How to Run Your IT Like a Business

8/16/16 4:07 PM / by Alvaro Prieto

Alvaro Prieto

Technology is at the heart of everything your business does, even if you don’t realize it.  In fact, in just the last minute, there were over 149 million emails sent, 66,600 Tumblr posts, 431,000 Tweets, 125,940 Skype calls, 43,000 Instagram uploads and over three million Google searches amounting to over two million GB of internet traffic.

IT-and-business-alignment.jpg

Surprised?  You shouldn’t be. IT is definitely not what it used to be - not by a long shot - but many companies still insist on running their IT departments the way they’ve always run them, and it’s costing them plenty.

According to Gartner, the percentage spent by businesses, simply to run their IT departments, is essentially the same as it was 10 years ago.  It’s been hovering at just over 70 percent throughout the years, leaving most businesses with little budgetary resources dedicated to any innovation or growth.  An IT department must be run like a business.  As such, organizations need to focus on lowering costs and investing any additional dollars in innovation, improvements and growth.

Why is this important? The answer is simple: Technology is a key enabler for innovation across the entire organization, not just in your IT department.  If your company does not embrace this fact it will most likely suffer - and ultimately die.

What Does It Mean to Run IT Like a Business?

In most companies, a budget is assigned to run and operate IT. But, this is normally done without a thorough understanding of how IT services are consumed or measured within the organization. Business owners simply assume that each is performing up to their optimum, despite evidence to the contrary. Running your IT like a business means you’re going to evaluate and assess all of your activities and services, identify opportunities for savings, and then reinvest those funds in valuable assets that are aligned with your business needs.

How Do You Start?

  • Track your department’s usage and performance. From the time it takes for a user to access a shared database, to the average time before a helpdesk ticket is resolved, everything that’s trackable should be tracked. Without data points, you can’t see where you’ve been or where you could go - in other words, “if you can’t measure IT, you can’t manage IT.”  Spending your time effectively delivering each service, identifying the cost drivers for those services, and accurately measuring the performance of each are the first steps towards running your IT like a business.
  • Increase cost transparency. Your IT department has certain set costs, but do you really know what those costs cover? Instead of accepting large line item explanations or traditional allocation models, delve deeper and ask for more information. Perhaps your equipment budget could be broken down into shared data hosting expenses and new equipment costs, for example. More information is the key.
  • Identify, prove and track services. When you’re trying to organize and maximize your IT budget, you need to know where every dollar is going, and understand if those dollars are, in fact, being invested Not only is it vital to understand your department’s overall performance, such as areas for improvement and where money is spent, but you must accurately determine the value of each item in your budget.  It’s important to capture and document how many resources (labor, compute, networking, etc.) are being consumed by each of the services IT delivers to the business.

These days, the cloud is causing CFOs to rethink the cost of running IT, and to ask more detailed questions.  The CIO and other IT executives now need to provide better explanations on the department spend.  CFOs are beginning to ask questions like “What is our cost per user, per mailbox?” or “How much does it cost to run our ERP software per hour?”  In order to answer these questions, your IT department needs to be prepared, informed, and focused on running very much like a business does.

IT Must Be Strategic—Otherwise Why Invest?

IT continues to be a significant part of the budget for many large businesses, and for a number of reasons.  Some of these reasons are completely valid, and others may need to be re-evaluated. Even if your current IT infrastructure seemed to be a good investment at one time, technology never stops changing.  What was once a nice-to-have may now be an absolute necessity.

Your IT department needs to be re-developed in a strategic fashion, ignoring your company’s established IT traditions.  Tracking everything is the first step in implementing a more disciplined IT management approach, and ensures that your IT department is in line with the rest of your business. A great IT department doesn’t need to be all in-house, but you can have your in-house team focus more on what is truly strategic to the business and less on the activities that can be performed better and cheaper by external parties.

What Should Your New and Improved IT Team Look Like?

  • Peformance. Increasing the level of IT capabilities, maturity and operational efficiencies not only makes your team more reliable, but it will also give the rest of your company the benefit of making much better informed and accurate business technology decisions.
  • Cost-effectiveness. Flexible cost models, aligned with the idea of business growth and your business objectives, are the goal. Whether outsourcing, or using an in-house team, your unit-based pricing should be available at any time to allow you to compare the costs between your current model and other external options, such as cloud operators.
  • Accountability. Pre-defined, measurable and forward-thinking key performance indicators can help your company determine when your IT department has hit its goals. These results should be validated on a regular basis to track progress, and monitor attempts for improvements or avoidance of future harmful or costly trends.
  • Manageability. There was a time, not long ago, when IT was a pretty technical and intimidating place where no manager dared to tread. Today’s IT has to be demystified. It has to be transparent; it has to be trackable and accountable just like a business does. Otherwise, how will you be able to see or change variables that are completely out of compliance with your business goals and objectives?

Final Thoughts

Lowering the cost of running your IT department is critical, allowing you the opportunity to transform and grow the capabilities you’re currently offering the business. With a new streamlined IT budget, you can assemble an IT “dream team” and acquire the innovative and creative instruments that will help your organization stay competitive, improve operations, and achieve more growth.

 

Alvaro Prieto

Written by

Alvaro Prieto

Alvaro is one of Auxis’ founders and leads our IT Services Practice, including both Infrastructure Transformation and Application Integration & Development. He brings over 25 years of technology and business experience, helping CIOs across multiple industries achieve Peak Performance in their IT operations through the design and implementation of agile operating models, processes and technologies. Some of his specialties include IT Service Management (Service Catalogs, ITIL, SLAs, Financial Management), Cloud and Data Center Transformation, large Software Implementations, among many others.