IT Strategy

IT Strategy Survey Results

Raj Sheelvant — Wed, 04 Nov 2009 17:13:27 PST

Results from the IT Strategy Survey are posted below. This survey was conducted by Ivo Velitchko (read more in my blog titled IT Strategy Survey).

Out of 104 people who responded 80% of you thought that the topic of IT Strategy in the past decade has been increasing. Good to know!

Business Flow Modeling Critical for ERP implementation

Raj Sheelvant — Mon, 02 Nov 2009 17:48:48 PST

Great article titled “CIO: Don’t attempt BPM system without mapping process flows” by Niel Nickolaisen on importance of understanding process flow before selecting Business Process Management (BPM) system. Niel writes how he always organizes, streamlines and simplifies transactional processes as part of BPM projects. He says he always manually map processes as part of any system requirements-gathering exercise.

Niel notes that process mapping makes the process visual. With the process visual, he can objectively assess the usefulness and quality of the process steps and find ways to streamline and improve the process. After implementing the process changes, he uses BPM tools to help automate and manage the process. The other advantage of making the process visible is that all the stakeholders can comfortably go to the next step and selecting ERP for BPM.

I think Niel makes a critical point here. Any ERP implementation will not be successful until the business process in mapped into some simple visual representation. The end consumers need to understand and then simplify their business process before implementation of ERP. In the end you not only want to automate the business process but you need to streamline it.

Cisco’s alignment of IT with Business

Raj Sheelvant — Tue, 27 Oct 2009 18:18:51 PDT

For many years, Cisco has grown through acquisitions. Since 1993, the company has assimilated more than 130 smaller firms, including five in 2008 and three so far in 2009. IT department’s role is to leverage the virtualized architecture and collaboration technology to quickly support each acquired company’s business processes. Thus, IT department of Cisco under the leadership of CIO Rebecca Jacoby, intends to lower the acquired company’s costs, while enabling it to add value to Cisco.

According to an article titled “Cisco: Collaboration Is Key to Business”, the ultimate goal of Cisco’s IT organization is to enable business growth and capabilities. IT plays a vital role within the organization, even as the company moves to an unusual committee-based management structure. IT is represented on all 60 committees on the new organization chart, which should help tie the IT department’s top two initiatives— virtualization and collaboration—to the company’s strategic business goals of asserting leadership across an ever-growing roster of businesses.

Virtualization: Cisco’s approach to virtualization encompasses both data centers and applications. By virtualizing servers in its data centers, Cisco is getting the same number of servers to do the work of many more. At the application level, a service- oriented architecture enables Cisco to deploy many applications across a common infrastructure via Web services.

Collaboration: Collaboration technology will be critical to successfully execute Cisco’s new organization structure, which bulldozes operational silos, replacing them with a matrix of committees, councils and boards. Cisco is taking a broad approach to collaboration—one that runs the gamut from social networking to video.

According to the article, Cisco’s IT organization is enabling the company’s push into the consumer products market. Manufacturing, distribution and retailing of consumer products is essentially an exercise in supporting a global supply chain and a global distribution channel.

Thus, with the focus on reducing both the acquization cost and time to market cost, IT department seem to be adding ‘strategic’ value at Cisco.

New Model in IT Offshoring

Raj Sheelvant — Mon, 19 Oct 2009 19:41:54 PDT

IT Offshoring continues to grow despite global downturn, but the delivery model is changing according to McKinsey Article titled “How innovators are changing IT offshoring”. The article notes that the widely adopted model for delivering offshore services – staff augmentation, is ceding ground to the more robust managed-services model.

In ’staff augmentation model’ the clients pay for each staff member a supplier adds to complete an IT contract. Clients seek the lowest cost per head, which encourages stiff price competition among suppliers, but gives the vendor limited incentive or accountability for the outcomes and quality, as no specific requirements or deliverables are specified in the contract. But, under the managed-services model, suppliers agree to deliver a specified capability or functionality with a desired level of service for a given price. This model requires a higher level of trust, as clients cede more control to suppliers.

McKinsey Survey (Shown above) displays that client organizations that rely primarily on the managed-service rather than staff augmentation model reap great advantages: the best and most efficient work, the highest satisfaction levels, and the lowest attrition rates among their suppliers’ employees.

