Posts Tagged ‘world class IT organization’

IT Value: How To Measure The Revenue Of IT

Wednesday, June 10th, 2009

IT Departments Produce Revenue, But You Have To Be Careful How You Measure It

IT Departments Produce Revenue, But You Have To Be Careful How You Measure It

What would you say is the biggest challenge that CIOs are facing today? There are a lot of possibilities to choose from, but if I had to put my money on just one issue, I’d choose the fact that all that today’s CIOs seem to get a chance to talk about is costs.

What’s missing here is a way for CIOs to communicate in a company-wide manner just how much value the investments that the company is making in IT are returning – the revenue of IT if you will. HP’s CIO Randy Mott has been facing this problem and he’s come up with a solution to it.

Chris Murphy over at InformationWeek had a chance to sit down with Randy and ask some questions about how he’s gone about communicating the value of IT in his company.

At HP, the IT teams attempt to put a measurable value on the work that they do. In short, it’s the sum of the tangible (hard dollar) and intangible benefits that each IT project delivers in the 12 months just after full implementation is complete.

Randy believes that IT has always produced a revenue; however, we’ve been doing a poor job of capturing the value of what we do. The correct way is to report on the value of an IT project  in such a way that it can be presented to the CFO / CEO / executive committee and have the numbers stand up.

How did HP pull this off? Simple – pre-planning. Before any project starts at HP, a complete cost-benefit analysis is performed and agreed to by both business unit leaders and finance. This means that the numbers are finance numbers – not IT numbers – and so they have credibility with the rest of the business.

So there you go – it is possible to measure the “revenue of IT”. It just takes commitment from both inside and outside of the IT department.

Questions For You

Is your IT department just a cost center? Does your IT department try to measure the revenue that they enable? Are the numbers that they report accepted by the rest of the company? Leave me a comment and let me know what you are thinking.

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Coming Up Next Time

The world at large believes that CIOs lack the business skills that are needed in order to have a seat at a company’s strategy steering table. If CIOs are to take the reins of the IT department and turn it into the engine that allows the rest of the company to move faster, then there are 5 things that they need to STOP doing…

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Posted in revenue | 1 Comment »

IT Work Split: The New 80/20 Rule

Monday, May 11th, 2009
IT Departments Need To Apply The 80/20 Rule To Support Work

IT Departments Need To Apply The 80/20 Rule To Support Work

Pity the poor CIO – he manages a team of professionals that do great work, but he / she rarely gets any credit for a job well done. Why you ask? Well an unfortunate comparison can be made to the maintenance staff that takes care of the building that your work in. It’s great that they keep everything up and working and looking good, but how often do you ever really think about them?

What’s missing here is for CIOs to determine what the right work split is for their team. No matter what we do, there is always going to be some support and maintenance work to be done, but how much is too much?

HP’s CIO Randy Mott was facing this problem when he came on board a few years ago and he’s moved quickly to try to resolve it.

Chris Murphy over at InformationWeek had a chance to sit down with Randy and ask some questions about how he’s gone about getting his team to work on the things that really count.

When Mott first joined HP the IT department was spending about 70% of its time doing support work – keeping the network up, resetting passwords, recovering deleted files, etc. This meant that only 30% of their time was being spent doing things that moved the company forward.

So did Mott do? First he cut his IT payroll almost in half – they went from 19,000 staff (50/50 contractors and employees) down to under 10,000 (90% of which are employees). The thinking here is that if you are just doing support, it really doesn’t matter who doing the job, contractor or employee, as long as it gets done. However, if you are doing mission critical system development, then the person doing the work had better be an employee so that you’ll have continuity.

The way that Mott figured out who to keep and who to let go was by documenting what everyone was doing. Once a week folks would stop and document what they had been working on that week. The thought was that if you don’t have good data on what folks are doing, then you can’t make good decisions about what they SHOULD be doing.

One other key change that HP made is in how they define work. There are only two buckets these days: support or “new development”. No middle ground is permitted so say goodbye to “enhancements”.

In the end, Mott’s been able to get his work split to a 70 / 30 mix. It’s not quite the 80 / 20 that he’s shooting for, but he’s getting close. This approach also allowed Mott to get enough data to be permitted to decommission some popular but high maintenance applications. How many other IT departments wish that they could do that?

What is the work split between support and new development in your department? What would you like it to be? What steps are you taking to reduce the amount of time that your team spends on support activities? Leave me a comment and let me know what you are thinking.

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What Can HP Teach You About How To Run Your IT Department?

Monday, April 27th, 2009

HP's CIO Has Taken Bold Steps That Can Teach Us A Few Things

HP's CIO Has Taken Bold Steps That Can Teach Us A Few Things

When I say “HP” what is the first thing that pops into your mind? In my case it’s a flashback to the HP 12C calculator that became welded to my hand while I was working on my MBA. These days, HP does a lot more and we all probably have some HP printers or PCs laying around somewhere. However, it’s what HP’s CIO Randy Mott has been up that has caught my attention.

Let’s start with results because otherwise Randy’s story really isn’t worth telling: HP has cut IT spending from 4% or revenue to about 2% of revenue, 70% of staff’s time spent on new development with just 30% being spent on support, shrunk 85 data centers down to just 6, 6,000 applications shrunk down to 1,500. Wow – sure looks like Randy must be walking on water, eh?

Any CIO would lust after results like these. However the devil is, as always, in how Randy got them. Chris Murphy over at InformationWeek did some digging and found out that Randy had to do a number of things that would make even the strongest of us think twice.

Randy’s most important strategy: he realized that it was not just enough to identify the big areas of HP’s IT department that needed to be transformed, what he needed to do was to go after all of them at the same time as one big, huge, effort.

Here’s what he took on (all at once): portfolio management, IT workforce effectiveness, world class IT organization, global data center consolidation, and a single enterprise data warehouse. Whew! You could build a CIO career on any one of those.

To accomplish all of this, HP needed to get their metrics right. Here’s what they measured:

  1. On-Time Delivery: Just like pizza, this is what really can make an IT department have some credibility. HP went one step farther – it’s weighted so delivering big projects on time counts for more than delivering a bunch of little projects on time.
  2. Time Spent Innovating: This measures how much IT time is spent working on new things as opposed to doing support tasks.
  3. Time-Phase Boxing: Similar projects should take the same amount of time to do similar phases. This metric serves as a warning flag if a project is starting to go off course.
  4. Collaboration: how many different locations are involved in a project? The goal here is to keep this number as low as possible.
  5. Cost / Benefit Analysis Validation: In a nutshell, this is an agreement BEFORE the project starts as to what it’s going to cost and what value it’s going to deliver. This metric tracks how close the team is to completing the CBA and nobody starts the project until it’s complete.

Do you think that your IT department could take all of these major initiatives on at the same time? Which of these metrics do you think would provide you with the best insights into how your IT projects are doing? What metric should be added to this list? Leave me a comment and let me know what you are thinking.

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Posted in CIO | 3 Comments »