IN SEARCH OF OVERHEAD HEROES The overhead business concerns coping with bureaucracy and being responsible for a necessary expense that’s rarely viewed as a source of competitive advantage. Whether its function is accounting, human resources, IT, or marketing, running a unit that’s considered overhead is among the most frustrating corporate jobs there is. Information technology is not only one of the most costly support functions to run, it’s also a lightning rod for management criticism. Companies in the US typically spend anywhere from 50% to 75% of their annual equipment budgets for IT, yet are rarely pleased with the results. IT executives are unhappy because they find it difficult to communicate IT’s value to the business and to deliver a level of service quality that’s satisfying to end-users. Non-IT executives are unhappy with IT overhead because all they generally see is the high cost and a return on investment that’s hard to measure. In order to combat this, IT executives are trying to transform IT departments into businesses (Market Driven Management.) The goal is to adopt the strategies, service definitions, product development programs and customer support of profitable businesses. There are two schools of thought in regards to this approach. First is IT alignment with the business. This methodology ensures that IT strategy, objectives and processes are consistent with the direction that the company is taking. The second is a commitment to cost management. This methodology is not just cost cutting, but also the determination of the overall measurements, assessments, and decisions involving budgets and capital investments. In either approach, it is imperative that Non-IT executives and IT executives communicate and work together to see all facets and implications of the IT decisions made. Unfortunately, preliminary data shows that running IT like a business doesn’t help to alleviate overhead concerns. Internal consumers that are the end users don’t seem to see an appreciable difference and IT management doesn’t feel better positioned within the organization. Neither of these approaches allows IT to focus on the customer or even decide who the customer is. (Sr. Managers vs. IT end users) Realizing the shortcomings of the Market Driven Management system listed above and reviewing the successes of Apple’s development of the IPod, Dell’s distribution model and IBM’s sourcing strategies a new market driven business mentality was fostered. Several questions were asked (What is our purpose? Who are our customers? What do different customers want and need to be more effective in their jobs? What services and products should we, and can we provide? Are we satisfying our customers?) and the answers warranted several changes. First opportunities to improve management practices in many different IT areas were examined. Elements as varied as the sourcing of IT products and the management of system capacity were addressed. Organizational structure was modified by adding a totally new front office organization staffed by IT professionals who intimately understood the customer demand. Account manager positions were created specifically to support technology vendors. These managers understand the consumer’s requirements, are able to explain how products and services can help their entities and serve as the main communication channel between the consumer and the functional factory. Customization is no longer an issue. Additonally, a service offering manager postion was created to handle the selection, distribution and ongoing support for one or more products or services. Overall this approach has worked much better. Clients and technology consumers are much happier with services, costs have been reduced significantly, and the IT teams feel more in control and happier with the end results. The main difference between the two approaches is that the latter includes having a front office where business issues such as service differentiation and resource allocation are discussed among IT employees and business clients. The discussions influence decisions.
The overhead business concerns coping with bureaucracy and being responsible for a necessary expense that’s rarely viewed as a source of competitive advantage. Whether its function is accounting, human resources, IT, or marketing, running a unit that’s considered overhead is among the most frustrating corporate jobs there is.
Information technology is not only one of the most costly support functions to run, it’s also a lightning rod for management criticism. Companies in the US typically spend anywhere from 50% to 75% of their annual equipment budgets for IT, yet are rarely pleased with the results. IT executives are unhappy because they find it difficult to communicate IT’s value to the business and to deliver a level of service quality that’s satisfying to end-users. Non-IT executives are unhappy with IT overhead because all they generally see is the high cost and a return on investment that’s hard to measure.
In order to combat this, IT executives are trying to transform IT departments into businesses (Market Driven Management.) The goal is to adopt the strategies, service definitions, product development programs and customer support of profitable businesses. There are two schools of thought in regards to this approach. First is IT alignment with the business. This methodology ensures that IT strategy, objectives and processes are consistent with the direction that the company is taking. The second is a commitment to cost management. This methodology is not just cost cutting, but also the determination of the overall measurements, assessments, and decisions involving budgets and capital investments. In either approach, it is imperative that Non-IT executives and IT executives communicate and work together to see all facets and implications of the IT decisions made. Unfortunately, preliminary data shows that running IT like a business doesn’t help to alleviate overhead concerns. Internal consumers that are the end users don’t seem to see an appreciable difference and IT management doesn’t feel better positioned within the organization. Neither of these approaches allows IT to focus on the customer or even decide who the customer is. (Sr. Managers vs. IT end users)
Realizing the shortcomings of the Market Driven Management system listed above and reviewing the successes of Apple’s development of the IPod, Dell’s distribution model and IBM’s sourcing strategies a new market driven business mentality was fostered. Several questions were asked (What is our purpose? Who are our customers? What do different customers want and need to be more effective in their jobs? What services and products should we, and can we provide? Are we satisfying our customers?) and the answers warranted several changes. First opportunities to improve management practices in many different IT areas were examined. Elements as varied as the sourcing of IT products and the management of system capacity were addressed. Organizational structure was modified by adding a totally new front office organization staffed by IT professionals who intimately understood the customer demand. Account manager positions were created specifically to support technology vendors. These managers understand the consumer’s requirements, are able to explain how products and services can help their entities and serve as the main communication channel between the consumer and the functional factory. Customization is no longer an issue. Additonally, a service offering manager postion was created to handle the selection, distribution and ongoing support for one or more products or services. Overall this approach has worked much better. Clients and technology consumers are much happier with services, costs have been reduced significantly, and the IT teams feel more in control and happier with the end results.
The main difference between the two approaches is that the latter includes having a front office where business issues such as service differentiation and resource allocation are discussed among IT employees and business clients. The discussions influence decisions.