How does IT add Value to Business?......what is behind the question?
Saturday, November 14, 2009
It suddenly seems to be the flavour of the day. Everyone is talking about “ how does IT add value to business”.
It is not as if IT was not adding value earlier so I wonder what is behind this heightened sensitivity towards “adding value”.
Some top of the mind factors as I see them –
a) Economic Downturn – When money was aplenty, and creativity of IT world was at its peak, budgets were generous and freedom to IT significant. Now the situation is grim, the market is tanking, shareholders are questioning the board, board is asking the CEO, CEO is asking CFO, CFO is asking CIO and CIO is asking his team and his vendors – Are you sure you are adding value to my business for all the dollars that I am spending ?
b) IT within Enterprises has become way too complicated – In the last 30 years, IT has become increasingly complicated with multiple vendors and standards. The mortality rate of vendors has increased the complexity. Interoperability of various systems is a key problem and integration which was thought of as a solution often leads to more problems if it is not thought through well. This complexity is coming in the way of business getting the ROI on the dollars it spends on IT.
c) Vendors are guilty of overpromising – In the last 30 years, the best of global talent gravitated towards IT and Finance. The share of this talent which went in marketing also went over the top in promising what IT can deliver. IT can solve some of the problems and can help in many areas but it cannot fix everything. Enterprises who spend a huge amount on costly products and servics, often discover to their dismay that they have not got what they thought they will and the gap in expectations continues to be signficant. The lock-in models (both techology and business models) practiced by most vendors only increases the complexity.
d) Enterprises not clear about what they want – If IT has to deliver value to business on a consistent basis, business, finance, CIO, and vendors (products and services) have to be in harmony and sing the same song. Enterprises need to align the IT strategy to business strategy and articulate clearly their expectations from the technologies they choose to implement.
If enterprises do not do their job , the talk of adding value to business will become like a husband asking his wife – fine you take good care of our house and our kids, and you ensure the food is on the table when I am home, but how can you help double my salary at work?
It is not impossible, but it is not realistic and not a necessary condition.
Having said this, the fact remains that IT has the rare positioning of being both an infrastruture lever and a transformational lever. Given this interesting position, IT does have an onus to show clear and consistent value to business, both in terms of keep-the-lights-on work, and transformational, game changing level…
In the Next post, will attempt to answer the question,
posted by Anirudh Joshi @ 10:49 PM,
4 Comments:
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At November 16, 2009 at 1:01 AM,
MyChilds said...
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Another flavor on why the question could be due to the ever present threat/risk that there is no age proofing an IT solution-ie the IT solution that is a fitment today becomes outdated tomorrow..so how do enterprises future proof them to ensure that the IT solution on which they invest millions today provides the same value for money and business value tomorrow when the whole world has shifted.
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At November 17, 2009 at 12:07 AM,
RD said...
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Enterprises are sometimes (many times in the recent past) clear about what they want, though at a level which provides little explicit help to the IT. It is like the husband asking the wife - how can she help him double his salary...
There is a probable need of a small organization, which understands the business and can relate to the IT understanding. This organization needs to translate the business objectives into goals for the IT, and establish a clear, unambiguous tracing between the two.
Is the CIO organization expected to do that? How well is it able to do that? Should there be another organization under the CIO to understand, track and manage this? -
At November 19, 2009 at 8:13 PM,
eBakar said...
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The question posed is definitely one of the most difficult for any CIO.But lets have a look on how are the most of F500 are structured, I believe CIO hardly forms a part of board or an exec council. His/her position is more of a follower rather than a leader, the business drives the CIO not vise versa. So in such a case should he/she be responsible for creating Organizational Value? How many times do we think CIO presents to the board that his/her ideas can take the company to the next level? But some organizations (eg Apple,Baxter)which have these practices have really stood apart from the crowd.
For the recession I believe it was great opportunity to prepare for the next wave of boom as Recession follows the business cycles. Organizations should do away with practices followed pre recession and adopt new practices, but have the organizations learnt from the recession still remains to be seen. The management should now be talking about how CIO can help in leverage technology to deliver "incremental value" rather than debating about the its existence. -
At December 8, 2009 at 12:42 PM,
Anirudh Joshi said...
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A comment I received on email from a colleague who has rich global experience dealing with CIOs...
I think value is in terms of economic value as well as ethical value. Customers will continue to want more for less (part of human nature) but they also want commitments to be met. So in a way they are looking for IT (or an IT partner) who can demonstrate ways and means of adding greater value to the customer’s organisation.
You have touched on these points in your blog. Companies have focussed (and fallen short) of providing promised economic value but still others have just not shown “Unyielding Integrity” in the engagements. It is the ethical value that customers are now looking for in long term partners.
Over time the husband has to realise that keeping a good home and having food on the table keeps his mind at rest and he is indeed able to perform better. Sooner, than later he will get a salary increase.
