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IT Alignment is Simple, Part 2

In a previous article I talked about business/IT alignment, explained the problem, and gave you the 7 criteria for achieving IT alignment. This month I’ll give you some tips for better and easier IT alignment.

I’ll start with a five-step process to change your IT budget to better support alignment. First, let’s clean up maintenance and infrastructure so they don’t distract us from our project budget.

Step 1. Follow the advice in my book, and organize your IT budget into separate categories for infrastructure, projects and maintenance.
Over time the percentage of an IT budget devoted to infrastructure and maintenance tends to rise because of the increased ongoing cost of all of the projects you’ve completed. So breaking out your budget into these three categories makes your budget more transparent and understandable to business executives. When they see that the percentage of money available for new projects is declining, they’ll better understand why you have trouble delivering more projects as time goes on. And they’ll be more receptive to increasing your total IT budget to fund additional projects.

Step 2. Now focus your maintenance budget on software maintenance.
Put hardware maintenance under infrastructure where it belongs. Also move to infrastructure the cost of certain software contracts that are required to make the infrastructure work. This includes server operating systems, database and network software licenses that are required by existing systems, and the cost of user software licenses like Microsoft Office that are installed on user PCs.

Step 3. Make your maintenance budget even clearer by taking any major software maintenance projects out of the maintenance budget category and putting them in the project category instead.
Maintenance projects are things like increasing the size of an order number, beefing up system security, or interfacing a new system to a bunch of old systems. These could all legitimately be considered maintenance, but they’re also projects that the business can appreciate for their business value. Accordingly, put these maintenance projects into your project budget where they belong, and reserve your maintenance budget for smaller things that are tougher to link to specific business benefits. Keep your maintenance budget category as small as you can.

Step 4. Tie your infrastructure budget to user-related variables.
Business users understand that increased volumes require increased cost, so tying various parts of your infrastructure budget to user volumes (e.g., transaction counts, network traffic, Help Desk calls, number of supported PCs) will transfer the responsibility for volume increases back to the user. For example, if the business doesn’t like spending more each year for increased Internet usage, then the business needs to work together with IT to find a way to control the Internet volumes. Or if the business doesn’t like your increased Help Desk cost, then the business can trade off lower support levels, or can discontinue support for certain products.

Make sure, however, that you use legitimate variables that are directly related to infrastructure cost. And anticipate the possibility of a decline in a volume variable. Will it be possible for you to cut costs in that infrastructure area if volumes decline?

Now for our last step in the five-step process, we’ll focus on aligning projects with the business.

Step 5. Connect each IT project to a specific strategic business objective that has a business deliverable and a business benefit.
That way they’re not IT projects – they’re projects for the business with some of the work done in IT. This is absolutely key to alignment; you cannot have alignment if business people believe that the IT organization does projects for its own sake.

The Advantages of this Five-Step Process
It’s a good idea to go through this five-step process even if you don’t go further and attempt IT alignment. First off, revamping your budget this way takes away most of the pain of budget cuts. When someone in the business wants to cut your budget, just go back to the business and ask what infrastructure service they’re willing to sacrifice, what systems they would like to discontinue (to reduce maintenance and infrastructure costs), and/or what projects they’re willing to cut or postpone. Since every part of your newly revamped IT budget has a specific business benefit, it becomes a business decision to choose which of the business benefits to defer or live without. IT budget cutting is no longer just an IT problem – it’s a joint business/IT problem.

On the other hand, if someone wants to add a new project, then it’s up to the business to find the funding to pay for the IT cost of the project and for the increased IT infrastructure and maintenance cost that the project requires. And if the business is actually going to enjoy a benefit from the project, then that’s only fair.

Business/IT alignment means that each and every part of IT activity is coupled to a specific part of the business (or coupled to multiple parts of the business in certain cases. But watch out for finger-pointing when you do this). Where the business goes, IT goes, and vice versa. Linkage leads to alignment.

Common Questions & Answers about Business/IT Alignment

1. My IT organization is a small part of a much larger corporate IT organization. How do I get business/IT alignment when I don’t have control over the larger corporate IT organization?

Answer: Just as a large system rollout is more successful when it’s done in a series of phases, you’ll find that getting business/IT alignment can also be done in phases, and often works better that way. Focus on your own IT organization, and do your best to get alignment for the areas of IT that are under your control. The nice thing about alignment is that you can get the benefits even if you just get alignment for a subset of IT. And when your local business partners start bragging about how good their IT is, now that it’s aligned (I know this from experience – it’s happened to my own business partners), you’ll find that the corporate IT group will become very interested in learning what you’re doing right, and they will want to do the same thing at a corporate level.

