As technology has enabled new ways of doing business, organisations have come to rely heavily on their IT departments for continued growth and competitive edge. Vast sums have been invested in improving access to information, customer service and productivity, and these enhancements have greatly improved businesses agility while driving down costs through more efficient processes.
But have IT departments adapted to meet the new responsibilities that come with this pivotal role? As the importance of technology has spread to touch all areas, so has the need to manage effectively the business risk associated with IT failure and poor performance.
A recent independent study of FTSE 750 organisations commissioned by Dimension Data suggests that the IT function continues to be poorly understood by those outside the department. Further, it is inadequately integrated into the management and reporting structures used elsewhere. End-users are apathetic about IT service delivery and, while individual business units are ultimately footing the bill for IT investment, they cannot quantify the value they receive.
The need to monitor and manage key performance metrics is at the heart of any effective IT department, yet only 35% of CIOs state they have a comprehensive and integrated set of tools to fulfil this key function. This would indicate that there needs to be a corresponding step-change in the way IT departments measure and report their performance. Internal Service Level Agreements (SLAs) should be introduced, with frameworks for best practice and real penalties for under-performance.
Both IT departments and the business units they serve must form a relationship more akin to that of supplier and client. Currently reporting directly to the top of the organisation, internal IT suppliers should also be accountable to departmental heads for the level of service they provide. Greater visibility would transition the IT department from cost-centre to business enabler, with a positive, measurable impact on the bottom-line.
The cost of IT faults to the UK economy is immeasurable: the average company loses 235 hours annually in service downtime. And, despite increasing sophistication and investment, the problem doesnt appear to be improving: 83% of companies reported static or declining application performance over the last 12 months.
Operations management solutions tools can provide insight into and exercise control over complex business and IT processes. However, answers are meaningless unless you ask the right questions and control is dangerous without understanding. A lack of real engagement between the IT department and its internal clients makes it easy for the former to fall into the trap of setting benchmarks and implementing policies without any reference to the actual needs of the business at large.
One-third of respondents from the business asserted that any improvement in IT performance would, in percentage terms, deliver equal gains in their departmental productivity. Yet despite acknowledging both the problem and the potential benefits of a solution, users are still fairly complacent about how their IT services are delivered.
At the heart of the challenge lies a fundamental communications breakdown between IT departments and the business units they serve. Lines of business (LOB) managers show little knowledge of quantitative measurements of IT service performance or how the IT department uses them to manage and improve its performance: only 57% were aware of the IT departments service level commitments, while one in 10 was unaware of their existence. Furthermore, one-third of LOB managers hardly ever or never held meetings with their IT departments to discuss service.
Leaving IT departments accountable only to senior management dictates that IT is a centrally managed overhead, rather than a shared resource something believed by half of all companies: only 30% assess the IT departments contribution in terms of its positive impact on the bottom-line. While the strategic importance of IT necessitates accountability to senior management, such individuals can rarely ask the right questions, set meaningful operational benchmarks, or provide insight from a user perspective.
The need to continually improve and refine the IT function provides a further driver for maintaining a reliable base offering, but while the disenfranchisement of users continues to push up operating costs, internal IT departments simply may not have the resources needed to implement key new technologies.
Internal SLAs give IT heads and LOB managers a quantifiable benchmark against which to evaluate the performance and value of their IT services. But even those 52% who have some form of formal SLAs in place do not appear to be undertaking a rigorous level of measurement and monitoring. This is imprudent because lapses in internal IT service now represent a real risk to the business and it is critical they are carefully managed. Meaningful SLAs backed by accountability for poor performance will help bridge the serious and widening gap between IT departments and users.
And what of the attitude towards outsourcing these services? These vary from 17% who will outsource whenever they can and whenever viable, to 48% who outsource when the business case is right for such a move, to just 35% who outsource in exceptional cases only. Additionally, there is evidence that IT outsourcing is now driven more by service improvement and business alignment objectives than simple cost reduction; when cut off from the wider impact of technological change or failure, the IT department cannot take the necessary managed risk approach to operations management, and the ramifications of this failure cannot be overstated.
For most organisations, IT is seen as an overhead cost and there is little attempt to quantify its value or impact on the bottom line. Whether this is the fault of the IT department or the business generally is irrelevant: businesses are paying for a service with no idea what is being delivered for the cost incurred. Identification and agreement on standards and policies for service delivery with LOB managers, strictly adhered to, must form the basis of any viable solution. If not, outsourcing, or a blended model, would appear an option to consider for many to improve service delivery, reduce the costs of service provision and more effectively manage risk by leveraging the specialist expertise of third-party providers. Looking to the future, IT departments need to get ready to be held accountable for the quality of the services they deliver, something they will only be able to prepare for if they put in place the right operations management processes and tools. The alternative, however, is to lose out to outsourcing.
Terry Wilson is business development director for Dimension Data's Operations Support Solutions business unit, a position he has held for two years. In this role, he is responsible for working with both sales and technical teams to craft and shape bespoke customer solutions, for liaising with his global counterparts to shape Dimension Data's market propositions and for managing vendor relationships within this space.