Tag: IT Management

Your Year End IT Leadership Checklist

    Jim D

I think we can all feel the holiday and yearend swooping in and things winding down where we work. The Christmas parties are in full swing and everyone is focused on making sure they get everything on their Christmas gift list. Next week is certain to be quiet in the office. For senior IT managers, here is a quick list of things to do as the year-end approaches:

1. Vacation overlaps: Re-check that you and your senior team are not all out on vacation and no one is left to mind the shop. If there’s a gap, given the timing, you need to be the one to fill it (besides, this way you’ll have an excuse when your spouse asks you to go to the store with return items).

2. Batch Cycles: With the upsurge in retail sales and other peaks this time of year, ask the production batch team to re-calibrate the peak processing time for batch runs in December, month-end and year end. It’s better to find out now you need to address capacity than at 3 am Sunday morning in the New Year and your company can’t close the books on time.

3. Feedback for your team: Spend some of your vacation time writing thoughtful performance reviews for your team. Start with your best and worst performers, they will get the biggest positive impact from a better writeup this year. For outstanding insight on competencies and how to coach, check out FYI: For Your Improvement by Lombardo and Eichinger.

4. Gain new insights: Spend another part of your vacation time reading a good management or IT book. The new perspectives experienced will help your fresh thinking in the new year. If you are looking for ideas then perhaps Magical Mathematics or The Rare Find or perhaps Great by Choice.

5. Start out proactively: Book time in January with your planning team to ensure you have the IT goals for 2012 clearly defined and map out the steps you will be taking to communicate it broadly. Otherwise you can get caught up on the first assignments that come in the door in 2012 and remain reactive the entire year.

6. Allocate the time for your customers: Ask your admin to ensure you have regular meetings scheduled every month with all of your business partners. You may already be doing this, but regular sessions are key to keeping in touch and providing great service.

7. Thank the team: Take your team out for a drink and thank them for the accomplishments for the year. Keep the evening clear of any assignments or negatives on missed deliveries. Everyone needs to be thanked and appreciated, and you’re likely to do enough ‘coaching’ of them the rest of the time.

8. Thank your admin: Your admin is the primary interface by which most people interact with you. If she or he has done well, make sure you thank them. And a nice gift is very reasonable — and ensure they do not get you one either. This would be on top of any formal bonus.

9. Thank your sponsors: Spend some quality time with your boss and whatever the challenges for the year have been, thank them for their support and the opportunities they have given you. Let them know you will be refreshed and ready to go for the new year.

10. Take time for yourself and your family: Make sure you take the time to decompress and reflect. Do whatever you need to do to relax and recharge. Focus on your family. Think about what went well and not so well. Identify the key things about you that you want to change in the new year. Save the how for another reflecting session. Make sure you walk into January with renewed strength and vigor and a focus and game plan on the new you.

For some of you, you have already either completed or will knock off all 10 items. For others, perhaps you have nearly all of them, but there is one or two items you can add to your list. If you are doing less than 5 of them, you need to make sure you do #10 so that you personally are ready for next year.

I hope your year has been successful and rewarding. And I trust that this blog has provided some insight for the last part of the year. Next year, I plan to make to continue to provide the regular posts and insights but have the best practices sections well-developed to enable a quick reference guide for IT management for you and your team.

All the best, and have a great holiday, Jim

 

IT Transparency: A key approach to delivering value and ensuring focus

    Jim D

Frequently, IT shops have a difficult time convincing their business users of the value of IT. It is straightforward for a businessperson to look at the cost of IT, which is readily available but not have a good reference for the benefits and the overall value of IT. This lack of a good reference then leads to further concerns on IT budgets and investment. As CIO, it is imperative that you provide transparency on the benefits and impacts of IT so your customer and the business team can understand the value of IT and properly allocate budget and investment to make the business more successful. Yet frequently, IT does a very poor job of measuring IT impact and benefits, and when it is measured it is often done only in technical metrics which are not easily translated into understandable business metrics.

