Chapter 6: Toward High-performance IT – Running IT Like a Business: A Step-by-Step Guide to Accenture's Internal IT

CHAPTER 6: TOWARD HIGH-PERFORMANCE IT

Over the course of this book, I have attempted to map the steps required to run IT like a business. But running IT in a business-like fashion is not an end in itself; the goal is something greater still – high-performance IT.

Accenture’s proprietary research into high-performance IT has drawn a clear cause-and-effect relationship between high-performance IT and high performance across the entire enterprise. As you map your IT function’s transformational journey, keep this ultimate destination in view. Whether you decide to incrementally change over an extended time period, or make a single concerted push in transforming your IT function, high-performance IT is the destination that counts.

CIOs understand that, as expectations across the entire executive leadership rise in the new economy, they have a newfound opportunity to position IT as a partner – and a growth engine – for the business. The desire is there: Accenture research shows that 67% of CIOs want to position IT as a strategic asset, thereby creating differentiated business capabilities for their organizations.

Whether they can stretch to this strategic level, however, remains to be seen. For years, executive leadership teams have been setting a higher bar for IT, challenging CIOs to deliver IT capabilities that fuel business innovation and agility. But in many instances, CIOs have not met the challenge. Some IT leaders continue to feel hamstrung by a combination of cost-cutting mandates, inadequate skill development in their IT organizations, and a “keep the lights on” focus that permeates many IT organizations. There are, however, a few exceptions. High-performing IT organizations have demonstrated excellence in three key traits – innovation, agility and execution – which enable them not only to manage IT like a business, but to run IT for the business and with the business. CIOs at these organizations are engaged in their company’s business strategies and are able to truly map out how IT supports those strategies.

The latest results from Accenture’s ongoing high-performance IT research show that high performers don’t just do a few things well – they excel across the board.

For example, compared with their peers, high performers:

  • Have web-enabled 42% more of their customer interactions and 93% more of their supplier interactions
  • Are 44% more likely to recognize the strategic role IT plays in customer satisfaction
  • Are eight times more likely to consistently measure the benefits realized from strategic IT initiatives
  • Spend 29% more annually on developing and implementing new applications, rather than on maintaining existing ones
  • Are twice as likely to view workforce performance as a priority.

Notably, the gap between high performers and other IT organizations is widening. When it comes to innovation, the delta between high performers and their peers has grown from 31% in 2008 to 42%. When the issue is execution, the gap has risen seven points – from 30% to 37% – in just two years. High performers that showed an ability to differentiate their core IT capabilities during the downturn – a period when most organizations were focused primarily on cost-cutting – are now positioned to deliver much more value to their companies as they search for business growth.

The widening performance gap between high performers and other IT organizations should serve as a wake-up call for the underperformers to improve core capabilities – or risk being marginalized by business leadership. The message is clear: the power to change is in the CIO’s hands. CIOs can accept a role as a caretaker for the business, or they can begin taking steps to improve the agility, innovativeness and execution of their IT organizations in order to establish a stronger partnership with the business. These steps can help them bridge not only the gap that exists between their organizations and high performers, but also the fissure that, in many companies, continues to separate IT.

What are high performers doing differently? Since its inception, Accenture’s ongoing high-performance IT research program has shown that some IT organizations perform fundamentally differently and continuously better than their peers.

This high performance is exhibited across three IT building blocks:

IT execution: Leaders in IT execution have active governance programs and involve the business as a partner in the IT strategy. They use metrics to ensure the effective cost/benefits management of IT investments and manage IT like a business.

IT agility: Leaders in IT agility are effective at aligning IT resources to business requirements and priorities. They integrate their optimized applications portfolio internally and externally, and they seek technologies that provide dynamic access to infrastructure.

IT innovation: Leaders in IT innovation consider IT a strategic asset for competitive advantage in the application of a continuous innovation and collaboration mindset to the deployment of new technologies.

These building blocks cut across nine core capabilities, which range from application architecture to workforce management. To be sure, each of these capabilities poses unique and ongoing challenges to all IT organizations. High performers, however, have leveraged these capabilities more effectively to refocus their efforts on meeting core business objectives – such as customer satisfaction and employee productivity – while other IT organizations continue to view cost management as a top priority. In many ways, it’s tough to blame them. The constraints of legacy infrastructures and a mandate to reduce operational costs can cloud a CIO’s strategic thinking, as well as how to spend their time and budget. The high performers in our survey, however, have embraced these challenges and created pockets of excellence that show demonstrable results across nine core capabilities, which our research explores in detail.

1. Strategic IT alignment

While all CIOs recognize that IT is strategic to the business agenda now more than ever before, only a fraction of CIOs – the high performers in our 2010 research – are better at defining how IT can help achieve core business objectives and then deliver on those objectives. For example, they are more than three times as likely to deliver IT’s committed value in new products and services, and twice as likely to cite IT’s strategic role in improving employee productivity.

To help the business achieve its goals, high performers are investing heavily in application development: 70% of their resources are devoted to deploying, testing, integrating, building or enhancing applications. This means they are spending more time building new functionality and less time “keeping the lights on.”

