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236 lines
15 KiB
236 lines
15 KiB
5 months ago
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<HEAD><TITLE>The CEO's Role in IT Decisions</TITLE>
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<P>
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<H1><LEFT>The CEO's role in IT decisions</LEFT></h1>
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<P>
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<H4><LEFT>Look both ways, Knowing when to act :</LEFT></H4>
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<P>
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<H4><ALIGN=LEFT>To avoid IT investment disasters, corporations must rethink when and how senior management's talents should be tapped.</LEFT></H4>
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<P>
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<H4>By Bill Carico</H4>
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<P><ALIGN=LEFT><FONT SIZE=+2>A</FONT><FONT SIZE=3>ttention CEOs: Over the last several years information technology professionals have witnessed a steady stream of top-down
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directives. The mandate: convert to client/server and open systems.A huge percentage of these conversions have failed, and approximately
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one third of these projects are abandoned. Everyone deserves their fair share of the blame --
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including top management.
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<P>True story: A typical but anonymous company was using mainframe and PC/LAN technology to provide on-line services for more than 1500 users. But senior management was concerned the company might be left behind in the massive shift to client/server. Articles everywhere claimed that
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scrapping the mainframe meant big cost savings, improved productivity, faster time to market, empowerment of end-users and
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more flexible access to information, so they asked their specialists if an overhaul of existing IT infrastructure
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were a good idea. The carefully considered reply came back from the glass-house: "Absolutely not!"</P>
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<P>Immediately an independent consultant was hired to author an objective, tie-breaking opinion.
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Not surprisingly, the consultant's advice was "The future is the future. Reengineer everything, shed the mainframe, it takes guts to be a leader."</P>
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<P>Management took the hook. A New Age CIO was hired to replace the Iron age incumbent. The incoming CIO, assuming the obsolescence of the
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IT staff, hired outside consultants to work directly with end-users on the New Age system. He also put a freeze on any spending for mainframe technology.</P>
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<P>After thirty million dollars, two years of development and a carefully phased migration, the New Age system was declared production ready.
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Unfortunately, it didn't work. Critical, end of year financial reports could not be generated. No contingency or parallel plans had been put in
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place. Within a week, the New Age CIO resigned.</P>
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<P>Senior management turned to the company's mainframe graybeards for help. The salvage operation was completed in 8 weeks, storage requirements were cut by 60% and response time was cut in half. More important the system could actually do a trial balance. Now fearful of after-shocks, end-users in the individual business units want nothing more to do with the $30 million client/server system.</P>
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<H4>Avoiding Reruns</H4>
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<P>
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Sound vaguely familiar?
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How can senior non-technical managers participate in IT decision-making without diminishing the chances of success?
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To avoid replaying the same scene, senior business executives must focus on clearly describing the problems and opportunities -
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yet must resist the urge to manipulate or dictate the choice of technological solutions. The head of Information Technology must be
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delegated the responsibility to solve problems or take advantage of the opportunities -- within agreed business parameters.
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Many successful companies have chief technologists in board-level positions where they can contribute properly to business
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strategy deliberations, especially those related to IT.
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<P>
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Your toughest challenge will be to staff qualified technology practitioners-from the chief technologist on down. For the last 10 years,
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the IT industry has suffered from a continuous brain drain, leaving "paratechnologists" in charge. The end result is an all-time-high
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failure rate for deploying new platforms and new applications. Some analysts estimate as high as 90% of new applications under-acheive what was
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originally commissioned by the end-user. As with the heart and lungs, care of vital information lifelines should only be entrusted to a qualified physician. Prescription without proper diagnosis is malpractice, so beware of techno-quacks who talk of paradigm shifts and use lots of trendy buzzwords. Also be skeptical of vendors who "sell high," suggesting CEOs and CFOs make massive technology purchases based
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primarily on marketing glossies and 35mm slide presentations. Whenever top management interferes with product selection,
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inferior products avoid close scrutiny that may otherwise reveal higher-than-expected cost and lower-than-expected functionality. Such failures are the legacy of the mindless rush to many of the so-called client/server and open-systems alternatives, though few companies want to admit their
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mistakes publicly. CEOs must resist the seductive Siren call of ads and articles promising silver bullet solutions that lead to "management by
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magazine." Though hordes of suppliers and journalists may tout the merits of in-vogue technology, all who may do so have one thing in common: They haven't taken the time to understand your business.
