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IT Fitness Check

Raising the level of speed and flexibility in IT presumes an in-depth determination of the current position
Published in "Think!", DMR 04/2010 Online: http://www.detecon-dmr.com/en/article/it-fitness-check_2010_12_16 Dr. Nikolaus Bubner Wolfgang Pantwich Always swimming ahead of the wave! Having a solution waiting in the bag before the IT customers have even noticed there is a problem flexible, capable of quick response, competitive, and customer-centric, and all of that at reasonable costs. The vision of modern companies confronts the IT department with special challenges.

IT departments today find themselves caught between two trends in development. On the one hand, competitive pressures force companies to strive continuously to optimize as well as to reorient existing procedures. Delivery times need to be shortened and existing business fields must be expanded by the addition of innovative products or redesigned with convergence products for new customer segments, just to mention a few examples. The IT department is expected to provide implementable, reliable, and cost-efficient solutions quickly to achieve these aims. On the other hand, evolving technology and methodology give IT little choice but to realize new technologies continuously in short time despite the simultaneous cost pressures so that the company can secure and expand sustainable competitive advantages by means of leading technology. The IT department must respond flexibly and rapidly: customers should be able to handle their business transactions easily and quickly with the best possible IT support. The driving forces A holistic analysis of the market and customer requirements critical for success includes the consideration of current trends such as the automation of business processes, the standardization of IT infrastructure, or the

Published in "Think!", DMR 04/2010

conversion of investment expenditures (Capex) into expenditures for operational business (Opex). In addition, there is an analysis of the underlying IT organizational structure. One process model (IT operating model) offers a typical structural basis for this analysis. It outlines the fields of activity of an IT department which must be established in a CIO organization to assure the greatest possible benefits for the company. Professional journals today emphasize the management of application and infrastructure portfolios, the determination of the best possible sourcing behavior, and transparent monitoring and management of data and process quality using enterprise performance management as examples. In our view, it is essential to include and analyze additionally the interfaces, transfer nodes, and interaction modalities among the various fields of activities in the assessment. A typical business case in the CIO organization such as the development of an IT strategy or the sustained establishment and exercise of a portfolio management assumes the interaction of all fields of activities if optimal results are to be obtained. A possible structure of the IT fields of activities is illustrated in Figure 1.

The challenges Jrgen D. had just started working in his new position as CIO in the company. When he accepted the responsibility, he had been very well aware

Published in "Think!", DMR 04/2010

that there was room for improvement. But now everything had happened all at once an experienced employee had left the company, the pressure of managements expectations was very high: Jrgen D. was supposed to, and wanted to, address the current challenges for his IT division and initiate a reorientation wherever this appeared to be sensible and necessary. The identified challenges can often push the IT organization to the limits of what it can handle. An objective assessment of the performance capability of IT operations examines the fundamental suitability (effectiveness: Do the right things) and the economical factor utilization (efficiency: Do things right) of the IT corporate activities. Since this distinction addresses a broad range of strategic and operative methods, it is advisable to set focal points by preparing a specification catalog. For example, the traditional way of looking at the value chain in IT outsourcing will be going through far-reaching transformations in view of the dynamic developments and the field of research and practice of cloud computing. When todays requirements on the IT organization, characterized by demand fluctuation and iterative patterns and trends, are taken into account, the consolidation and the subsequent virtualization of computing capacity offer a sensible method for countering cost pressures. This incentive to reduce costs is reinforced by the fact that historically developed, heterogeneous system landscapes are often the cause for steadily rising costs. In contrast, it initially appears logical to benefit from the exploitable synergy potential or cost advantages. The method IT strategy and IT organization must be subjected to a structural examination so that all of the topics can be covered and prioritized for a company. A specific analysis should entail reference to current business processes and crossover aspects. This means shifting the focus from the consideration of isolated solution approaches in favor of complex structures. Future developments on the market and in the company as a whole lay the foundation for determining which complex interdependencies must be described. Essential questions on core topics such as What contribution does IT make to corporate value, and in what IT projects should investments be made? or How must the technological position of the company be appraised in comparison with best practice companies? must be answered on the basis of valid diagnoses or performance indicators on the financial and technological situation. The nature of the strategy concept in the IT department is of key significance in the context of successful corporate management. This is reflected especially in the companys capability to respond contemporaneously and

