly changing business environment, corporate IT functions are under
pressure to deliver business-critical solutions—the kinds that increase revenues, reduce costs,
and cut time-to-market—faster, more frequently, and with the same or smaller budgets. But
business leaders, stung by past IT projects that took too long, went over budget, or stalled
business initiatives, question the IT function’s reliability and resist new systems because they
don’t fit their requirements. At a time when collaboration is crucial, business and IT teams often
share a fractious relationship in which blame and mistrust obstruct co-creation.
Trends come and go, but business-IT alignment remains a persistent bone of contention for
chief information officers (CIOs) and business executives. Surveys by the Society for Information
Management over the past decade consistently rank business-IT alignment as the number one
issue faced by CIOs.
Neither the IT function nor business teams in isolation can solve this mystery. Both must work
together to build a successful relationship that allows the organization to realize the full value
from its IT investments.
The Mystery Unfolds
We define business-IT alignment as “a formalized process for collaboration between business
users and the IT function that minimizes risks and ensures value is realized.” In other words,
alignment is about enabling and delivering on IT demands consistently and convincingly in a
relationship based on trust, transparency, and mutual commitment. It requires common goals,
coordinated steps, and mutual understanding. An effective partnership between business and
IT teams leads to plans that are realistic and reliable, and supportive of each other’s objectives
and constraints. IT solutions are then more effective and shared objectives are achieved (see
sidebar: The Benefits of Business-IT Alignment). Unfortunately, as one CIO admitted at our annual
CIO summit in Grindelwald, Switzerland, “Business-IT alignment today is like a game of soccer,
but IT is often the ball.”
The Benefits of Business-IT Alignment
Realistic planning. When changes
are controlled and executed
according to a defined plan, IT
projects run efficiently and deliver
on time. A stable and predictable
IT environment supports longterm business planning as it
facilitates IT’s ability to innovate,
make timely investments in new
technology, and build future
capabilities. In addition, IT can
allocate resources and plan the
use of third parties with greater
certainty.
Cost efficiency. Close involvement of business users in the
early stages of software
development can lead to better
defined requirements, resulting
in more accurate effort estimates
and timelines, and the earlier
identi-fication of coding errors.
By focusing energies, eliminating
redundant activities and waste,
and working to an agreed plan,
“operating noise” and costs from
inefficient processing can be
avoided.
shared results, and resolving
issues involves teamwork. Joint
accountability shifts customer
satisfaction so that it is as much
about “how it was delivered” as
“what was delivered.” With fewer
competing priorities, the IT
function can focus on improving
the quality and value of its
deliverables, and ensuring
business users adopt new
systems effectively.
Customer satisfaction. With
greater dialogue and transparency, the business-IT
relationship is strengthened and
a shared commitment develops.
Positive outcomes become
Cracking the Unsolved Mystery of IT
1
Five emerging needs are making business-IT alignment more crucial than ever before.
1. The need for speed. Business and IT alignment is vital in industries and regions undergoing
rapid change. For example, much of the Middle East is experiencing hyper-speed evolution
(HSE), a phenomenon in which organizations reach the maturity levels of global leaders in
drastically shorter time frames (see figure 1). IT feels the strain of rapid business growth and
needs to play catch-up to deliver timely and effective solutions. Agility, reliability, and a
constructive business dialogue are crucial because there is little margin for error—without
strong business-IT alignment, business growth can be impaired and IT costs can rise.
Figure 1
During hyper-speed evolution, IT often plays catch-up on delivering solutions
Hyper-speed evolution
• Rapid growth time frames
• Learning from others
• Fueled by support mechanisms
• Need for agile, reliable IT solutions
Traditional economies
• Evolution over long periods of time
• Mature ecosystems
• Growth through iterative innovation
• Time to develop
Source: A.T. Kearney analysis
2. The need to do more with less. Almost 100 CIOs across Europe, the Middle East, and Africa took
part in our “IT in the Downturn” survey. The leaders told us that business growth and new requirements are the primary sources for IT cost increases—even as IT budgets are being squeezed (see
figure 2 on page 3). IT’s conundrum is unique—few corporate departments are asked to be the
conduits of business transformation while at the same time enduring sizable budget reductions.
