Structure in Threes: IT Investment Strategy Lessons

This week as I continue to research IT Strategic Planning issues for a series white papers I’m writing I’m noticing more gaps in the average IT organization’s planning approaches.  Despite more sophistication in technology, the planning efforts are still rather primitive.   Many IT Planning organizations spend significant time on the technology requirements, functions and interactions; which they should.  However, when it comes to the effects and benefits to the business which they serve, these functions come up fairly short still.  The average business case just little more that a primitive ROI based upon very weak assumptions.  It is not wonder why CFOs and Controllers are tightening the screws on IT projects and considering outsourcing and cloud alternatives.  A few organizations I’m aware of are looking at eliminating their IT function entirely and moving everything to the cloud.

Review of prior Portfolio Management R&D at IBM

This coming week’s agenda is to develop the optimum means for presenting the Modern IT Portfolio Management process to executives and managers.  During the initial portfolio management R&D for business investment at IBM an interesting reaction was observed.  Executives and Managers disliked operating on models with more than two to three factors, preferring two factor matrices with binary values.  This was rather interesting observation in that each Stakeholder when surveyed asked for multiple factors to be evaluated.  However, in practice only a couple of factors are examined for consideration.  These factors typically center around near term monetary consideration.   optimal portfolios with high risk.  Thus other factors or strategies should be considered which infers a more complex matrix of considerations.

Lessons learned from Venture Capitalists

Venture Capitalists (VCs) evaluate investment candidates based upon returns like other investors, however, other factors are often used to classify and filter opportunities.  These are often used in what has been called a stage-gate process.  This is a series of smaller decisions that in effect gate weaker opportunities out of the pool of candidates.  This makes the decision not a single yes/no but a series of yes/no decisions.  The other aspect of a VC‘s investment process is the core to the portfolio management concept; multiple independent investments.  Typically this is accomplished by VCs teaming with other VCs enabling them to make smaller bets but spread amount a larger group of opportunities.  This strategy reduces risk by eliminating the eggs all in one basket approach.  The final strategy many venture capitalist used to mitigate risk is employing a variation of options theory.  Employing this strategy, VCs will often stage release of funds based upon a business venture’s ability to meet specific goals.  If a venture does not meet these goals the VC has the option to discontinue funding and cut their losses or potentially take a more active role in the management of the venture.

Other Research

Other areas of investment research under current study for this practice include:

• Stock Brokerage [reviewing interview notes]
• Investment Bankers
• Insurance Actuaries
• Natural Resource exploration enterprises

Investment Management and ITSM: Lessons to be Learned

Spent several hours yesterday with a brokerage firm, consolidating various financial accounts.  I’ve worked for various corporations over my career naturally choosing to take the 401k investment options that each had offered.  My belief is if the place is good enough to work at why wouldn’t you invest in it also.  On the surface the logic makes sense.  However, as I’ve delved deeper in Portfolio Management and Enterprise Risk Management (ERM) concepts the past several months I’ve gained a deeper appreciation of the concepts of diversification and attention capacity or economics.

Diversification

Most modern portfolio management discussions introduce the topic of diversification as a means of risk mitigation.  The theory suggest that having a broad set of investments reduces one’s risk as if one element in the portfolio crashes or under performs it will be made up by others.  This only hold true if each investment is independent of the others.  That is to say, there is causal relationship between the two components.  However, if there are causal relationships then these components are not truly independent and the portfolio you’ve create still has risk exposure.  Take the most recent financial meltdown of the economy.  Stocks, Bonds, Real Estate, and other investment all tanked crashing the economy.  In theory this should not have occurred as these are separate asset classes, independent of others.  However, as the laws, rules and regulations changed regarding banks, brokerage houses, Real Estate Mortgages, and other financial vehicles subtle interconnections between these components were established.  These connections were either not well understood or completely ignored.  Investment vehicles such as collateralized debt started to appear.  These created the linkage between other assets which established the potential for what eventually happened.

Collateralized Debt has as its root a portion of Portfolio Management.  That is investing in multiple elements to reduce risk, in many cases high risk mortgages.  The theory being that may be one or two mortgages might fail but overall the majority of these would not.  However, the conditions that created failure for several of these mortgage failures where the same for most of the others.  This when one failed it was only a matter of time for the others. As such this pool was a collection not a managed portfolio.  Add to this other investment vehicles such as derivatives which further linked real estate to other types of investment in the economy and the causal chain was completed with few people realizing the risk that was just created.

