The compulsion to match business needs with technological capabilities is at the heart of IT executives' growing reliance on IT optimization. This is a long way from the many tales of multimillion- dollar enterprise resource planning and customer relationship management deployments that yielded questionable business results. In fact, effective IT optimization doesn't have to involve substantial technology investments. It can be motivated by an IT department that has accumulated business smarts and formed strong collaborative ties with other parts of the business. It's the difference between finding answers and investing in engineering.
It hasn't always been that way, though. In the 1990s, IT optimization was generally driven from the supply side: IT departments sought to improve efficiency, rationalize IT assets and consolidate infrastructure, for instance, independent of business needs. In some cases, that supply-side focus could be traced to a desire to reduce operating costs to make companies more attractive to potential buyers. Eventually, a category of "CIOs for hire" emerged, with a specialty of turning around inefficient IT departments by establishing the controls needed to deliver basic services at an agreed-upon percentage of revenue.
But over the past several years, Clevel executives have begun expecting CIOs to provide more competitive advantage. In exchange for the ability to articulate the impact of IT on the business and vice versa, demand-side CIOs were granted a seat at the executive table, leading the emphasis in many IT departments to shift toward demand-side optimization. "I don't see IT optimization," says Michael Farber, a vice president in IT consulting at Booz Allen Hamilton. "I see business optimization."
With the days of technology for technology's sake disappearing, the ties between IT and business clearly are tightening, as reflected by the growing incidence of CIOs who come from the business side, as well as business execs who come from IT. In some cases, executives actively straddle both worlds.
Take Bob Wittstein, CIO and vice president of procurement for specialty paper-maker Sappi Fine Paper North America. Those dual roles reflect not only a career that has spanned both sides of the ITbusiness fence, but also Sappi's increasingly crossfunctional approach to solving business problems.
Sappi has created a shared-services center in which directors from financial services, customer service, logistics, operations planning and IT work together as a team, establishing agreed-upon lists of business priorities that can be addressed through better use of IT resources.
And Wittstein makes the most of those resources--across-the-board cuts have reduced his staff to 78 from 150 over five years, with the biggest portion of those cuts hitting IT management, yet he insists IT produces more results for the business than it did previously.
When that cross-functional team identified several potential ways to streamline Sappi's sales processes, most of which centered on improving data integration and putting more information and analysis at the fingertips of its sales staff and customers, a clear technology path to solve those business problems was established.
Sappi added a layer of business-process integration software from Sterling Commerce over its SAP enterprise resource planning suite in 2005, establishing integration of customer data with the company's new business-to-business e-commerce platform.
The new e-ordering capabilities allowed customers to get their orders in before Sappi's daily 5 p.m. deadline, something that had been impossible in the old batch-order paradigm. That helped bolster customer confidence in electronic transactions, and in the two years since, the portion of stock orders placed electronically has risen to 65 percent from a mere 5 percent.
Wittstein's team also built a software tool that analyzes customer data to determine order volume and profitability by product or customer. The resulting intelligence is delivered to desk tops and laptops via a Web browser or Microsoft's Sharepoint collaboration software, letting the sales staff focus on building customer relationships that generate the healthiest profit margins. And that's not all; Wittstein's crew developed a piece of software it calls a pocket margin calculator that salespeople access via a Web browser.
The calculator applies a formula that lets the sales staff pull out rebates and bulk discounts from a proposed order to determine whether the sale is priced right to achieve sought-after margins. The result has been a reduction in low-profitability orders for products such as textured business paper, pulp and tissue wadding used in everything from toilet paper to medical wipes.
In each case, the sales tools are drawing on data that existed in Sappi's SAP system--it was simply a matter of extracting that data and making it available in an appropriate format for those who needed it. "IT optimization is about translating technology into something that's useful in the business world," Wittstein says. "We can talk about this and we can think about that, but if we can't deliver it, it's for nothing."
The way Wittstein sees it, the increased blending of IT and business has made it easier for IT to understand the problems business execs bring forward, as well as for business users to better understand the impact of IT. Everyone in IT understands that all projects must do at least one of the following:
- improve profitability,
- boost customer satisfaction,
- create new product attributes and
- cut costs.
As a result, everyone in IT is thinking about IT's role in the business and is becoming better able to demystify technology.