In an extension to my first blog, I research quantitative analysis of enterprise IT functions to demonstrate how to create IT business value. It has to be established that, with so much data being collected from IT systems, IT managers can use this type of pervasive data to their advantage. Functionality such as maintaining health, securing systems, and properly sizing new systems all have an impact to IT budgets.
Data analytics promotes value in IT. Strategies using data analytics aim to create incremental value that can build on itself. One of the keys of strategic IT value is to adopt a holistic approach to technology value, ignoring gimmicks, gadgets and marketing and instead looking at innovation as a combination of people, information and technology. This balanced business strategy involves taking ownership of IT assets. In order for businesses to understand the value of those assets, it is crucial for IT managers to communicate that value. Data analysis is a part of that communication. Although data analytics can provide great insight into business technology, it will not always be successful in that goal. The mission of data analytics as an IT strategy is to experiment often and to not be fearful of failure.
IT strategy involves aligning overall business goals and technology investment. The first priority is for IT resources, people and functions to be planned around the overall business organization goals. In order for such alignment to take place, IT managers need to communicate their strategy in business terms.
In many companies, funding for strategic initiatives is allocated in stages so their potential value can be reassessed between those stages. When executives introduce a new business plan to increase market share by 15 percent with a new technology, IT managers must also meet those goals by assessing the quality of the IT infrastructure.
Executives also must have confidence that the IT assets that they purchase are sound. There must be mutual trust, visible business support, and IT staff who are part of the business problem-solving team. All of these factors are needed to properly determine the business value of IT.
One of the principals of business technology innovation is to aim for joint ownership of technology initiatives. The quality of the IT-business relationship is central to delivering quality IT solutions that scale and meet production requirements. Imagine a scenario where IT wasn’t aware that a utility would bring 1,000,000 new meters online that read electrical data every hour within two years, but instead, only sized for the initial 5,000 meter deployment. This type of scenario would directly result in an utility customer having to upgrade all of their hardware only a year after the full deployment.
Innovations have created new ways of automating analysis to give more visibility into IT infrastructure. This data can be analyzed using trending and predictive analytics to determine how much growth is needed based on specific targets and parameters.
Ideally, business and IT strategies should complement and support each other. In order to improve the IT “Value Proposition”, IT projects must stop being considered the responsibility of only IT. The definition of value must be clearly designed and presented by IT, but there must be a greater understanding that business executives have to take leadership in making technology investments shape and align the business strategy. IT strategy must always be closely linked with sound business strategy.
Not only should IT and business be aligned, they must also complement each other strongly in order to build the type of relationship essential to achieve business goals. It is a mistake to consider technology projects solely the responsibility of IT or to make IT solely accountable. Business and IT must be accountable to each other when implementing and executing IT projects.
When creating an IT Strategy that can align to business objectives, five themes should be addressed. These include:
- business improvement
- business enabling
- business opportunities
- opportunity leverage
Research has shown that companies that have a framework for making targeted investments in IT infrastructure will further their overall strategic development and direction. When companies fail to make IT infrastructure investment strategic, struggle on how to justify or fund for it. In order for IT expenditures to be justified, many companies have concentrated on determining the business value of specific IT project deliverables, because it allows projects that focus on specific business goals to be properly scoped to include IT expenditures.
How a company measures business performance can be an accumulation of metrics both on the business side and the IT side. Undelivered IT investment remains a big problem for organizations. Many CEOs and CIOs believe that their Return on Investment (ROI) expectations for IT investments have not been properly met. Although IT measures can be qualitative, meaning that expertise and knowledge from IT managers and staff contribute to understanding current and future IT growth and capacity, there are also ways to measure value quantitatively to help in the decisions making.
Non-technical communication is critical to executives. IT staff typically work across many organizational units and must be effective at translating technical requirements into business requirements and vice versa. Communication has become mission critical in the IT business value proposition. When deciding how to apply data analytics across the organizations, IT should work with business leaders by looking at the IT function areas that produce the most data for their organization. These areas include:
- business analysis
- system analysis
- data management
- project management
- application development
- quality assurance and testing
- application and system support
- data center operations
IT strategies require full business integration. When IT managers are proposing new strategies, an executive summary should be the most important part of the proposal, prototype, roadmap, technical architecture document, etc.
Along with IT system metrics, IT managers must also keep in mind business operational metrics which are metrics based more on labor and time. IT managers need to factor both IT and operational metrics in reports to business stakeholders. There are several ways of reporting IT strategies to the business. Key Performance Indicators (KPIs) are fundamental to business decisions and are used to correlate business performance such as the how often a transaction results in a customer satisfaction. KPIs examples include:
- Efficiency rates.
- Customer satisfaction scores
- Capacity rates
- Incident reporting rate
- Total penalties paid per incident
Balanced Scorecards are strategic initiatives that align business strategy to corporate vision and goals. It’s typically not the responsibility of IT managers to build scorecards, but rather understand the corporate balanced scorecards when building IT strategies.
Dashboards are visual representations of success, risk, status and failure of business operations. In a very high paced organization, they allow information to be quickly disseminated and assessed by stakeholders for business decision making. Dashboards tend to have more quantitative analysis than other types of reporting styles.
In the area of governance, the International Standards Organization (ISO) certification 27002 addresses monitoring and information security incidents. Many of the methods used in the collection of data about system health can complement the adherence to information system security. Monitors log user access and security events such as unauthorized access to information systems. Keeping security audit logs synchronized with specific system activity logs can indicate coordinated attacks on the system or denial of service (DOS) attacks that are popular for web applications and application service provides. Using data analytics can help determine if deviations in system performance are related to security events such as unauthorized access, security threats such as malware, or other security issues; or if there is an issue with a functional issue within the system itself. The boundaries between security and system health are consistently breached with networking, services and databases where the integrity and size of user traffic can be impacted. Any unauthorized access can impact the availability and integrity of an information systems.
