How significant a role does information technology (IT) play in achieving a company’s business goals?
You could get very different answers to that question, depending on who you talk to.
IT executives, in general, believe their departments play a vital role in achieving their organization’s business goals, according to a recent survey conducted by Westport, Conn.-based Saugatuck Technology Inc. and New York-based BusinessWeek Research Services.
Saugatuck Technology provides market strategy consulting and subscription research services.
The survey polled around 500 executives worldwide from CEOs, COOs, CFOs to CIOs and CTOs – as well as other senior IT executives.
Survey participants were asked to rate the relative importance and effectiveness of IT in achieving business goals through 2007.
The survey revealed IT executives consistently – and in some cases, significantly – rated their company’s execution of enterprise IT strategies as more effective than did their business executive peers.
The report writers attribute this sharp difference in perception to what they see as a tendency among IT executives to “overestimate” their departments’ accomplishments.
This tendency, they say, is what sociologists refer to as the Lake Wobegon effect – when people tend to consider themselves and what they do as above average.
The name takes root in the fictional town of Lake Wobegon from the radio series ‘A Prairie Home Companion’, where “all the women are strong, all the men are good-looking, and all the children are above average”.
The Lake Wobegon effect, they say, was witnessed when IT executives were quizzed about strategies such business process outsourcing, server/database consolidation and server virtualization.
Most IT executives rated the impact of these strategies higher than their business counterparts did.
The reason why these strategies are rated highly by IT executives could have to do with the fact that they are more “mature”, says Mark Koenig, vice-president of consulting operations at Saugatuck Technology. “They’re well covered in the media and have been well executed for a number of years by large enterprises.”
In addition, huge sums of money have been spent in these areas over the past three to five years.
These are probably some of the reasons why IT executives believe they are more proficient at implementing such strategies, Koenig says.
By contrast, relatively small discrepancies in the perceptions of IT and business executives were recorded, when they were asked about the business impact of strategies such as application modernization, application outsourcing, and service orientation.
The reason, here, might be these strategies are relatively new, says Koenig. “The level of expectation may not be quite as high yet.”
While certain IT strategies may be perceived to be more effective than others, both business and IT executives agree on one thing: that all these strategies are important.
The difference lies at the tactical end, says Koenig. “The room for improvement [is in the] actual execution.”
These findings are relevant to IT spending and budgeting, he says. If business executives – chief financial officers, for instance – don’t see a return on IT investment, they’ll be reluctant to let the cash flow.
“They’ll continue to micromanage IT spending until the IT department raises their level of effectiveness,” says Koenig.
Funding can enable IT to invest in innovative projects, he says.
Can the fact that business executives don’t see eye to eye with their IT counterparts be attributed entirely to the Lake Wobegon effect?
At least one Canadian expert believes other factors also influence differences in perception about the value of IT.
An inability to communicate an IT strategy and its successes are partly to blame, says Savino DiPasquale, vice-president of IT and CIO at Mississauga-based GlaxoSmithKline Inc., a research-based pharmaceutical and healthcare company.
“It’s true to some extent that people rate themselves better than others, but the question is why didn’t [the business executives] rate you higher?”
DiPasquale suggests that IT strategies should be marketed and communicated in concrete business terms, rather than in the language of technology.
When it looks and feels like any other business strategy in the company, the value drivers are immediately evident to everyone, he says.
Koenig, however, isn’t convinced that ineffective communication is the main cause of these perception differences.
“The metrics for measuring success are pretty well understood. There really shouldn’t be any communication breakdown when it comes to determining effectiveness.”
While he doesn’t dismiss communication entirely, Koenig says it plays a small role. “I tend to shy away from communication as a rationale for business failures. It only tells a small part of the story,” he says.