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The seven principles of IT Effectiveness

The western world had to learn it the hard way - they wasted lots of money until they understood: IT has to be driven and owned by the business because their are more and more important for business success:

The reasons are manifold:

  • IT is becoming integral part of the business and in many industries it even can lead to significant competitive advantage
  • IT spendings as percentage of revenue are increasing in many industries – a cost position in the Profit and Loss statement that can’t be ignored any more
  • IT can also be a bottleneck – company can’t grow further without IT support, hence they need to establish the right systems very fast
  • Due to it’s complexity and long delivery cycles IT has to be planned long time in advance to catch up with the fast moving nature of today’s Asian businesses
  • If conducted improperly, IT can also be a risk for your business – imagine the figures out of your accounting system are just wrong

The western world had to learn it the hard way - they wasted lots of money until they understood: IT has to be driven and owned by the business because their are more and more important for business success:

The reasons are manifold:

  • IT is becoming integral part of the business and in many industries it even can lead to significant competitive advantage
  • IT spendings as percentage of revenue are increasing in many industries – a cost position in the Profit and Loss statement that can’t be ignored any more
  • IT can also be a bottleneck – company can’t grow further without IT support, hence they need to establish the right systems very fast
  • Due to it’s complexity and long delivery cycles IT has to be planned long time in advance to catch up with the fast moving nature of today’s Asian businesses
  • If conducted improperly, IT can also be a risk for your business – imagine the figures out of your accounting system are just wrong

This is why IT management has to be in the focus of Top Management.

Unfortunately the reality often looks different:

  • Both, IT and Business side possess different kind of knowledge that all has to get together in order to take the right decisions for your IT. Unfortunately both sides often speak a different language and nobody is able to translate technical speech into business speech or the opposite. This results in either IT solutions that don’t provide high value to the business or IT systems that are much too complicated and expensive
  • Executive Management’s background is mostly not IT. This results in low focus of Top Management on IT and a delegation of important decisions to people who mostly don’t know enough about the overall business direction
  • Some companies try to outsource their IT with the hope that problems will be reduced – this usually makes it worse since the IT department is moving even more far away from the business
  • Many companies don’t have processes for IT governance, i.e. processes and a management structure that enables the business to control their IT activities and spendings. I saw some companies in Thailand who have them on paper (most likely due to a ISO or CMM certification) but in many cases these processes were not really lived

Many questions have to be answered by the business to enable IT to deliver what the business really need. Here are some principles that you may consider to make your IT more effective: 7 principles that lead Best-In-Class companies worldwide to high IT effectiveness

  1. Understand that IT is a top management matter and it can’t be completely outsourced
  2. Setup and live strong IT governance processes, especially a centralized requirements management process and measure this process through KPI’s
  3. Use the Simple principle (‘selective implementation’) to avoid over engineering
  4. Consider all costs in cost-benefit analysis such as change management, reduced productivity during launch phase, etc
  5. Charge IT requirements back to the business unit who requires the functionality (requires cost-to-serve model)
  6. Try to use standard software whenever possible to maintain high flexibility at low maintenance costs
  7. Hire people into IT governance positions who understand both, Business Value drivers and respective IT capabilities

I saw companies who could reduce their IT costs dramatically by considering these rules and at the same time achieve higher flexibility to realize future business requirements. It will take time to implement all of this and also bring an IT governance culture in your organization. The experience of overseas companies shows that it’s worth to do so.

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