ITSM’s relationship to Investment Management

ITSM seeks to create an ecosystem for the enterprise where the Information Technology function creates a catalog of services for the rest of the enterprise to consume either to perform its knowledge work or provide to its external customers.  One the surface this is a great concept.  In practice creating an catalog of services that are tightly integrated brings to it the same risks to the enterprise as tightly linking the various financial vehicles did in the general economy.  This serious strategy and due diligence in risk management and mitigation is called for least an enterprise crash like the economy over an IT failure.  Consider if your network infrastructure failed for several days and you just recently migrated all your voice (phones) to voice of IP (VOIP):  Your financial functions can not access your general ledger, not billing can go out, nor paying vendors; Your in house sales staff either cannot call prospects or have to use their personal cellphones to make calls, further expense and they can’t enter orders anyway your systems are down; other negative effects propagate throughout the enterprise and compound the situation.  In a very short period of time an enterprise could be so overwhelmed with the consequences it could take years to recover or might never recover.

Some vendors might say move to the cloud that will solve the problem…but will it? What happens if your cloud provider fails, or access (your internet connection is down), or both.  You are back to that same perfect storm scenario.  So is the answer go back to a paper based system?  Not likely, the scale and speed of business today prevents going back to such methods.  The answer I believe lays in a more comprehensive approach to the strategy and design of enterprise.  An approach the unifies Executives, Line of Business Management and Information Technology is an effort to view and manage the risk in a coherent and conscious manner.  This suggest enhancing current portfolio management practices advocated by vendors that only prioritize investment by ROI (gain) to include the downside aspects (i.e., Risks such that ERM typically works to mitigate).

Attention Economics

The problem with such an approach is that it requires greater attention to detail and in an age where businesses have caught AD/HD, this is a hard practice to employ.  Its easy to ignore the risks as did the investment and economics communities prior to the financial meltdown.  Many corporations are focused on multiple targets and this one is left to the IT function, typically without effective governance or oversight my the executive suite.  Possibly due to the fact that discussions often arise around the technology’s structure rather than the capability ad risks of applying.  This tends to overwhelm the attention span of the rest of the business as those not involved with IT capability creation and management don’t have the time to learn the details.  This is where Enterprise Architects and Technology Strategist should play a role, however, oft times they are used for designing applications rather than helping to guide technology application for the enterprise.  A subtle difference but critical to understand if your EA function is to provide the highest value to the corporation.

The one leverage point that may eventually cause corporations to focus on this arena -in spite of all the standards and methodologies out there– is that Corporate Executives are now held responsible for governance actions.  And whether they understand the ramifications or not of new laws and regulations such as SOX, Patriot Act, HIPA, and others not understanding how to govern corporate information and information processing will eventually put both a business at risk and executives out on the street or worse.

Structure in Threes: Business Continuity / Disaster Recovery

Several months back I had released the first four parts of a White Paper Series on Business Continuity / Disaster Recovery Strategy for Microsoft’s Services.  During my research & brainstorming efforts for the series I became aware of just how fragmented the entire domain was.  There are efforts in Finance; Information Technology; and Corporate Governance, Risk and Compliance functions.  However, collaboration between these functions on the topic of protecting the corporation are often non-existent.   This fact become further evident to me during a discussion I had yesterday around an old engagement on Y2K mitigation.  I was discussing an old consulting engagement with a group director.  He had wanted to get a handle on “How I Think”  –I though it reasonable, but unlikely to succeed objective, but was willing to give him the best opportunity to do such.  The unfortunate think about discussions like this is these require similar knowledge bases and context as often terms and concepts are used to relay deeper meanings.  If you’re not aware of these materials its like hearing a foreign language; you may pick up some of the tone of the conversation but the deeper meanings are lost.

