Down To Business: Show That IT Matters, Don't Just Insist It Does

Just when you thought you'd heard the last retort to "IT Doesn't Matter," here comes yet another study that aims to debunk the infamous Nicholas Carr thesis. The study, from the Hackett Group, an advisory firm, makes a compelling argument for why IT matters based on empirical evidence. But the industry doth protest too much, methinks.

In their analysis of IT benchmark data from more than 2,100 companies, Hackett principals Erik Dorr and Philip Carnelley find that world-class business technology organizations--"those which achieve peak efficiency and effectiveness"--spend 7% more per end user on IT operations than typical companies do. Those above-average investments more than pay for themselves, the authors maintain, by driving down costs and improving the performance of finance, procurement, HR, and other operations.

Hackett finds that leading organizations pursue five key strategies: They standardize their data definitions--moving toward the much-ballyhooed "one version of the truth"--and they consolidate systems and applications. They do precise risk/reward analysis on every major tech investment, so-called IT portfolio management. They don't cut IT costs across the board but seek to rebalance them, favoring application management over infrastructure plumbing, for instance. They align their information architectures directly with business initiatives such as enterprise performance management. And they outsource selectively to improve "effectiveness" rather than to just slash costs.

The Hackett principals thus conclude that smart tech investments do indeed create competitive advantages. But they warn that a "failure to cultivate the IT-business partnership will result in a widening rift, with the business increasingly bypassing IT when sourcing critical systems and services."

Fair warning. I got to thinking about the Hackett Group's findings while reading the "innovation essays" submitted by business tech organizations for the upcoming InformationWeek 500 ranking. If, in fact, Carr's IT-is-a-commodity thesis is dead wrong and Hackett's IT-is-a-differentiator thesis is on the money, there would be plenty of hard evidence in those essays.

What I found is a mixed bag. Our instructions to IW 500 candidates--public companies with at least $500 million in revenue--were clear: "Tell us about your organization's most innovative business technology initiative completed in the last year. Within the body of the essay, define what about the initiative truly makes it innovative and describe the business value derived from the initiative. Quantify the results and provide examples."

Only two in five essays I read described in any detail how those IT organizations are delivering bottom-line results. The other entries meandered about, relating what their organizations did (developed an application, supported a process, adopted standards) without quantifying the returns.

Why put so much stock in a bunch of essays? Because if you can't communicate in a self-analysis the business value your IT organization is delivering, then you'll have a hard time communicating those deliverables to your CEO, CFO, department heads, and colleagues. You'll have a hard time articulating why--and precisely how--IT matters.

This isn't a call for lubricating the IT PR machine. The most sophisticated organizations already have that external messaging down pat. It's a call for internal clarity in tying tech projects to business goals, for measuring IT success not so much in terms of capacity and uptime and system performance but in tangible business results.

In a recent Optimize magazine survey of 575 business and IT execs (see story, "CIOs Gain Influence And Responsibility"), 78% said their CIO is becoming more of a business leader. If you want to be one of those leading organizations cited by Hackett that's leveraging IT to outrun its competitors, then everyone in your tech organization--not just the CIO--must aspire to business leadership.

ROB PRESTON,
VP/EDITOR IN CHIEF
[email protected]

To find out more about Rob Preston, please visit his page.