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Don’t Think That There’s Business Value In IT? Try The IT-CMF…

Wednesday, June 16th, 2010
Image Credit The IT-CMF Is A New Way Of Locating How IT Provides Business Value

The IT-CMF Is A New Way Of Locating How IT Provides Business Value

As though running an IT department wasn’t enough, now CIOs are being asked to become more valuable to the business – to start thinking about the company’s bottom line. What part of running a company’s cost center are they missing? It sure seems as though the pressure on CIOs to deliver more business value isn’t going to go away anytime soon. If only there was some methodology that we could use to unlock all of that business value that we know is within the IT department. Oh wait, there is: it’s called the IT-CMF.

What Is The IT-CMF?

A consortium of industry and academic players have gotten together and created what they are calling the IT Capability Maturity Framework (IT-CMF). The thinking behind this new model for operating the different parts of an IT department is that CIOs need an end-to-end integrated framework to help them boost their department’s IT capabilities while at the same time providing them with a way to show the rest of the company that IT can deliver bottom line value.

IT Investment: Not A Pretty Story

It turns out that most companies end up spending roughly 1% to 5% of their annual revenue (note that that’s revenue [a big number], not profit [a smaller number]) on their IT activities. However, there’s never really been a way for firms to do a good job of either measuring or maximizing the return that they’ve been getting on this investment.

You might think that IT departments would like this state of affairs: no measurement means no oversight. However, that’s not the case. Despite having become more strategically important to a company’s success, IT departments have been stuck as a cost center. What’s been missing has been some way to align what CIOs do with the business results that they produce.

How Does It All Work?

Clearly, trying to operate any part of an IT department can be a big challenge. The IT-CMF framework tries to simplify this by breaking a big problem up into several smaller pieces.

At a high level, The IT-CMF breaks an IT department down into four main macroprocesses:

  • Managing IT like a business: this requires an IT Leader to shift their focus from the technology of IT over to both customers and services.
  • Managing the IT budget: keeping track of where the money goes in order to make sure that the company gets the best performance and value for their investment.
  • Managing the IT capability: this consists of making sure that you have the IT assets where you need them as well as ensuring that you are developing the competencies that the company will need in order to succeed.
  • Managing IT for business value: clearly showing how investments in the IT department tie back to clear benefits for the business.

    • How To Use The IT-CMF

    Each of the four major areas of IT operations is then further broken down in the IT-CMF model. It identifies a total of 36 different categories that are then distributed among the four major macroprocesses. This is where the IT-CMF can show an IT Leader where their team fits into the overall IT department.

    The IT-CMF classifies everything that an IT department does up into five different stages of maturity. We all do the things that are needed, we just don’t always do them as well as we should be doing them.

    Once you’ve taken the time to classify your IT operations using the IT-CMF model, you can then benchmark your team against other companies in order to find any process maturity gaps.

    What All Of This Means For You

    It’s never been easy to be a CIO and the current global economic troubles certainly haven’t made it any easier. More and more CIOs are being asked to focus on how the actions of IT can leveraged to boost the company’s bottom line.

    In order to justify the company’s ongoing investment in the IT department CIOs need a framework that will allow them to demonstrate the value of IT. The IT Capability Maturity Framework (IT-CMF) provides the framework that CIOs can use to identify IT process maturity gaps.

    Moving what your IT department does from being a cost center to becoming a value center has always been the goal of CIOs. The IT-CMF now provides CIOs with the tools that they need to accomplish this. Now is the time for CIOs to use these tools to show the rest of the company the value of the IT department.

    - Dr. Jim Anderson
    Blue Elephant Consulting –
    Your Source For Real World IT Department Leadership Skills

    Question For You: Who in a company outside of the IT department do you think would have to champion the use of the IT-CMF in order for it to be successful?

    Click here to get automatic updates when The Accidental Successful CIO Blog is updated.

