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4/8/2005
03:42 PM
Bob Evans
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Business Technology: Time To Apply 'If You Build It' Principle To IT

''So today, the trend is toward punishing IT--the CIO and his team are sitting in the corner with a dunce cap on. It's not fair, but that's what it's like right now.'' Sound a little too close to home? Bob Evans asks. Courage: Here are some suggestions toward new headwear from Accenture chief technology strategist Bob Suh.

How many times have you heard that the manufacturing industry in the United States is dead or dying? How often have you been told that this country doesn't build anything anymore? And what about the decay of the Rust Belt supposedly blighting the landscape of Middle America?

Perhaps like so much conventional wisdom, these ideas might represent the current convention, but they most certainly do not reflect wisdom. Or truth.

In fact, at a time when many business-technology executives and managers are struggling to find the right metrics to quantify objectively that they're delivering business value, driving productivity, and building competitive advantage, the tragically unhip manufacturing sector has long since figured all that out.

"We can learn a lot about the importance of tracking productivity from the manufacturing sector," Accenture chief technology strategist Bob Suh said in a recent bulletin. "Manufacturing contributes roughly the same to Gross Domestic Product growth as services, but with only a quarter of the workforce. Similarly, profits per worker in manufacturing are roughly six times that of the service sector. We believe this is primarily due to a relentless, metrics-based focus on manufacturing productivity growth, which is nearly double the annual growth in the service sector."

Other Voices

"There could be a $1 billion sale out there for a lucky enterprise software vendor. A General Electric official said Tuesday that the company would like to implement a massive enterprise-resource-planning system to tie together its 11 business units and countless divisions. ... As an alternative, [GE's Richard] Dobbs said he would like to see a major outsourcing company pair up with a major ERP vendor to provide GE with a 'wing to wing' ERP offering on an outsourced basis."

-- Paul McDougall, InformationWeek.com, April 6


The key issue, Suh explained in a conversation last week, is that while many IT organizations are caught in an "austerity trap" that's only partly of their own making, the result is the same: They're unable, despite years of struggle with this very issue, to predict with high degrees of confidence whether projects will work, meet deadlines, and come in on budget.

"Heart transplants today have a success rate of 95%, but in IT, we're still stuck somewhere around 65%," Suh said. "I'm convinced that if we can push that number up to 80% or 90%, investment dollars will follow. But that raises another problem: To get these critically important numbers, most companies today have to rely on outside firms like Standish because internally, they don't have the right metrics."

(Question to readers: What about you--do you have these capabilities internally? Please tell us about your situation.)

The economic climate of the past few years has no doubt forced many--most? all?--IT organizations to develop broad and deep expertise with cost metrics. We pound on IT vendors to get lower prices, evaluate projects on costs, and delay growth initiatives because they're too expensive. But while those cost issues are surely relevant, they're not the only factors. The manufacturing sector didn't get to be more productive and vastly more profitable than the service sector purely by hacking at expenses--rather, it gained that status by developing rigorous ways of scrutinizing and evaluating performance and processes, not just nickels and dimes.

"We are in a productivity-advantaged era," Suh said last week, "and if you can determine the ways to drive a more productive operating model, then you can use the free cash flow that generates to fund new initiatives."

So the big question is this: In the highly inefficient services sector, can IT play a significant role in helping to create a more productive operating model? "Absolutely--there's no question about it," Suh said. "We believe it more than ever now.

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