A good area to start to provide transparency to your business partners is with your production services. Typical IT metrics here are done only in technical terms not in business terms. For example, you often find availability measured in outage time or percentage or as the number of incidents per month. And while these are useful metrics to do some technical analysis, they are poor metrics to communicate business impact. Instead you should be providing your production metrics to your customer in business form. For example, you should report on the key service channels that are delivered to the end customer (e.g., ATMs, retail points of sale, call centers, etc) and the underlying metric should be customer impact availability. You derive this metric by counting the number of customer interaction or transactions that were successful divided by the total number of possible customer interactions or transactions for that time period.

Specifically, take an ATM channel as the example. Let’s assume there are normally 100,000 customer transactions in that month. If the ATMs were down for 1 hour that month and there would have been 1000 customer transactions that normally would have been completed in that hour then the customer impact availability was 99% (= (100,000 -1,000)/100,000). Just as importantly, your business also knows 1,000 customers were impacted by the systems issue. And if the outage occurred at peak usage — say 1 hour on a Friday evening rather than 3 AM on a Sunday, you may have 2,000 customers impacted versus 100. And your business-oriented metric, customer impact availability, would show this rather than the constant view that a system time availability metric would show. But this is critical knowledge, for you and for your business partners. You will have to collect information on how your customers use your service channels and understand daily, weekly, and seasonal variations, but you should know this anyway so you can better plan capacity upgrades and implement changes and releases.

You should apply the same criteria to your project delivery. Typically, IT shops only provide on-time and on-budget metrics. And these are often flawed because they either accept major changes through the project lifecycle (what I call ‘drawing the bullseye after the arrow is shot’) and they take no account of whether the project is ‘on-function’ or on-quality. Even worse, few shops track if the promised benefits were delivered or the expected revenue materialized. Thus making it very hard to assess if you are getting the expected return on investment. To remedy this, partner with the CFO office and tackle the large projects and big investments first. Insist on tracking with the CFO’s office the original cost, timeframe, benefits and and function and quality targets for this subset of the projects. If there is a major change to scope or requirements, note the change and track the additional revised cost, time, quality, etc. Then at project closeout, the project is not completed without a full assessment on how well you met the original estimates and any lessons learned on why not. It may also require a revisit of the benefits and revenues 6 months down the road to properly assess them. This information is extremely valuable to then have for assessing future investments. Is the business consistently over-estimating the revenue that will result? Is your team often underestimating the time to get projects completed? At the end of the year, you will be able to communicate not just these trends back to business but also you can outline that for X spend on large projects you delivered Y in benefits (with Finance’s backing). That should provide a compelling value statement if the projects were well-chosen. And if not, you now have the rationale to adjust the company’s investment process.

Similarly, for the ‘routine services’ of IT (delivering small systems, help desk services, desktop support, etc) you should provide metrics that are business relevant.  Provide the cost of the routine services as a cost per user (e.g. cost for desktop service per user per year) or cost per service (cost of a help desk call).  Go further and enable the business team to understand the impact of investment in the services by defining the number of staff hours of work saved. If you are implementing self service (e.g. password resets as an example) you may have a cost save (reduced help desk calls and thus fewer help desk staff, but you should really have reduced staff time to reset and less staff downtime as a result (improving staff productivity and engagement). Similarly, a new departmental workflow system should reduce both staff hours to process say an HR transaction but also substantially reduce the wall time of that transaction (again driving improved productivity and engagement). These are often neglected areas within a corporation that by translating into business metrics (staff hours saved, wall time reductions) will make visible the business benefits.

By routinely expressing what IT does in terms of business metrics, you will enable you business partners to understand the impact and value of IT on their customers and services. It will drive better decisions on how much and where to invest in technology. And it will also raise the level of business awareness of your team. When they know an outage impacted 32,000 customers, that comes across as much more material and important than a 40 minute router outage. You can adjust or denote the metrics as appropriate for your business. For example, if you are handling large financial sums then system outages may be expressed in terms of the sum of the financial amounts delayed or not processed. Further, several large Financial Services firms with robust shops report not just the customer impacts but also correlate if there was an industry cause and impact as well as if a portion of the functionality was available (e.g. you could access the ATM and withdraw cash but not see your balance).  The key is to put your primary measure in business relevant metrics.