    What We’ll Be Talking About Next Time

    When you become a CIO, you will have the chance to be leading the IT department when the next global recession hits. I don’t care if you’ve got a list of Cisco technical certifications as long as your arm after your title and the fanciest MBA degree available, there’s no training for how to deal with this. Good news: the folks over at Cisco are in the process of blazing a trail that will show CIOs how to deal with this type of situation.

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    A New Way To Spell IT / Business Alignment: XBRL

    Wednesday, March 3rd, 2010
    Image Credit
    The New XBRL Requirements Open The Door For IT To Help The Rest Of The Business

    The New XBRL Requirements Open The Door For IT To Help The Rest Of The Business

    The Opportunity

    I believe that one of the reasons that it is so hard for a CIO to get the IT department to align with the rest of the business is that finding the correct opportunities where alignment is possible can be a big challenge. Well I’ve got some good news for you: it looks like such an opportunity is getting ready to show up and it’s called XBRL.

    The Security and Exchanges Commission (SEC) passed a ruling last year that made adding the XBRL reporting tags to a company’s 10-Q and 10-F financial filings mandatory last year. The door of opportunity has opened for CIOs because the reporting company XBRL Cloud reports that 70% of the companies that made their filings using the XBRL tags had some sort of error.

    Currently this is no big deal – however, by the time that you become CIO it could well be be a very big deal. The SEC has agreed to limited liability for the next three years. After that, everyone had better be getting it right.

    What Is The XBRL?

    The extendable business reporting language (XBRL) is a series of custom XML tags that firms need to start to insert into their financial records that they file with the SEC. The goal is to make it easier for the SEC and financial analysts to pull out the information that they are looking for (and to compare it to other firms).

    The SEC’s rules stated that large companies had to start filing using it in July, 2009. Over the next three years all pubic companies will have to start using it. Clearly this is important and this type of work lends itself to exactly what the IT department does best.

    XBRL consists of interactive data tags that will allow financial analysts to better process a company’s financial numbers. Currently these tags only need to be placed at certain places in the body of the filing. However, next year detailed tags have to added to a company’s footnotes and MD&A parts of the annual report

    How Are Companies Solving This Problem Now?

    In order to meet the SEC’s requirements, there are two ways that companies are working to update their filings. The first way is to purchase software that allows the company to insert the tags into the filing themselves. The second way is to outsource the whole process and have their financial printer do it.

    Outsourcing the work seems to be the most popular way to solve this problem right now. RR Donnelley reported that 100% of its 141 customers who were required to report using XBRL outsourced it to them to take care of.

    The downside to outsourcing is that it doesn’t come cheap. One financial printer charged $24,995 per year to cover XBRL filings. To make things even worse, outsourcing is expected to become more expensive when detailed footnote tagging becomes part of the package. On the other hand, software to do this task in-house costs roughly $5,000.

    Where Is The IT Department’s Opportunity?

    Clearly the arrival of the XBRL requirement provides a great opportunity for a company’s IT department to better align itself with the rest of the business. The key question that you will have to ask yourself once you become CIO is how to do this?

    The #1 rule for IT here will be to make sure that you get the IT department involved in the process as far in advance of the due date as possible. The reason for this is because the SEC continues to issue constant revisions to the XBRL taxonomy and this can require additional effort by the IT department right up until the last minute.

    The good news for the IT department is that the software that will allow you do perform this tagging in-house is constantly getting better. However, no matter how good it becomes, IT will always have to work with the rest of the company in order to validate the data once its been tagged using XBRL notation.

    The overall goal here is to make sure that the XBRL tagged data matches the company’s 10-Q or 10-K filing. If for some reason it doesn’t, then the SEC may reject the filing and this will mean bad publicity for the company and a black eye for the IT department.

    What All Of This Means For You

    The new SEC XBRL rules are a much bigger deal than just a new financial reporting structure. Once the XBRL tags are in place, then the SEC is going to be able to use XBRL to quickly discover non-XBRL problems.