Many IT functions are buckling under the pressure of their existing workloads and cannot
address strategic requirements—partly the result of limited in-house capacity following years of
cost cutting, and partly the result of the complexity of their legacy systems and architecture.
Unable to get ahead of the curve, business engagement is limited to a help desk, and IT misses
the opportunity to serve internal clients better.
3. The need to meet expectations. IT functions already wear many hats as enablers of process
efficiencies, communications, and information-based decision making. Yet business and IT
teams both feel let down. For instance, users want flexible, tailored solutions, but the IT function
wants standardization and commonality.
Cracking the Unsolved Mystery of IT
2
Figure 2
Business growth and new requirements are the primary sources for IT cost increases
How much have these factors increased your IT costs over the past 18 months?
Business
growth
Demand-side
factors
New
requirements
Legislative
changes
New IT
products
Ranked by
relevance
Increased
vendor costs
Supply-side
factors
1 (high)
2
New IT
standards
3
4 (low)
Other
0
5
10
15
20
25
30
35
40
Note: Respondents ranked factors on a scale of 1 (high importance) to 7 (low importance). Only top four factors are included.
Source: A.T. Kearney survey of CIOs
In our recent IT Innovation and Effectiveness Study, seven out of eight business executives say
that IT is strategically important to the realization of their objectives, yet only one in four say
they value their company’s IT function. For IT functions to succeed—and to be recognized for
their successes—there needs to be greater clarity on their mandate and how it fits with what the
business needs.
4. The need to collaborate. The lexicon of IT is littered with business-sounding terms such as
“clients,” “solutions,” “networks,” and “services,” but in reality their usage only confuses and
distances non-technical audiences. IT is no longer the preserve of specialists and scientists.
Even as technology has become more user-friendly, the IT function remains burdened by
jargon, methodologies, and processes that are hard to comprehend and operate. Unsurprisingly,
business users and IT teams seldom understand each other’s disciplines, resulting in poorly
specified requirements and re-work.
With the mass consumerization of IT, business users are more technologically literate, have
strong opinions on what they need and how it should be delivered, and are more confident in
selecting and using IT. They want to do more than merely park their requirements on IT’s front
door and wait for delivery. With vendor-led innovations and disruptive technologies being
directly marketed to users, the IT function is steadily losing control, despite its standards and
policies. A more collaborative relationship is necessary without compromising on IT’s
mandate and accountabilities.
Cracking the Unsolved Mystery of IT
3
5. The need to innovate. Given the lengthy timescales, delays, and frequent failures associated
with major IT projects, it’s not surprising that few business leaders look to their IT function to
conceive and implement “white-space” innovation. The IT function has traditionally been the
gatekeeper to innovation in what is effectively a supplier-led IT marketplace. This role, however,
can make it an inhibitor rather than a champion of innovation. For good reasons, IT teams need
to screen and approve new technologies before they are deployed. But a common complaint
from the business community is that corporate IT just can’t keep up, that it’s slow to adopt new
ideas, and that it buries new ideas in rules and policies that destroy value. Addressing this lack
of agility should now be a priority for IT functions.
Six Clues to Solving the Mystery
To manage business demands, IT managers have traditionally used only a few of the options at
their disposal—usually those easiest to implement rather than the most effective (see figure 3).
Demand management has to be part of a holistic business-IT alignment framework. Simply
imposing demand controls on the business will not lead to sustainable benefits or foster
business-IT alignment.
And it’s a tougher climb than it may seem. One global consumer goods company thought that
breaking its IT function into separate supply and demand entities—one to manage new business
demands and the other to supply IT services—would be an effective way to address the
conflicting priorities IT faced. Yet it hasn’t quelled the general dissatisfaction with how the IT
function supports business needs. The handover of newly captured business requirements to
development teams remains difficult, and business users are still unclear of where to turn for
post-implementation support.
