Managing IT Supply and DemandBy Don Desiderato | Posted 11-08-2011
Demand Management: The Cornerstone of Strategic Leadership
To succeed as a CIO, you must develop a solid reputation as someone who can deliver as promised for the business--on time, within budget and according to business needs. To do so, you must tackle one of the most complicated (and politically charged) aspects of running your shop: managing demand.
Sound demand management discipline is important for the following reasons:
The only way to know the true productivity of an organization is to know precisely what is being worked on.
Distraction-type work is eliminated.
Transparency to the business breeds confidence from the business.
A CIO who understands the demand side of the equation will be able to accurately assess the supply side.
Know Precisely What Is Being Worked On
Demand management involves the proper allocation of resources and assets in a way that delivers the greatest capabilities that have been prioritized, collectively, by your organization. Prioritizing internal technology initiatives can induce culture shock. The first step the CIO must take in managing demand is to know all the "entry points" where work is being introduced into the IT organization. To do so, you'll want to:
Document all work being performed.
Identify whether it's a large-, medium- or small-scale initiative (more on this below).
Quantify the cost.
Identify a business owner who is invested in the success of this work.
Understanding the pipeline is important because it helps the enterprise comprehend, and then maximize, its investment in IT. The first step is simply identifying all the work currently being done.
Eliminate IT Distraction Work
Once you understand the full scope of what is being worked on, the next step is to ensure that this level of work--and the specific items involved--are agreed upon by the enterprise. This step depends on the elimination of distraction work, which is accomplished in two ways:
Create a prioritization committee.
Limit entry points.
Your prioritization committee is a cross-functional group of business and IT executives who are empowered to make prioritization decisions. The group will collectively assign business owners to projects, assess business benefits, and then track and report on progress. It is here in the prioritization committee where even discretionary IT projects are approved. This committee is also accountable for ensuring that the business benefits are achieved after a project is completed.
Criteria used to filter whether a project is approved or not can include items such as cost reductions, potential revenue enhancements, regulatory concerns, compliance-related issues, operational improvements or pure technology needs. A common technique for a prioritization committee is to break projects into categories, for example, by using total cost of the project:
Large: greater than $1 million in projected cost
Medium: $500,000 to $1 million
Small: $100,000 to $500,000
Very small: less than $100,000.
The rationale for breaking initiatives into categories is that the committee may want to allocate small amounts (e.g., $50,000) to a business leader (e.g., head of operations) to spend on multiple bug fixes. The dollars can then be managed in the aggregate by a business owner. In addition, there may be a greater degree of business justification required to get large, multiyear initiatives approved versus medium-size or small projects.
In the event a prioritization committee is deadlocked, there must be an escalation process in place to send the question to the executive leadership team. In addition, while the CIO normally chairs the committee early on, long-term ownership should be placed in the hands of the portfolio management office or a senior business leader.
As far as the process of limiting entry points is concerned, it's important to note that, in a typical IT organization, it is quite common for a programmer to receive a phone call from an associate in the business asking for a "favor." Programmers, being problem solvers, usually agree. While the request is important to that one associate, it may be complete distraction work--or, worse, a feature with which others may actually disagree. Business associates may like this instant access to IT, and IT workers may relish the opportunity to help a colleague. Nonetheless, this is inefficient and can result in frustration for business leaders who expect a strategic use of time.
Identifying entry points into the organization and creating forums where even the simplest request is put through a transparent prioritization process may mean a big change in culture at your organization. Cultural change isn't easy but, as CIO, it is your obligation to advocate the benefits of a structured approach to managing the pipeline. By managing demand, you will be able to create an organization that is transparent over time. You're not only revealing to the organization what the IT team is working on--you are also putting the responsibility of prioritizing initiatives into the hands of the business users. That is exactly where it belongs.
Managing IT Supply and Demand
In the IT organization, the "supply" tends to be the IT workers, who have the talent necessary to deliver on initiatives. The "demand" side, of course, is the project workload. Given that not all workers can support all projects, you need to consider the competencies of your resource pool. To do so, you'll need a clear understanding of two crucial elements: what is in the pipeline six to 18 months out; and what resource mix is currently available.
Many CIOs will introduce an organizational role called the business relationship manager. (Some companies have more than one person in this role.) These executives work very closely with the IT leadership team, business leaders and the prioritization committee. Essentially, their job is to integrate themselves across all functional areas of the business with the objective of anticipating upcoming strategic projects.
With this improved knowledge of the upcoming pipeline, the CIO can anticipate long-term resource needs. To effectively ramp up or down, CIOs generally use a mix of full-time employees and consultants The ideal scenario in a ramp-down situation is to eliminate the consulting staff. In a ramp-up scenario, the CIO can go to the consulting supplier for specific resource needs.
Sound demand management is a core competency for successful IT organizations. As the CIO puts processes in place to effectively manage demand, the CIO and the IT organization become elevated from serving as suppliers for the business to being true business partners. So, for the CIO, demand management is more than demand management--it is really about strategic leadership.
About the Author
Don Desiderato is a principal at Novarica and former divisional CIO. This article is adapted from the Novarica report "CIO Best Practices: Why Demand Management Is More than Managing Demand."