    This is going to be the real opportunity for the CIO to have the IT department align with the rest of the business. IT needs to step in and help solve the XBRL reporting issue and then stay engaged in order to help validate the tagged document and detect the issues that the SEC will find long before they do.

    We’ve been talking about the challenges associated with aligning IT with the rest of the business. The arrival of the XBRL requirement show how IT / Business alignment is truly going to happen and it’s going to take strong leadership from the CIO to make it happen.

    How should the CIO approach the finance people in order to ask if IT can help out with the XBRL tagging?

    Click here to get automatic updates when The Accidental Successful CIO Blog is updated.

    What We’ll Be Talking About Next Time

    When you become CIO, you’re going to be faced with the challenge of picking your friends. No, I’m not talking about being nice to the CEO and CFO – let’s hope that they are already your friends. What I’m talking about is the collection of outside firms that provide your IT department with goods and services. They can’t all be your best friend, so you’ve got some decisions to make…

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    Bad Behavior: Why CIOs Don’t Get Along With The Rest Of The Business

    Wednesday, February 3rd, 2010
    Image Credit
    A CIOs Personality Often Rubs Other Departments The Wrong Way

    A CIOs Personality Often Rubs Other Departments The Wrong Way

    Forget the whole alignment thing, is it possible that a CIO’s behavior is the root of the problem that the IT side of the house and the business side of the house have never been able to get along? Could it be that this is the secret as to why there has always been such a gap between these groups?

    What Drives CIOs?

    You may not be a CIO just yet, but I’m willing to bet that you share all of the bad personality characteristics that your CIO has. Perhaps if we take a moment and uncover just what is holding the IT department back from being all that it can be, we’ll also be able to uncover a way to solve this problem.

    IT by its very nature likes to focus on things like technology and processes. However, it’s that “people dimension” that turns out to really be the most important thing. It’s how people interact that either allows IT and the business to align – or keeps them apart.

    Studies of CIOs have revealed that they have two personality characteristics that help them be good CIOs, but which are probably dooming their ability to interact well with other departments. Wonder if you share these traits?

    What Makes A CIO Good & Bad At The Same Time

    A recent personality study of more than 500 CIOs, managers, and IT staffers have uncovered two personality traits that appear to be crucial to doing well in IT while impeding interactions with other departments.

    The first of these personality traits is the need to do things right and to do them perfectly. I’m sure that we can all agree that we share this characteristic in some manner. When the CIO has this personality “feature” , it has a habit of being adopted by the entire IT department.

    The problem with this trait is that it means that IT can be very slow to change how it does business. CIOs won’t want to make changes until they can be assured that the change has been tested and that it will work correctly in every situation. Needless to say, if the rest of the company is dynamically changing in order to adapt to the market, then IT will come to be seen as a drag on the rest of the company.

    The other trait that CIOs share is a deep set need to do things correctly and to find ways to continuously improve what they are doing. We’ve all seen both of these characteristics show up in countless internal IT improvement programs. This is something that can help an IT department get more done, but it’s going to hinder working with other parts of the business.

    The problem with this trait is that when other departments show up and ask the CIO to do something quickly or to do a job only partially in order to quickly react to a changing market situation, CIOs often balk.

    When the rest of the company encounters resistance to their requests from the CIO, they are not pleased. This kind of internal roadblock is dealt with by the rest of the business by either complaining to the CEO that IT is not being responsive or else (and we’ll all seen this before) the business ends up going around the IT department in order to solve their problem.

    How To Fix These Personality Flaws

    These personality flaws are a challenge for any CIO to deal with and will remain that way when you become CIO. The issue is that you need to have these personality features when you are performing IT functions, but you need to find a way to deal with them when you are interacting with people from other departments.

    Knowing that these two personality traits are a hindrance to aligning the IT department with the rest of the business is the first step in finding a solution to this problem. The next step is to realize that you need to consciously work to “turn them off” when you are working with other departments. This can be done by forcing yourself to step into their shoes and working to see the world the way that they do, not how IT sees it. Not easy, but doable.

