Can you control IT from the 'Centre'?

One of the challenges many companies face is how to maintain appropriate control and governance over their IT functions. This is a particular issue where companies are geographically diverse – both within and across countries – or where they are composite entities i.e. they sell different products and services under the same umbrella brand or corporate ownership. Businesses spend significant sums on Information Technology – for the majority between 1% and 3% of turnover – so it’s important that this is spent wisely.

At the top- and bottom-ends of the corporate scale, the approach to control is potentially less of a practical issue. At the top-end, a global conglomerate might actually be able to allow many of its constituent parts the grace and favour of fiefdom; and at the bottom-end, the scale could be so small that ensuring commonality and consistency may be the only practical approach. In the mid-range the challenge is more acute.

Many organisations wishing to drive commonality and consistency against the promise of lower IT costs – and potentially, ignoring resultant negative business impacts that might dwarf the gains from uniform technologies – typically would have in place a central or ‘core’ function to take ownership of the IT operating model. Such a core function could define strategy, standards, processes and approaches, and communicate these out with the full expectation of compliance.

 

In theory this is fine, but it only really works if a number of other factors are in place. There will be many, but for example:

·         rigid and strict enforcement, with perhaps some form of ‘penalty’ for failing to follow the dictated line;

·         fantastic communication;

·         unwavering commitment to the vision;

·         the explicit and clearly evidenced support of ‘the business’ – i.e. the IT function’s customers – who also toe the line, even when it might want to do something different.

Some organisations might be achieving the IT control they desire in this way, possibly through a subset of the things above. Some may have chosen to tackle just a slice of their technological landscape (say in the area of Financial Systems) in order to make the endeavour manageable. Some may believe that they have a perfect mix of approaches, less draconian than suggested above, that is doing exactly what they set out to. That’s great. But is it true?

The ‘Centre Out’ model of IT control in a large and diverse entity (whatever ‘diverse’ might mean) potentially falls foul of a number of critical weaknesses.

·         The Ivory Tower Syndrome. Component parts of the dictated IT direction – strategy, solution sets, processes, organisational structures etc. – could end up being based on a theoretical nirvana because the core entity responsible for them is divorced from the day-to-day operational reality of the business it serves. At a profound working level, it may actually not understand what goes on.

·         One size fits all. Almost by definition, the ambition of the centre will tend towards a single model that could fail to reflect on, acknowledge, and allow for local markets, cultures, lines of business, trading ethos etc. This could manifest itself at a micro level – a certain product is not available or certain organisational structures are not culturally acceptable in a particular geography – to the macro scale. Whole companies have been brought to their knees and gone under on the back of pursuing ‘the big ERP dream’.

·         Who pays the wages? The problem of “not invented here” will never go away. But there is a subtle further dimension to this if the people responsible for IT are actually employed by the ‘local’ businesses they serve i.e. they are not employed by the central function. The impact of “he who pays the Piper calls the tune” cannot be underestimated.

·         Nodding acquiescence. Whilst people say they support the central strategy, they don’t really. Their loyalty is to the organisation that pays their wages, in the geography where they grew up, allied to the business they know… And in this context, for some cultures, ‘Yes’ doesn’t actually mean ‘Yes’ at all!

·         Manuals. Not a major factor, more a symptom. But are there lots of manuals, processes and procedures that no-one reads or follows – except for those who produced them?

Does any of this ring a bell? Decent central control is actually very hard to achieve. But there must be a way of being (more) successful. There must be other approaches that would be at least as effective as the ‘Centre Out’ option – and hopefully more so.

Let’s start with an assumption that you do actually need a central IT function of some kind in a ‘diverse’ business. And let’s also assume that the ambition towards some degree of commonality or standardisation is a good thing. But then let’s also start at where the real work is done, where the true business impact of IT is actually felt. Is it possible that there could be an ‘Outside In’ approach to controlling IT?

Driving from the margins has the immediate benefits of tackling some of the major issues listed above: there will be no Ivory Tower; no one size fits all where this doesn’t make sense; and it is more likely to ensure buy-in. It was invented here! If we can find a way to allow entity-wide standards and strategies to be explicitly owned by business-facing IT units, if ‘components of control’ are owned by people ‘at the coal face’, is it not more likely that we will arrive at a direction for IT that will be more relevant for the entire business it serves?

OK, but this is even harder! It could end up like herding cats. Anarchy could reign. And it could! But to mitigate this, the more federal approach demands a change in the role of the core IT group at the centre. It needs to shift to coordination from control; it must referee and not manage; and it becomes a place for arbitration, rather than one of dictate. If you can achieve this ‘Outside In’ approach, the benefits are clear:

·         broader buy-in

·         business-relevant IT, driven by business imperatives, not artificial IT timescales

·         flexibility of approach

·         more cost effective; no big central teams

You could achieve 90% control over 70% of the entire landscape, rather than 30% control over 100% of it.

How it might work? The $64,000 question! Inevitably, it depends. It depends on your business and the industry and markets it is in; on the diversity – product, geography, culture – of your organisation; on the size, composition and ‘spread’ of the IT team(s); on the philosophical approach to insourcing vs. outsourcing, package solutions vs. home grown. There are many factors to take into consideration – and if there were one simple answer, everyone would be doing it already!

You might start by articulating some of the ‘facts of life’ as they relate to your business and IT in your business – outsourcing, packages etc. You might stand back from your current capability and see where you have the skills and experience to be able to delegate specific areas of ownership to individual local teams on behalf of the whole. You might want to start thinking about models for governance going forward – how will you coordinate and referee, rather than dictate and manage? You will certainly need to understand if such a radical approach is acceptable and within the DNA of your company; it simply may not be.

But before all of that, you need to understand whether or not you have a problem at all. There are some questions that you will need to address – and honestly! And you may need to recognise that you are too close to the action to be able to do that yourself.

·         if you are pursuing a ‘Centre Out’ control approach, are you doing it for the right reasons – business reasons – and is it fundamentally valid?

·         where are you now? how much are you trying to control? how much are you controlling? and how well are you doing that?

·         what have you really delivered from the centre that’s meaningful / valuable to the business (compared to what is being delivered locally)? what have you produced that is really being used or referenced? And what has it really cost you?

·         do people really, truly believe the vision? And if they say ‘yes’ when you ask them, don’t necessarily believe them! (This may be where you need most help from outside…)

·         what are the real, here-and-now business drivers? and is your control strategy aiding or abetting achieving these?

-*-

Ian Gouge is widely experienced in business-driven Information Technology, culminating in significant achievements majoring on organisational and process change, and with a proven track record in turning around / re-engineering IT functions. He possesses in-depth experience of change, transformation, IT delivery, customer and supplier engagement, and broad International exposure. Also the author of management books on the topics of IT strategy and project management, the impact on IT of e-business, and the IT organisation.

 

This material is copyright of Ian Gouge © 2012. All rights reserved. Any similarity to actual IT or business organisations is entirely coincidental and unintentional.

 

Any redistribution or reproduction of part or all of the contents in any form is prohibited other than the following:

·         you may print or download to a local hard disk extracts for your personal and non-commercial use only;

·         you may copy the content to individual third parties for their personal and non-commercial use, but only if you acknowledge the author and blog as the source of the material.

You may not, except with express written permission from the author, distribute or commercially exploit the content. Nor may you transmit it or store it in any other website or other form of electronic retrieval system.