Published in "Think!", DMR 04/2010

flexibly to external changes or to adapt to market demands with little expenditure of effort. At a high level of abstraction, this means knowledge and control of the companys own resources and capabilities, even though the business environment is highly dynamic and involves many other determinants. One of these factors determining performance is the demand for declining IT costs and an improvement in the cash situation while at the same time achieving a higher value contribution from IT. Strict customer and service orientation of the IT is indispensable to secure this contribution and to optimize the performance of IT services. Another requirement addresses the holistic competence of internal capabilities of IT to manage successfully requests from the business departments as they grow in complexity and do so faster and faster in comparison with the past. Such requests include implementations as well as concrete help in making decisions such as a feasibility study or economic efficiency analysis. An objective assessment of the performance capability of IT operation is inevitably based on a quantified understanding of the company strengths and opportunities as well as the related target variables. In this context, the degree of automation and standardization of IT service plays a special role, especially during the preparation of decisions concerning the optimal value creation depth of the IT department. This lays the foundation for the optimal allocation of resources within the company because the departments within and outside the IT are usually interdependent on one another and the definition of performance targets coordinated with one another is decisive for the consistent development of the company. Another characteristic of current market and customer requirements can be seen in the management of the increasing complexity which confronts companies today. It includes organizational changes, new technologies, and the increasing dependency of business processes on IT. This is why open and flexible or continuous planning processes are becoming increasingly important in place of the classic strategic management and planning process. This situation arises from the general internal and external dynamics which demand a permanent state of change for targets and general conditions in IT as well. One possible negative trait of this development is the shift of IT budget and competencies into the business units; this frequently encourages wild growth, a lack of transparency, and increased difficulty in managing IT landscapes which have grown naturally as a consequence of parallel and redundant developments. The preparation of an overall image drawing on the corporate strategy and the business process specifications for the future orientation of the IT organization is required. The motivation

Published in "Think!", DMR 04/2010

Jrgen D. decided to have an independent assessment of his IT department carried out. An appraisal of the location of this type must be seen as the prerequisite for the application of best practice models and the subsequent preparation of a change profile. The identification of the optimization potential of the IT organization is followed by an expert opinion on the current development status of the organization and concrete proposals for optimization (and the procedures required for this purpose). They must be closely linked with a strategic outlook for the continuous process improvement of IT, employee development, and the underlying service culture of the IT organization. The compulsion towards agility in IT as well as the differences in further development of the IT fields of activities in comparison cyclically require a correction and a new determination of position so that specific changes can be implemented. Depending on the current situation of a CIO organization, IT has a broad range of methods at its disposal to determine its position in peer comparison and best practice models. They include established methods of benchmarking and various models for appraising the maturity level for the focal points process management and project/product management. Methods such as Six Sigma are also being used more and more frequently in IT operations. However, Jrgen D. did not want to conduct a time- and effort-consuming project with comprehensive analysis results; he was looking for a solution which would give him a good overview of the necessary room for action in the shortest possible time. Determining position The IT Fitness Check provides a fast and simultaneously in-depth determination of the position of a CIO organization. This fitness check examines all of the important IT management tasks on the basis of 12 defined diagnosis clusters, taking into account specific focal points. An important focus is on the interaction of the clusters, taking into consideration the typical business events in the IT organization. The following questions are at the core: What strengths and weaknesses does the IT department have? How can the maturity level of the IT department, its ability to enable the effective and cost-efficient realization of the corporate vision, continuously and sustainably enhance the respect it commands from the business units and business customers? The IT Fitness Check is based on a strict, systematic procedure which considers in each case the specific corporate requirements, the customer situation, and the customer needs. One point is essential: the IT Fitness Check is not an automated tool, but is carried out by experts who have at their disposal many years of experience and profound business and management competence at the interface between the IT department and the business.