What business relevant metrics have you used with success? What hurdles have you encountered?

I look forward to your thoughts and success with more transparent metrics.

Best, Jim

 

Too busy to be productive? Traps of our modern world

    Jim D

There was a very good article in the Wall Street Journal yesterday on ‘How to Save an Unproductive Day in 25 Minutes’.  I found it useful that the article points out a few techniques to keep that day from being a complete loss. But while the authors pointed out a portion of the cause of unproductivity (fragmentation and interruption), they failed to really pin down why so many of us struggle to be productive at work. Or perhaps to put it another way, why so many of us spend nearly all of our time killing alligators and spend so little time draining the swamp. This tendency of being ‘too busy to be productive’ finds particularly fertile ground in IT organizations.

The reason this is more prevalent in IT teams is because in IT there are are the usual ‘urgent’ distractions of email and phone calls and business meetings AND there are additional and very real urgent distractions of production issues and high priority projects that are running late but must be completed on a specific date. Thus, the opportunity and time to do important foundational tasks is even smaller. As a result, I come across many IT teams that are running at 100 miles an hour, not doing a good job of delivery of production or projects and their teams are at or close to burnout. And yet the solution to this very real and overwhelming issue is close at hand for IT leadership to leverage.

To solve this ‘too busy to be productive’ issue, you must address it on two levels: for your self and for your team. If you are running around with your hair on fire, then no amount of coaching by you will change how your team approaches their work. Let’s start with the knowledge that we will be able to change both your productivity and your team’s dramatically in two to three months. Understand that going forward, things that are important (and may or may not have a critical time deadline) will take precedence over everything that tends to interrupt but is not important. And you must demonstrate this improved choice everyday for the next 3 months. Here are the steps to get you and your team out of burnout and delivering with much greater quality and capability:

For you:

a) First, get your calendar balanced. Take your calendar for the next two months and let’s implement some radical changes. First go through your calendar and categorize your activities as either important or not important, reactive (dealing with a crisis demand or the fallout of an issue) or proactive (e.g. planning or addressing root causes). After categorizing, it would be interesting to see how much time you are spending on important and proactive work. My bet is it is less than 25%. And it is even less than that because the first part of the meeting focuses on today’s production failure rather than the planning work you were going to do. Next, either delegate or eliminate all the not important meetings from your calendar. Then, at least 3 times a week allocate 2 hours for important proactive work. Ensure you cover the areas you know need the most attention. If production is a problem, then spend two hours on root cause and how to improve change quality. If project delivery is a problem, spend an hour with your key team reviewing your project metrics and constraints affecting delivery and how to solve them. Spend at least 1 hour per week ensuring your key goals for the next 3 months and the next year are clear, and craft the messages to ensure they are well-communicated. Spend another hour figuring out how you can improve or coach your team to better performance. And stop doing every email and phone call that comes in. You do not need to meet with vendors for new products and solutions when you are having issues with your current delivery. At least half of your emails never need to be read or responded to – ignore them. Stop interrupting your meetings due to phone calls unless it is your boss or a very important customer.   Throughout your day, continually evaluate if you are spending good, solid time on important proactive work.

b) Make clear decisions and ensure you empower the team to execute with quality. Sometimes the cause of the productivity issue is a team caught up in over-analysis. If you are not making clear decisions or if you are making micro-decisions then you can cause your team to do 200% of the work necessary as they try to buttress their recommendation and collect every data point possible. Or the team may abdicate doing work they should do because in the end, they know that you will overrule them and make a micro-decision. Be self aware enough that you are causing these effects. If, in the past three months you have either recalled previous decisions more than once or sent multiple decisions back for more research than either the team is inadequate or you are not decisioning effectively. Sound out with a trusted colleague or coach if you need to improve your decisioning process. The bottom line is that you must stop requiring or doing unimportant analysis work or decision work. Let your team make the decisions for the areas they are accountable for and stop requiring perfect facts to make a decision in this imperfect world.

