Can IT be run like a business?*

To become valued contributors to a business, IT must adopt a business mindset and offer proactive solutions to problems, rather than simply taking orders to fix them

By Terry Stuart

*This is an expanded version of a summary that originally appeared in the September 2008 issue of CAmagazine

Traditionally the IT function has been seen merely as a service provider – not a strategic partner that can help a business compete more effectively and create greater value for customers and shareholders. The historical model for managing IT in financial services looks something like this: Buy expensive hardware and software. Pay too much money to run it. Repeat.

Against this backdrop, many IT organizations find themselves stuck between a rock and a hard place. On the one hand, they are expected to deliver increased IT capabilities on a fixed or shrinking budget. On the other, they are striving to increase the impact and stature of IT at a time when their services are increasingly viewed as an expensive commodity.

How can IT organizations resolve this dilemma? To find out, Deloitte recently conducted a survey of 21 senior IT executives in Canada’s financial services industry. The goal was to understand their biggest challenges, and what they are doing to overcome them.

It is no surprise that improving the alignment between the interests of IT and those of the business is identified as a top priority. IT organizations in Canada’s banks, insurers, credit unions and other financial service providers now wish to be seen and appreciated as strategic business partners who can contribute real value to the overall enterprise. Most survey respondents said they wanted to be more of a participant or even a leader in business strategy and planning. Of course, that’s easier said than done.

Achieving alignment requires a deliberate effort from both sides. Too often, people on the IT side are content to focus on systems instead of business results. Conversely, people on the business side may complain about IT costs, but rarely work in partnership with their IT counterparts to find ways to reduce them. It is helpful if both sides speak the same language – specifically, the language of business value. In order for business managers to understand what IT can do for them, IT managers must translate IT performance metrics into terms the rest of the business can understand and work with.

To become strategic and valued contributors to the business, IT must adopt a business mindset, learn to communicate in business language and offer proactive solutions to problems, rather than simply taking orders to fix them.

Once the IT organization and the business interests are aligned, the IT projects and activities undertaken will come into greater focus. The survey reported that too often, the wrong projects (i.e., those that don’t maximize value) are chosen for the wrong reasons (i.e., a lack of understanding of how that value should be measured). But with greater alignment, business requirements become clearer and better understood, and IT managers can better identify those projects that will contribute most to the goals of the business. Resources (both financial and human) will be spent more wisely and many wrong turns can be avoided.

Naturally, execution plays a large role. The survey found that in recent years, IT organizations in Canada’s financial services industry have improved their operational effectiveness. However, there is significant room for improvement. Most IT projects still come in late or over budget. This is the most visible symptom that something is wrong further down the line and explains why respondents said that “successful delivery of critical projects” is the top priority for the coming year. Improvements in the areas of alignment would go a long way to helping managers reach these goals. But so would improved metrics to help gauge the progress of a project while it is under way. Another key factor is flexibility. To better contribute to the business, the IT organization must recognize that the strategies of the business will shift from time to time.

To stay flexible, it is essential to have the right people in place at the right time. But with demand for IT workers soaring, the challenge is enormous. Strategic thinkers such as business analysts, architects, strategic planners and senior executives are particularly hard to come by, according to the survey. Trends point to the need for business-savvy IT professionals who can communicate with managers in other departments. Also, outsourcing to off-shore suppliers requires talent who can effectively manage across international boundaries. With demographics pointing to a continued lack of skilled workers, IT organizations need to be forward thinking in their planning. Yet, according to the survey, most lack a formal workforce strategy or are only planning for the needs of the coming year.

Clearly, much of the success of a more effective IT organization lies in long-term planning. This certainly includes innovation. Yet the survey suggests innovation is a relatively low priority for many IT organizations in Canada’s financial services industry. The problem is that too often, what passes for innovation is actually no more than improved productivity. A worthy cause, to be sure, but one that overlooks what innovation can really do. We are just starting to see IT innovation being used as an enabler for new products and new ways to deliver customer service.

Over and over again the case is being made that IT should be viewed as an integral driver of value in any financial services organization. We are seeing marked and productive improvements in the relationship between IT and the business. However, if the relationship is to truly meet its potential, it is clear that more can, and should, be done to put both players on the same track.

Terry Stuart is a partner and national Consulting financial services Leader at Deloitte. To download Deloitte’s full report, Running IT as a business, please visit deloitte.com/ca/consulting.