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Towards value-creating IT organisations

Towards value-creating IT organisations

IT organisations must move to become high fliers and create tangible business benefits

<b>Figure 1: The IT value ladder</b>

IT organisations that operate well across all the four levels of the ladder achieve both operational excellence and business transformation by creating business value.

<b>Figure 1: The IT value ladder</b>

IT organisations that operate well across all the four levels of the ladder achieve both operational excellence and business transformation by creating business value.

In his article IT Doesn’t Matter, published in the May 2003 edition of the Harvard Business Review, Nicholas G Carr suggested that, with IT services becoming ubiquitous, their strategic importance to their businesses had decreased and that IT didn’t matter to a company’s strategy any more.

His view came to be fiercely debated and contested. While the strategic importance and relevance of IT to a firm’s strategy is now universally accepted by CEOs and CIOs alike, the fact remains that a vast majority of IT organisations do not create any tangible business value for their firms and, in Carr’s words, do not matter to their firms.

Carr’s view holds good in the case of IT organisations — call them ‘low-fliers’ — that have, over the years, allowed themselves to be reduced to mere cost centres with the single-point agenda of providing the IT infrastructure to the business within stipulated costs. Some low-fliers make a good job of it and some don’t, but at the end of the day, this is all what they do — ‘keeping the lights on’. These organisations are mere infrastructure providers to their businesses as they do not engage in the business of doing business, something that prevents them from making strategic contributions to their firms. They do not always enjoy the respect and confidence of the business either. Business units normally either question the value received from such IT organisations or blame IT for transferring unmanaged costs in the form of chargebacks.

The value-creating IT organisations however — call them ‘high-fliers’ — create tangible business value by engaging in much more than the basic non-negotiable IT operational activities. In addition to providing the IT infrastructure to the business, these organisations partner with the business and enable it to realise its objectives as per the strategic vision of the firm.

The low-fliers and the high-fliers

The low-fliers can easily be separated and distinguished from the value-creating high-fliers on the basis of the nature of activities they perform. While the former restrict their activities to the business of IT, the latter participate in the business.

Business participation is easier said than done though, for understanding the tricks and rules of the business does not come naturally to many IT executives. It is like taking a leap up in order to start liaising strategically with the business. The IT Value Ladder depicted in Figure 1 best represents the divide.

Levels 1 and 2 of the ladder represent operational activities such as running data centres, managing laptop fleets, developing and implementing new software systems and the other non-negotiable IT activities that must be performed to support the IT requirements of the business. These activities are fundamentally technical IT activities that do not require heightened business skills and do not generate any tangible business value. The low-fliers operate within the first two levels of the value ladder at different levels of efficiency. It should be noted here that even the best performing IT organisations at these two levels can get only so far in creating business value.

An IT organisation requires a giant leap forward to traverse the chasm that separates levels 3 and 4 from levels 1 and 2. They have to step out of their comfort zones into the realms of business operations and business strategy. IT organisations that operate well across all the four levels of the ladder achieve both operational excellence and business transformation by enabling the business to increase market share, revenues and reduce costs.

Next: Bridging the chasm – Towards value creating IT organisations

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