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8/25/2014
09:06 AM
Lorna Garey
Lorna Garey
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IT Needs A Dose Of Its Own Medicine

You're all over collecting and mining information to help the business get lean and mean. Why not shine that light inward?

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At a recent CIO Summit hosted by Extreme Networks at Gillette Stadium, home of the New England Patriots, IT executives from all four major Boston teams joined the CIO of the NFL, Michelle McKenna-Doyle, and tech leaders from major universities. The topic? Using big data in innovative ways in their organizations.

These IT pros sweat every detail of the fan or student experience. For the teams, that means using data to watch season ticket re-ups like hawks. These ticket holders tend to trend older, says Jessica Gelman, VP of customer marketing & strategy at Kraft Sports Group, owner of the Pats. The teams know a giant TV and comfy chair can be awfully alluring compared with costly concession food, snarled traffic, and in the case of the Patriots, often bone-chilling cold. The education CIOs are just as focused on experience. Joanna Young, VP & CIO of Michigan State University, tracks data including clubs joined and attendance at sporting events to predict the retention of freshmen. Michael Mathews, CIO of Oral Roberts University, is championing an Education and Career Positioning System project using the Department of Education's Open Data Initiative to put information into the hands of students and their families.

Of course, big data and metrics are used way beyond sports and education. IT's championed the Lean methodologies that have sucked the last ounce of fat from manufacturing operations. Advanced CAD systems keep a sharp eye on engineering teams designing everything from bridges to electronics. Salespeople are rated not just on closed deals but the velocity of sales and potentially dozens more criteria. CMOs track KPIs like reach, conversion, and returns on campaigns. A doctor didn't wash her hands often enough? Some hospital admin, somewhere, knows it, thanks to technology.

IT has gleefully helped companies use metrics to give other employees and business units the equivalent of a 24/7/365 proctology exam.

Now if only enterprise CIOs were willing to turn that data-driven lens on their own operations. Think about the IT project fiascos you've been personally involved in. Oracle's very public feud with Oregon over the failure of the state's insurance exchange is just the latest high-stakes debacle. State tech leaders tried hard to push blame onto Oracle but, as my colleague David Carr reports, the exchange failed to process even a single self-service application. That's a leadership failure of the sort that wouldn't be tolerated in any other business unit. Yet many CIOs shrug and say, essentially, "Hey, technology is complicated. Stuff happens."

[Service-Oriented IT: Millions of dollars and years of work have gone into ITSM and ITIL. Was it all worth it? Jonathan Feldman investigates.]

Chris Pick, president of the nonprofit Technology Business Management Council and a speaker at Interop New York, says the time has come for IT leaders to turn the IT benchmarking lens on IT itself. The result would be cost transparency and the ability to prove IT's value with hard numbers. Heck, maybe the business should be spending more on technology.

"Every publicly traded company today is evaluated from a performance perspective on generally accepted accounting principles" that standardize metrics like income statements, balance sheets, cash flows, and changes in equity, says Pick. "Those statements provide an apples-to-apples comparison. IT's never had that."

The TBM Council provides an open-source framework to bring this rigor to technology leaders. The goal? "Managing IT with business discipline," says Pick.

The council's Unified Model (see diagram, below) breaks IT into 12 areas: data center, compute, storage, data network, voice network, delivery services (project management), user services, applications, IT management, IT operations, and security & compliance. Within each area are cost pools: hardware, software, internal and external labor, facilities/overhead, and outside service. "All of those can be standardized," says Pick.

It's not that there's no accounting now. But it's too general and not up to the task of metrics-driven decision-making. "Every organization, right now, manages their IT department with a general ledger," he says. "Those general ledgers are insufficient in developing a way to make decisions."

Using the unified model, a company could compare outlays granularly, in standard cost pools, and benchmark against peers in a way that makes sense to the CFO. "Say you're GE, you might want to find another global conglomerate that has an IT spend of $2 billion and does durable goods manufacturing," says Pick.

Right now the TBM has more than 1,300 members, from banking to healthcare, all of which have contributed to developing the model. That means they've provided the kind of transparency that sales, manufacturing, and other areas of the business have taken for granted for years. Apptio, a technology business management software company for which Pick serves as CMO, has also applied the model to several hundred customers.

A static accounting isn't the endgame, either. Pick says the TBM Council's goal is to automate so that at any time the business can check current metrics for IT service delivery by understanding the cost of components, just like any supply chain. It's also not looking to do the kind of qualitative, point-in-time assessments consultancies like Gartner make their money on. Pick says benchmarks need to be quantitative, driven by facts and data.

"The 'poor man's benchmarking' today is, 'Where am I against Amazon for cost of compute, or the cost per gigabyte of storage through Rackspace?'" he says. "Businesses are now asking, 'Why are we materially higher?' That's where the data is so important." Cloud has educated the business and supplied competition. Unless IT can justify why storage costs twice as much internally, what makes us think the business will keep letting us manage it?

