Reader ROI

• How the Six Sigma process methodology applies to IT
• What Six Sigma can and can't do for you
• Best practices for rolling it out

Six Sigma is a defect reduction methodology that forces organisations to focus on the quality of the customer experience. And it can most definitely be applied to IT.

The IT organisation at Raytheon Aircraft saved $US500,000 from a single project in 2002.

The nine CIOs at Textron saved a total of $US5 million in six months.

One team of engineers at Fidelity Wide Processing expects to deliver $US6 million to $US8 million in cost reductions this year.

Some of the largest IT organisations are looking trim and vigorous these days. Others, like Telstra locally, are not yet the lean, mean fighting machine they hope to be - but are working hard at it (see "Right Answers to Dumb Questions", CIO November 2003). It's no miracle cure or diet of the month. It's a particular piece of process methodology called Six Sigma.

Six Sigma is a defect reduction methodology that transforms organisations by forcing them to focus on the quality of the customer experience. The term sigma refers to deviations from an ideal level of operation, where each level of sigma, starting from one, allows for fewer defects. Sigma six, the operational equivalent of nirvana, allows a mere 3.4 defects per million outputs. If you're in manufacturing, that means 999,996.6 flaw-free widgets. If you're in IT, that means fewer servers, faster call response times and better project delivery.

Six Sigma got its start in manufacturing at Motorola in the 1980s, and later spread to nuts-and-bolts powerhouses like AlliedSignal, General Electric and Honeywell International. But now CIOs at companies of all disciplines are adopting Six Sigma for its fact-based, quantifiable insistence on continuous improvement and its ability to doggedly root out and improve defects in processes.

"Six Sigma isn't just a manufacturing thing. It can be applied to the financial services industry very effectively," says Doug Sutton, president of Fidelity Wide Processing, where the methodology is delivering cost reductions and quality improvements in the range of 20 per cent to 50 per cent across the board. "A lot of our potential customers are asking if we use it. They want to know if we're focused on business process improvement, and the answer is yes."

On the numbers side, Six Sigma provides CIOs with an objective, measurable way to justify technology investments; on the karma side, it serves as a judgement-free common language between IT and other project stakeholders within the company.

"IT always gets caught up in insatiable demands and lost ROI. Six Sigma solves both those problems," says Charles Costa, executive vice president and CIO at Chase Financial Services, which assigns a Six Sigma team to most IT projects worth more than $US1 million. "Six Sigma gives us a very precise way to demonstrate the real value of technology, and it helps us improve the way we deliver that value."

Six Sigma has a lot of normally staid CIOs excited for a good reason: Quality is back on the corporate radar in a big way. "We've cut so far into IT in the past couple of years that we're starting to see some quality problems," says Val Sribar, a Meta Group senior vice president. "If you're smart about where you apply [Six Sigma], if you apply it to your core disciplines, it makes a lot of sense right now."

Still, wary and weary CIOs, especially those who have endured both the 1990s flavour-of-the-month management mania and the apparently endless post-bubble budget crises, are justified in wondering if Six Sigma is right for them.

Six Sigma users insist it works for all types of companies and in all functions, but they do admit there are a few times when the methodology won't take. If your resources have truly been cut beyond the point of pain, now isn't the time - not because you don't need Six Sigma's benefits (you probably do, more than ever) but because burned-out staffers and stressed-out managers aren't likely to be able to give the regimen its due.

While very small IT shops can benefit from Six Sigma's approach to error reduction, they'll have to wait to see quantifiable benefits. "There's still applicability, but it will take a small shop a long time to know whether they've reduced their defects to three in a million, just because it's going to take longer to get to that first million," observes Matt Light, a research director at Gartner.

And finally, every single IT professional experienced with Six Sigma emphasises that it absolutely, positively requires top-down buy-in. Six Sigma is an executive-directed transformation tool, and if senior management isn't interested or willing to personally sponsor the strategy, it's going to fail - point blank.

"To have a successful Six Sigma initiative in your company, senior management has to understand its role: to pick teams, decide what measurements are going to matter, establish some form of accountability and visibility, and set up a mechanism to establish and track results," says Alan Larson, author of Demystifying Six Sigma: A Company-Wide Approach to Continuous Improvement who worked at Motorola in the 1980s and was part of the team that introduced Six Sigma to Honeywell.