I think the IT offshoring model is finally maturing. Staff Augmentation Model is based on old F.W. Taylor observation of manufacturing efficiency. This old manufacturing efficiency model that initially led to manufacturing outsourcing is based on linear productivity improvement. For example: If it takes one person working full time build 10 widgets. Then 4 full time workers are needed to build 40 widgets. Initial manufacturing outsourcings based on these simplistic calculations generally were successful. If you need 40 widgets from your outsourcing partner, use staff augmentation model and ask them to hire 4 outsourced worker. But same thinking cannot be applied to IT or any other Knowledge based work. Can you say if one programmer can produce 10000 lines of code per day, then four programmers produce 40K lines of code? Even if the number of lines grows linearly, can you conclude that 40K lines of code is 4 times valuable than 10K code? (in my opinion lines of code is a wrong metric to valuate productivity but its still a very popular metric). This legacy manufacturing based management thinking has led to failed IT projects and subpar offshoring results again and again. Evolution into Managed service model is a better way of offshoring and measuring success.

CIOs Recalibrate Their IT Strategies

Raj Sheelvant — Tue, 13 Oct 2009 18:16:14 PDT

courtesy flickr

CIOs are increasingly open to new, alternative IT operating models, which also could mean new vendor relationships. A grinding recession, paired with new choices in terms of online software, mobile computing, outsourcing, open source, and more, opens the door to this change according to Information Week article titled “Alternate IT”. Article notes that CIOs are rethinking significant parts of their software strategies, considering alternatives to conventional licenses, maintenance, and fee structures, as well as alternatives to lengthy internal development cycles, complex customization, and long global rollouts and upgrades.

Though the ‘alternative’ approaches to software are named differently, they are making software cheaper, simpler, more flexible, and more accessible. Alternative IT models are gaining ground because, in many cases, they make too much sense to ignore. There is an interesting case study with GlaxoSmithKline in this article. You can download the detailed report here (registration required).

IT serves to systematize and streamline the business process which in turn drives down the cost of operation. As IT matures, the article points there is a major shift in CIOs’ openness to new IT operating models. What’s most striking about the alternative models is where they’re driving IT teams to think differently about their role and the value they provide. Well it’s an overused cliché but “paradigm shift” is the only way to describe the changes happening in the software industry and how they’re helping IT organizations let go of the tactical issues of technology according to the article.

10 Truths about Project Planning

Raj Sheelvant — Fri, 09 Oct 2009 18:08:36 PDT

Baseline Article titled “10 Truths about Project Planning” lists these 10 items. I have listed them below. Issues with software project planning are well known but when you start quantifying them it looks scary. I think we in the IT area should take these finding seriously and looks for way to improve these numbers. With the focus on cost cutting and belt tightening in the corporate world, IT Project Manager needs to be proactive in systematizing project variability.

Approximately 68% of companies surveyed were statistically unlikely to run a successful project, based on the findings in the survey.
Companies with poor business analysis are three times as likely to see their projects fail.
Bad project requirements can exact up to a 60% hike in budget and time.
For a $3 million budgeted project using a set of poor requirements, companies will pay an average of $5.87 million.
The typical organization tends to use up 41.5% of new project development dollars on unnecessary or poorly specified requirements.
When non-IT business leaders set project requirements, projects come in at:
- 196.5 % of the target budget
- 245.3 % of the target time
- And 110.1% of the target functionality originally set by requirements
When IT leaders set project requirements, projects come in at:
- 162.9 % of the target budget
- 172 % of the target time
- And 91.4 % of the target functionality originally set by requirements
When a mixed team of IT and non-IT leaders set project requirements, projects come in at:
- 143.4 % of the target budget
- 159.3 % of the target time
- And 103.7 % of the target functionality originally set by requirements
Over 50 % of organizations do not have the basic business processes and procedures in place to establish effective business and software requirements for new projects.
Project failure associated with poor requirements can be slashed on over 80 % of projects by auditing three areas within requirements documentation:
- Uncovering interdependencies
- Setting ambiguous goals
- Documenting information required to support the process.

IT Strategy Survey

Raj Sheelvant — Wed, 30 Sep 2009 18:26:59 PDT

Ivo Velitchkov is working on concept for integration of models and modeling objects of Business, IT Strategy, Enterprise Architecture and Project Management. You can read more about his concept at “Cohesion of Enterprise Model“. He is planning to start this PhD research after 15 years in IT in many roles, as entrepreneur, consultant, project manager, enterprise architect and the like. As a part of his research, he is conducting the survey and would appreciate if you could spare a minute to fill in this form.

