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September 14, 2005

The Business Value of IT Operations

It's safe to assume that every IT organization leader in every mid-to-large sized company is being pointed by the company executives at the need to demonstrate IT's "business value". To ultimately survive this challenge, we have to avoid proving the wrong thing for the right reason, and avoid proving the right thing for the wrong reason...

I.

Debates seem basically unavoidable when it comes to deciding what "business value" means. But until the meaning is defined, it's difficult to decide on what should really be included for demonstration. Not surprisingly, the things that distinguish "business" audiences -- their respective roles, objectives and priorities -- virtually guarantee that there will be multiple perspectives on the idea of "value" -- reflecting role-sensitivity. Meeting the demonstration requirements for all of these different perspectives is a gigantic burden on IT managers.

Even when all the bases get covered, too often the results seem to not correlate meaningfully with the business outcomes that the executives themselves are measured by. From 50,000 feet high, Business changes while IT doesn't, or IT changes but Business doesn't... and it seems that the two things are independent -- so a lack of confidence in "demonstrated value" persists.

II.

At the core of that problem is the possibility that the wrong kind of relationship is being hunted down, for no good reason other than that it would be exciting if it proved to be true. Namely, we want IT to "cause" better business performance, because IT is tangible so we hope thereby to mechanize our success.

At some point, though, and let's take now as a good one, it becomes smarter to look for a kind of relationship that shows more consistency.

This can start with leaving behind the idea of "causal" (or systematic) and replacing it with the idea of "systemic".

An important way to address the issue of business value is to ask what business does that is done "better" due to I.T. utilization. This question, which is a particular point of view, looks at I.T. as an enabling resource for business capability. The systemic perspective looks at the influence of the resource on the whole "ability" -- which is represented by the business task.

III.

Capability enablement is achieved through operations that allow the business to leverage the resource, and that leverage practically represents the resource's influence.

To institute this, business coordinates management of those operations as a logical organizational unit within the overall management of business operations.

At that point, a big part of the complication in value assessments is that the "logic" of the organizational unit is not linear. Instead it is multidimensional due to the variety of ways that the unit should establish the leverage business seeks. This is about the variety of responsibilities invested in the role of the operations.

In the case of IT operations, we derive the dimensions from basic expectations, in this way:
- First, business enablement is not the same thing as business execution. Knowing a language is not the same as public speaking. Being trained is not the same as performing.
- Second, managing enablement is a scope of responsibility requiring attention to the form, function, purpose and acceptance of the means of enablement offered to the business by operations.
- Finally, IT operations are the provider, not the client, wherein the operations value to the business is established.

What are the key dimensions of the provider role, as seen from the business point of view?

The model below shows the systemic relationship of the four business perspectives -- supply, production, delivery, provision -- that IT operations is accountable for in its provider role of manager of IT enablement of the business.

IV.

Business's ability to use IT effectively is one of the major strategic objectives of IT operations; but effective utilization must have an objectively sensible meaning. If there is real meaning to the idea of "business value", there is no point in holding IT accountable for value outside of the context of the business's management of its tasks. The cost, speed, efficiency, control and impact of the task are representative aspects of the "whole" ability supported by the resource of IT.

The business must find that its dependency on the provided enabler was sufficient for the necessary performance level of the business task. But there is a logical limit to how much the enabler's contribution can be held responsible for the target outcome of the business task. The success factors of the business task include more than the IT component, and the idea of the task's "success" includes more than just the completion or output of the task.

Considering those issues together gives the business fair warning on how to envision IT's involvement in the answer to the question "how predictably and frequently can we do really well what we need to do?" IT does not decide what the business needs to do. But the more IT utilization can be attributed to a positive answer, the more valuable IT is to the business.

Posted by Malcolm Ryder at September 14, 2005 9:36 AM

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