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<P>
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<H4>CEO action items</H4>
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<P>
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<OL>
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1. Measure the business value of IT. Anything not measured is not managed.
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Senior executives should always be looking for value, and that doesn't
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always mean the lowest cost or price. If quality is defined as doing things
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right, value can be defined as doing the right things. Successful companies
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continue to develop and refine their own standards for technology, using
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their own measures for business task productivity.
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<P>
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Quantify the overall economic value to the business when expanding
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IT capabilities. One car-rental company with 1200
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telephone agents calculated
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it could save
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$400,000 annually for each second shaved from the
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average time to book a call-in reservation. Similarly, a
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credit-card firm justified the investment to add parallel computers to their
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arsenal because they
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reduced the run time for a critical application from several days to
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several minutes,
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allowing the company to expand its direct-marketing efforts. Another
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company realized $1 million in annual savings by automating a single
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computer-operator task,
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thereby avoiding periodic system outages.
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<P>
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Properly applied technology is much more than a simple ROI issue, as it can
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open up new business opportunities. Where use of systems, especially large
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ones,
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appears to be qualitative rather than quantitative, simply look at what it
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would cost to do business without the systems, including any lost
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opportunities that would result.
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</OL>
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<P>
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<OL>
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2. Re-centralized control of IT spending. Obvious yes, but
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few companies have control and flexibility. One
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large company reported
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annual savings totaling tens of millions of dollars merely by reducing the
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dozens of PC suppliers down to three. These gains are relatively easy to
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achieve.
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Since corporate information is a strategic asset,
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technologists handling it should be accountable to competent business
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professionals. Anyone can be tempted to buy new toys, so corporate IT
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spending should be closely monitored by those possessing enough business
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savvy to keep technologists on track.
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<P>
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Imagine for a moment that each individual department of a major shipping
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company were given the authority to "cut a deal" for its own transportation
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needs. Suppose each organization bought its own trucks, picked its own
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colors, ordered its own parts, hired its own mechanics, established its own
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insurance program. Of course, no CEO would allow such a monster to develop.
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Yet when it comes to IT, such insanity is widespread. Individual
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departments create a high-tech Tower of Babble and senior management expects
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someone to knit it all together into a unified infrastructure.
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Fragmentation of information services (distributed systems and distributed
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budgets) leads to loss of IT control in almost every aspect. Centralized control points insure against duplication of tools and efforts. Therefore,
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you should mandate central control over IT spending wherever possible, but
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be nimble and flexible enough so business units can fully exploit IT
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opportunities.
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<P>
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Stipulate what you would like to see in financial justifications. At this
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point there are some basic technical concepts to master. Do not allow your
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technologists to use cost-per-MIPS (millions of instructions per second) to
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compare computing platforms. MIPS should more appropriately be named
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Misleading Indication of Processor Speed, as they only give a small fraction
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of the performance picture needed. It is safer to compare computing systems
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using cost-per-user or cost-per-transaction numbers, which is easy after
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completing a 3 to 5 year total cost of computing analysis for all platforms
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being considered. The analysis gets at the true cost of ownership by
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totaling cost of hardware, software and personnel that tend the technology.
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</OL>
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<P>
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<OL>
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3. Keep the IT architecture/infrastructure simple. Successful technology
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projects today are those that break down complex tasks into smaller, simpler
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pieces. Examples of these tasks would include security, resource
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management, workload management, change management, network management,
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data
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management, etc. Unsound IT infrastructures are loaded with unnecessary
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complexity, which ultimately results in higher support costs.
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Numerous studies report that personnel and related development and support
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costs already represent from 1/2 to 3/4 of technology budgets.
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Management should take note because labor costs can vary greatly by
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platform and are
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increasing over time while the cost of hardware and software is decreasing.
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<P>
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Decentralized models, whether in business or computing, tend to make the
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underlying tasks or processes more complicated to perform, as opposed to
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centralized models where complicated tasks typically become easier to
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perform and manage. An IBM survey of 24 companies attempting to deploy
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large distributed systems showed that 88% failed and had to go back and
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totally redo the infrastructure. Along these same lines, International
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<P>
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Technology
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Group, a Mountain View Ca. consulting firm, surveyed 250 U.S. companies
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and reported than, on average, it costs 43 cents to process a transaction on
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a PC/LAN, compared to 3 cents on a mainframe. These cost advantages are
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typical for a centralized model, due to inherent advantages of resource
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sharing and economies of scale that are harder, sometimes impossible to
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realize using a distributed model. Distributed systems work best
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where numbers of users are small, and
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large-scale distributed systems will cost a premium. Carefully question
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the motives of anyone who tells you otherwise.