Figure 3
IT leaders’ traditional options for managing business demands
Heighten cost
awareness and tighten
policies and standards
Occasionally used
Seldom used
Impose approvals and
tighten procurement
process
Encourage
substitution
Reduce
quantity
Reduce
frequency
Reduce
requirements
Eliminate
need
Low
Ease of implementation
High
Commonly used
Low
Effectiveness
High
Source: A.T. Kearney analysis
Cracking the Unsolved Mystery of IT
4
Figure 4
Six steps for creating business-IT alignment
1.
4.
Govern
IT
Pla 3.
an n su
d d pp
em ly
an
d
5. oles
e r the e
fin ge erfac
De na
t
ma T in
to ss-I
e
sin
bu
Business-IT
alignment
framework
2. on
ree n
Ag mmo es
co ectiv
j
ob
Ed 6.
u
thr cat
inv ou e
olv gh
em
en
t
Lead beyond
traditional
boundaries
Source: A.T. Kearney analysis
To build business-IT alignment all facets of this complex problem need to be addressed. We
identify six important areas: open and collaborative leadership, shared objectives, end-to-end
integrated planning, effective governance, clear roles and responsibilities, and greater
business-IT education and understanding (see figure 4).
The CIO needs to think like a company
executive, not a technology ruler, and serve
as an ambassador for the IT function.
1. Lead beyond traditional boundaries. Business-IT alignment requires leadership—in the form
of anticipating and shaping needs, aligning expectations, and acting with purpose. And
alignment starts from the top and permeates all levels.
From an IT perspective, the CIO needs to think like a company executive, not a technology ruler,
and be an ambassador for the IT function. It is important for the CIO to engage upward and
outward to communicate the role of the IT function, its value proposition, and its achievements.
By listening to its internal customers and resolving challenges in a positive and proactive
manner, the IT function can strengthen its understanding of business needs and priorities, and
propose better IT solutions.
To break out of IT’s stereotype as a “black box,” CIOs must make public relations a core activity,
spending a considerable portion of their time—we suggest up to 40 percent—with internal
customers to build trust, improve transparency, and gain insight on strategic initiatives.
Cracking the Unsolved Mystery of IT
5
Business executives also need to be a channel of communication for their teams and model
the behaviors they wish their team members to emulate. They need to ensure the strategic
value of IT is discussed and woven into their business plans, and information is shared openly
with the IT function.
In addition, management rotations of IT and business executives can help cultivate a collaborative culture and enable IT to transcend traditional organizational boundaries.
2. Agree on common objectives. A productive business-IT relationship requires each party to
be explicit about what they require and why, and their timescales. They need to recognize how
their objectives are mutually compatible, and agree on how they will be met, their respective
contributions, and how to measure performance.
Best-practice IT functions work closely with their business counterparts, helping set strategic
goals and preparing integrated IT road maps. By working closely with business leaders to
understand their requirements, they can better align IT spending. As a shared “contract,” the
final integrated IT road map should be ratified by the CIO and the leaders of the relevant
business units. For example, a leading telecom operator in the Middle East consolidates plans
for all new product and promotional launches for the year, translates these business needs into
technology solutions, and uses the combined inputs to develop a business-IT road map.
Establishing common objectives also lends itself to meaningful key performance indicators
(KPIs) that allow the IT road map to be tracked and the business value of IT communicated (see
figure 5). Communications to IT team members should provide clarity on the business direction,
its implications for the IT function, and the specific steps to be taken.
Figure 5
Common KPIs help track the business value of IT
Business
contribution
Customer
orientation
Operational
excellence
Future
orientation
Workforce
management
• Top performer
retention
• Cost reduction
projects
• Customer
satisfaction
• IT spending as a
percent of revenue
• Contribution to
technology strategy
• Revenuegenerating projects
• Average time for
ticket closure
• IT opex as a percent
of revenue
• Innovation spending • Offshore staff
as a percent of
composition
portfolio spending
• Skill alignment
• Innovation
execution rate
• Project delivery
• Cost impact
• Key system SLAs met
Notes: KPIs are key performance indicators; opex is operational expenditures; SLAs are service level agreements.