To continue while discussing the engagement I had started to think about how to integrate these three Business Continuity / Disaster Recovery function’s focus around ensuring business survival in context to Portfolio Management.  Clearly, the financial planning specialist consider these goals.  Then another recent request for information and conversation came back to me regarding the Future of Wealth Management Branches.  This past year I’ve been getting lots of inquiries from various Wealth Management and associated  groups about what they can do for me.  Or may be I’m just more attune to the messages this year due to the topics I’ve been researching and developing Intellectual Property around.   From the synthesis and analysis of the data I had been collecting, the financial services industry around this topic was just as fragmented as businesses itself.

–As an side, it was appearing to me to become the organizational equivalent of a Fractal, now you see why I though understanding my thinking process was going to be difficult.  I’m continually developing broader and deeper knowledge base, like most people…however, I spend time generalizing these into patterns and looking how to connect and integrate these into my broader knowledge base.  This was the foundation for my company Intellectual Arbitrage Group.  Which later I discovered a small collective of other people are doing also; Genrich Altshuller whose methodology TRIZ is a brilliant formalization of the process I go through is one example.–

So as I review the outline for my book project I’m starting to see another thread develop which also looks to be another triad.

Value: IT has it backwards

The calculation of IT Value has traditionally been a bottom up process trying to build a business case based upon return on investment in an application.  This typically either overstates the value to the enterprise or provides an artificial justification that is not relevant to the business.

 

Most of this is due to two factors

1)      An overreliance on scientific culture which focuses on breaking objects into smaller components

2)      an over emphasis on cost centers, corporations have placed on most Information Technology organizations

 

While the “scientific method” of partitioning objects into atomic elements has brought about some very important breakthroughs and benefits to our culture. The over overreliance on this tool has also yielded some of the most horrible and apparently intractable problems.  Example, had one looked at a larger view behind atomic energy production, the decision to go forward or the nature of the solution might be different.  Similar issues arise in agriculture and pesticides, poverty, etc. This is not a condemnation of the scientific method of partitioning, but rather a recognition that like mathematical equations both sides have to balance.  We often focus our efforts towards one side of the equation dividing into smaller components, but often forget that many things are greater than the sum of the parts.  Balancing reductionism with general systems yields better results and as in the case of understanding value of IT to the enterprise this is especially true.

 

Cost Center Management or Activity Base Costing is a good compromise to measure one side of the benefits equation.  However, Cost Center management was never designed to provide management with an accurate measure of benefit or value.  Yet many corporations use cost center data and a first order consequence or effect to create an ROI measure to justify the acquisition of IT Assets, those typically being identified as Hardware and Software.  The benefits and ultimately value are typically not a cost plus calculation.  Consider, an Automobile.  I content the value of an automobile is higher in Orange County California than it New York City.  Implicitly, those that have lived in both places know that travel in a car in NY is easier without a car and the added operational costs (maintenance, parking, etc.) which has a comprehensive public transportation system.  While in Orange County without a car, except in certain locations, your lifestyle options are significantly limited.  Thus while a car purchased in NY and Orange County may cost the same, the values vary significantly.

 

This suggests examining IT value from another perspective; that is as how much IT contributes to the value an enterprise creates and eventually captures**.  This is a top down approach rather than a bottom up.

 

** Think EVA

Change Challenge

Downloaded Windows 8 and Office 15 Previews yesterday as part of our internal “Dogfood” initiative.  As noted I am working for Microsoft again, and yes employees enthusiastically sign up all throughout the product development process –and after to test it before it is release to market.  Internally they call this “Eating Our Own DogFood”.   My role in the corporation is to think about the future of IT and develop strategy, architecture and guidance for customers so they can realize value from their Information Technology investments.  Basically helping enterprises use their information technology and other informational assets better; change management of a sort. 

With that as a professional focus over the years, one would think I could change how I do things at a drop of a dime.  Not so.  Like others I am working through the new graphical interface that is a key feature of Windows 8.  The rational for the change was to create simplicity for the end-user much akin to the “apps” on smartphones.  I love the idea.  Intellectually it just makes sense.  If you look at our world today it’s a mass of complexity.  We have created so much capability at our command through a host of product features.  However, the price of all that capability in the world is an ever growing complexity.  With all that is going on, people have become overwhelmed by all the details in front of them.  Several years ago I wrote an article on Information Overload aka “InfoGlut”.  The phenomenon was just starting to surface.  Military and Civilian organizations that I had been working with had started to notice that all the additional information constantly bombarding us was causing extreme distractions while performing a task.  In some cases staff were turning off systems as they only provided noise and interference when accomplishing a task.  A decade or so later user interface simplicity is the goal. 

