Aligning business-IT strategies

In business enterprises with low maturity IT organizations, IT is traditionally perceived to be a “necessary evil” and treated as a cost center because of the following key business reasons:

• IT costs are taxed across all businesses / customers irrespective of whether a particular business / customer uses any of the ‘things’ provided by IT or not. These ‘things’ are normally not well understood in low maturity organizations and may not actually qualify as something that is delivering value to the customers. Therefore, they may not be services.

• Businesses / customers really do not understand what their IT organization does for them and in most cases, may not have the visibility into what they are paying for and why.

• Businesses / customers really do not have any control over what they want from IT and what they don’t.

• Businesses / customers view IT as a “necessary evil” because they know that they need certain ‘things’ from IT and that they will not be able to function with those things. In other cases, existing IT organization / service provider is the only option available and businesses / customers do not have any choice.

• Businesses / customers know that IT does not know what they do and what all pains they go through on a daily basis. In addition, businesses / customers know that they will have to literally go through a painful journey to have IT enable their business processes.

• IT is perceived as disconnected from the business and as a ‘spender’ that does not understand itself what it costs them to create their services. 

• Business / customers know that IT makes promises and rarely delivers.

• Lastly, if businesses / customers could, they would get rid of IT in a split second.

Well, I can actually just continue down this list. These are the real ‘pain’ points of most businesses and customers that have to deal with low maturity IT organizations. The most unfortunate part of all this is that continuing disappointments on the IT part has largely led the businesses / customers believe not to actually believe IT. The result may be that, under these conditions, if you go to your business partners with revised Service Level Agreements (SLAs), they will not even sit down to look at those. The most common reaction that Business Relationship Managers or Account Managers will get is that, “you don’t know our pain points”. This is not an exaggeration and is actually based on my experiences with real clients. Key question is that how do you go about creating that trust again?

On the IT side, we must realize the following facts:

• Understand what you do for your customers and how well you do it – First and most important, you need to clearly understand what you do for your customers. This will involve interviewing both business customers / end users as well as IT stakeholders. You will need to quickly establish a clear understanding of what are your customers pain-points on all that they receive from you.

• Stop that bleeding immediately – When you understand what you do for your customers and their pain-points, plan (as part of the larger BSM implementation) to address the pain-points immediately and achieve quick wins.

• Plan to achieve business-IT integration – In strategic terms, one important reality is that if IT does not align its strategy with the overall business strategy, then it will continue to be a cost center and perceived as a necessary evil. IT organizations must plan a longer-term transformation to become a value-add business partner if they are to survive the competition from outside IT service providers

So what organizational maturity level is right for us?

Having discussed the various maturity levels, next important question for you is to ask yourself what level is appropriate for your business and customers. Do all IT organizations aspire to become ‘value-add’ business partners with their customers? One can simply argue that if any of the core business process is automated / enabled by some level of IT services, then IT is perhaps playing a critical role in the success of that business. Other relevant aspects that may be considered in determining the relative importance of IT are as follows:

·      Reports and dashboards: Are reports and dashboards generated by using IT systems? Are these reports used by senior management to make important business decisions? Are these reports used by IT senior management to plan IT improvements?

·      Computational needs: Do businesses and / or customers and / or end users depend heavily on IT systems to perform complex large volume data analytics and calculations? Do these computations provide business critical information? Can businesses be profitable without such computational capabilities? Are IT systems used to store the results of these computations?

·      User base: What percentage of total employees in your company (in case of internal IT service provider) or in your customers company (in case of external IT service provider) depend on IT for completing their every day tasks?

·      Business challenges: Are business challenges associated with lack of proper IT services? Does your customer’s business face challenges if IT does not deliver right products / services at the right levels?

·      Communication and collaboration: Do your customers use IT for collaboration and communication related activities?

·      Business process enablement: Is IT used to enable all or part of business processes?

·      Support IT Services vs. Enabling IT Services: Finally, is IT used in a ‘support’ function or is viewed as an ‘enabling’ function? Do your customers / businesses believe that IT is just there to support their work through email, storage, telephone, and other basic support services? Or, is IT used to really enable your businesses to better provide their products / services to their end customers? For example, if you are in a manufacturing business, does your business depend on IT for their supply chain management processes?

In order to achieve Organizational Maturity Level 3 or above, a comprehensive effort to improve service management processes needs to be planned and implemented. If your organization is currently at maturity level 1, then achieving maturity level 3 or above will mean more cultural transformation than any other single factor. In the process, the overall IT capability – the ability of an organization to achieve the most business benefits from its IT resources – is enhanced.  

Understanding organizational maturity levels

The extent to which a business enterprise is able to exploit IT capabilities to achieve its business objectives is determined by the maturity of its IT organization. ITILv3 provides a set of good practices in order to build IT capabilities so that it is able to deliver what IT organization’s businesses and / or customers are looking for. IT organizational maturity ranges from just being a technology shop i.e., Level 1 to become a value-chain value-add partner i.e., Level 5. In this blog, we will try to gain better insights into what these levels actually represent. This discussion will help us with future topics as well.

Here is my perspective on different levels of organizational maturity.

Level 1 – Technology

IT organizations at “Maturity Level 1 – Technology” demonstrate the following characteristics:

• Technology focused and technology aligned
• Lack of appreciation on which technology components enable which business services.
• IT investments are primarily made based on technological aspirations rather than business enablement and return on investments.
• Technology domains are managed in technology silos. For example, problems are prioritized and resolved based on technology focus not because of the potential impact of these problems on business / customer priorities.
• IT organizations plan and deliver their services largely in a vacuum without a comprehensive appreciation of the business needs.
• IT organizations largely find themselves in ‘reactive’ mode of operating.

Level 2 – Products / Services

IT organizations at maturity level 2 exhibit the following characteristics:

• IT organizations understand the products / services that are created / delivered by their technology components.
• There is a better understanding of which technology components deliver what services.
• Organizations are still largely technology-driven because of lack of business and customer needs.

 

Level 3 – Customers

At maturity level 3, IT organizations are able to clearly understand their customers and what they actually need. At this level of maturity, IT organizations are able to identify the gaps between the products and / or services that they produce and the products and / or services that customers actually need. Based on this, IT organizations are able to improve / define services such that the actual customer / business needs are met.

Level 4 – Business

With the concrete understanding of 1) technology capabilities, 2) products and / or services produced, and 3) needs of the customers and / or businesses, IT organizations are able to run IT as a business at maturity level 4. Some of the characteristics are as follows:

• IT organizations clearly understand the market (customers and / or businesses) that they are trying to service.

• IT organizations understand its distinctive capabilities and in what services they are able to provide differentiating services at competitive prices.

• Customers / businesses have control over the IT-related costs and what they want from IT and appreciate the value delivered by IT.

• IT organization is no longer a ‘cost-center’.

Level 5 – Value Chain

IT organizations at maturity level 5 clearly understand the value chain i.e., how do IT services enable business processes and ultimately create value for the end-customers (customers of your customers and / or businesses). These IT organizations are able to clearly relate their IT services to business processes and business products / services. At this level, IT organizations actually become value-add partners.