Source: A.T. Kearney analysis
3. Plan supply and demand. Jointly forecasting future needs allows both parties to collaboratively plan supply and demand over the short and long term, decide budgetary cost allocations,
build a common road map, and agree on any changes to the work schedule. A number of
techniques are available:
• Cut-off periods. Business requirements are submitted according to a schedule so as to
“batch and queue” demand. A leading global financial institution, for example, classifies
Cracking the Unsolved Mystery of IT
6
new requirements based on the development effort they require. Smaller requirements have
weekly cut-off periods, while larger requests have a quarterly window.
Cut-off periods establish a discipline that leads to greater transparency and allows the IT
function to assess its workload and plan its resources efficiently. Business users also benefit
from a clearer timetable of when to submit IT requirements and realistic estimates on when
they will receive solutions.
Quotas encourage business units to
consolidate, review, and prioritize their
demands before submitting them to IT.
• Triage. Requests are screened before any IT resources are committed. A team acts as
a gatekeeper with responsibility for assessing the IT effort and types of resources needed.
Demands are prioritized based on their business importance and ease of implementation.
On the supply side, resources are also planned and optimized against this known workload.
• Quotas. Business demand (which is variable in nature) is capped on the basis of a permitted
quota, so that at an aggregate level it matches available IT capacity over a certain time
horizon. Because IT capacity is defined by the budget and is expressed in monetary terms,
business demands are similarly quantified using effort estimates and rate cards, and initially
sized based on historic demands by business area.
A telecom operator in the Gulf region recently implemented such a quota model, restricting
the number of business requirements to the level of IT supply planned in the annual IT budget
(see figure 6). This approach encouraged business units to consolidate, review, and prioritize
their demands before submitting them to the IT function, knowing that excesses were unlikely
to be delivered on time and could put the entire IT portfolio at risk. When major business
changes require IT quotas to be revisited, the need for additional IT funding is also clearer and
easier to approve.
Figure 6
Using quotas to ensure alignment between business
demand and IT supply
Variable business demand
Large
projects
Illustrative
Business unit IT capacity
quotas based on budget plans
Finance
Sales
Operations
Changed
requirements
Service
requests
Delivered
IT
HR
Marketing
Source: A.T. Kearney analysis
Cracking the Unsolved Mystery of IT
7
4. Govern IT. Governance ties together operational and strategic plans, ensures IT implementation adheres to the integrated business-IT road map, and initiates any corrective actions.
When effective, it ensures timely decision making, facilitates the resolution of issues and
escalations, and enables stakeholder alignment.
Some common entities that can help enable business-IT alignment include:
• Portfolio and investment committee. Serves as a strategic forum to oversee the IT project
portfolio, coordinate IT supply, and approve new IT projects and capital investments.
Business representation on these committees is essential to ensure business requirements
and priorities are understood and managed collectively.
• IT innovation council. Assesses industry trends and scans the market for new concepts
and technologies that could improve IT service and generate additional business value.
Recommendations are passed to teams involved in solution planning and design. Business
and vendor representation are crucial to the success of this council.
• Architecture and design authority. This group develops, maintains, and plans the
improvement of the enterprise architecture in terms of policies, standards, and overall
enhancement.
• Program management office (PMO). Is responsible for delivering the overall IT road map,
scheduling resources, tracking progress of change requests, and reporting on status.
• Quality management office. Establishes and enforces policies and standards, and assures
deliverables for compliance.
• Vendor management office (VMO). VMOs are responsible for service provider selection,
renegotiations, and ongoing vendor performance and contract management. Outsourcing
vendors can have a major impact on customer satisfaction, so their governance is vital to
business-IT alignment. VMOs also routinely reassess the make-vs.-buy strategy across all
stages of the systems development life cycle (SDLC) to ensure external capabilities are
used effectively.