For your team:

a) First, set goals and expectations that i) you want them to deliver with quality and ii) you will support them to fix things so their work can be done in an improved manner. You must let them know that not only is it ‘safe’ to do things with quality, it is expected. Your team and organization may have fallen into the trap of thinking the only thing that is important is that work must get done based on the timeline, even if it means slamming something in that is riddled with defects. By insisting on quality first, you put your team on notice that this is foundational. Now, it should also be noted that this is not a pass to then have endless delays and no accountability to deliver. Instead, you must work hard to deliver in as timely a manner possible, but with the quality.

b) Use the proactive important time or your calendar to work with your team on the things that will improve how the work is getting done. Are your processes convoluted and time-consuming? Then spend time with the team to straighten them out and lighten the load. Are the tools inadequate? Then figure out what is best practice and pilot an improved set. Are things going in with lousy quality and causing production issues and lots of rework? Then stop letting poor quality change in and fix it before production. Do this even if it means a train wreck on a promised implementation date with the customer. Go and personally talk to the customer that quality is too important to you and to him or her. (I have never met a customer who remembered they insisted something go into production when it was known poor quality and instead blamed IT. Conversely, if you delayed something by a few weeks or even months yet it went in with quality, 6 months later, they invariably remember the successful launch versus the delay.) Spend your time with your team draining the swamp.

c) Set their goals and their schedule leveraging the fact the people do urgent things first. In other words, it is a natural tendency to focus on the urgent things like email instead of getting a backout plan done for a change or mapping out how we improve our development process. So, as the leader, set clear deliverables and clear dates and accountability for the important things (thus making the important and proactive work important AND urgent) for your team. It is a very effective management technique. Then, you will find that much more of the proactive work will get done.

Watch what happens then as a virtuous cycle takes hold. Because implementations start to get done with more quality, there is less fallout and production incidents. With reduced demand to work production issues, your team should have more time and focus on doing more proactive work (you must do (c) above to get this effect, otherwise they will just do more email or other urgent and unimportant work). And as they do more proactive work, they eliminate bottlenecks and rework and become even more productive. This cycle will take a few months to gain traction. And if your organization is really in a rut it may take as long as 6 months to show measurable difference. But usually, the effect is much quicker, and the first lift can be outpaced by the second and third and subsequent lifts as the cycle repeats. I recall one infrastructure component team that had a terrible production track record, the rest of IT viewed them as a bottleneck in the project process and the team, being close to burnout, saw no solution except to double or triple the number of staff. By implementing this approach, within a few months their change success rate went from the mid eighties to better then 99% and they trimmed their implementation processes significantly in terms of effort to deliver a unit of work. Everyone understood what their goals were and what was important to get done to be successful. And when I asked one of the managers to compare his team’s work to the state three months prior, he said ‘It is night and day. I can get all the important work done and our implementations go smoothly. I no longer spend every evening on a bridge call trying to figure out why something is not working. And I come in the next morning refreshed and productive. My week is in a box.’ This was the result in just a few months.

It can be tough in IT with the press of production incidents and the pressure of critical project deadlines. Add to that our everyday distractions of email and mobile devices and trying to keep up with the pace of technology and we soon lose the forest for the trees. Perhaps the best treatise on this effect is in ‘The Seven Habits of Highly Effective People’ by Stephen R. Covey and his time management matrix.  By leveraging this knowledge of techniques to ensure we work on the important things versus the unimportant but urgent, you can be a better manager and your teams can be more successful and have their week in a box. You might even buy copies of this book for your managers so they understand what is happening themselves and learn personal techniques to address it.

All of us undoubtably, have had some experience where we felt trapped in an overwhelming level of work and no real way out. How did you solve this? Do these approaches resonate with you? Have you employed them to change your team in a sustaining way? I look forward to hearing from you.