2. The business people won’t tell me their business strategy. How can I align with the business if I don’t know what their strategy is?

Answer: First of all, you probably know more about the business strategy than you think. Most senior IT people have a better view of the overall business than someone in any other business organization. That’s because IT interacts with so many different parts of the business, and it gets involved in the key processes of each organization.

So if the business people won’t tell you their strategy then put together a summary of what you think their strategy is and what the corresponding IT strategy should be. Then go back to the business executives and give them this speech:

I haven’t been able to get a clear idea of what our company’s business strategy is, so I’ve put together my own assumptions. Here they are (show them the key points of your version of the business strategy), and here’s what I think IT should do to support this business strategy.

What you’ll find is that most business executives who are hesitant to reveal what they consider “privileged” information are much more likely to correct your assumptions. So through their corrections you’ll end up getting the business strategy information you need.

3. I understand what you’re saying about linking projects to business objectives, but my business partners insist that I cut my IT budget without sacrificing any of my planned project deliverables. What can I do?

Answer: Your problem is that your business partners either (a) don’t trust you, (b) don’t think your IT organization is productive enough, and/or (c) have too much of a sense of magic about IT (see Chapter 1 in my book) and therefore expect the impossible.

First you need to decide whether you’re worthy of their trust. Have you been honest with them about anticipating project successes and failures, or have you been giving them surprises? Have you been accurate in your project estimates, or when estimates were off, have you explained how changes to requirements caused the error (assuming that’s the real cause)? Do your business partners think you’re sandbagging on estimates (deliberately estimating extremely high to give yourself more flexibility)? Until you develop a trusting relationship with your business partners, they’re going to keep squeezing you to do more and more with less and less.

Second, take a hard look at the productivity (deliverables/dollar) of your IT organization. Are there areas in which you could make order of magnitude improvements (10x or more) in your budget by outsourcing, by adopting new techniques, or by eliminating redundancy? Maybe there are ways to cut your budget without sacrificing deliverables.

Last, if you have the trust of your business partners and you’ve done everything you can to improve productivity, then you’re dealing with a magic perception: your business partners are expecting the impossible. See my book for suggestions on how to reduce magic in your IT.

4. I’m in a small company with a very small IT organization. Is IT alignment relevant to me?

Answer: Yes, IT alignment is relevant and important for all IT organizations, no matter how big or small they are. In fact, I can make the case that IT alignment is even more important for small IT organizations. Small IT departments have no resources to spare, so it’s critical that your limited resources are focused on the things that are the most important to the business. That’s what IT alignment is all about: aligning your IT resources with what the business needs.

5. We have an IT strategy, and we have a business strategy, but we still can’t achieve alignment. What are we doing wrong?

Answer: There are a lot of possibilities. First, take a hard look at the business and IT strategies. Are they short (usually less than 10 pages) and do they convey a real sense of focus (e.g., “we’re going to do this and this, but not this and this”)? Many strategy documents are worded in “consultant speak” because they’re written by consultants (or with the help of people who think like consultants) who are more focused on creating something that sounds good than on creating a strategy that can be useful. Consultant speak is a strange language that looks like eloquent English but in fact strings together a bunch of business buzzwords without having any real meaning.

One way to do a quick evaluation of a strategy is to go through the strategy and try to create a hypothetical alternate strategy that does the exact opposite of what your strategy says. For example, if your strategy says we’re going to “take advantage of competitive opportunities as they arise” (typical consultant speak) then the opposite would be what? To avoid competition? To ignore opportunities? You’ll find that if the opposite of a strategy statement isn’t meaningful then there’s a good chance that the original strategy statement isn’t meaningful either.

Good strategy statements are specific, things like “we are going to expand into Canada by looking for companies in our business that we can buy” or “we’re going to focus on increasing same-store sales and slow down our growth of new stores.” Good strategy statements actually help you focus on doing the things that are important for the business. Bad strategy statements just give you platitudes and generalizations that aren’t helpful at all. Good strategies are short and to the point. Bad strategies are long – just a collection of wish list items that don’t help you focus.

If your business and IT strategies are good, then you’ll have something to build on for IT alignment. There’s a lot of communication required, but this is something that is very achievable if you have mutual trust and a willingness to cooperate. Go back to part 1 of this article and look at the seven criteria for business/IT alignment. When you can achieve all seven criteria, then you’ll be aligned.

And if you still have problems, or if you have any questions, send me an email and I’ll try to help you.

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