A term thrown around in the information architecture circles is “removing all the chrome” harkening back to the 1950s when automotive manufacturers put chrome on almost everything which did nothing for performance of its main function.  The new Windows 8 and Office User Interfaces (UI) are a well thought out [my opinion].  However, that does not make it any easier to switch to a new model of interaction.  Today, I am in a mass of confusion as I poke around trying to accomplish several tasks I use to do almost blindfolded.  Friends and colleagues consider me reasonably intelligent, maybe even smart, so it become all the more interesting as I step back to watch myself in this condition.  Knowing I am going through a change process does not make it any easier to accomplish, other than realizing that is what it is.

One might theorize that its some hidden subconscious resistance to the change, however, I doubt it.  On an intellectual level I see the benefit.  If fact I had actually done a cost benefit analysis on upgrading my entire household to the new technology when it becomes publically available.   [I’ll be buying a Surface Pro, Upgrading to Windows 8 and Office 15 and using Office 365 to store my content]  The numbers do not lie.  Having made that rational decision myself.  If it makes sense why is it a challenge for me?  Is it some dead emotional conflict; Doubt it.  If it is not an intellectual or emotional resistance reaction it must be something else.

From the research I’ve done over the years some interesting ideas come to mind: muscle memory.  When one practices a task whether physical or mental those patterns are etched into the neurons in our brain.  The more we practice the more they are reinforces.  This enables us to execute these patterns quickly almost without thinking.  Consider typing as an example.  When I starting using a keyboard I was literally a hunt and peck typist.  Over the years I have developed the muscle memory so most of the time I do not require looking at the keyboard or thinking to type.  Bringing this back to my current change challenge I see similarities.  I have practiced using the previous UI to accomplish tasks that it is well etched in my mind.  The intellectual decision to change makes economic sense.  However, adoption into how I do my everyday tasks will take time and opening up how I can exploit these new ways (innovation) will take a little longer as I discover the possibilities.

This brings me to the pondering of whether much of the change management we talk about is focused on the wrong areas.  Maybe organizations and people it them are as ready to change as I am, but are caught with the fact that they have spent years doing things one way creating “Enterprise Muscle Memory” and need a way to practice the future state to develop a new muscle memory?                                                   

Endgame

These days I am back working in a Think-tank.  It is great to have the time to think or think in depth.  The past few years was more like production line thinking; take information, distill it, synthesize it, form it into easily consumable packages that require no serious thinking by the reader.  Template Intellectual Capital (TIC) if you please.  Those spreadsheets and word templates passed around the office to help shorten your analysis or transmitting information is one form of TIC.  There is nothing inherently wrong with TIC, in point of fact, I will be producing some later next month.  TIC is a productivity tool for many, and others an excuse not to think.  However, I digress.           

I have spent the past few weeks researching and thinking about the future of the Information Technology profession.  From the convergence of trends, I see another paradigm shift.  [My apologies to Don Tapscot for throwing the paradigm word out there.  However, in the sense that Don used the word as a fundamental change in how things are accomplished or thought of.  I foresee a great shift coming to the profession.

Cloud, though many may argue, is a significant change.  The simple thought behind Cloud is it is just Timeshare with a new name.  That however is a simplistic view.  Cloud computing breaks apart information processing into its constituent parts as well as repackages these in different combinational clusters.  Currently these clusters provide a hierarchy of services with acronyms such as IaaS, PaaS, and SaaS; Infrastructure as a Service, Platform as a Service and Software as a Service.  The goal is to encapsulate the capabilities of the previous level such that consumers do not have to administer those components.  Given the popularity of using automotive analogies with IT; as cars have gotten more sophisticated, not many people manage the maintenance and repair of their automobile.  They take it to a dealer of repair shop to maintain.  As such, they are just a few steps away from a lease that is a personalized transportation services a lessee contracts.  A consumer of Cloud service is similar, the operation and maintenance of those services is the responsibility of a provider. 