    What All This Means For You

    When you become CIO, there probably still won’t be true alignment between the IT department and the rest of the business. This means that it will fall on your shoulders to finally solve this problem.

    Knowing that one of the root causes of this problem lies in the very personality traits that will make you a good CIO is the first step in finding a way to deal with this issue. Your focus then needs to be on finding ways to turn these traits on when you are dealing with IT issues and off when you are dealing with business issues.

    You may feel as though this will require you to become sorta of Dr Jekyll and Mr Hyde type of CIO. Perhaps this is true, but if it allows alignment to happen then go ahead and drink the potion…!

    Do you think that you already have these two personality characteristics that could make it difficult to get along with the rest of the business?

    Click here to get automatic updates when The Accidental Successful CIO Blog is updated.

    What We’ll Be Talking About Next Time

    When you become CIO, vendors will enter your life and they just won’t leave. What this means is that they’ll be a constant pain in your neck, always wanting your time and attention. However, on the flip side, they will be a valuable resource that can provide you and your team with information and guidance that you couldn’t get anywhere else. Don’t do what too many new CIOs do and stop talking with vendors after the deal is signed…

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    6 Reasons That IT / Business Alignment May Be Impossible To Do

    Wednesday, January 13th, 2010

    A quick quiz for you: what has been the #1 task on every CIO’s to-do list for the better part of the past 20 years? If you guessed “aligning IT with the rest of the business” then you are correct. This has been an IT goal for the past 20 years? What’s up with that? When you become CIO what are you going to do to solve this problem. Can it even be solved?

    It’s All About Communication

    Why has something that sounds so simple when we talk about it been so hard for CIOs to do? Tony Kontzer over at CIO Insight has taken a look at what’s been holding CIOs back and he’s come up with one answer: communication.

    I’m pretty sure that we all know where this one is going. The non-IT business folks like to spend their time talking in business terms and we over on the IT side of the house seem to be only able to communicate using IT jargon. The results of this inability to communicate can be disastrous.

    The Tower Of Babel — IT Style

    When the business side of the house and the IT side of the house find it hard to communicate, what happens is that they simply stop communicating. When this happens, each side goes off and starts to do its own thing.

    I can’t tell you how many firms that I’ve worked for where I’ve seen this happen. When communication breaks down between IT and the rest of the business is when you start to see the multiplying factor start to show up: multiple email systems, multiple ERP applications, etc.

    From a CIO perspective, this is the worst thing in the world that can happen. The reason is that every IT system that gets added to the company means that there is one more system that needs to supported forever and that boosts the cost of having the IT department do work that does nothing to help the company’s bottom line.

    The Big 6

    When you become CIO, how will you be able to measure how well the IT department and the rest of the company are doing in trying to align themselves? Well, you’ll have to fall back on what everyone in IT loves the most: metrics. The trick is knowing what needs to be measured. Here are the top six alignment metrics as recommended by the Society for Information Management (SIM):

    1. Communication Channels: Have effective communications channels been established between the IT department and the other departments in the firm? Are these channels being used?
    2. Metrics: are metrics in place and are they being measured in order to determine where the firm stands in it’s efforts to align how the business processes operate and what the IT department spends its time working on?
    3. Governance: are there processes in place that will ensure that what IT works on lines up with what the company’s true business needs are?
    4. Partnership: is there a partnership between IT and the rest of the departments where each is taking actions to make the other more successful?
    5. HR: does the HR department understand what the company is trying to align and are they taking action to attract and retain the talent that will be needed to make this happen?
    6. Technology: are the right tools in place and available to be used in order to drive the changes that will be needed to transform how business is done once the alignment has occurred?

    What All Of This Means To You

    For way too long CIOs have been looking for ways to try to align what IT does with what the rest of the business needs. So far they have not been successful.

    The primary stumbling block has been the simple fact that there exists an enormous two-way communications gap between the IT department and the rest of the firm. IT communicates using technical terms that nobody else knows about while the rest of the firm communicates using business terms that make no sense to the IT staff.