IT Strategy Consulting Challenges

Raj Sheelvant — Mon, 28 Sep 2009 18:18:23 PDT

David Clark is a former Managing Partner for Gartner UK Consulting. Prior to that, he has been in senior positions at a few of the other “tier one” consulting firms and a couple of enjoyable stints as a CIO positions in industry. His career spans about 25 years during which time he has delivered around fifteen or so IT strategies and had four “done to him”. It’s always a good idea to hear from someone in the trenches about challenges of IT Strategy Consulting rather than reading Business School Case Studies. My brief chat with David validated that. I learnt a lot from my conversations with David and hope you do too!

Raj: Any common theme you found in your IT Strategy Consulting?

Dave: What I’ve found again and again and again is how much a strategy and the IT function all too often mirrors the personality of the CIO and when moving into implementation it can end up costing way more than it needs to if the CIO has ambition beyond their pockets. Every consulting firm, regardless of what any of them say approaches strategy in a fairly similar way – and most of them can arrive at a fairly obvious and sensible outcome. Some can do it in a few weeks and some spin it out for eternity. My point about the CIO’s personality is that I’ve noticed over the years that more often than not the strategy eventually twists and turn into something that they then rationalize to fit their own original thoughts. Unless of course it’s Accenture delivering it then he or she will probably be lucky to remain the CIO.

Raj: So you reckon that managing the CIO’s ego is also part of a consulting job?

Dave: Without question, although I’m not sure it’s managing it or simply recognizing it! I think the thing that I have found, more than anything else over the last twenty five years, is that everything boils down to people. It might on the surface look like a technology issue or perhaps a process problem but seriously – when you dig down – 9 times out of 10 it’s a people problem. It boils down to a mixture of ego, ability, personality, capabilities, behaviors which then manifest themselves in all sorts of ways. I can wax lyrical on this one for hours – so I’ll try and stop myself. It’s also what really makes business interesting so I shouldn’t complain!

Raj: What did you find out about CEOs and CMOs involvement during your IT Strategy Consultancy? Are they interested in defining IT Strategy or do they delegate it to CIO?

Dave: Hmmm. I think this is a really interesting question about the other members of the exec. I think that the challenge around aligning the business, and I have to say I hate the term aligning with the business – how often do you hear that Sales is aligning with the business or HR is aligning with the business, sorry off on a tangent there, as I was saying all too often the business itself lacks a true strategy – I’ve often encountered companies who say they have a business strategy and don’t and then IT have to try and align to something that’s ill defined and often bland. I’ll give you an example – we reviewed an IT strategy for a large commercial company – the business strategy was sell more services to more customer in more sectors, which in itself was hardly incisive and their IT Strategy: be more efficient, modularize and optimize. Yea – sure – they don’t need IT Strategy Consultants to tell them that although they had actually had one of the tiers one firms in for quite a good few weeks before we got involved. Perhaps one day there will be a single integrated strategy for the business with IT as a thread within it – some companies are now doing this so hopefully it’ll catch on.

Raj: So the other ‘C’ level executives know what IT can do for their business strategy?

Dave: They think they know, or rather they have some ideas, which today is perfectly reasonable, as so many business have graying boards - i.e. the CEO knows IT is important but he’s 55 years old and in many ways only “gets” a bit of what IT should mean to his company. The COO often views IT as the function to blame when any operational issue occurs, or they can’t deliver in time. The CFO will as ever be asking about costs and where savings can be made, etc etc… this scenario plays out time and in again in so many companies. So the CIO has to mash all of this together and then deliver something interesting, engaging and compelling usually for less money that it really needs and in less time than he would ideally like.

Raj: So, what should CIO do to get the board interested in IT Strategy?

Dave: I think the CIO has to really create a highly visual and compelling story to try and engage his/her board – I’m a big fan of the story teller CIO – so for example in the case I mentioned earlier – we attempted to condense the IT Strategy into a compelling idea and then build the story around this – but in all honesty Raj this is really to try and get the attention of people who I personally think should pay attention in any case! Over the next few years I think it will start to change as a generation hits the board room who have been raised on smart IT. I find it difficult to imagine any of my children for instance needing to have the benefits of collaboration explained to them, or accepting it will takes eight months to introduce a new application….!? As an aside collaboration and corporate are in many cases mutually exclusive, they weren’t built to collaborate – but that’s probably a topic for another day.

Raj: Moving on to a different topic… What do you think of SaaS and Cloud computing?

Dave: I’ve got very strong views on this so here goes…whilst the various consulting firms and technology vendors argue about definitions, security, total cost of ownership, transferability, cost per server, cloud, SaaS, PaaS, on-premise, off-premise what they seem to miss is whether they like it or not small and medium size companies are happily buying services over the internet. For them it’s all down to cash flow, flexibility and scalability and these small and medium sized companies are just as important, if not more so to the economy than the industrial giants.