Now consider several years in the future.  Services whether on premise or in the cloud are capable of being relocated almost transparently.   This infers two possible effects:

The role of IT Professionals will change radically having developers and operations staff merge or specialize in a different form.  Developers will become systems integrators/service designers rather than programming specialists, Operations staff will become optimization analysts and consultants, they will spend more time looking at how to implement, operate the services and act as consultants to Service designers.

Second, the Service Industry will become a market, similar to investment markets, where you’ll have service investments, service brokers, and service investment consultants assisting Enterprises in how to optimize their investments.  Move ahead a few years and these markets will become just as dynamic as the financial market, with activities such as service arbitrage, options theory for service contracts (short and long term) and service hedging as common practice for advanced Enterprises.

I know, it sounds like science fiction.  However, consider how many management-consulting firms are offering services on IT Portfolio Management.

ITIL muses

Considering all the churn in I.T. organizations today around skills, delivery models, development technologies application backlogs and portfolios, I’m surprise how little time CIOs and CxOs are looking at re-engineering the I.T. function to meet today’s and tomorrows new challenges.  Talking across the industry with friends and colleagues this month has indicated to me most organizations are using a scatter-shot quick hit approach towards fixing the issue which seems to only be treating the symptoms.  The Einstein and Clinton quote appears appropriate: “Doing the same thing expecting a different results….” or maybe it is a case of draining the swamp and all the alligators.

While pondering that, the idea of using a single instance of ITIL/CoBIt across multiple provider models (i.e., ITIL Provider Types I – III) seems doable if one takes the same mindset as OS Developers have had for years: Layers of Abstraction and delayed binding:  Since the IT Governance and management functions do not require the absolute details and seven layers of precision, it is feasible.  At the highest level of governance and management I would challenge anyone to see the difference between in-house IT and Outsourcing.  The differences only become apparent when you’re at the 1st and 2nd levels of operations.  While legal and financial details are different between in-house and Outsourcing the control objectives and processes are the same, just the R&Rs and accountabilities change and are adapted to the legal structures accountable to perform.  The Service Order Management, Service Portfolio and Catalog project I’d worked on last year and blogged about prior has convinced me of that fact.

I.T. is a business within a business, but has not been managed that way.  Adopting Service Management enables switching to that perspective.  That switch of perspective permits a CIO to consider other aspects of I.T. that have been not given a due consideration.  The surround around the technical aspects of an offering in business ( (Slywotzky, 1995) (Marks, 1998) has influence on success as much and in many cases more than the technical features.

Designing the attributes of the surround is something many businesses do by default and I.T. organizations are not even aware of but could benefit greatly by addressing.

Discipline Maturity Lifecycle: Enterprise Architecture example

Spent this morning thinking about operating models in IT organizations and ITIL initiatives.   After a few minutes of pondering , hearing a group next to me at a conference extol the virtues of the 4hr days a few thoughts came back to me; the IT discipline is still in a low state of maturity.  If I was to use a human scale, the IT discipline is like a 5 year old copying its older brothers thinking it is all grown up.  Sure the IT Discipline has many elements that other more mature design and development disciplines have, however, the behavior, standards, ethics and other aspects around the profession have yet to develop.

This revelation is not new to me, years ago I had started quantifying how other design disciplines evolved and matured.  I had presented a corkscrew diagram at some conference back then and left it as an interesting phenomena.  As I was in a keynote session the image popped back in my mind and the book I had started but never finished.

What triggered that thought process was a discussion of the Enterprise Architecture discipline/practice.  This had triggered another memory of drafting a paper and proposal to create “The Architect’s Office” within an IT Organization I was working in.  Some of the issues are still the same which were taken from my studies in residential architecture and later field experience:  Architectural Practice is not like Howard Roark in Anne Rand’s The Fountainhead the majority of the time.  It is a social and community effort.

There are two aspects to successful architectural firms:

• The Practice BOK –the body of knowledge and activities used to perform and deliver value to the client.  This is where most practitioners focus when discussing the discipline.  The mechanics of deliverable creation.   While this is the      foundation of any discipline and it grows as it matures, it is only part of the practice.  Many EA firms have yet to take that jump into operating the discipline as a business as opposed to only a methodology of delivery.