    A first step in finally bridging this gap is to implement the six alignment process metrics that we’ve identified. When you become CIO these will provide you with a way to measure your progress in finally getting the IT department to become a meaningful part of the firm. Nobody ever said that this was going to be easy, but at least now you have a plan for how you can accomplish the impossible.

    What do you think is the biggest barrier stopping the IT department from working more effectively with the rest of the company?

    Click here to get automatic updates when The Accidental Successful CIO Blog is updated.

    What We’ll Be Talking About Next Time

    When you become CIO, you’ll probably have all of the technical skills that you need to stay on top of today’s cutting edge IT issues such as storage, bandwidth, cloud computing, etc.  However, there is one thing that you may have forgotten to get: a law degree…

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    3 Ways To Bring Business And IT Together

    Wednesday, June 3rd, 2009

    Executing A Single Business / Technology Strategy Leads To Success

    Executing A Single Business / Technology Strategy Leads To Success

    In the end, it all comes down to execution. No, not chopping heads off, but rather how you go about having your IT department perform the tasks that the business needs them to do. How hard could this possibly be?

    What’s The Goal?

    The power term “alignment” is tossed around a lot these days. I think that it’s gotten used so much that a lot of us have forgotten just exactly what it means. In its simplest form, when a company is truly aligned then it is able to mange both its business and its technology together.

    As simple as this may seem, too few companies are able to achieve this goal. The reasons are many: differing personalities, budgets that are unrelated, lack of accountability for business results, etc.

    Fredric Fishman has spent some time  thinking about this and he’s come to the realization that in order for a a company to commit to managing both its business and its technology together, then it needs to do three things well:

    • Provide a clear vision for the organization
    • Create a well-defined roadmap that shows how to get to the future
    • Measure outcomes against predefined criteria

    One Strategy For Both Business And Technology

    If you have any hopes of bringing your business and technology activities together, then you’re going to have to make sure that the firm has a living business strategy. The world changes and your business strategy needs to be able to change with it. One way to accomplish this is to implement processes that will allow feedback on the business strategy to be collected and used to make adjustments.

    The next step is to make sure that everyone understand just exactly how technology is going to be used to achieve each one of your business objectives. Finally, don’t just hope for the best – make sure that you have criteria in place to judge success before you start any IT project.

    Strategic Imperative: Talk & Spend

    A company’s goals are no good if nobody knows about them. Make sure that any planned investment in technology has a direct link to a business objective. This kind of decision making won’t happen overnight. You’re going to have to take the time to create internal processes that will allow your staff to learn how to make the correct investment decisions.

    Once again, good communication is at the heart of any well run organization. You need to make sure that EVERYONE knows what the expected outcomes are and what the expected business results are. This will establish a sense of ownership and will make sure that everyone has “skin in the game”.

    Measure, Measure, Measure

    The best IT programs in the world don’t amount for much if you can’t determine what their impact was. You need to monitor the outcomes of each IT investment decision so that your decision making process just keeps getting better.

    This is where IT folks can really shine: collect those metrics, stats, and usage data and use these numbers to measure impacts and report results.

    Final Thoughts

    As you can see, the steps that we need to take to align technology and business are pretty straightforward. The challenge is that this calls out not for a technology solution, but rather for a human-to-human solution. Within IT we’re great at writing code and hooking up new systems, now we just have to do a better job of talking and communicating with the rest of the company.

    Questions For You

    Within your firm, do you feel that you have a clear vision or is it just a piece of paper on the wall? Do you know how the company is going to achieve its stated goals? Are there effective ways to measure your IT results in place today? Leave me a comment and let me know what you are thinking.

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             The Accidental Successful CIO Blog is updated.

    Coming Up Next Time

    HP’s CIO Randy Mott has done some fantastic things in helping to turn the company around. However, now things are starting to get tricky and it’s not clear that the company is going to be able to continue to be successful…

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