Effective governance ensures timely
decision making, facilitates the resolution
of issues and escalations, and enables
stakeholder alignment.
5. Define roles to manage the business-IT interface. Aligning how business users and IT teams
engage with each other requires more than just superficial changes to job titles. Points of
contact and responsibilities need to be defined and understood by both parties, and the right
capabilities and sufficient capacity assigned.
Business users typically interact with IT to submit new requirements, and then step away until
the IT solution is ready. This approach does little to engender trust and transparency, or develop
mutual understanding. Greater, more regular collaboration is required, along with a clearer
definition of roles and responsibilities.
Cracking the Unsolved Mystery of IT
8
Although many approaches are used to capture business requirements, few are successful at
enabling business-IT alignment.
At one company we interviewed, business process specialists (BPS) capture, analyze, and
document the requirements in their respective areas and forward them to IT. This “over-the-wall”
approach, however, does not help IT plan its workload in an efficient manner and results in
frequent clarification requests that delay IT delivery. A major retailer has enhanced this approach
by appointing a “speaking partner” within the IT function as the single point of contact for the
BPS. Together they shape and filter business requirements before submitting them to IT as a
change request or project.
Ideally, a dedicated team of business users and IT specialists should work together to capture,
analyze, and document requirements in a business area. Together they should solicit user
inputs, harmonize requirements, resolve gaps, determine impact on processes and IT systems,
and attain business sign-off.
Greater transparency and awareness
of how each party operates promotes
understanding and builds familiarity with
content and terminology.
Since establishing such a team is not always feasible, a more pragmatic alternative is to appoint IT
business relationship managers (BRMs) to work with end users to shape, capture, and synthesize
their requirements and prioritize demands. The BRMs assess the business environment to identify
future IT solutions, monitor business satisfaction, and provide feedback to the IT function on
how it can improve. They also act as representatives of the business within IT, overseeing and
expediting IT delivery and providing regular updates to users. By screening requests before
they are submitted to IT, user expectations are better managed and IT can work with a stable
set of requirements.
A Middle East telecom company is using this approach to good effect, with the IT BRMs engaging
directly with business users. Their role is to help users articulate their needs in a structured and
standardized way, and to filter and prioritize requests. Many of the BRMs migrated, or are on
secondment, to IT from the business, which gives them the business insight and credibility
crucial to the success of this approach.
6. Educate through involvement. Greater transparency and awareness of how each party
operates promotes understanding and builds familiarity with content and terminology. While IT
functions typically have some understanding of business operations based on their overview of
enterprise applications, IT is often seen as a black box by outsiders. Involving and exposing IT
users to the development cycle can be beneficial. It can also help IT teams understand how
their solution supports an overall business initiative.
There are four common approaches:
• Mixed project teams. A mixed team of IT and business staffers works together to design,
develop, and deploy new IT solutions. In this model of cooperation, there is greater
Cracking the Unsolved Mystery of IT
9
understanding, trust, and alignment on what IT is expected to accomplish and how
requirements are to be fulfilled. This often works for large, technology-enabled projects.
However, not every business requirement warrants the full-time assignment of a mixed
project team.
• Structured learning. Formalized training sessions, such as through an in-house academy,
can educate both business and IT teams about their respective fields. Although this is a
passive way to learn that is disconnected from the actual delivery of IT, structured learning
can help build a base level of familiarity and trust.
• Staff secondments. Temporary transfers can help IT managers gain important business
exposure and contacts as well as a hands-on understanding of how IT is actually used. The
managers also broaden their business knowledge and sharpen their skills in managing non-IT
resources, and can be powerful agents to help communicate IT’s message deep within the
organization. Similarly, business managers transferred to IT gain an inside-out view of how IT
operates and supports business requirements. From the vantage point of IT, these business
managers acquire a valuable cross-functional understanding of the wider organization.
One CIO for a multinational metals business based in the Middle East was temporarily transferred to the supply chain team, and the move helped him break down internal boundaries.
