De Strategie van IT

Strategische IT neemt stadium bij financiële de dienstenfirma”, only 5% of employees, at most, understood what IT was or could do for the company. As technology became pervasive for many businesses, the perception of IT as “no more than a cost center” is beginning to fade, but it is not gone completely. A Wisconsin Technology Network Media (WTN) survey as quoted by the article, of 434 upper-level executives conducted between Dec. 19, 2007, and Jan. 7, 2008, found that IT as a cost center is still a reality for about 25% of the respondents. And, although nearly 70% of respondents said they participate in forming business strategy, more than half (54.2%) said they still spend more time on operations and functionality than on business transformation or strategy, compared with about 25% who cited business transformation as their chief activity, and 22% who get to focus exclusively on strategy.

IT and the business need to be joined at the hip to be successful in global economy. Many traditional CEOs do not understand IT’s ability and thus look at it only from a cost center perspective. Bifurcation of the two aspects of IT should be done by the CIO and IT Executives. The operational and tactical aspect as mentioned in the survey above, can and should be outsourced so that internal IT department can focus on how to use IT to add business value to the organization. According to the article, IT department need to invest “considerable amount of time” to plotting what the company wants to do in the coming year. Rather than waiting for the green light on individual projects, IT and the business need to dig in immediately to do market research on the potential projects and likely partners. When the go-ahead comes, IT can be ready to move rather than relegating that project to the next budget cycle. I agree that this is the only way IT department can enable the business strategy.

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A McKinsey Quarterly survey finds that executives view climate change issues as important for their companies, seeing both opportunity and risk. 60 percent of global executives view climate change as important to consider within their companies’ overall strategy. Further, nearly 70 percent see it as an important consideration for managing corporate reputation and brands.

Since IT strategy aligns with and enables Business Strategy, CIOs and other IT executive should be proactive in enabling businesses to achieve their Branding Strategy. As I mentioned in my previous blog Green IT – Hype or Relevant Strategy? we have reached a tipping point where majority of consumers are concerned of impact of global warming. Having a ‘green’ IT department would be a great PR victory and firms can tout their leadership role in trying to “reduce the footprint”.

Not only that, according to Ten Strategic Technologies to watch in 2008, Green IT is one of the ‘Strategic Technology’ for the year 2008. Article states that “Strategic technologies, as defined by Gartner, are technologies that could disrupt IT or business in the next 18 to 36 months. They may require a large dollar investment and could cripple your organization if adopted too late.” Its not only customer demand that is going to drive IT departments to go ‘green’, but high energy cost along with regulatory needs could make it impossible for IT department to run ‘business as usual’.

CIOs are getting the message. In the article Green IT mind shift taking hold larger percentage of IT Executives see the urgency in going ‘green’. The CIO needs to be on board but IT cannot implement Green IT strategy without the cooperation and collaboration with other departments. According to CIO Insight article, Green IT – Buzzword or Strategy?, IT organization should draft an action plan that includes an overall vision, strategy and specific goals. IT leaders must spearhead a multidisciplinary effort that would involve representatives from all levels of the organization, including end users, business managers and executives.

Its very clear IT Executives cannot afford NOT to implement Green IT Strategy.

Green IT Strategy guidelines according to the article Green IT - Buzzword or Strategy?

• Define an environmental policy, identifying and prioritizing the issues the organization wants to address. Do this within the context of the enterprise’s broader environmental and corporate social responsibility policies.

• Have the IT organization be responsible for the energy efficiency of the data center and IT equipment.

• Make the data center a priority, but understand the green IT strategy must extend beyond that.

• Create an environmental performance dashboard based on the enterprise’s and IT organization’s environmental policy.

• Use existing and emerging energy management tools, and address behavioral issues to decrease the power consumption of IT-related equipment.

Source: “10 Key Elements of a ‘Green IT’ Strategy,” Gartner Inc., Dec. 7, 2007

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Cindi Hawson in her article on Intelligent Enterprise titled The Road to Pervasive BI writes that organizations which can better understand and reap value from data to deliver best-in-class service, boost revenue, and increase operating efficiencies have implemented Business Intelligence (BI) that is pervasive in nature i.e BI tools used not only by business analysts, but also by front-line employees and even customers and suppliers. If organizations clearly understand value BI tools, then is BI ready to go mainstream?