I often think therefore that the debates themselves tend to re-enforce the IT geek model. However I do accept that for larger companies SaaS and cloud has quite a few more implications, but really it’s just another delivery model that the CIO can factor into his strategy and thinking. So, I’m not sure if you agree, but I think we are sitting at a really interesting point in IT – a sort of tectonic plate shifting time – eventually the whole SaaS/Cloud stuff will make a difference across the industry, regardless of all the debate and I personally think it’s going to cause some interesting shifts in the traditional Consulting/SI firms – which is good for the customer as well. At least I hope so as I took the plunge of leaving Gartner to start a new consulting/SI type firm which is really founded on this new generation services that are starting to appear. Sort of put your money where your mouth is approach!

Raj: So what’s your vision for your new consulting company?

Dave: Oh no the dreaded elevator pitch – here goes then…a business and technology firm formed from collaboration with many active members across the globe linked by great systems and sharing capabilities, knowledge and profits in an equitable and ethical manner. I just don’t believe that it makes sense anymore to have 10,000 people on your books, in a hierarchical model, driving you to make decisions that are so often sub optimal for the client – and I know this is the case because in my time I’ve seen it happen – lots. I described our company recently to a customer as “An efficient 21st century workers co-operative!”

Raj: All the best with your new endeavor. Keep us posted.

Dave: Thanks Raj, likewise with the blog -it’s good fun and it makes me smile and think a bit – which is what it’s all about really.

Wikimedia’s “Open” Strategy Planning Session

Raj Sheelvant — Fri, 25 Sep 2009 18:46:46 PDT

Wikimedia Foundation, the nonprofit organization that supports Wikipedia has grown without a strategy. But Barry Newstead in the HBR article titled “Inside Wikimedia’s Open-Source Strategic Planning” says that there are some strategic issues that needs to resolved. Now they are ready to tackle strategic questions like “How to prioritize growth initiatives that involve reaching every single human being? How to make ever increasing amounts of knowledge freely sharable? How to cultivate a healthy, growing and diverse community of contributors? How to enhance quality of knowledge? How to ensure Wikimedia has the resources and capabilities to sustain its work in perpetuity?” Now is a good time to tackle these issues. But what’s unique is that the board of directors is going to go into the strategy session that is ‘open’ to the world. This mean, according to Barry Newstead, Wikimedia strategic planning process will be blogged pretty much as it happens. Their goal is to tap into ‘crowd’ expertise, perspectives and creativity for the benefit of Wikimedia’s strategy. Their biggest challenge, which Barry concedes, is how might one develop a strategy that could provide direction to such a complex and connected organization without losing the voice of its millions of community stakeholders? Barry writes that they are going to use the following core principles as a guide:

•   Anchor on the vision: Wikimedia has a powerful vision (”a world in which every single human being can freely share in the sum of all human knowledge”) that serves as a touchstone for the strategy process
•   Do it the Wiki way: Open, transparent and evolving deliberations that trust in the constructive spirit of diverse volunteers to bring powerful expertise and perspective
•   Use the best of nonprofit strategy know-how: Drive dialogue and decisions from facts and rigorous analysis of options; Focus on the most critical decisions that will drive large scale impact; tackle questions that require “values” choices explicitly
•   Presume good faith: People are engaging with Wikimedia in the best spirit of volunteerism and contribution to social good and will act with the best motives
•   Learn and change: Try stuff, If it doesn’t work stop, and try something else

This is unique and exciting! Will Wikimedia be able to exploit the “wisdom of the crowd” to achieve you strategy? The problem with involving the ‘crowd’ is the noise that it generates. How will they ferret out the right ideas from multiple substandard ones? How will they identify if a ‘bizarre’ feedback is actually an ‘out of the box’ creative solution? On a small scale these issues are manageable but by opening up to a large crowd, they have magnified the scale and I think this might become a management challenge. Their past in being a pioneer in open collaboration definitely qualifies them to succeed in “Open” Strategy Planning. We will have to keep our fingers crossed…

Lean Manufacturing and IT Strategy

Raj Sheelvant — Sun, 20 Sep 2009 18:38:35 PDT

Olivier Drean is EMEA alliance partner for APRISO, which is an editor of MOM (Manufacturing Operation Management) system. He has 15 years of manufacturing experience that is split between production management, Lean Manufacturing consultancy before joining APRISO. Olivier has a Mechanical Engineering degree and a MBA. He has a unique perspective of IT in manufacturing organization. I had an interesting conversation with Olivier and here is an excerpt of my conversations with him…

