IT shops miss out in strategy stakes: survey

IT shops believe they sit low on the value scale in companies if the responses to a recent survey are any indication.

Only 6 per cent of IT executives believe their companies see IT as a strategic partner, while 58 per cent felt they had achieved just a basic level of trust and were viewed merely as a business supporter.

In a recent Meta Group survey, 35 per cent of CIOs surveyed said they had a fluid IT portfolio management process in operation, while only 25 per cent had done business cases on a select few IT projects.

Peter Hind, InTep program manager at industry analyst IDC (InTep is a forum of IT managers and CIOs), agreed with the findings, but said the validity of this would vary depending on the nature of the company.

"Whether IT is seen as a strategic partner, or whether it's a support centre, depends on the focus of the company. A financial services organisation, for instance, might be more IT dependant than manufacturing and see it as a partner," Hind said.

"There are exceptions. But IT has had to earn that respect. This depends on the capability of IT managers to gain the kudos of their business peers. IT has to be bold. You can't accept the role of whipping boy," he added. "It's up to IT to change the perception of IT."

Meta Group says the findings show a need for IT organisations to adopt practices and principles that continually align IT pressures with business demands.

According to Meta Group, only one in six companies is equipped to handle marketplace dynamics and pick up on new IT opportunities. Many of these organisations only align their budgets with business needs once or twice a year. The Group claims that adequate IT portfolio management can have a dramatic impact on aligning IT and business expectations and CIOs who embrace this methodology have shown record improvement in sustainable IT efficiency and effectiveness.

An IT portfolio is much like a financial portfolio, Meta officials said. It is a disciplined approach for managing an organisation's technology assets -- hardware, software, and human capital -- as well as projects based on current and future economic drivers.

Dr Howard Rubin, Meta Group executive vice president and research fellow, said, "Many companies continue to employ a singular focus around costs for their IT projects. IT portfolio management emphasises providing a balance between value, risk, and costs. This approach enables companies to reprioritise their investments by identifying and reducing redundant activities.

"Organisations that fail to embrace this disciplined approach to managing their IT assets will not be able to deliver shareholder value through their technology investments. It's short-sighted to continue to focus solely on current price -- future yield, risks, and benefits timing must all be part of the mix," he added.

"In such a dynamically changing marketplace, these companies are missing the boat if they're not using the same timings and tempos employed in the financial model," Rubin said.

There are three main portfolio categories, each directed at a specific business need:

· Run the business needs - which include core and non-discretionary costs such as IT services that enable fundamental business processes and operations; · Grow the business - costs associated with discretionary enhancements to support basic business change; · Transform the business - which are investments designed to deepen penetration into an existing market, and additional venture funding intended to reach and penetrate new markets.

Hind said many of the CIOs he spoke to at the InTEP forums already go through this process of prioritising and categorising their IT spend on a subconscious level.

Almost 80 per cent of Meta Group respondents are spending 50 per cent or more of their budget on the "run the business" portion of their portfolio, that is those projects and applications they consider essential to staying in business.

However, 25 per cent of respondents estimated they were still planning on spending 20 per cent or more on either "grow the business" or "transform the business".

Rubin said the balance is different for each company, but most organisations do not have the tools in place to get the appropriate level of visibility into their investment mix.

Meta Group also claims the portfolio representation of IT investments must be mapped to the business's portfolio of investments to better align IT shops and business and facilitate communications with business decision makers.

"This concept is the binding principle of the IT management work we've been doing for more than 10 years," says Dale Kutnick, Meta Group chairman, CEO, and co-research director. "We're now seeing companies applying portfolio management techniques to the entire business and treating the IT organisation as part of the overall business portfolio."

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