Cindy Hawson tries to ask an important question “With BI becoming more affordable and in flavors to suit every budget, it would seem BI is poised to go mainstream. But are companies ready?” She further expands on that problem and states that “The final road to pervasive BI has nothing to do with technology and everything to do with the way companies must rethink who benefits from BI. The challenge here is that users rarely know what they want until they see it and may not realize the problems BI can solve. Those users who know what they want are typically power users, already well versed in BI.”

Almost 3 years back, The Data Warehousing Institute in an article titled “A New Power in Business Intelligence”, found the same problem with pervasive BI “for all the benefits these BI systems provide, they also share common limitations that make them less than optimal at meeting their primary goal: enabling users to make decisions that enhance the company’s competitiveness. One problem is that their use is generally confined to a small audience. At most businesses, the users most able to take the actions suggested by the data in a BI solution do not have access to the data.”

To paraphrase both the articles, the technological solutions with respect to pervasive BI exists, every business executive clearly understands the benefits of pervasive BI. But, the technical BI experts are not trained or educated to understand the real ‘business need’ and hence not able to provide a pervasive BI solution. It’s not just enough for every BI professional to become an expert in only the technical aspect of a BI solution. Here lies a fantastic opportunity for every technical BI professional to provide pervasive BI by truly learning the business they are trying to solve. Only when the BI experts can easily bridge the technical and business gap that exists in organizations, BI will go mainstream. Also read my blog article A New Breed of IT workers to understand all the skills needed by the techie.

Cindy Hawson says that BI experts need to flip the requirements definition process from “What do you want?” to “Here’s information relevant to your job”. Here are 5 Steps every organizations need to taketo make BI pervasive

Think Big: Don’t think of BI as synonymous with query tools; instead, think about how information can be used to improve everything about your business.

Start Small: A focused project will yield a fast win, garner executive enthusiasm, and provide greater insight into BI’s complexities.

Foster Business-IT Partnership: Learn what drives the business. Staff BI teams jointly with business and tech experts.

Clean Up: If your source systems are a mess, your BI platform will be, too. Use a data governance program to improve data integrity.

Provide A Portfolio Of Tools: BI interfaces are optimized for different users and applications. Don’t underestimate the importance of interface appeal

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Mark Banioff CEO of Salesforce.com, the company that created whole new market segment share for On-Demand delivery model, in an interview with eWeek titled “Platform in the Clouds” talks about the future of Saleforce.com’s On–Demand delivery model. The company is now moving on to logical next step: enabling firms to move their entire IT infrastructure management to the ‘multi-tenant system’. Aptly termed as Platform-as-a-Service (PaaS), Salesforce.com is planning on providing infrastructure and tools so that individual firms can build their customizable application in the ‘cloud’.

Salesforce.com is widening its revenue base and according to Banioff their vision is to “become multi-application, multi-category company”. But the real interesting point is that with the introduction PaaS tools Salesforce.com has made a subtle shift in its strategy. Instead of doing it alone as with its AppExchage (on-demand application) and its ‘proprietary’ language -Apex, the company is now taking a collaborative strategy. Instead of providing PaaS infrastructure software directly to the firms, this time around Salesforce.com is teaming up with ISV by providing them the tools. Thus, they intend to leverage existing network affect created by the ISVs. It’s easier for ISVs to sell to the existing client the PaaS concept and encourage them to move their infrastructure to the grid/cloud in small steps.

It’s another example of how Nicholas Carr’s prediction on moving IT infrastructure to the cloud in his book ‘Big Switch’ is coming fruition. Still a long way off where everyone will make the ‘big switch’ (no pun intended) to the cloud, but PaaS is the first step that will enable firms to migrate commoditized IT infrastructure and focus only on that aspect of IT that can enable their Business Strategy.It’s also a bold move away from

Enterprise application vendor’s claim that “our generalized black box solution provides one way for EVERYONE to streamline their business”, and thus suggesting that IT does not play a valuable role in providing competitive advantage. With PaaS, at least Salesforce.com is conceding that each firm can ‘customize’ their Enterprise application to maximize their Business Strategy.

