What Color is Your IT Shop?

It’s OK to be a utility provider.

Amidst all the talk about elevating IT organizations to key roles in delivering products and services that lead to competitive advantage, a new report from the IT Process Institute finds that strategic alignment success is more about whether your IT organization — be it a utility provider, a process optimizer, or a revenue enabler — is a good fit with your current business strategy.

“When an IT organization focuses on adding business value without first confirming the archetype fit, it risks becoming fragmented as it attempts to move simultaneously in multiple and counterproductive ‘value add’ directions,” the report notes.

The IT Process Institute surveyed 269 organizations to learn what practices predict the highest levels of strategic alignment, and in the process discovered that different types of IT organizations fit different business strategies. The report, titled “Improving IT Strategic Alignment,” suggests that IT organizations ask not what they can do to deliver business value as the first question in attempting to establish IT strategic alignment, but rather identify what archetypal role they currently occupy.

“For example, if the company’s business strategy is to buy and hold companies and gain cost advantage through consolidation and economies of scale, it makes sense to have an IT organization that specializes in fast and effective technology consolidation and delivery of shared services with a focus on operational efficiency and cost containment,” the report notes. “When the business strategy calls for a differentiated offering to a niche market, the IT organization must optimize business processes to enhance the competitive position of the company’s products or services. When a business strategy prioritizes the offering of technology-enabled products and services ahead of the competition, then an agility-focused IT organization must be able to quickly change gears to support a fast-paced product road map.”

The report classifies the key organizational attributes of the three IT archetypes (information management for utility providers, business process for process optimizers, and strategic revenue for revenue enablers) across nine pillars.

For example, the CIO role in utility provider-oriented IT organizations tends to be an operations expert reporting to the CFO or COO; within process optimizer-oriented IT organizations, he or she is a business manager reporting to a business unit executive; and in revenue enabler-focused IT groups, that person is a corporate strategist reporting to the CEO.

As to purpose, utility provider IT groups provide shared services across a common infrastructure; process optimizer groups focus on application and process improvement to differentiate customer offerings; and revenue enablement groups enable technology-based products and services to enter new markets.

Other attributes that each group brings its own focus to are new technology requirements, IT funding sources, success metrics, business strategy participation, competitive advantage contribution, and investment justification. As might be expected, utility provider groups are more focused on improving costs and efficiencies and their metrics revolve around operating performance SLAs and user satisfaction, whereas on the other end of the spectrum, revenue enabler groups have the enablement of new products and services as their technology requirements, and are measured on enterprise-level revenue contribution.