1 Core IT Capabilities Within Organizations Dr. Mary C. Lacity The Tower of Babel by Pieter Bruegel the Elder, 1563 KbKunsthistorisches Museum Wien, Vienna

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Core IT Capabilities Within Organizations

Dr. Mary C. Lacity

The Tower of Babel by Pieter Bruegel the Elder,

1563 KbKunsthistorisches Museum Wien, Vienna

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Session Objectives

Understand 9 Core IT Capabilities that should be kept in-house

EnsureValue for IT

Spend

to

Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp. 9-21.

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Forces Shaping IT Function

In-house ITFunction

RecessionsCompetitionForce costreduction

CoreCompetence

Strategy

BusinessReliance

On IT

Maturity & Size of

IT Providers


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Feeny & Willcocks: IT Capabilities

Business Face

SupplyFace

TechnicalFace

Governance Face


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Business Face

SupplyFace

TechnicalFace

Governance Face

Information SystemsStrategy

Sourcing Strategy

Information Management Strategy

InformationTechnologyStrategy


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Business and IT Vision

Delivery of IS Service

Design of IT Architecture

Business SystemsThinking

ContractFacilitation

TechnicalArchitecture

ContractMonitoring

VendorDevelopment

TechnicalDoer

RelationshipBuilder IS

Leadership;InformedBuying



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IS Leadership




ISLeadership


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IS Leadership

• Integrating IS/IT effort with business purpose & activity • Implements structures, processes, and staffing to fill other 8 roles• Alignment of IS strategy and business• Fosters relationships with senior management

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•Fosters relationships with senior management

"I went to the city, I usually had one or two things to do. I made it a point when I went in, I went up to the chairman's office and many times his secretary was there when I'd get there. I'd say, 'tell the chairman and CEO, tell Harry I'm in the building. Could I talk to him? I'm available.' I went right down the hall to the president, who at the time was Michael, and said, 'I'm in town for a week if you have any questions about computing, I'd be happy to talk to you about it.' I would also visit every senior vice president on the executive floor. I would stick my head in the door and say, 'hey I'm in town, what can I do to help?'" -- VP of IS, PETRO2

IS Leadership

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• What are the characteristics of good CIOs?

Business and People skills are more important than technical skills:

“My advice to CEOs is this: Your IT function should be run by a great general manager, not by a traditional technology manager…More and more, business considerations rather than technical ones drive investments in IT. Our businesses are asking, “Why not buy solutions rather than build them? and “How can IT serve the critical needs of the business rather than those narrowly defined by accounting and human resources?” Far too many IT professionals don’t know how to frame questions like these, much less answer them.” -- Gene Batchelder, CFO, GPM Gas

IS Leadership

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In a survey of 64 CIOs, Applegate and Elam found that 30% had only a technical background; 33% had only a business background, and 37 had a “hybrid background”.

Practice often prescribed:

Have the CIO report to the CEO to ensure the CIO has enoughauthority and power to be effective.

IS Leadership• What are the characteristics of good CIOs?

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Business Systems Thinker




Business SystemsThinking


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• Envisioning the business processes which technology makes possible• Focus on business process improvement rather than just IS improvement

“To serve customers well, companies need to be proficient in half a dozen key areas: reduced cycle times, reduced asset levels, faster development of new products, improved customer service, increasing empowerment of employees, and increased knowledge sharing and learning. Information technology is a key resource for accomplishing those goals” John Rockart, MIT

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• Not all IT managers are welcome in this role:

"The IS organization have a tremendous amount to contribute if they ever get out of the back room and be perceived as having an opportunity to participate in the resolution of problems rather than being one of those problems." -- Corporate Planning Manager, Occidental Petroleum


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Proven practices include:

IT representation on major business initiatives:• Business Strategic Planning• Operating Committees• Capital Budgeting Committees

Educate senior managers on IT capabilities:"We'd make it a point that every one of our executives attended that four day class. Every time we got as many as ten or fifteen people at the general manager level who had not taken the course. I'd call to schedule the course. And we'd schedule it and we'd get the CEO's signature saying, 'You've been selected to attend a computer concepts class. Please be at the homestead on four o'clock on Sunday, signed, Harry Thompson, CEO." -- VP of IS, PETRO2


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Relationship Building




RelationshipBuilder


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User-Business Relationship Builder

• Getting the business constructively engaged in IS/IT issues.

•Focus on ability to speak “business” language to gain credibility

• Working with business community to understand cost/service trade-offs,•what technology can and cannot do

When a unit manager requested a new system that would save$250,000, IT manager had to explain it would cost $500,000to build.

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• Focus on ability to speak “business” language to gain credibility

“The senior managers within BAe and even more the managers within the business units, by and large didn’t want to hear people talking pure IT. What they wanted was to hear people talking their language, the language of making airplanes. And we were able to do that, we were able to produce these people who talked their language.” -- CSC Quality Manager (Transferred from BAe)


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Often prescribed practices might include:

• Dedicating systems analysts to specific business units to build relationships and learn about business.

• Cross-training users and IT

• Governance Structures that include business users


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Technical Architect



Design of IT Architecture Technical

Architecture


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Technical Architect

•Defining architecture standards•Centralized computing environment•Distributed computing environment•Technology renewal (n, n-1, n-2?)•Technology replacement•Security•Disaster recovery management

Creating the coherent blueprint for a technical platform that responds to currentAnd future business needs.