Check out the advertisement for Salesforce.com’s PaaS called force.com below.

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Brian Watson of CIO Insight on his blog “Does Green IT Matter?” tackles an interesting trend in ‘greening’ of products and services. He says that “regardless of businesses’ motivation, investment in eco-friendly technologies continues to grow—fast”. He talks about a study by KPMG, in which “venture capitalists, bankers, entrepreneurs and others said a quarter of new investments will towards green IT”.Why is Green IT suddenly important? Here is my opinion - the confluence of 2 events that are creating new challenges and opportunities for the IT to go green.

1. The rise of commodity prices over the past 5 years, mainly due to insatiable desire by Asian countries (led by China) to modernize, will continue into the future. Demand for base commodity that enable production of power is going to be greater than the supply. The era of cheap commodity is over (at least in for next 7-10 years). This means that the CFO will be under pressure to find alternate viable source of energy in the quest to manage the overhead costs.
2. We have reached a tipping point where majority of consumers are concerned of impact of global warming. There is real drive to “reduce the footprint”. CMO (Chief Marketing Officers) are adapting to the new reality and are baking ‘green’ into their product brand image. CMO’s don’t have the luxury of ignoring the demand by the consumers who want to make sure that the products they use are environmentally friendly. Even hardcore oil companies like Chevron and BP are touting how green they are.

Hence there is huge push on CIOs to deliver an IT infrastructure that is environmentally friendly. Should going green be part of IT Strategy?

If the goal of IT is to align with the business strategy, it’s very easy to envision that the IT Strategy that enables the businesses to achieve both of its objectives a) reduce/manage overhead costs b) increase brand value is not just necessary but extremely essential.

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Read the interview with Nicholas Carr on CIO insight, titled Nicholas Carr: Why IT will change, where he talks about his new book The Big Switch: Rewiring the World, from Edison to Google

In the interview with Ed Cone, Nicholas Carr defends that “the IT department is unlikely to survive, at least in its familiar form. It will have little left to do once the bulk of business computing shifts out of private data centers and into ‘the cloud’ or ‘the grid’. Business units and even individual employees will be able to control the processing of information directly, without the need for legions of technical specialists” and “The shift seems to be proceeding quickly…”

Nicholas Carr continues to say IT is turning out to be a commodity and defends his view that he initially presented in the HBR article titled “IT Doesn’t Matter”. In that HBR article, he mentioned that IT will go the way of Electricity. Everyone can and will hook into the IT grid (similar to electricity) and in the long run it does not provide any competitive advantage to deploy IT.

To a question Ed asks “What becomes of the corporate IT function in the age of the grid?” Carr responds “Over the next five or 10 years, the technical aspect of the IT department will become less important. It will slowly evaporate as more of those experts go outside onto the grid. But the information management and information strategy elements will become, if anything, more important. The ways companies take advantage of digitized information will become more important, not less.”

I am confused here. If IT is going the route of electricity to become a commodity how will it be more important for companies to take advantage of it? I don’t see ‘Electricity Strategist’ as a role in any organization.

The fact that IT can be used to differentiate the firm from the competitors (that’s why you would want an IT Strategist in an organization) is an indication that IT Does Matter. Is Nicholas Carr contradicting himself? Well, he further clarifies on how he viewed IT when he first wrote the paper “When I wrote Does IT Matter?, I focused on the noun in “information technology.” But information has always been a critical strategic element of business and probably will be even more so tomorrow. It’s important to underline that the ability to think strategically, to think in business terms about information—whether it’s information about your business or the transformation of your products into pure information—those skills will be critically important to companies, probably increasingly important, in the years ahead”.

If you look at IT only from the sourcing (make, buy or outsource), distribution (‘grid’ or otherwise), technology (open source or custom created application) or the infrastructure (email etc) perspective you can argue that IT is becoming a commodity. I agree it’s a matter of time before all of the above component will become commodity. But to somehow pigeon hole IT in this narrowly defined aspect is a fruitless exercise, because information in the word IT encompasses critical and strategic thinking. THAT can never become a commodity!

I am happy to see Nicholas Carr clarify his stance on IT and I am in agreement with him there!

