Reversing the IT Resource Allocation Imbalance Equation

For decades, senior IT leaders have confronted the financial reality that every year 80% of their IT budgets are allocated to “running the business” while 20% are allocated to “changing the business.”

No one can argue how important it is for IT to make sure each company’s systems infrastructure and data is stable, secure and in compliance with industry standards and regulations. Unfortunately, just doing that job well severely limits the ability of CIOs and their senior leadership teams to maximize the business value of IT across their organizations.

The Trapped Value Audit

The new 4 Zones Model is designed to reverse that equation by creating individual playbooks for each zone and, in doing so, enable IT to exponentially increase its business value. The Productivity Zone Playbook is designed to optimize the costs of maintaining a company’s systems of record thereby freeing up resources to be redeployed against developing new systems of engagement.

A key tool to achieve this outcome is the Trapped Value Audit which enables cross-functional teams to systematically review all their systems of record and determine if they should be modernized, out-sourced or, if possible, eliminated. This audit is also designed the identify opportunities to significantly reduce or eliminate a company’s “technical debt.”

You can get started by asking some core questions:

• Where is the trapped value in our company? E.g., maintaining systems of record
• How can we identify and unlock that trapped value?
• How can we redeploy that trapped value against critical new IT investment priorities? E.g., the development of new systems of engagement
• Where is the new business value of IT going to come from?

The results of these efforts will enable senior IT leaders to redirect resources away from lower busine47ss value activities in the left hand column to higher value activities in the right hand column in the chart below.

Extending IT’s Business Value Beyond A Company’s Infrastructure Model

Unlike previous evolutions of enterprise IT, which were mainly focused on the need for a company to adjust its infrastructure model, the disruptive impact of social, mobile, analytics and the cloud extend to its operating and business models. As such, it is imperative for IT to realign its skills, capabilities and resources to better enable the performance of the company’s operating model and if necessary help shift its business model.

From my early discussions with CIOs, this process entails earning the trust and confidence of their internal business users and partners as well as creating cross-functional teams to align future IT investment priorities with critical business growth goals and deliverables.

The chart below highlights these three levels of disruption and identifies specific sources of trapped value that these cross-functional teams can pursue together.

By optimizing the costs of maintaining the infrastructure value delivery system, IT is then well positioned to deliver net new value creation for the company and thereby extend its business value across all three areas of potential disruption.

End Of Life Programs – It Takes A Village To Make Them Work

To be perfectly clear, companies cannot operate without stable, secure and well-maintained systems of record. These SORs run core functions from CRM to ERP to Finance. They also must be able to quickly and seamlessly connect with systems of engagement in order to deliver a friction-free user experience. That said, the fact remains that there is a significant amount of trapped value in how most companies deploy resources to maintain them.

In taking on the challenge of reducing or eliminating that trapped value, CIOs must establish a set of protocols and repeatable processes to monitor and evaluate the business value each SOR delivers. I have drawn upon some ideas and perspectives from my brother, Geoffrey, to give you some suggested ways to increase your odds of success:

• Establish a stand-alone end of life (EOL) shared service function whose sole purpose is to manage this process from start to finish. Note: this is not just IT but all effected stakeholders.
• Transfer all the SOR’s costs/expenses to the EOL shared services function.
• Develop an EOL roadmap and timetable for each SOR.
• Don’t allow non-EOL priorities/deliverables to compete for the shared services time and resources.
• Accrue any trapped value savings to be redirected to new IT investment priorities.

A First Step

The Productivity Zone playbook is the first step in helping CIOs maximize the business value of IT across their organizations. It incorporates a set of tools to help senior IT leadership teams find the right balance between protecting the value they’ve created with stable, secure, compliant systems of record and creating new business value with easily accessible, friction-free systems of engagement that deliver compelling and enduring user experiences.

In my next blog, I will take a deeper dive into the Performance Zone and talk about the importance of IT building strong collaborative relationships with their internal business partners and other key stakeholders.

As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at pdmoore@woellc.com.