Eddie A.
Head of comp sys&labs at Tel-Aviv University, School of Computer Science
What is the "right" place of the IT in an organization ?
It is not a secret that the IT department spends money (rather than earn money), but it is an enabler for the company operation. Apparently it is not enough !
Will it be needed and possible to turn the IT into a strategic unit ?
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Frank F.
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In the typical company, IT will be under Admin or Finance, depending on the type of industry and business.
However, it is conceivable that it could be under Marketing, especially in a direct marketing or e-Commerce company. I have not looked at their structures, but IT is central and strategic to companies such as Amazon, eBay, or Dell, for example.
And I also believe that IT is strategic to every business. Andrew Grove, Chairman Emeritus of Intel Corp., once said that if a company does not become an e-business it will not be in business. And I have written, that in the digital era, it is implicit that a company must be digitally competitive to survive and prosper. So I have suggested that a company's e-business strategy (i.e., its IT function) should in fact over-ride or drive the company's overall corporate strategy.
I think it is a mistake to simply view IT as a cost center. Investments in IT are essential not just to internal processing but to overall competitiveness, and to interfacing with both suppliers and customers. There is no reason why it should not be possible to measure the ROI of that IT investment. IT optimizes and leverages competitive advantage. And that is why IT strategy is particularly important.
Hello Eddie,
Your question is partially known as the “Information Technology Paradox”. In short, the ROI is simply too low and too slow, so why bother?
The formal answer for the paradox is “what would have happened if you didn’t make this IT investment?”. Will your business still be competitive in means of cost, quality, and innovation? The answer is apparently, “no”. You need IT to manage and control your costs, to maintain the quality of products and services, and to support the time to market of your innovation.
Therefore, don’t look on the IT spending; look on the cost of the alternative (of not investing in IT). There is where your answer is.
As for the role of IT – my simple view is; the role of IT is to save money and to make money via technological tools, processes, and people. The IT is not (only) “enabler” the IT is a real chain in the value chain of a company.
Ciao,
Ariel
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Octavio B.
Global Thinker ★ Corporate Strategist with focus in 2.0 Technologies
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Hi Eddie,
In corporate cultures where aversion to risk is common, Technology usually is considered more of a tool to reduce costs by improving operational excellence than as an effective driver in supporting corporate strategy.
In such organizational contexts having a poorly developed strategic mindset fully driven for the operational dynamic, IT function can be organizationally subordinated to the Finance department or to the Administration department, where its role in promoting innovation is almost negligible in spite of the well-intentioned efforts and willpower from CIO’s and CTO’s in promoting a portfolio of technology’s projects with a clear strategic profile.
In corporate cultures where an innovative mindset is explicitly encouraged and collaborative workplaces are the norm, Senior Management usually has a thoroughly understanding regarding the role that Technology plays in encouraging corporate innovation. In such organizations is usual conceive a Technology function having a seat at the corporate table and showing a direct involvement in the execution of the corporate strategy
No matter how literate may be your workforce, when CIOs in current organizations should face the following challenges:
- It is instrumental that a CIO/CTO works by applying a cross-functional approach entirely based in processes. A CIO/CTO should schedule periodic meetings with the heads in Operations, Marketing, Finance, HR and Production to get a quick glimpse about the company’s operational framework and gain thereby the trustful and respect from other managers and colleagues.
- The growing trend of outsourcing non-core technology’s operations in many of the today’s companies will create a clear opportunity for a strategic organization where his/her CIO/CTO can be more dedicated to develop technological projects strategically aligned and with potential to add business value. Projects with a strategic added value like CRM, Business Process Management, Knowledge Management and ERP are amply recommended because its positive impact in the core business of the enterprise.
- A strategically oriented CIO/CTO should consider changing the focus of his/her organization, from an Information Technology Department transactional and operationally oriented to a new one with more strategic focus and exclusively oriented to bring support to reach the business goals. To achieve this objective this CTO need look for commitment from Senior Management and the recognition of the role that Technology plays like a strategic driver of the business.
- A business oriented CIO/CTO should use at least one of the web based technology’s services (Gartner, IDC, Forrester Research) available in the market to make technology intelligence in positioning the technology investments.
I include the links to 3 questions that I have posted in Linkedin that could be complementary to the theme of your question:
1. Does Innovation happen at the intersection of market insight and technological know-how; if so, what is the missing link?
2. What would change if Human Resources and Technology had a seat at the corporate table?
3. How does Technology impact on Management Practices?
I hope this helps you.
Octavio
Links:
Gene T.
Green IT Architect, Virtualization Pro
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I would say: IT is a nerve system of the business. How mach do you value your nerve system??
Christopher W.
Information Security Project Consultant at Colt Technology Services
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IT is an enabeler to business, it should be there to meet the business requirements.
Unless your business is a technology company, then I don't see it driving business stratagey, although it can help to realise business stratagy and help shape it.
Clarification added October 2, 2008:
As to the answer below
Google stratagy is to sell more advertising by offering content to end users
eBay is to provide services to make money off of 3rd party sales by providing them an easy to use enviroment and payment method
Amazons stratagy is to sell good and allow 3rd parties to sell goods via an easy to use interface and payment method.
In each of these cases the stratagy does specify technology although technology will be the enabeler. When it coes to stratagy and business requirements you look at what the business is trying to achieve and not the mechanisms of achieving it.
In each of the cases technology is not driving the stratagy but advances in technology may help to steer the stratagy.
By reducing the cost of technology or technology reducing the cost of operations, you may improve profits but the implentation of a technology does not generate money.
A new technology may allow you to present adverts in a new way that generates profit but it is the advert that generates profit and not the technology.
