Sit Down and Talk
It really boils down to trust. When the IT organization is trusted by its customers, it has more latitude to avoid the micromanagement and nitpicking about the dollars that is bound to alienate its business cohorts. If you can get to the core of the relationship between IT and the business and begin to diffuse the tension between the two, you will improve IT's ability to serve the strategy of the business. The most important step to improving the alignment of IT with business strategy is for IT leadership to open a candid dialogue with corporate and business unit executives. Together, they should challenge the effects and benefits of their IT finance policies. Together, they can consider whether current practices serve the best interest of the company as a whole, or if they constrain it. Together, they can commit not just to following the money, but to managing IT spending for competitive advantage.
Step by Step
The following prescriptions suggest a path to improved alignment through IT finance policy:
Eliminate overall spending caps on IT expenditures.
Divide the IT budget into mandatory spending (to keep the business running) and discretionary spending (investments to improve the business).
Manage mandatory spending by tracking unit costs, industry benchmarks and predicted demand.
Integrate discretionary IT spending decisions with their associated business cases, considering all costs and benefits that accrue to the corporation.
Depoliticize the discretionary decisions by taking them out of the hands of the IT organization.
Align discretionary spending decisions with corporate and business unit strategy.
Track actual discretionary costs and benefits compared with forecasts to manage strategic initiatives and improve forecasting.
Allocate and recover IT costs completely and transparently, according to actual consumption, from each part of the organization.
Robert S. Gold, Vice President and Practice Leader for Strategic IT Management at the Balanced Scorecard Collaborative, Inc., has provided strategic and technology management advice to leaders in Fortune 500 firms for the past 14 years. He earned his MBA from Northwestern University's Kellogg School of Management. Please send comments on this story to firstname.lastname@example.org.