(Also read Carr’s interview in Wired magazine and the review of his new book by CIO Insight)

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Information Week’s article Cisco’s Emerging Collaboration Strategy talks on how Cisco’s Chairman John Chambers intends to build hardware and software solution to take advantage of collaboration that will enable traditional organization to transform its business model. Chambers says that collaboration will fundamentally change the nature of work, enabling productivity growth to soar back into the realms last seen in the economic surge of the late 1990s.

While other traditional companies are unsure on how to deploy and use collaboration, interactive technologies (aka Web 2.0), Cisco is internally deploying interactive Web forums like wikis and blogs; IM; interactive “teamspaces” and videoconferencing and telepresence–a life-size, high-def, multiple-screen system for face-to-face meetings among users in multiple locations. By ‘eating its own dog food’, Cisco is branding itself as a game changer again.

Though, the article questions “is Cisco’s latest initiative just Videoconferencing 2.0, or is it really something revolutionary”? I believe Cisco is more in tune with collaboration opportunity the global networking ‘cloud’ has created. It will only accelerate the productivity in coming years because of the network effect. The article talks on how “I-Zone wiki, a company-wide forum for new business ideas launched not by IT but by the Emerging Technologies Group”. This is a clear example of how collaboration technologies within Cisco are bringing about new innovations.

Though there is certainly some hype with Web 2.0 (similar to ‘dot com’ hype), collaboration and social networking technologies have far more impact on the improving global productivity than the initial introduction of internet (aka Web 1.0). The race is on for the Companies to get ‘collaboration’ right which in turn will enable them to build complex talent-based competitive advantages that competitors won’t be able to duplicate easily. Kudos to Chambers for seeing this opportunity and positioning his company to take advantage of huge collaboration infrastructure investment by all companies in near future. Telepresence (its giant size video conference) will not make a huge impact on Cisco’s bottom line initially but it is sure to have a phenomenal impact on its brand. Cisco’s Collaboration Strategy is bombastic yet realistic and it will reap huge benefit because of its belief in the future of ‘human network’.

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Michael Porter’s ground breaking HBR article in 1979 on Five Competitive Forces called “How Competitive Forces Shape Strategy” has been revised by the author after about three decades. His new work not only updates and extends but also reaffirms his findings. You can find the article in its entirety here. You can also listen to an interview with Michael Porter. A link to his interview is here.

In my view Michael Porter drives home an important point in his interview. Rivalry with the competitors does not need to be zero sum game. Most of the competition is focused on price and market segment gain. This invariable accelerates the move towards the commoditization of the product. This in the short run appears good for the consumers (because they get a good price) but in the long run its bad for them (because they will be left with no choice as many of the competitors will be driven away by the intense competition and the product will be a commodity product). This is the kind of environment when any competitive advantage is meaningless because the competition will imitate it eventually. That’s the assumption Nicholas Carr makes in his argument for “IT Doesn’t Matter”. BTW, he has written a new book The Big Switch (I have not read it yet but will read it soon). In a commoditized world, where perfect market is at work, price is the only tangible factor that balances supply and demand. Hence no need for IT to pursue differentiation.

According to Porter it does not have to be that way. So instead of mindless competition based on the price, multiple rivals can be successful by competing on different aspects of customer needs. This is the big take away from the revised Michael Porter’s Five Competitive Forces article. He calls this new competitive model as positive sum game where firms compete based on their core competency not to gain market share but to carve out a niche. Consumers will be willing to pay a price premium to get that level of ‘customized’ product/service. This is how everyone wins. In this scenario the business process which is based on firm’s core competency is going to be different for different competitors. And IT can play a major role in automating those core business processes. Positive sum competition is the basic assumption where IT can and will Matter.

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Professor Donald Marchand of IMD in his article Realizing IT Values: A Shared Responsibility between Senior Managers and the CIO gives an interesting perspective on how to make IT matter. Check out the Senior Manager and CIO leadership Matrix below which shows how to make IT Matter to an organization.

Basic premise of the article is that “IT and knowledge capabilities embedded in strategy and business model are too important to be left to CIO alone. For most companies competing globally in service or industrial products businesses, the use of knowledge embedded in their people, information about products, customers and operations, and IT applications and competencies can inhibit or enhance competitive success.”

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