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</OL>
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<P>
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<OL>
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4. Insist on rigorous pilot testing that clearly demonstrates
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proof-of-concept before you approve any major overhauls of your IT
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infrastructure. Beware of consultants who try to move your focus away from
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a technical architecture to one that requires you be synchronized with your
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strategic business vision. Many consultants/advisors have falsely assumed
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that a decentralized IT model provides the best support for a decentralized
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business model. For most large organizations, this is simply not true. As
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numerous fashion victims can attest, a collaboration between centralized and
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distributed systems leverages the strengths each model has to offer. While
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many have a financial interest in defining client/server to exclude the
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centralized mainframe, companies with several hundred end-users frequently
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fail using this definition.
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<P>
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One such company attempted a wholesale conversion to a decentralized IT
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model after a few accounting applications had been moved from the mainframe
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to a distributed system running Unix. The massive downsizing strategy was
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aborted when shortly into the migration it was discovered the network of
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distributed systems couldn't sustain the company's transaction workloads,
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even after the vendor re-sized the hardware to twice the capacity
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originally forecast. The moral of this story: approve no migration plan
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until the new system's architectural and practical limits are clearly
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identified. Hold consultants and vendors accountable.
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Take legal precautions to protect your interests and minimize
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finger-pointing
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should
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problems get out of hand.
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</OL>
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<P>
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<OL>
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5. Closely monitor what the IT suppliers are using to run their businesses.
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Many vendors follow a "do as I say, not as I do" philosophy when they
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suggest other companies scrap their mainframe.
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Microsoft, Intel, Hewlett Packard and Sun
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Microsystems all use mainframes in running their own businesses. If taking
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the mainframe and throwing it on the junk heap were really such a great
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idea, these vendors would be first in line to do so. Such a move would be a
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public relations bonanza. It is no secret, for example, that Intel has
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tried for years to become self-reliant on its own x86 systems, but keeps
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coming up short. Two years ago, Intel's CEO was cited in newspapers
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stating Intel had just bought its last mainframe. Not surprisingly,
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those statements were not retracted when Intel
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increased mainframe capacity last year, nor have
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their plans been publicized
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to upgrade again this year.
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</OL>
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<P>
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<H4>Conclusion</H4>
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<P>
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With these steps in mind, do your own thinking and
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avoid-as best as possible-emotional and political skirmishes when evaluating
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and deploying new technology. The key ingredient in successful IT
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deployment is the involvement of competent people making it work.
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Computer professionals
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experience rapid-fire rates-of-change like no other profession, so
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pay them well and give them the tools and training they need.
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Lastly, don't succumb to the tyranny of
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urgency when making multimillion-dollar IT investments. Since prescription
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without proper diagnosis is malpractice,
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take a reasoned, deliberate approach. Firmly adhere
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to the above action items, and as CEO your contribution to IT strategy
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will greatly increase your company's chances for success.
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<P>
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<P>
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<P><B>About The Author:</B>
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<P><IMG SRC="../graphx/wac18.jpg" ALIGN="LEFT" HSPACE=19 VSPACE=19 WIDTH=93 HEIGHT=142>
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<FONT SIZE=2>Bill Carico has over 25 years of experience in the computer industry. He is co-founder and president of ACTS Corporation, which specializes in consulting and education. Bill is an internationally recognized writer and speaker, and lectures frequently on strategic IT topics at courses and conferences all over the world.
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<P>
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Before founding ACTS Corporation, Bill worked for both Intel and IBM, giving him a unique perspective from which to understand the technical and marketing dynamics of the computer industry. His technical expertise encompasses the MVS, OS/390, PC/LAN environments, the Internet and distributed systems in general.
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<P>
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Bill is the primary course author of the highly acclaimed Technical Awareness Series, and author of the book Automated Operations: Accepting the Challenge. He has written numerous technical and management articles that have appeared in the trade press including Computerworld's Leadership Series and IBM's Trends in Technology Publication.
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<P>
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</HTML>
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