Maybe you've developed very specific security controls that will protect shareholders. You know it; now quantify it. Of course, security has always lagged in terms of standardization. You can't even know for sure it's successful, much less price it on a per-port or per-MB basis. Pick admits this is one area where work needs to be done, but says we can't wait. "The discussion of running IT as a business is driven by the business demanding that visibility."

The excuses why quantitative benchmarking of IT services will never work are, of course, myriad. It's too complicated. Technology changes too fast. We don't have time. The business doesn't care.

What it boils down to is: Many IT shops are scared. What should be more scary is that cloud is coming. Can you prove that you can deliver services better? Metrics let IT and the business have an unemotional discussion about what's paying off -- and what isn't.

"Start small, but start," says Pick. "Information sets you free." Maybe just benchmark fixed vs. variable, or run vs. grow or transform. "You can't manage what you can't measure."

In its ninth year, Interop New York (Sept. 29 to Oct. 3) is the premier event for the Northeast IT market. Strongly represented vertical industries include financial services, government, and education. Join more than 5,000 attendees to learn about IT leadership, cloud, collaboration, infrastructure, mobility, risk management and security, and SDN, as well as explore 125 exhibitors' offerings. Register with Discount Code MPIWK to save $200 off Total Access & Conference Passes.

Lorna Garey is content director of InformationWeek digital media. View Full Bio
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Lorna Garey
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Lorna Garey,
User Rank: Author
9/2/2014 | 10:17:01 AM
Re: IT Needs A Dose Of Its Own Medicine
Try replacing "IT" with "sales" in that thought -- a salesperson might argue that numbers alone can never tell the whole story. And, maybe that's so. But it won't stop a sales director from firing a salesperson who can't make his numbers, even if customers & coworkers think he's a great guy.

Same for manufacturing. Doesn't matter how nice it is that Company A makes its widgets in the US in a carbon-neutral factory; if it can't do so efficiently and deliver profits, the operation will be outsourced. Sure, maybe the company can quantify a marketing advantage to putting "Made in the USA" on the package. But it better be able to show that this advantage offsets added costs.

Like it or not, we're all in a metrics-driven world. 
zerox203
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zerox203,
User Rank: Ninja
8/31/2014 | 11:20:41 AM
Re: IT Needs A Dose Of Its Own Medicine
I'll definitely agree that this is a conversation worth having, but I'm not sure I agree with the sense of urgency Mr. Pick seems to have about it, and the exact approach he recommends. Of course, the very idea is that we can't rely on "qualitative" analysis because it's too subjective, and that's true... nevertheless,  it's hard to see how you could completely remove that from IT. The example brought up involves storage and proving why it's worth the added cost of keeping it in-house...but due to the very security (security being one of the main benefits of in-housing anything) measuring problems discussed, the numbers alone can never tell the whole story.

It's essentially fair to say that IT managers might want to avoid this analysis because it goes against their biases. However, you could also say CFOs or whom-have-you want analysis like this just to confirm their biases and bypass IT. It's basically the same conversation we've had going since forever, and it is worth discussing, but maybe a middle ground is needed instead of one or the other. I do like the idea that some of you have put forth about IT using this kind of analysis to their advantage, though. There is something to be said for putting your money (literally) where your mouth is.
yalanand
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yalanand,
User Rank: Ninja
8/30/2014 | 3:16:34 PM
IT has problems that can be solved by itself
In present times, IT must show why it is relevant to companies and quantify its importance to businesses.  This is akin to the evolutional survival for the fittest. More and more inventive technologies keep popping up and bestowing new opportunities and possibilities to business. If IT doesn't adapt or better yet,show why it is needed, cloud is here and is likely going to expunge it from business. 
Susan_Nunziata
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Susan_Nunziata,
User Rank: Strategist
8/28/2014 | 7:48:41 PM
Re: Great Post
@eamon: I understand the fear factor you mention, although I suspect that better metrics could actually have the opposite effect for CIOs. Increastingly, I hear the refrain of "proving the business value of IT." What better way to do this than to provide metrics that show where and how IT has managed its expenditures and delivered good ROI to the business?
jagibbons
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jagibbons,
User Rank: Ninja
8/25/2014 | 2:23:49 PM
Re: Great Post
Good point about consistency. The same criteria need to be used across the organization. IT shouldn't be measured any more or less critically than any other part of the business, especially other internal "service provider" type of groups.
Lorna Garey
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Lorna Garey,
User Rank: Author
8/25/2014 | 11:32:47 AM
Re: Great Post
Thanks @eamon - there are definitely a few ways to benchmark. I think the important thing is to pick one that makes sense to the business, not just IT, and use it consistently.
eamonwalsh80
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eamonwalsh80,
User Rank: Strategist
8/25/2014 | 11:02:02 AM
Great Post
Much needed post. Legacy IT bosses, once they get to helm the big data initiatives have traditionally either resisted the data mined for their own spot, simply for the threat that might pose to their chair; or they have used the search light to justify more value by working with or for other solutions. Tools like Haven(goo.gl/HFdxfV) can be extremely handy when it comes to mining relevant stats beyond your own customer base, but even feedback from stakeholders on your own. That needs to be viewed as a benchmark to uphold standards of internal IT and their services as well. 
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