A clear understanding of business objectives, where the CIO and CEO are more actively engaged, is critical to the success of IT projects.
The reality is this: accountability for IT success should fall not only on IT managers but more importantly on business leaders, said Frank Koelsch, executive vice-president, corporate strategy and research for Info-Tech Research Group in London, Ont.
And by the same token, he said, CIOs must have an equally important role in defining business strategy as the CEO.
Koelsch’s views are echoed by Paul Williams, a trustee with the Rolling Meadows, Ill.-based IT Governance Institute (ITGI) and author of a book released earlier this month titled, IT Alignment: Who is in Charge? The book discusses strategies for business-IT alignment and provides guidance on the responsibilities of the CIO, CEO and board.
Research indicates that these are the issues being neglected by many businesses. More than 50 per cent of organizations polled in a recent ITGI survey lacked any formal structure to align IT investments with business strategy. And fewer than 25 per cent engaged board members directly in the IT strategy-setting process.
Business should actively involve IT to better understand the realities of technology’s capabilities and risks; and IT has to learn to think, communicate and plan in business lingo, say both Koelsch and Williams.
“There are no IT projects; there are only business projects. That’s a baseline, so it’s incumbent upon the business executive to include and to drive IT initiatives as part of business initiatives, as part of the business deployment process,” said Koelsch.
He says business objectives and IT’s ability to support these are doomed if there is no business and IT alignment.
According to Koelsch, a common vision between both units is essential to achieve agreement on issues such as: how much a project will cost, how long it will take, what resources it will consume. “Often IT managers are told they have to do something, at a certain cost, within a certain time frame and deliver certain IT capabilities, all of which are unrealistic.”
Williams said companies should look at “buying IT” as akin to embarking on a major business change initiative, in which IT plays a significant, but not an isolated or discrete, part.
“One of the most common reasons for [IT] failure is a lack of understanding of the way that the business [itself] needs to change or adapt to benefit from the [IT] initiative,” said Williams.
He said this business change component is rarely understood fully, and is always more complex than anticipated. For this reason, he said, business leaders need to be educated, not just on what IT can do, but also on what it can’t do – and that includes bringing about [people and business] change in itself.
IT managers have to be realistic and not have unreasonably high expectations about the business benefits of a project. “Sometimes they will have to downgrade business expectations.”
Williams said businesses must work in full partnership with IT departments (including third party outsourcers) to build reliable metrics for project performance and ultimate success. These metrics would consider things like active IT investment portfolio management and the impact of risk on project performance and delivery.
“Business often sees IT as a ‘magic box’ solution in that all you need to do is buy the [product], plug it in and miraculously it will give you the [expected] benefits,” said Williams. “We all know it cannot be that simple. There needs to be a joint understanding that IT of itself will never deliver benefit.”
He said businesses must specify statements of value expectation that are specific and measurable. “Too often the benefits are articulated in soft terms such as improved staff morale or improved product or service quality. These are too vague.”
“Improved staff morale should lead to lower staff turnover and therefore [support] quantifiable measures such as reduced costs for recruitment or new staff training. Similarly, improved product quality should lead to higher revenues and reduced costs for dealing with returns.
“What needs to be understood, of course, is that all of this becomes totally academic unless the value achieved is actually measured across the life cycle of the solution. Without such measurement there can be little accountability and minimal learning,” Williams said.
John Sloan, senior research analyst at Info-Tech, says business success comes from a combination of a CEO who wishes to “include and drive IT” and a CIO who is an aggressive student of the business. “It’s equally important that the IT leader be able to speak the language of business,” said Sloan. “This needs to be a priority.”
The focus should be on achieving a business strategy and creating success measures. “IT and business can only see eye-to-eye on the business value of IT if they both speak the same language. As this is a business value discussion, that language should be a common set of business value measures,” Sloan said.
According to Sloan, IT governance has created the framework for planning, measurement, control, execution and accountability. “Through governance, the enterprise asserts its ownership of IT. The IT group and business stakeholders start by agreeing on goals and how success will be measured.”
He said IT decision-makers should place a higher priority on formal management systems that document a set of repeatable and measurable procedures. “The biggest impact of formal systems is not so much on the speed and efficiency of projects themselves, as on the management of expectations. Repeatable and measurable procedures provide benchmarks that everybody can understand and accept.”
This process is often best led through a properly constituted and representative investment committee, said Williams. One option is to outsource this task to an independent investment office to avoid internal bias and politics. “The outsourced service would not make the final decisions, but would ensure proper, objective comparison of the facts to enable an informed decision to be made.’
He said the CEO must ensure that decisions on IT-related investments match the business priorities and – through active involvement of the CIO – take into account skill and resource limitations.
“It needs to be made clear that IT is there to deliver the IT component of key projects, but ultimately it is the business’ responsibility to deliver value from the total project. This needs to be done in full partnership and shared accountability between the business and IT,” Williams said.