Practicing operational excellence in the management of your internal IT services can provide you with a distinct advantage over your competitors.
By James C. Hamilton
Companies that practice operational excellence in delivering internal IT services enjoy a distinct advantage over their competitors. Despite all the marketing hype from computer vendors about the latest “gee whiz” technology or killer app, the true and lasting competitive edge from IT is achieved by a disciplined commitment to operational excellence in IT management. By applying a strict management discipline and following proven best practices, the IT function can be transformed from a difficult-to-manage cost center into a value-added service to the corporation. This approach has been proven to be a winning strategy throughout the highs and lows of business cycles, and it is an even more important discipline for companies weathering the storms of a recession.
Over the years, IT in the corporate world has seen an enormous amount of change, both in the rapidly evolving technology itself, but also in the approach to effective management of these complex systems.
The good news is that IT has been an enormous enabler of productivity and with the powerful networks, computing platforms, and sophisticated application environments available today, enterprises can do so much more—and do it more rapidly and economically—than ever before. With the advent of the PC, the Internet, and other portable and wireless personal devices, businesses and consumers can employ an impressive array of capabilities, such as information access, information sharing, knowledge acquisition, decision making, automation, and market development, that were not possible just several years ago.
However, while much has changed, many of the challenges experienced by business leaders—as they try to make sense of the complexities, opportunities, risks and costs associated with IT—remain the same. Many companies are struggling with these challenges, and they are also missing out on opportunities that go well beyond the immediate internal efficiencies that result from an operationally excellent IT function. IT today is absolutely critical to any business, and while some business leaders may still consider IT to be non-core or non-strategic, most CEOs recognize that their businesses cannot survive and prosper without a well-functioning IT service, underpinning and supporting every transaction and activity throughout the enterprise.
The average company today spends between 4 and 5 percent of revenue on IT, and the figure can be 10 percent or more in industries highly dependent on IT. This is a substantial investment that can add significant value to the corporation, but it also represents a very large component of expense. However, the quality (or lack thereof) of IT services can have an even broader impact on the success of the enterprise. IT service management can literally make the difference between a thriving, successful business and one that struggles—or fails. Information technology is an integral and vital element of any organization, and a smooth-running IT operation will not only directly impact the bottom line, but it will also project a quality, professional image of the company externally.
From a business leader's perspective, the world of IT can be an intimidating maze of terminology and hype, one with an insatiable appetite for new and ongoing project funding. Business leaders struggle with questions of how much to spend on IT, how to ensure benefits will accrue from the very significant investments, and how to effectively organize and manage IT. This is all the more challenging as IT is not normally the main mission of the enterprise, nor the core competence of senior business leaders. Even within IT management circles, the complexities can be overwhelming in the absence of a disciplined approach to managing IT services.
As a consequence, there is ample evidence today in trade journals and the popular press about IT management failures, and many published surveys show a low level of satisfaction with the performance of internal IT departments. Across all industries there is a widespread need to demystify IT from a business perspective and to provide a blueprint for managing IT services in the corporation. There are no magic answers, but by learning from what has worked well over many years, a clear picture emerges of what a company needs to excel at.