Investing in new technologies is critical for businesses looking to improve their agility in the new economy. High performers, in fact, are on average 25% more likely than other IT organizations to deploy or pilot new technologies, and even more in areas such as business analytics, virtualization, and data management and security.

More specifically related to the use of emerging web tools that reduce costs, streamline, or otherwise improve interactions with employees, customers and suppliers, high performers have 93% more web-enabled supplier interactions and 42% more web-enabled customer interactions, compared with other IT organizations. In addition, twice as many employee interactions are mobile-enabled.

2. Governance

The economic downturn forced many IT organizations to cut spending in proportion to the reduced revenues of the business. But high performers have shown resilience in securing new investments, in large part because of their excellence in IT governance and their ability to turn cost savings and efficiency improvements into value-adding reinvestments in IT.

For example, 69% of high performers say they develop a business case for nearly every new IT initiative – more than twice the percentage of other IT organizations. Perhaps more importantly, high performers are eight times more likely to measure the benefits realized from these IT projects.

Among all respondents, on average 55% of IT projects are delivered successfully annually. This shows an improvement over industry reported benchmarks, and much of the credit can be given to the knowledge, practices, and standards that have contributed to the professionalization of the IT organization. Unfortunately, too many failures still occur. Because many of these failures can be traced to management and decision-making practices, it is useful to explore the tools and best practices IT organizations use to help diagnose and perhaps even prevent failures from occurring.

3. Application architecture

A critical distinction between companies identified as 2010 high performers and others can be made in terms of how the target application architecture of IT organizations are defined and evolve. The IT leaders emphasize the importance of a target application architecture centered on three objectives.

The first involves scheduling and implementing regular refreshes of the application architecture: 62% of high performers cited this element as highly important, compared with 17% of other IT organizations.

The second involves proactively applying architecture principles in all initiatives. More than 60% of high performers said this objective was highly important, compared with 33% of the other respondents.

Thirdly, high performers understand the importance of avoiding duplication in their application portfolios: 54% cited this feature as highly important, versus 35% of other IT organizations.

High performers are in control of the evolution of their architecture toward emerging concepts, such as virtualization and service orientation. They also effectively manage the tradeoffs between the desire to innovate and the incremental costs associated with exploration and innovation. One third of high performers tell us they retire less successful services quickly to manage costs, while only six percent of other organizations are able to do so.

As Accenture’s research clearly shows, architecture is the IT organization’s weakest link for most participants. Organizations should focus on building stronger and more active application and technology architecture capabilities, with IT and business stakeholders working together to adopt and enforce consistent processes to plan, execute and optimize investments across the organization that directly support business value creation. This architecture should be refreshed and optimized regularly.

4. Information management

High performers, unsurprisingly, are more evolved in their information management practices than other IT organizations. They are more than twice as likely, for example, to have developed target data architectures, and created effective business intelligence and analytics capabilities, as well as data governance. High performers also provide their employees with more access to the most detailed and real-time information they need to do their jobs. The most accessible, granular and real-time customer data, for example, is 80% more accessible, more than twice as granular, and twice as likely to be available in real time in high-performing IT organizations compared with other IT organizations.

Investments in information management technology are delivering significantly more value for high performers. More than three quarters of high performers said that business analytics investments are delivering 75% or more of the expected value, versus only 40% in other IT organizations. For example, high performers have invested more aggressively in data quality assurance and master data management technologies, giving them reliable and consistent information about customers, products, employees, and suppliers. Indeed, 92% and 77% of high performers have deployed or are piloting data quality assurance and master data management, respectively, versus 53% and 57% of other organizations.

5. Service management and operations

IT organizations are changing the way they provide and manage IT services – high performers most notably, as they progress toward achieving centralized and fully virtualized environments. Having rationalized and simplified their IT for a leaner infrastructure, high performers provide IT services via a standard, well-defined services-based catalog at twice the rate of other IT organizations, for example. In addition, almost half of high performers are leveraging advanced virtualization technologies and dynamic provisioning, versus just three percent of other IT organizations in our research.

Adopting standards-based services catalogs and deploying virtualization technologies puts high performers in a much better position to migrate enterprise infrastructure and applications to private or public cloud services, as the need arises. While external cloud services represent just a modest fraction of their infrastructure, three times as many high performers as other organizations are looking to leverage these dynamic services as needed today.

High performers are also ahead of their peers in their approach to monitoring IT operations. For example, 70% say they measure end-to-end business process performance with automated, live reporting, versus 23% of other IT organizations.

6. Solutions delivery

High performers are significantly ahead in extracting benefits from the integration of business processes, information and IT systems. For example, they are six times more likely to provide real-time visibility into processes, and four times more likely to provide real-time dashboards and alert systems. In addition, as noted earlier, high performers spend 29% more annually on developing and implementing applications than they spend on running them – a significant enabler of innovation and business agility. This approach also allows leading IT organizations to ensure applications meet their technical and business needs: on average, high performers’ applications are more than two times as likely to meet their business needs and more than three times as likely to meet their technical needs.

