This article was contributed by Giuliano Caldo, VP, Head of IT Diagnostics, McKinsey & Company, Inc.
IT has traditionally been seen as a black box and a cost center that the business only thought about when servers went down. Today, that story is being rewritten.
IT has traditionally been seen as a black box and a cost center. Long ago, when I was an IT manager, the conventional wisdom had it that, if everything went well, nobody even knew IT existed; only when servers went down or in the budget season, did the business think about IT.
Nowadays, IT can be much more than that. Multiple initiatives have emerged to change the ‘old’ way of thinking and to put CIOs at the forefront of delivering business innovation. One of the most successful frameworks in this area is called Technology Business Management. Ultimately, TBM’s purpose is to help CIOs turn IT from a cost center to a driver of value, by managing IT like a business.
McKinsey has identified 5 different archetypes of increasing TBM maturity. For example, Archetype 1, “Transparency Driven” is a largely black-box IT department, trying to increase transparency but with few new cost savings. Moving up in TBM maturity, Archetype 3 is the “Portfolio Optimizer”, where IT interacts with the business based on an effective service portfolio. The most visionary Archetype 5 is called “Digital Enterprise”, where IT is one of the driving forces of business digitization.
However, despite the general agreement that technology-driven companies are the winners of tomorrow, many CIOs are still facing challenges that prevent them from moving up the TBM archetypes.
What are the reasons for this?
In my consulting job at McKinsey, I have diagnosed IT performance of hundreds of companies in multiple sectors and geographies, and have had the opportunity to talk with many CIOs about transparency and TBM. The two main issues I’ve observed IT leaders face are 1) the difficulty to successfully explain IT services to the business and 2) the complexity of IT performance-related data (costs, FTE, projects, asset inventories, etc.).
Because of these apparent difficulties, CIOs will often decide to indefinitely postpone the necessary TBM journey. In a survey run by McKinsey with over 100 IT organizations, it turned out that 62% of respondents are still at Archetype 1, and have neither been able to define a systematic cost-savings program based on additional IT transparency nor to have a service catalog covering most of its IT.
What can be done to change this? While each company is different, there are typically three things that can help jump start TBM:
- Build a vision, by describing your applications as business-oriented services
Looking for an example? Just visit the website of salesforce.com, gsuite, or at any other cloud-based enterprise service.
- Get the facts, by making a map of IT data sources
What information is needed to understand the cost and service level of each of the above services? Where does the info lie? What is the data quality?
- Be gradual
Work in waves of 3-6 months to aggregate and analyze data about your IT; each wave should incrementally increase transparency of IT, and, especially, should bring specific benefits, in terms of cost savings, improved service levels, etc.
The opportunities are numerous, TBM can turn IT from a cost center to a source of value, and from a black box to a digital toolbox. It’s a journey; all it takes is the first step.
Please join Giuliano Caldo of McKinsey, and other IT leaders at Leading IT Like a Business in Frankfurt, Germany on November 24th, 2016