Over the course of his secondment, this CIO acquired business knowledge and established
credibility across the business that, on his return to IT, proved instrumental to the positive
relationship and award-winning success of his team.
Agile methods deliver results with an
increased focus on value generation,
shorter time-to-market, lower development
costs, and higher quality compared to
traditional systems development methods.
• Agile methods. IT functions are increasingly looking beyond the traditional “waterfall”
approach to systems development to “agile methods.” Agile involves an incremental and
iterative approach that requires regular business interactions for prioritization and validation
purposes. Agile methods break down large, monolithic IT projects into smaller, more frequent,
time-boxed “sprints” with regular user reviews of prototypes. As IT solutions evolve in line
with user needs, they tend to deliver on time and to a higher level of business acceptance.
This immersive approach has proven to be one of the most effective ways to educate business
users about IT and to build shared accountability for IT projects.
Agile methods deliver results with an increased focus on value generation, shorter time-tomarket, lower development costs, and higher quality compared to traditional systems development methods. Our recent paper, Agile Software Development Hits the Major Leagues,
discusses the practical application of agile development. For example, AT&T has successfully
employed agile development on complex, cutting-edge IT projects that have successfully
involved business users throughout the entire IT development process.
Cracking the Unsolved Mystery of IT 10
A Mystery No More
As businesses increasingly rely on IT to support their operations and enable growth, effective
dialogue and a shared IT plan cannot be overlooked. Greater collaboration and coordination
between business and IT teams increases the odds of success.
Business-IT alignment has remained an unsolved mystery for too long, yet the six areas described
above shed light on how it can be easily attained. Achieving business-IT alignment is not, however,
a one-time effort, but rather an ongoing exercise in communication and trust building. It takes
time and effort from all parties involved. By formalizing the way alignment occurs, organizations
can create immediate results and build a long-term competitive advantage.
Authors
Dan Starta, partner, Middle East
[email protected]
Farhan Mirza, principal, Middle East
[email protected]
Sauvik Tegta, consultant, Middle East
[email protected]
Cracking the Unsolved Mystery of IT 11
A.T. Kearney is a leading global management consulting firm with offices in more
than 40 countries. Since 1926, we have been trusted advisors to the world's foremost
organizations. A.T. Kearney is a partner-owned firm, committed to helping clients
achieve immediate impact and growing advantage on their most mission-critical
issues. For more information, visit www.atkearney.com.
Americas
Atlanta
Bogotá
Calgary
Chicago
Dallas
Detroit
Houston
Mexico City
New York
Palo Alto
San Francisco
São Paulo
Toronto
Washington, D.C.
Asia Pacific
Bangkok
Beijing
Hong Kong
Jakarta
Kuala Lumpur
Melbourne
Mumbai
New Delhi
Seoul
Shanghai
Singapore
Sydney
Tokyo
Europe
Amsterdam
Berlin
Brussels
Bucharest
Budapest
Copenhagen
Düsseldorf
Frankfurt
Helsinki
Istanbul
Kiev
Lisbon
Ljubljana
London
Madrid
Milan
Moscow
Munich
Oslo
Paris
Prague
Rome
Stockholm
Stuttgart
Vienna
Warsaw
Zurich
Middle East
and Africa
Abu Dhabi
Doha
Dubai
Johannesburg
Manama
Riyadh
For more information, permission to reprint or translate this work, and all other
correspondence, please email: [email protected].
The signature of our namesake and founder, Andrew Thomas Kearney, on the cover
of this document represents our pledge to live the values he instilled in our firm and
uphold his commitment to ensuring “essential rightness” in all that we do.
A.T. Kearney Korea LLC is a separate and independent legal entity operating under the A.T. Kearney name in Korea.
A.T. Kearney operates in India as A.T. Kearney Limited (Branch Office), a branch office of A.T. Kearney Limited,
a company organized under the laws of England and Wales.
© 2014, A.T. Kearney, Inc. All rights reserved.