7. Workforce and resource management

IT organizations are investing in developing leadership, while focusing on setting a clear IT direction and priorities. Moreover, they strive to assign the right people to the right roles, and reward them according to set objectives tied to business outcomes.

For example:

  • More than a quarter of IT organizations seek to deploy their IT resources in a supply/demand model (also known as “on demand”), with most IT resources and services shared across business areas.
  • Today, just under one in ten IT organizations measure their IT workforce performance against individual achievement and alignment with business outcomes, but 36% are hoping to achieve this objective in the future.
  • One in six IT organizations actively seeks to create a well-managed IT workforce by aligning training and succession planning with workers’ specific skills. Almost half of IT organizations plan on doing so in the future.

The high performers in our research make workforce management a top priority and have made significant strides in addressing workforce challenges. It is clear that high performers view the workforce strategically as a core resource – one that must be invested in and supported with the proper tools, training and certification. For example, high performers are more than seven times more likely than other IT organizations to have already invested in new technology skills development. They are six times as likely as other IT organizations to have a plan in place to address the aging workforce and the potential loss of institutional knowledge as these workers retire, three times more likely to be developing new career tracks to develop future IT workers, and three times more likely to be addressing skills development for application and technology architectures and information management.

8. Information and technology security

Security policies and procedures affect the entire business – its operations, how it interacts with customers and partners, and even its brand performance. High performers, which are more likely to have a chief security officer in place (with a clear role in the organization that is complementary to and reinforces the role of the CIO), demonstrate leadership and agility in deploying comprehensive information and technology security strategies. The majority of high performers (77%) also feel they have the right level of investment in security today, while 27% of other organizations believe they are under-investing in security initiatives. High performers are three times as likely to coordinate security governance with lines of business, as opposed to simply sharing security policies with them. High performers also put significantly more emphasis than other IT organizations on defining an overall security strategy and architecture: they are twice as likely, for instance, to implement data protection controls, and nearly three times as likely to automate compliance procedures and clarify a security governance model and organization structure.

9. Outsourcing

Outsourcing is more than just a way to lower costs. High-performing IT organizations strategically use outsourcing to gain access to critical IT skills, improve their agility and flexibility, increase the effectiveness of business processes, and lower the total cost of ownership of applications and infrastructure. High performers approach outsourcing as a partnership with service providers, which enables them to extract significantly more value out of their application and infrastructure investments. Out of the high performers in our research, 83% said application development and maintenance services provide the greatest value in helping them achieve critical IT objectives, while three quarters cited infrastructure management as providing high value in achieving IT goals.

Outsourcing also is a critical aspect to workforce management because it allows CIOs to build new skills faster and retire skills that are no longer relevant. High-performing IT organizations realize significantly more value from staff augmentation and, in fact, often meet or exceed their original objectives. This is in stark contrast to other IT organizations that do not leverage outsourcing.

Importantly, high performers are more successful at employing sophisticated metrics and processes to track the effectiveness of outsourcing service providers. For example, three quarters of high performers in our 2010 research said they employ sophisticated metrics for application outsourcing, compared with 36% of other IT organizations in our survey. High performers are also more likely to employ sophisticated metrics for infrastructure outsourcing (73%, compared with 46% of other organizations) and business process outsourcing (67% versus 35%). These metrics are essential for demonstrating the value that outsourcing delivers to the business. While many organizations use inadequate process standardization and insufficient tools as excuses for not applying the necessary metrics, high performers are confident that their metrics demonstrate business value, particularly in infrastructure outsourcing and business process outsourcing. As a result, the value high performers realize from outsourced services more often exceeds their original projected business objectives.

What can we learn from these results? Business and IT leaders should continually be challenging the status quo by evaluating alternative computing models and emerging technologies – such as SaaS, cloud computing or mobility – as a means to reduce costs and improve employee efficiency, as well as to increase customer satisfaction. But we know that investing in new technologies alone will not make an organization a high performer.

It is worth restating that, by definition, high-performing IT organizations must excel across all three IT building blocks: execution, agility and innovation. In other words, high-performing IT organizations remain focused on the opportunity to improve IT value and gain competitive advantage, while improving IT’s economics. High performers also understand that these are not mutually exclusive goals, meaning that improving in one area will help them improve performance in the other two as well. We believe that this virtuous cycle of performance improvement explains much of the widening gap between high performers and other organizations. CIOs have the power to close the performance gap and turn the vicious cycle into a virtuous one. Although there is no universal formula for becoming a high performer, there is a path that organizations can follow, regardless of their current state.

For more information about Accenture’s high performance research, and for the full report on high-performance IT cited in this chapter, visit www.accenture.com. The Accenture Institute for High Performance develops and publishes practical insights into critical management issues and global economic trends. Its worldwide team of researchers connects with Accenture’s consulting, technology and outsourcing leaders to demonstrate how organizations become and remain high performers through original, rigorous research and analysis.