Once upon another lean time, a large life insurance company hired a grim reaper -- aka benchmarking consultant...
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-- to look at the IT budget. At 7% of company revenue, the IT dollars appeared ripe for a mowing. Fortunately, the insurance company also hired a management consultant to look at IT business processes. As it turned out, the money made by the super-efficient, IT-enabled business processes dwarfed the amount saved by the proposed across-the-board IT reductions. The company decided not to cut back on the IT services that had engineered that revenue.
The moral of the story?
CIOs tasked by their businesses to cut their budgets -- and who isn't these days? -- should resist making blind cuts. Instead, experts at Forrester Research Inc. recommend that you do the extra work to quantify the cost of cost cutting -- to your customers, to your current IT infrastructure and to the internal technology skill sets required to run the business and help it thrive.
While the business ultimately makes the call about how big the IT budget will be, Forrester said CIOs have a responsibility to educate the business on the impact of those cuts and to assign value to expenditures that will end up making or saving money. It is up to the CIO to set aside the time to create the business case and sell it to the business, with numbers as well as melodramatic anecdotes and a vision of how the company will look in the future.
The advice, presented by a team of Forrester analysts Monday, kicked off a week of webinars from the Cambridge, Mass.-based firm aimed at helping CIOs through what is now positively, absolutely, undeniably and most reliably a recession.
In lean times, CIOs should apply Lean Six Sigma practices to IT operations, the panel said. But Lean is not about cost cutting, or simply chipping IT costs equally among business units, said Alexander Peters, a principal analyst at Forrester. "Lean is about eliminating waste."
This is easier said by analysts than done, Peters conceded. For mature IT processes, such as incident management, change management and release configurations that have been codified by frameworks like the IT Infrastructure Library (ITIL), applying lean thinking should be par for the course. On the other hand, in application development, which is more of a "moving target" and less mature, applying lean thinking is much more difficult, Peters said. But it should be done, by keeping value uppermost in mind. Resources should be focused on the people who can really add value to the process.
A lean IT organization is also continually evaluating systems and processes for "overkill," said principal analyst Marc Cecere. A 700-person IT shop that requires 18 signatures on every approval is an example of overkill, Cecere said. In addition, every problem does not deserve its own process, he added, urging CIOs to adopt the "Kill stupid rules" policy of one of his clients.
Lean is about eliminating waste.
Alexander Peters, principal analyst, Forrester Research Inc.
But, the Forrester experts also acknowledged that IT is at a disadvantage when it comes to applying lean principles that benefit the entire enterprise, especially at large companies with many business units, each with their own business needs. Indeed, Lean or Six Sigma applied to IT services and support cannot work without the strong support of executive management. And a bigger roadblock is often middle management, where hierarchies are entrenched and fall hard.
Two areas that tend to get short shrift during lean times are process improvement and training, said principal analyst Dave West, who specializes in software development. This is a big mistake. Process improvement should be on the "top of the agenda and something you focus on manically," West said. The responsibility for improving processes should not fall to one person; they should be shouldered by a team of well-trained developers. In his work with companies, West said he has been told that working with a small, educated team of developers "is better than an uneducated and untrained workforce."
IT consolidation of platforms, facilities and services saves companies money. But the drive to consolidation implies standardization and the elimination of duplicate platforms. And it isn't done without investment and buy-in from executives and middle management. Virtualization of severs -- which CIOs, according to the Forrester panel, have not pushed aggressively enough -- isn't accomplished without up-front investments in automation tools and usually assistance from a third party to set the stage.
The fact that business and IT often speak a different language, even when using the same word, can also muddy discussions about cost cuts, the Forrester experts said. For example, when the business talks about agility, it almost always means the agility to get into new markets or attract new customers or introduce new products. But agility can also be defined in terms of the company's ability to develop the software that will improve a process or product, or to get out of a building it may no longer want to own, or the cost attached to untangling the IT systems of a business it wants to divest. CIOs need to spell out the benefit of that kind of agility, or the cost of not investing in it.
Let us know what you think about the story; email Linda Tucci, Senior News Writer.