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• Assimilate the organization’s strategy
• Perform a current state assessment
• Design a desired future state aligned with corporate strategy
• Develop a plan to migrate from the current state to the desired future state
• Obtain funding approval to execute the plan
This process, while effective for a period of time, soon became too slow to adapt to the rapid technology-enabled pace of business change. As an interesting factoid, many SISP approaches included IT portfolio management as a technique to optimize the creation of a migration plan.
Further commodization of hardware due to the software effect and rapid advances in price-performance ratios caused downward price pressure on hardware to the point where business units, divisions, and smaller businesses could afford to directly buy their own information technology. Notions of distributed computing, coupled with an “empower the end user” collective consciousness, led to the movement of information technology from centralized IT departments to business units.
Business units, requiring IT support to be competitive and unwilling to wait for the centralized IT backlog to clear, took matters in their own hands, ushering in the age of information technology anarchy. While business units were able to develop functional systems to support their needs, these systems most often did not adhere to corporate standards around approved technology, security, scalability, and interoperability, leading to islands of automation. Advances in networking standards and improvements in personal computing further exacerbated the situation by enabling business units to develop mission critical applications on technology not designed for mission critical applications.
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In the early 1990s, however, business process reengineering, enabled with client-server technologies, provided the false promise of the optimal and agile process-centered enterprise. In a few select cases, successes spawned a flurry of process rework and enterprise resource planning (ERP) implementations. This wave was followed by the recognition that two-digit date fields would, in fact, be problematic at the turn of the century. Y2K fears ushered in unbridled IT spending. It was not uncommon to see absurd IT projects justified as necessary as part of Y2K remediation. In one instance, a company footed the bill for new personal digital assistants (PDAs) for its IT department because the old PDAs were not certified as Y2K ready; the prior PDAs were called legal pads! Much hard work enabled the universe to transcend the perils of Y2K.
Directly following the success of Y2K, however, the extraordinary madness of crowds led to the irrationally exuberant age of e-business. Whereas today the value of e-business is being discovered, many of the proposed e-business projects (or pure play dot.com start-ups) immediately following Y2K had little merit. The notion of funding a project or business because it was “sticky” or because there was not enough time to think things through was, in retrospect, absurd.
Eventually, the collective consciousness of the business and IT community discovered that not only was the emperor not wearing any clothes, he was corpu-lent—the Nasdaq crashed, innovation dollars shriveled, and IT budgets had to go on a starvation diet. Corporate accounting scandals also surfaced to add fuel to the fire, with Enron stock plummeting from $84.87 per share in 2000 to less than $1 per share in 2001. Not long afterward, in June 2002, an internal audit of World-com discovered that $3.8 billion had been “misaccounted,” kicking off a Securities and Exchange Commission (SEC) investigation. The largest accounting firm in the world, Arthur Andersen, closed its doors. An avalanche of additional corporate accounting scandals followed.
Fueled by some of the events and factors in the preceding paragraph, there are three key factors leading to the increased importance of IT governance. First, an overall increase in corporate governance has impacted all areas including IT. In many instances, IT governance is mandated by legislation.
Second, the CIO’s role has evolved over recent years as IT has taken on a more prominent role within companies. When IT was the Darwinian equivalent of an amoeba, the CIO’s role was easy and of less importance. Now, IT is the evolutionary equivalent of a Portuguese man-of-war—a loosely coordinated colony of cellular interactions—and the CIO’s role has dramatically evolved. If the pace of technological innovation continues, within 10 years IT will be the digital Darwinian equivalent of an elephant. Tamed, an elephant can perform amazing feats. Untamed, an elephant is capable of just about anything.
Third, and most importantly, are the increasing demands for return on IT investments. When modern digital computing was first introduced to organizations, high
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costs demanded good investment management. As the costs of technology declined, investment management fell by the wayside. Technology investments, once previously capitalized and depreciated over a period of years, were taken as operating expenses or accelerated depreciation. They were taken off the books as quickly as possible, and this was justified by a perception of rapid obsolescence. Of course, once removed from the books, it is difficult to track costs and benefits associated with these investments. Now there is an understanding that technology investments left unchecked are costly to maintain regardless of the obsolescence of their underlying architectures. Organizations’ IT budgets are being largely consumed by maintenance of legacy systems as these arcane and rigid systems enter into a never-ending “fix a bug, make a bug” cycle.