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Technical Architect

"You shouldn’t outsource technical architecture.

[The suppliers] are going to take your architecture where their business is going, not where you want to go. Those that let all their technical architects go, and we have an exposure there because we let most of ours go, and now as I skill up my group, I to build up an expertise that can keep up. It’s probably most contentious in the mainframe area...suppliers want vanilla, and customers want chocolate. And we even have discussions on the supplier's standards. We want to run this security environment, not their standard security environment for these reasons." -- Contract Administrator, PBS5

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Technical DoerBusiness and IT Vision


Design of IT Architecture Technical

Doer


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Technical Doer:Making Technology Work

• Rapidly Troubleshoot Problems• Technical work-arounds• Bypass political bureaucracy

What are the stereotypical characteristics ofa technical doer?

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Outsourcing Roles





ContractMonitoring

VendorDevelopment

InformedBuying


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Informed Buying





ContractMonitoring

VendorDevelopment

InformedBuying

Sourcing strategy, RFP process contract

negotiation


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Informed Buying

•Develops a sourcing strategy•Analyzes external market for IT/IS services•Leadership of the tendering, contract, and service management processes

“If you are a senior manager in the company and you want something done, you come to me and I will go outside, select the vendor, and draw up the contract with the outsourcer, and if anything goes wrong it’s my butt that gets kicked by you.”

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Informed Buying

Proven practices include:

• Joint senior executive/IT manager development of IT sourcing strategy

• Creating RFP and inviting internal & external bids

• Short term contracts

• Detailed contracts

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ContractMonitoring

VendorDevelopment

InformedBuying

Ensures success of existing contractsUser/Supplier Liaison

Contract Facilitation


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Contract Facilitation

• Provide one-stop shopping for the business user• Develop user guides to the contract• Help manage user expectations of the contract• Assess and prioritize user demands• Determine if user demands will trigger contract excess fees• Determine if users are demanding too little

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Contract Monitoring





ContractMonitoring

VendorDevelopment

InformedBuying

Protect business contractual position;Monitor supplier costs

and performance vis-à-visthe contract


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Contract Monitoring

• Monitor vendor performance (service)• Review monthly bills (cost) • Solve disputes with vendor• Refine performance measures as needed• Benchmark existing contract against developing market capability• Escalation procedures • Negotiate detailed amendments

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Vendor Development





ContractMonitoring

VendorDevelopment

InformedBuying

Develop supplier relationshipbeyond contract


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Vendor Development

• Identifies opportunities for added-value:1. Business value-added, in which the supplier applies their expertise to help the customer exploit IT for business advantage.2. Capacity value-added, in which the supplier infuses new skills and technologies in an effective manner.3. Utility value-added, in which the supplier provides cheaper IT services.

• Focus on innovation and exploiting opportunities • Explores potential for new vendor services

“Yes, [the vendor] can achieve all the things that were proposed---but where is this famous "added-value" service? We are not getting anything over-and-above what any old outsourcer could provide.” -- IT Services Director, Aerospace Company

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Evolution in the Management of IT

Education

Learning

DELIVERY REORIENTATION REORGANIZATION

ServiceCompetence& RightPerception

Vision to transform& right agenda

Informed Buyer& right sourcing

Feeny, D., “The Five-Year Learning of Ten IT Directors,” in Managing IT as a Strategic Resource (Willcocks, Feeny & Islei (Ed), McGraw Hill, 1997, pp. 475-493

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Education

Learning

DELIVERY

ServiceCompetence& RightPerception

Focus on establishing operationalCredibility, project successes, CIORole always important, but technicalRoles also very important here…


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Education

Learning

REORIENTATION

Vision to transform& right agenda

CIO role is key as isRelationship BuildingTo help educate businessAbout strategic potentialOf IT. Then IT “allowed”To become business systemsthinkers


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Education

Learning

DELIVERY REORIENTATION REORGANIZATION

Informed Buyer& right sourcingRightsourcing,

With centralized,Decentralized &Outsourced portfolio


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Capabilities & Skills in Emerging IT Function

Technical Business Interpersonal

CIO Medium High High

Business Systems Thinking

Low/Medium High High

Relationship Building Medium Medium High

Technical Architecture High Low/Medium Medium

Making Technology Work

High Low Medium

Informed Buying Medium High High

Contract Facilitation Medium Medium High

Contract Monitoring Medium Medium Medium

Vendor Development Medium High Medium


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Core-Periphery Model RevisitedDEMAND

Information Management

Information Systems

Information Technology

SUPPLYSTRATEGY -------------- ENACTMENT

CORE

Non-CORE

?

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Core-Periphery Model RevisitedDEMAND

Information Management

Information Systems

Information Technology

SUPPLYSTRATEGY -------------- ENACTMENT

CIO

SystemsThinker

RelationshipBuilder

Fixer

Monitor

Facilitator

TechnicalArchitect

VendorDeveloper

InformedBuyer

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Conclusion

Most critically, the core IT capability model implies migration to a smaller ITfunction, staffed by highly able people.

Documents

1 Core IT Capabilities Within Organizations Dr. Mary C. Lacity The Tower of Babel by Pieter Bruegel the Elder, 1563 KbKunsthistorisches Museum Wien, Vienna