• The Business –the selection of market, the value defined to be delivered, and the means on how value controlled and delivered (aka the Business Model).   Without knowing your business model Enterprise Architectures are prone to produce limited value to customers though providing what was requested.       Eventually, the practice could end up in a different business or on the corner with a sign “will architect for food” as the activities performed do not deliver an acceptable cost benefit ratio to  clients. This suggests that architects need to understand their market and alternatives to their delivery of value.       Many residential architects left the calling in the 70s & 80s as customers failed to see the value they provided over general contractors that had draftsman on staff.

Governance Visualization

Reading Enterprise Architecture -creating value by informed governance.   The one take-away I’ve gotten so far from the book has been confirmation of Stafford Beer VSM’s concepts: the recognition that management and control within an enterprise need to be designed with the same discipline and rigor or more that are used for products and services.

Designing effective governance directly effects an enterprise’s ability.  In an environment and economy that demands that enterprises be flexible, adaptive, efficient and effective, having the appropriate governance system is a critical enabling factor.  Some of the spectacular business failures of the past decades have not been failures of product, production process or services.  These failures have been lapses of effective governance.  This goes beyond the financial and ethical scandals that have brought about SOX legislation.   One only needs to look at the issues that the US Government is going through.  Almost everyone is looking towards the government with frustration and wondering why it does not appear to be working or unable to get things done.  A simple look indicates a failure of governance by the very body that has been delegated that responsibility.   I bring these circumstances and events up as proof-points to my original premise; management and control have gotten complex enough in today’s environment that governance needs to be designed and built.

If I haven’t lost you reading this you’re asking now what?  What do I do if I buy your premise?  As an Enterprise Architect, the next step appears simple but is quiet hard: recognize that governance is a subsystem in the enterprise which is a system in the environment.  Usually Enterprise Architects spend significant time articulating how the value creation process is exposed by a product or service system.   Or Infrastructure Architects focus on creating the information system that enables or embodies this creation process.   However, the sub-discipline and practice of governance creation is still emerging as a practice within Enterprise Architecture.

The diagrams below are but one visualization method on how governance can be displayed.  While overly simplified, I find this method clear and concise to communicate in a less jargon filled discussion.  The first diagram illustrates how the management system aka governance reacts with both the environment and operations.  The management senses the environment and operations and sends control instructions to operations to adjust to environmental needs.  In this context environment is the ecosystem that the business operates within.

In this second illustration the system is diagramed in more detail showing how the management system is partitioned is to sub-control activities and the mechanisms (triangles) used to coordinate activities.   This does not take the place of business rules, charters, and other textual representations of governance, however, it does enable visualization on how the components interact as well as help identify gaps in governance.

 

Enterprise I.T. Strategy and Governance Vacuum

Over the past two years I’ve been observing the dialog within the SharePoint community around governance.   There are hints that the community is evolving as several people are now discussing the role of business in governance.   This discussion was missing during initial treatments of the topic at conferences I attended.  It was emblematic of the IT community as a whole during the past decade.

Much of the focus of IT governance has been on execution of permissions for access to information or applications.  While this is important and the end goal of governance, this is the equivalent of law enforcement more so than actual governance which is the process by which decisions on access is made.  IT organizations have become surrogate business asset management boards and in some cases the role has been pushed down to the lowest levels of IT.  A natural result of such unrestrained delegation has been this focus on execution with the decisions on who and how information assess becomes an ad hoc process or left to those that build but do not use the systems.

IT Catch-22

These factors have left IT organizations frustrated as the businesses as they serve.  IT organizations are either blamed for not “just taking care of it” or being “too arrogant, bureaucratic, unresponsive and out of touch with business needs”.  IT Leaders are not complacent about this situation, but confused as to how to address it.  Candid discussions the past two weeks with several organizations facing these challenges confirm this.

 

If an IT organization attempts to just take care of managing an enterprise’s information it faces the challenge of understanding what information is needed, who needs access, how it is to be used, and a variety of other attributes for this information.  All this and then attaining agreement and adoption from the business community.  This is a tall order for a organization that has spent the majority of its efforts on deploying and maintaining technology.  One only need look at IT group budgets over the years to understand where its capabilities and competencies lay.  One could blame MIS directors and CIOs for this however, this is what they were missioned and incented to achieve throughout the past decades.  The typical IT Executives had been constantly receiving directions to lower costs of the infrastructure, increase capacity, and maintain the current technology.  If one looks at IT Industry focus over the past several decades aside from the technology generations the one initiative that stands out is TCO, Total Cost of Ownership.

