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Sign No. 4 of a Well-Run I.T. Shop
At least 40% of the budget is spent on new business capabilities
Take inventory of what your department is spending its money on. If the overwhelming majority of spending is maintenance-related, chances are you aren't part of a tight ship.
To consultant Merlyn, maintenance spending in excess of 60% is a red flag. This applies to spending on basic fixes, software fine-tuning and hardware upgrades-anything, he says, where "there's no new capability being added."
Indeed, Merlyn likes to see his CIO-clients devoting 10% of their budgets to risky and innovative opportunities. "The great thing about these risky projects is the cost is relatively low," he says. "And if they work out the business value can be incredibly high."
Merlyn remembers working with a specialty chemicals company, where an I.T. manager, noticing that sensors were getting cheap, suggested it might be possible to use sensors to catch delivery-truck problems before they got out of hand.
At minimal expense, a project team was assembled to jerry-rig a system-which used not just the sensors but a global positioning chip and cell-phone chip embedded on delivery trucks. The idea was to avoid having a delivery truck travel, say, 2,000 miles to a drop point, only to find that its load of compressed gas had degraded in quality.
"Not only did you just spend a lot of money shipping a worthless product, but you've let a key customer down," says Merlyn.
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After a series of experiments, none of them very costly, the chemical company concluded the system would work. "It became a very successful initiative," Merlyn says.
Sign No. 5 of a Well-Run I.T. Shop
There are people directly responsible for enterprise architecture and for tracking innovation
Every company discusses questions of technology architecture. But very often those discussions center on the design of individual systems-for instance, a data warehouse to provide insight into customer profitability.
Architectural discussions should cover all your systems, not just one in isolation, says Diamond Management's Curran. "The reason you need that is because that's where the speed will come from, in being able to share common tools and components. Cost savings come from building skills that are reusable and from sharing vendors," he adds.
At multibillion dollar organizations, Curran says, there may actually be a group called Enterprise Architecture, or an individual with the title of Enterprise Architect. But even at smaller companies, where such lofty titles might be a bit much, someone needs to be responsible for analyzing the long-term implications of technology decisions.
"Even if you've only got five sales guys, you can't think piecemeal about making a change to your CRM system or your contact management system," Curran says. "You've got to think, How am I going to use that contact management in a few years?"
He adds, "Having a one-page view of scribbled-down boxes and arrows may be enough if you're a small firm."
A corollary to employing enterprise architects is having "innovation scouts" who act as sensing mechanisms for a company, bringing technologies with significant business potential to the attention of the CIO.
There is a lot of variation in how these people function, says Nicholas Evans, an expert in innovation at the consulting firm Unisys. Many scouts have other jobs and do their technology sleuthing only on a part-time basis. Some scouts limit their work to understanding the R&D efforts and technology roadmaps of just one strategic vendor. Others have a broader charter.
"They're helping the company see what's coming and start to make decisions on when to act," Evans says.
Sign No. 6 of a Well-Run I.T. Shop
Success is never assumed, it's measured
Many CIOs assess their projects in terms of budgets and schedules. If they said the project was going to take 12 months and cost $2 million, and it does, they use that as evidence of the project's success.
But such analyses are often too narrow to provide any real insight.
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What if, in order to stay within budget, the project team discarded a quarter of the functions it was asked to provide? What if the rationale for the project was that it would allow the company to process 30% more bills per month, and the improvement was more like 7%?
There is no one set of criteria that can be applied to everything in I.T. However, BSG Concours' Merlyn says that, whatever criteria are used, the best CIOs are transparent about publishing the results.
As a rule of thumb, Merlyn says about a quarter of the measures should be efficiency-related (the cost of E-mail per user, say); a quarter about the customer experience (what business users think of I.T.); a quarter about the business value delivered by a specific project; and a quarter about I.T. growth and learning (for instance, how many I.T. workers have passed some certification program).
Diamond Management's Curran says that post-project measurement is so rare-"I can't think of anybody who does it well"-that he isn't inclined to be picky about the form it takes.
"Just do something after the project's done. Ask the customers to evaluate the business case. Do something."
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