Published in "Think!", DMR 04/2010

The IT Fitness Check consists of the following elements: The configuration of pre-structured questionnaires and linked interviews with respect to the concrete corporate context size, organization, business fields, current challenges, strategic goals and vision, etc. Assessment of prioritized IT management tasks in direct discussion with the people in charge of IT (view from the inside) and the IT customers (view from the outside) Consideration of the hard and soft facts within the organization and of the interdependencies in the specified tasks Assessment of the analysis results by experienced management consultants (not an automated analysis tool). The result Jrgen D. received an IT Fitness Report with key statements on the current status of the IT as a result of the IT Fitness Check. The report describes the top strengths and top weaknesses that had been identified as well as recommendations for the further development of the IT organization. Following the analysis on the basis of the defined 12 diagnosis clusters, the performance capability and quality of the IT is assessed and

Published in "Think!", DMR 04/2010

visualized with the help of strength and weakness profiles. Taking the aggregate examination results as a starting point, e.g., related to maturity level in process management and project/portfolio management, the as-is status of the IT is determined. As envisioned by Jrgen D., the IT Fitness Check is not limited to the development of new concepts, but also contains recommendations which help him and his IT management to achieve a better positioning with regard to the internal and external challenges. The concluding IT Fitness Report is discussed with management to find the proper balance of all of the pros and cons of possible activities and to initiate the introductory measures. The value contribution The IT Fitness Check is aimed at generating a joint dialog about IT quality and IT performance between decision-makers in the IT management and their relevant customers. It provides a fast, well-founded diagnosis on the IT status in terms of maturity level and sustainability in relation to all of the relevant tasks of IT management. It takes into account current framework conditions and corporate goals and quickly brings about planning security, orientation, and transparency concerning the present position of IT in the company, generates ideas for continuous improvement of position, and offers optimal support in preparing decisions. Moreover, the consulting solution includes an assessment of the optimal implementation depth, the IT portfolio, IT governance, management and control systems, and the process and organization model. The action and problem fields thus identified are linked to statements concerning the impact on business budgets and the value contribution for the IT organization. Besides serving as leverage points for the solution of present tasks, they make a decisive contribution to the creation of a solid and sustainable communication and discussion foundation for the analysis of architectural changes, for example, on both the demand and supply sides. Jrgen D. is satisfied: Now I know what my employees and I have to focus on. The strengths in daily operation which have been identified give us the confidence we need for the development of new fields; the weaknesses identified in the cooperation with the business units appear to be a red thread running through all of the blocks of topics the strategic realignment is affected just as much as the change management and the solution delivery in the projects. This is where we will apply the recommended measures. Thanks to the IT Fitness Check, we have shortened the required time period by at least six months!

Dr. Nikolaus Bubner

Published in "Think!", DMR 04/2010

Dr Nikolaus Bubner is a Managing Consultant and works in the Group "Executive Advisory". He was formerly employed in the Volkswagen Corporation, the Deutsche Post DHL Corporation, and in various midsize businesses around the world as a management consultant as well as program and project manager. The focal points of his work are in the areas IT strategy, IT transformation, enterprise architecture, and IT merger and cost and value management. Wolfgang Pantwich Wolfgang Pantwich is a Managing Consultant and works in the Group "Executive Advisory". Before joining Detecon, he held a broad range of line and staff positions in the IT industry, working on both the supply and demand sides. His work at Detecon focuses on management consulting with the topics IT strategy and portfolio management, IT service management, project management, outsourcing, and transformation of organizations.

Published in "Think!", DMR 04/2010