Doing the same thing and expecting a different result…

When management consulting started to address Information Technology management it has continually put its efforts into optimization of existing resources.  This is equivalent to efforts that these firms put toward manufacturing hard goods products.  The thoughts behind doing so was that human labor was cheap but equipment was expensive.  So methods such as operations research to cut idle time through scheduling and a limited version of portfolio management meant to reduce capital holdings became the prevailing wisdom of the day.  Most enterprises unaware that the paradigm of work was changing from expensive equipment to expensive labor accepted this IT strategy.  During the 80s human resources became more expensive than physical resources, however, the management strategies and techniques have not kept pace with this reality in most enterprises.

Acceptance of this old strategy has meant that over time enterprises and IT organizations as a result, spent what resources not devoted to technology deployment and maintenance to developing competence on cost management or cutting.  The areas of information strategy and architecture that had started in parallel were gradually thinned out, demoted and discounted as the orders of the day was cost management.  Enterprises had by default outsourced their information management strategy to vendors.  Those that disagree with this assessment can look no further than the details of most technology strategy groups within IT functions and see the primary activity is around technology purchase, deployment, maintenance optimization.   Very little investment has been put forth on developing information management verses information technology capabilities.  Of the fifteen organizations I’ve surveyed the past two months, all had Portfolio Management initiatives with a mission on reduction of application and hardware investments, only two had just the start a practice for the management of information as an asset and both are struggling with understanding how to ensure alignment with business.

This is not a condemnation of enterprise management, management consulting or the IT organizations.  This is just a reporting of what I’ve seen over the decades as someone who has cycle through multiple  functions within the business and multiple organizations.  The circumstances, the decisions and actions made have resulted into the situation enterprises are in today.  Like issues with the US Economy or the Environment these are results from the build up of small effects over a long period of time.  Long horizon effects is something that most people and therefore organizations are not well suited to address, especially with the instant gratification culture we’ve developed into today.    So it should not be unexpected that managing information –a new discipline — has not developed as a competency in the business side or IT.

 I’m going to show them … a world without rules or controls, borders or boundaries. A world where anything is possible. Where we go from there is a choice I leave to you

Where does that leave business and IT?  Businesses need to reexamine their role in managing information.  I say information specifically not information technology.  Business members cannot delegate the responsibility to manage their information.  Abdicating control over this critical component results in losing control of the business itself.  For IT figuring out how to partner with the business to address complex issues is key.  Discussing EA with my fifteen IT organizations and on LinkedIn CIO Network forum the questions I’m repeatedly asked is “how?”.  How do we partner with business?  How do we get business engaged with information/technology decision issues?  Senior and technical leadership within IT organizations asking these questions does not suggest arrogance to me.  IT’s focus on IT specific issues without linkage to the  business paradigm and goals suggests a blindness or one dimensional quality which can be seen as arrogance by other disciplines in the enterprise.

I don’t have a magic formula for Business-IT engagement other than to open a dialog.  However, for dialog to occur a common language or effective translation needs to occur.  IT organizations need to develop an understanding of business and the means to translate business concepts into IT execution.  This is more than just a word for word translation but an active exchange where concepts such as business models are investigated for IT enablement options, the alternatives are relayed back to enterprise executives and line of business management as well as the consequences of choosing an alternative from a business perspective so joint decisions can be made.  This model of engagement is not new to industrial enterprises.  Marketing, Engineering, and Manufacturing now team on making decisions in most leading corporations since the 80s under the banner of concurrent engineering.   This is focused upon decisions about products and goods sold.  Today as products and services include IT components, IT organizations should be prepared to “participate” not direct in these teams.  Likewise IT needs to prepare itself to discuss business strategy, organization and operations on more than just a technology thread.  Failure to be able to converse on content beyond IT will continue to relegate the IT organization as a suspected subordinate function.

How this effects Enterprise Strategy and IT Governance?  Without the executive and line of business management participating in governance as full members the IT organizations will always be viewed as autocratic and detached from the business.  IT organizations need to prepare, educate, and reach out to other’s as a colleagues.