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June 17, 2005

CIOs: Managing the business's IT Agency

In the new industrial revolution, IT is at the center of the business evolution, and CIOs are at the center of the IT revolution in business.

Business now knows that reliance on IT means that IT is a business element, not just a tool. In the old dysfunctional relationships, LOBs get burned by providers, CFOs get angry about the wasted money, and CIOs take the heat. As strongly reflected in the Deloitte survey on outsourcing (covered by Christopher Koch at CIO magazine), companies have definitely found that the dysfunction isn't departmentalized internally or externally but instead ecologically systemic. Thus, merely leveraging lines of authority (for example, against the IT organization) doesn't make it go away; instead, capability maturity must set in with executive management of the relationships.

The biggest barrier to climbing the maturity ladder is the perspective that the IT organization is simply a repository of skills and assets -- a store -- instead of a management center for business operations. This perspective essentially displaces operations strategy with procurement, and then laments the poor state of the architecture on which enterprise economy of scale is supposedly built.

To have a shot at operations strategy, the business needs CIOs to manage the relationships between CFOs, LOBs and service providers. Experience has taught the enterprise that CFOs and LOBs alike must be able to count on the CIO function to provide knowledge, assurance and leverage of the providers of IT and IT services.

In effect, the CIO function should be an executive-level broker of IT and services for the enterprise, and with the overview of enterprise needs the CIO also manages the opportunities of importance to the service providers.

In governing provision against requirements, CIOs "own" the work of IT services providers, to generate ROI for the CFO and the enterprise, while likewise generating and protecting value for the LOBs from the services. Whether the providers are internal or external, CIOs must manage supply and demand equally well.

In managing the performance of the IT work, CIOs must focus the work to satisfy the business customer. This means the work must be executed in business-terms, to assure continued quality of service against the objectives of the business.

Run like a business, the new "IT Organization" features a blend of internal and external resources. At minimum, the CIO needs to:
- know where the strengths lie with all the involved providers,
- be able to call on them reliably, and
- know when to rebuild, reposition, or replace them, to keep up with the business.

But lessons must be learned from those who have the most experience. The performance of this new organization is modeled most clearly by the situation of external providers. Since they ARE businesses, their performance has always determined whether they got new business and stayed in business. They set the bar. Internal providers must work well based on the same type of competencies that make external providers successful performers.

Core competencies of external providers include managing skills and customer relationships to ensure that work such as projects and infrastructure changes align with the business and with required service levels, both current and future. As complex as that often is, the even bigger challenge is to understand how to collaborate on business requirements at the operations level instead of just at the infrastructure level. In collaboration, roles are the key, and provider competencies only count in terms of the role. Here, the critical differences are between being a contractor, a facility and a partner. All three are responses to the question of "how the business' work gets done" ... but providing the client's operations with (respectively) a business resource, a business environment, or a business competency are drastically different responsibilities for a role to address. Mismatches of client expectations and provider roles are lethal. To proactively align them or reactively reconcile them, the CIO should model the collaboration of providers as an operations strategy, and market the strategy both internally and externally.

Posted by Malcolm Ryder at June 17, 2005 7:56 AM

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