Raj: What do you think is the biggest problem manufacturing organizations are facing that IT has not solved yet?
Olivier: In the manufacturing world one of the biggest challenges we are facing is a strong aversion to IT by the business people. IT is often perceived as intrusive and with minimal value added vs. automation which can provide a lot of help. This gap has even been increasing by the massive implementation of ERP which is not a dedicated manufacturing tool. The result is a large set of local custom development or initiative has led to a huge heterogeneity in IT systems that prevent people from working together. This has ultimately led to a chasm between business and IT. I think IT can play a strong role in enabling large business transformation project such as Lean Manufacturing or 6 sigma initiatives which has not been exploited by the manufacturing organizations.

Raj: Tell me more about the solution APRISO has and how do you solve IT Strategy Issues?
Olivier: APRISO has developed and implemented a business consulting offering named OVA – Operational Value Assessment. This is a way to align business strategy from top to bottom and bottom to top. We define IT needs right down to the shop floor. The goal of this analysis is to be quick. It take us more or less 2 days per plant and a few days of interview with C executive and consolidation to be able to deliver a phased project/program in line with business needs with a target saving which build the ROI of the project. Last year we performed a few of those and for a 3 sites OVA the overall duration is from 4 to 6 weeks maximum, then a project can be started. As a key MOM player the savings we delivered to our customers are really amazing and with more 600 plants running in discrete manufacturing we start to have large numbers of testimonies.

Raj: Interesting approach… Do you see resistance from your customers to adapt to this approach?
Olivier: As Software editor, this approach is quite surprising and customers still view our approach with suspicion. That’s why we are looking at IT consulting firms that provide high level IT infrastructure or just at IT standardization to justify ROI, while at the same time they can be part of business transformation initiatives that lead to even bigger and more sustainable savings. IT can play an important role but with most of Lean people who are still claim that Lean journey can be taken is without IT, while Toyota is investing 10b$ in IT since 2003, is very much frustrating.

Raj: Maybe that is the myth created by ‘Lean experts’. All the books I have read about Lean Manufacturing, claim that Toyota manages Lean process with minimal IT Support. But you say Toyota is investing $10B. Do you know where they are investing?
Olivier: Yes and it is public knowledge. In 2003 an article was published (in Japanese) about how Toyota invested 2 billion USD in IT to do what they called “Global Kaizen”. This is also called the 1st step of the planned “10 billion dollar Kaikaku”.

Toyota tends to be very secretive about their investment plan. This article is written by a highly regarded Japanese magazine called “Nikkei Information Strategy” which hired several Auto industrial consultants to investigate Toyota’s IT investment.
They have identified 4 areas that Toyota invested heavily on IT.

Electronic Kanban for global purchasing – In 2003, Toyota’s profit margin was Japan 9.2%, NA 4.6%, Europe 0.2% => best practice failed to roll out from Japan to overseas
New product planning and design – switching from old “V-Comm” system to CATIA and automate cost estimation
Support for BTO – to adopt Dell model… capability to search what WIP are on the factory line and then allocate to customer requested options / specifications
After sales service – consider as major revenue stream – traceability system extended to post sales and running record on vehicles
Multi-tera byte M-BOM – Dassault PDM

There is an interesting comment at the end of this article: Toyota does not use the word “Standard” in any documents but rather calls them “Format”. This is because the Toyota is not concerned whether oversea facilities have inferior performance or Kanban not running correctly. Toyota’s biggest worry is Kaizen being stopped and employees blindly following according to “Standard”. Hence all standards are considered as temporary formats subject to Kaizen changes. This is their greatest concern in rolling out global “standardized” IT systems.

Therefore an important takeaway, when talking to Toyota, do not talk about standardization of process. Only talk about standardized platform to sustain Kaizen.

Raj: Wow that is an important distinction! No wonder Toyota is a leader in continuous improvement of their business process. Is there anything else IT can learn from the Lean Manufacturing?
Olivier: Lean relies on capability to improve continuously, IT is perceived as rigid and constraint full. IT development and project management has been evolving and today can fully embrace and support Lean philosophy. A key element of the lean journey is embracing changes, the IT world should learn from that principle: to go back to simplicity and rely on the strength of everyone and not only pushing dogmatic vision that are not serving their key resources, pragmatically it means that stronger collaboration with business people.