DevOps and Agile Software Development
DevOps is a corporate culture that emphasizes collaboration between developers (typically software developers) and operational business units. DevOps provide tools and automation that can create a better customer experience by addressing issues and product changes faster. Information systems can assist this functional area by providing analytical techniques about the readiness of release product code in the software development life cycle.
The principles of DevOps is to develop and test against production-like systems, deploy reliable processes, monitoring and validate operational quality and to improve the customer feedback loop to turn issues around faster. Part of the power of data analysis is the ability to assist in agile, continuous delivery of software. Automated testing and feedback with data analytical methods can provide the most qualitative information for business. Providing data analysis on performance analysis, error logging and customer feedback as dashboards and visualizations can help make software development life cycle visible to all business stakeholders. As a rule of thumb business leaders are not interested in code or complex spreadsheets. They are much more interested in quality scores, key performance indicators (KPIs) and business metrics.
IT budgets are addressed in two categories: operational costs and strategic investments. Operation are “keep the lights on” cost that involve running IT like a utility. Operation cost include maintenance, computing, storage, network and support, to name a few examples. Strategic investments is a balance of initiative spending and coordination with organizational strategic objectives. Strategic investment becomes more efficient from the corporate to department level.
IT budgets are also about reducing costs. Many organizations have legacy systems that are not used efficiently and have requirements that create problems for strategic investments in new innovations. Having an application portfolio is a good way of understanding the risks versus benefits of maintaining legacy systems. Creating a data integration strategy as part of a data analysis ecosystem allows businesses to fully utilize all of their assets. Most of these systems contain metadata that has long since been de-supported. Part of the power of data analysis services such as online analytical processing (OLAP), business intelligence (BI) and master data management (MDM) is the ability to integrate with legacy systems.
Budgets are a key components of corporate performance management. The most important thing to understand about IT budgets are that they assist in the establishment of strategic goals. Systems provide data about the various level of utilization of resources. An example question that a business client would pose to an IT manager would include:
What are the annual storage requirements of our Enterprise Billing System?
This question could be answered by tracking the amount storage consumed throughout the year based on the number of data sets stored in megabytes and looking at the interval of time that those data sets are stored. From there an IT manager can translate that requirement in yearly terms, which in turn gives the budgeting team a metric of how much storage they need to purchase or maintain each year.
For large corporate firms in utilities, energy and manufacturing where literally, there could be hundreds of servers, there needs to be a more centralized structure for IT operations budgets. The mandate given to IT managers in centralized IT Budget structures is to standardize and streamline multiple processes on hardware and software services. The introduction of both private and public cloud architectures, and virtual architectures has made this possible. Another question likely to be posed to IT managers:
Can our physical servers be migrated to a cloud or virtual infrastructure with higher performance and availability?
Having the right kind of analysis on current systems helps to ensure that dollars are spent appropriately when systems are consolidated or provisioned, and that they perform ideally according to business requirements. IT managers are receiving pressure from executives to do more with less. Data analysis has been a catalyst for innovation in cross delivery business development through the integration of systems and data. Operational questions regarding IT include:
How much operational labor is expended providing IT services to an organization?
How much of the IT budget expended implementing changes to infrastructure?
Other budget concerns includes transitioning from a physical architecture to a cloud service based model. Typically, with public cloud architecture, the resources are provisioned and managed by a hosting team. Most cloud services will propose “elastic” solutions such as Amazon’s EC2 solution or Microsoft Azure which allows companies to use only what they need. Therefore, the methodologies of sizing may not be as appropriate in such architecture. However, in very data intensive industries where there are large scale architectures and multiple interaction of business and server processes, placing everything in a cloud domain is not only impractical, but very expensive and potentially illegal. For example, in the utilities industry, state regulations may prohibit customer data from being off site. An energy company’s proprietary information stored in an international data center that does not recognize the source country’s regulatory body could represent a public trust violation.
If migrating from a multi-tier architecture to a complete cloud-base services, it’s important to understand the type of cost involved. Cloud based services typically have subscription model, where all the management, configuration and provisioning (unless self-provisioned) is handled by the hosting company. There is a contract that specifies a level of service and support and that cost reflects how many resources the company is utilizing and the level of service for which to service its customers. Payment terms can be yearly and quarterly, and there is usually a renewal date when payment is due .
The IT Values Proposition
IT value measures the worth and effectiveness of business technology solutions. It is mostly a subjective assessment of how a business measures its assets when it pertains to business goals. Value in information technology is typically defined in Return on Investment (ROI) and Key Performance Indicators (KPI) and other economic terms. IT is most valuable when tied to business goals and objectives. Adding value to IT also includes ensuring that IT assets are part of a data analytics ecosystem. A data analytics ecosystem is where IT assets generate insight into how businesses produce, collect, store and learn from data and data analytics. Data analytics is an important part of the IT value proposition, because of the tremendous treasure trove of knowledge and insight that can be gained from it. A data analytics ecosystem helps to create processes to turn data into actionable business decisions.
Other best practices in IT value includes:
- Evaluating the corporate business model in order to promote innovation.
- Have strategic themes around data collection, dissemination and analysis.
- Get the right people involved. This can include data scientist, engineers, business analysis, and many others.