When I have the opportunity to visit with key suppliers or with another IT leader, I love to hear how others are doing the same things that we do. I don’t ever want to think that we’ve got the perfect solution and that our way is THE way to do it. I feel this so strongly that I tell some IT vendors that if they think we are doing it wrong, or they’ve seen a better way or if we just don’t get it, that I expect them to speak up and tell us. I want and need to hear all the good ideas I can find and then we need to put them into the mix to address our problems.
Usually, it is not a big deal when companies choose different email systems. However, it is a completely different matter to see a company use an entirely different process from yours that still gets them to a similar end point. When another group tackles the same problem you have and they solve it in a completely different manner, then likely you can learn from that difference.
IT leaders have got to seek out these learning opportunities.
IT runs the risk of pouring concrete everywhere including in their own minds. Decisions made years ago, based on conditions then, may no longer be relevant or correct, but the decision was made and IT has made up its mind. Instead, we’ve got to be plugged into ideas from conferences, from colleagues and from on-line resources. We’ve got to challenge our own IT thought leaders to challenge each other and keep plugged into what is going on out there.
I frequently see articles about how to have an innovative culture, but perhaps a key first step and what might get you far down that path is just listening to what others are doing. You can learn a lot by just listening.
I’ve been pondering the question of how does one determine the proper investment level for IT in a company if you don’t start with the current spending levels. In other words, how does the leadership of a company determine the right dollar amount to invest without referring to the run rate?
There are various benchmarks that can be used to see how an industry sector invests. For example, we can find out the average for the insurance industry or the retail industry. But I’ve not seen anybody provide 2nd order statistics for the industry groups that would help us understand the spread around the mean. I’ve also found cases where the companies in the study for my industry group were not at all like my company. The grouping itself can be flawed.
Even if one knows the average for an industry group, what does that tell us about whether we should spend more or less? I don’t typically want to be average. It might make sense to spend a lot more than the average based on the specifics of your company and its situation. One company might get huge leverage on their IT spending and thus more spending is appropriate and warranted.
There are two key components of IT spending. One is called the Run component and it consists of the spending required to keep the lights on. Typically, one would want to minimize this spending while maintaining a proper service level. It does no good to keep cutting the Run spending if the quality of service is going down along the way. The second component is a Grow or Innovate component and this is used to characterize projects that can help the business grow or innovate. This second component is where the real discussions should take place and where conversations with the business leadership can make all the difference. IT should be there to enable the business to move forward. IT has to spend minimally to keep it running but it also has to spend to help the business innovate.
I think the answer to my question is that there are two answers and they are answered differently. If there is lots of waste and redundancy in the Run part, then more spending might be warranted to streamline and consolidate to enable the Run component to get smaller later. If the Run component is already lean with single instances of everything, etc. then perhaps Run can be determined based on what is required to keep the same steady-state.
The Grow/Innovate component is a conversation and partnership with all involved. This part is where you can spend more or less depending on the story and ideas involved.
The InformationWeek 500 was published today for 2009. The study describes IT priorities, spending and directions for a lot of companies and then in some sense ranks the IT shops. Other organizations like Gartner Group do the same thing as well as other magazines like CIO Magazine.
I’ve got a fairly strong statistics background and I have to say, it really bothers me that these studies will always show the average IT spend as a percent of revenue by industry, state, group or whatever. But they never show any 2nd order statistics. It would really be helpful if they go that next step and tell us the spread about the mean. If the Manufacturing group in the study has a average IT spend as percent of revenue of 1.8%, I’d really like to know the spread around the average. Is the spread tight or wide? That would really give me a deeper understanding of the data. Specifically, if I’m away from that ‘average’ is that unusal or not? If the variance is large, I’ll draw a different conclusion from a tight variance.
So to those of you doing these rankings, studies, evaluations, please start putting 2nd order statistics in your results. Thanks from a CIO.