April, 2009

Is IT governance all about (or only about) the money?

“IT governance IS about the money,” said Michael Cohn, who currently heads up an eight-person IT governance committee at his accounting firm. “The IT governance committee should focus on the top initiatives that will bring the best ROI to the business,” said Cohn.

At last week’s Babson College Center for Information Management Studies (CIMS) executive session on IT governance, attendee Cohn voiced his opinion about the real goal of IT governance. “The business assumes within a budget year that capacity is fixed; if you need more capacity, you will likely require more money.”

Cohn, who is the director of the WolfPAC Integrated Risk Management Solution group at Boston-based Wolf & Company PC, said the governance process can be a long one and always ends up being a decision about the money. One example he offered was a request for smartphones with email. According to Cohn, it took months to get this request approved by the IT governance committee. The governance process dragged out because “they needed to know everything about the costs — for encryption requirements, compliance and anything that would affect the business bottom line,” said Cohn.

However, featured speaker Alex Cullen, who is also vice president, research director at Forrester Research, disagreed with Cohn’s comments. According to Cullen, IT governance is only partially about ROI and the money. “ROI is not the most complete way to gauge value of an investment,” said Cullen. Rather, governance is a process of processes and is really more about portfolios, he said.

According to the IT Governance Institute, “IT governance is an integral part of enterprise governance and consists of the leadership and organizational structures and processes that ensure that the organization’s IT sustains and extends the organization’s strategies and objectives.” Although money is not mentioned in this definition, you can’t deny the fact that achieving greater ROI and lowering costs are all critical decision factors when evaluating any IT decision that will affect the business.

Do you agree, then, that IT governance is about projects that will bring the most value to the business — and that in today’s economy, value is measured by money?

Is cloud computing a platform or a stage?

Cloud computing is at that early stage where there’s much discussion of taxonomy: Is it infrastructure? Is it Software as a Service? Is it a platform? All well and good, but little discussed so far is “Whatever it is, where does it fit in the lifecycle of corporate IT?”

Talking to IT folks who attended last night’s MIT Innovation Series forum on cloud computing, I got much more of a sense that some see cloud computing more as a staging area for new projects or businesses than as a permanent platform. Startup companies, which spend most of their first years as small to midmarket firms, are being touted as one of the early markets for cloud computing. Speaking to one startup technology director, his view of cloud computing was instructive. He is trying to walk between a rock and a hard place: provision too few servers and his company’s customers will have a bad experience online and never come back; provision too many servers and the company will run out of funding too soon.

His interest in cloud was as a prototype environment, therefore. He can find the right amount of capacity for a given number of users of his website without heavy capital investment. Later, he is likely to bring the operation in-house. He’s more impressed by the flexibility of cloud computing then by the cost: He says cloud capacity costs about 30% more than owning it, but that’s just comparing raw capacity costs, not including labor or real estate.

Still, it was evident at the forum that a lot of midmarket service providers in the technology space — development tools and middleware companies, contract developers and integrators and Web design firms, to name a few — are likely to convert their offerings to cloud offerings. Instead of buying a boutique tool vendor’s product, you’ll use it in the cloud as part of a whole stack. Hundreds of companies, literally, are lining up to offer such services on top of Amazon, and ultimately on top of other providers as they emerge. Their goal is to get you to stay in the cloud, using (and paying for) their portion of the stack indefinitely.

The recession and oddballs: Working with Dwight Schrute

Looking for ways to do more with less? Drive innovation? Develop some overall new ideas? A new study suggests having a “socially distinct newcomer” in your team can help with decision making.

The study, recently published in the Personality and Social Psychology Bulletin, asked groups of students from different sororities and fraternities to solve a murder mystery. Each group contained an “outsider.” In this case, the outsider was someone from a different social circle – someone who stood out within the crowd. The study authors found that whenever a member of the original group agreed with the outsider, that original group member tended to elaborate and explain why they agreed with the newcomer to prevent alienation from the rest of the original group.

How does this pertain to you? We all work with someone similar to Dwight Schrute on NBC’s The Office (if you think you don’t, that person is probably you. Congratulations!) But don’t ostracize, embrace! The study concluded that the incorporation of new workers with different backgrounds and perspectives helps existing teams make better decisions by encouraging more discussion and analysis.

So if a restructuring or merger introduces a new member to your group or team who isn’t quite like everyone else, welcome the diversity. Part of being a good leader, after all, is leading a high-performing team, and diversity produces better discussions and results.

Do collaboration tools really increase employee productivity?

Did you know that the cost of not finding information is $3,300 per employee per year, according to IDC research? That’s crazy! IDC’s research credits ineffective searches; poor, inconsistent access tools; re-created content; reformats; and revisions as factors in causing employees to not find the information they need. So if you’re a midsized company with 500 employees, you’re talking $1,650,000 in productivity losses each year. In this economy, who can afford to take such a hit?

Many midmarket IT organizations are looking at collaboration tools like Microsoft’s SharePoint and social technology platforms to help centralize documents, manage people, tasks and time, and ultimately improve employee productivity. But can collaboration tools actually eliminate or lessen the $3,300 per-employee productivity loss companies are experiencing?

Increased productivity is one of the benefits of collaboration tools, because users travel less and spend less time searching for relevant information and expertise, said Rob Koplowitz, principal analyst at Forrester Research. But these benefits are rarely measured in terms of a formal ROI. Business owners really want to know “if I work with IT, will things work better?” he said.

But some midmarket companies are actually seeing measurable ROI from their investment in collaboration tools. One company is Los Angeles-based Equipois Inc., which manufactures a “zero gravity” mechanical arm technology for use in industrial and biomedical applications. Equipois uses Central Desktop for collaboration among three offices across the country for nearly all operational aspects of the business, from R&D to purchasing to customer project management.

“The cost of hardware, software and staffing to replicate this collaboration would be roughly 40 to 60 times our current annual expenditures, giving us an astronomical ROI,” said Eric Golden, Equipios’s CEO. Using these collaboration tools, “we’ve seen $40,000 to $70,000 in one-time cost savings and $65,000 savings in recurring costs.”

How does he know? Central Desktop’s SaaS social technology platform comes with an ROI calculator that computes weekly and annual savings in terms of system administrator hours reduced, estimated dollars spent on servers and number of hours employees saved not needing to rework documents and manage revisions. Based on feedback from customers, “many companies are seeing ROI savings of one to two hours per day, per employee, using our product,” said Isaac Garcia, CEO and co-founder of Central Desktop.

Golden didn’t say what he’s spending on Central Desktop, but the company’s pricing chart indicates you can have up to 100 users on it for, at most, about $25 a month each. That’s about $300 a year — less than 10% of that $3,300 number we cited earlier.

Central Desktop is just one of many collaboration tools out there, and none are a panacea for every productivity challenge. But as midmarket companies continue looking for ways to cut costs and remain productive in this tough economy, chipping away at that $1,650,000 is one way to boost IT’s contribution in today’s business environment.