Early my career, a CFO asked me a very good question. “If IT can’t deliver a return on investment that is better than what I could get by putting corporate monies into a bank savings account, then why would I want to invest in IT?”
At the time, I didn’t have a good answer. In fact, I was a bit embarrassed. But looking back, I realize that he was absolutely right.
Is your IT organization delivering a good return on investment? Or is your IT organization being silently killed?
Where does IT spend the business’ money?
If I look at the broad categories of IT spend, there are three categories where IT spends the business’ money:
KTLO, or Keeping The Lights On, can be thought of as the cost of doing business. All other things remaining equal, KTLO is spend that typically fluctuates little on a year to year basis. This category includes spending on things like support contracts, salaries, training, regulatory and legal compliance, and maintenance and support activities to keep current systems running optimally.
Innovation represents investments in technology. This type of spend includes initiatives like new systems, new lines of business, technology enablement of new business products, mergers and acquisitions, or significant expansions of existing services. This can be thought of as “grow the business” or “transform the business” kinds of spend.
What is the third category of IT spending?
Break-fix. Break-fix represents spending related to failed changes. Recurring incidents. Major incidents. Failed deployments. Re-work. Poor quality.
When technology breaks, or changes fail, or an issue occurs that interrupts the business’ ability to do business, IT must stop whatever it is doing and fix the issue. Granted, some (hopefully limited) number of outages and failures should be expected. After all, technology ages and at some point, may fail. Business situations emerge in ways that software was perhaps not designed to manage. The bottom line is that when things break, IT has to fix what’s broken.
But here’s the thing. Regardless of whether IT is spending its time KTLO, innovating, or fixing, it all pays the same. To say it differently, an organization’s IT personnel are paid the same, regardless of what they’re working on.
Here’s the other thing. CFOs expect IT to deliver within its annual budget. IT doesn’t get more budget money to spend, just because it’s spending more money “fixing” rather than “innovating”.
If you’re the CFO, where would you like to see IT spending its time? Certainly not on “break-fix”.
What is the impact?
What happens when fixing issues and constant rework becomes (nearly) a way of life for the IT organization?
Well, two things.
First, remember those innovation projects that had been planned? When IT spends more time on “fixing”, those innovation projects get broken out into subprojects in the hopes of getting “something” rather than “nothing” done. Or they get delayed until the next budget cycle. Or they get outsourced to someone else. Or they don’t get done at all. Why? Because IT is too busy with rework and fixing, it has no time to work on the innovation that the business requested.
Second, the reputation and credibility of the IT organization become damaged. While some in IT may be (briefly) recognized for their heroic efforts in “putting out the fires”, the longer-term damage is being done. IT becomes perceived as being too reactive, inconsistent, incompetent, and unreliable.
Are the silent killers evident at your IT organization?
I just finished reading “The Art of Business Value” by Mark Schwartz. In the book, Schwartz described the abstracted total of IT capabilities for many organizations – software, infrastructure, the whole bit – as a giant hairball. This giant hairball is continually getting new pieces stuck to it – and not all of it pretty. The hairball clearly has value to the organization – it enables the business! – but the hairball is continually becoming more and more difficult to manage.
And, in my opinion, it’s this hairball that is silently killing IT.
“Break-fix” is just one thing that is silently killing IT. What are some other silent killers?
- Uneven effort. There are often overlapping efforts by those in IT – multiple people doing similar activities. Or even worse – there are gaps in effort. Things that should be getting done, but are not.
- Lack of transparency. No one is able to identify what happens to investments in IT. No one can adequately describe the value proposition of IT. All the business knows is that it spends monies on IT. It’s not consistently clear of what is coming out of IT.
- Increased spending in KTLO. Because systems aren’t being retired, or new applications or technologies are continually being bolted-on to legacy systems, the cost just to keep the lights on rises from year to year.
- Inability to respond to changing business needs in a timely fashion. IT is unable to deploy new or updated technology in the timeframes or in a manner required by business.
- IT personnel lack business acumen. IT people think and talk only in terms of “bits and bytes” and have no ability to relate technology efforts to business outcomes and value.
- Avoidance. From the business perspective, it’s too darn difficult to do business with IT. So, the business doesn’t invite IT to strategy discussions. “Shadow” technology projects pop up within business areas, or aspects of technology use are outsourced.
Silencing the Silent Killers
IT organizations are complex and ever-evolving. And while all of the current talk of IT needing to be more agile and responsive is well and good, the fact remains that most IT organizations are stuck grooming a hairball. And it’s that hairball that is killing the IT organization. What can the IT organization do?
- Define the service portfolio. Identify and capture the business outcomes, total cost of ownership, needed resources, and business value of what IT does in the service portfolio. Not only will this illustrate how technology provides business value, it will also help identify areas of technical debt and help with informed decision-making regarding the use of technology within the organization.
- Develop business acumen. Understanding the business of the business – and the contribution that technology makes to the business – is critical for survival of the IT organization. Talk with business colleagues in business terms!
- Formally define processes. If there ever was anything close to a silver bullet for IT challenges, having defined processes might just be it. First, defined processes help IT understand what is to be done and by whom. Defined processes document and enable flow. Lastly, defined processes enable automation, which helps IT become more responsive to business demands.
- Make regular payments on technical debt. Unabated, the IT hairball will only become worse. IT must dedicate focused efforts to pay down the organization’s technical debt. This should include activities such as kaizens, re-architecting systems from being monolithic to being more modular, and allocating part of all new project spend toward retirement (and shutdown) of non-necessary legacy systems.
- Unleash your “inner salesperson”. If you’re unable to promote the value of IT, you can’t expect anyone outside of IT to perceive value. Continually sell the value proposition of the IT organization. Be able to answer why investment in IT is a good thing for the organization. What will your CFO see as the return in the investment of the business’ monies into IT?
What makes the silent killers of IT so dangerous is the fact that IT organizations don’t recognize them…until it is too late. Don’t let your IT organization fall victim to these silent killers. My five actions for stopping the silent killers will help IT demonstrate a good return on investment for the business.
Don’t let your IT organization fall victim to these silent killers! Tedder Consulting can help you flush out and remove the silent killers of IT organizations with workshops, assessments, process design, and more. Don’t wait – contact us today!
For more pragmatic advice and service management insight, click here to subscribe to my newsletter!
 Schwartz, Mark. “The Art of Business Value”. Portland, OR: IT Revolution. 2016.
Picture credit: PixabayShare