Best, Jim

Delivering Efficiency and Cost Reduction: Long term tactics

    Jim D

We have spend the past several weeks covering how to deliver efficiency and cost reduction in IT, and particularly how to do it while maintaining or improving your capabilities. In my last post we discussed what are some of the recent technology industry trends that enable reduced costs at the same or improved capabilities. In this post we will cover the first two of the long term tactics that you can leverage to achieve world class cost and performance: quality and a high performance team.

The first and really most important area to tackle is quality. If a factory had a quarter of the output that it produced was defective and became scrap, it could no long compete in the lean manufacturing regime of today’s industry. Yet frequently, IT shops have defect rates of 10%, 20%, or even north of 50%. And much of the time and effort of the IT team is actually spent fixing things as opposed to new work or proper maintenance. You need to regard every defect in your shop as waste and as a cost to you and your business. You should tackle this waste wherever it occurs in your shop. It is not uncommon for more than 50% of large projects or programs to be over schedule and over budget. It is not uncommon to see shops where more than 10 or 20% of the changes result in some other problem, typically impacting production and service to the customers. These areas must be addressed with rigor.
For projects and programs, are you following a robust project methodology? Do you have proper sponsorship and governance? Are you leveraging a strong analysis and requirements management methodology and toolset? Are you taking advantage of modern methodologies that solve the tough parts of a problem first, get good prototypes out early for user review and avoid the big bang and timeliness issues of a waterfall approach? Are you giving your project managers a full toolset along with the industry training and empowerment to make the right calls? If not, then you are likely experiencing issues and delays on more than 25% and perhaps more than 50% of your projects. And that is where your money is being wasted. When a fully staffed project team is waiting for requirements signoff, or when requirements are being changed again, too late in the project cycle, you are burning project monies while the resources idle or have to do rework. By introducing a rigorous process and robust tools and metrics, you will be able to avoid most issues before they start and for those that do occur, you will know precisely why and be able to correct it for the next project.
For your production services, you should insist on at least a 98% change success rate and if you wish to be a 1st quartile shop you need to drive to a 99% or 99.5% change success rate. This means that for every 200 changes only 1 or 2 fail. These success rates can be achieved by ensuring you have an effective but not burdensome change process and you have rigorous change testing and planning (including a backout plan). Have your operations and service management experts participate in and provide guidance to those making the changes (either the application areas or the infrastructure teams). And ensure full root cause on any change that fails with the requisite actions to prevent re-occurance being completed. Publish simple and straightforward reports on change and project success and quality. By measuring quality your team will get the message and place much more emphasis on getting it right the first time. And remarkably, by focusing on quality first, you will get a strong reduction in cost (whereas if you first tried to reduce costs then to improve quality you would make little progress on either). Accompanying this thrust with simple but bedrock true messages such as ‘Do it right the first time’ and ‘Spend it like it is your own money’ go a long ways to get the spirit of what you are trying to get accomplished across. You must mean it though and you must back up doing it right, even if it costs more initially. Remember you are looking to establish a quality culture and achieve longer term returns here.

The other long term tactic we will discuss today is achieving a highly productive and well-balanced team. First, understand that while you are implementing longer term team plans you should leverage some or all of the near term tactics for staffing that I identified in the October 31st post. The long term tactics are straightforward and are based on you attaining a staffing mix that is composed of a balanced mix of top performing individuals who, for your company, are in the right geography and at critical mass sites.

Some key truths that should be recognized and understood before setting out to build such a highly productive team:

– top performing engineers, typically paid similar as their mediocre peers are not 10% better but 2x to 10x better

– having primarily only senior engineers and not a good mix of interns, graduates, junior and mid and senior level engineers will result in stagnation and overpaid senior engineers doing low level work

– having a dozen small sites with little interaction is far less synergistic and productive than having a few strategic sites with critical mass

– relying on contractors to do most of the critical or transformational work is a huge penalty to retain or grow top engineers

– line and mid-level managers must be very good people managers, not great engineers, otherwise you are likely have difficulty retaining good talent

– engineers do not want to work in an expensive in-city location like the financial district of London (that is for investment bankers)

– enabling an environment where mistakes can be made, lessons learned, and quality and innovation and initiative are prized means you will get a staff that behaves performs like that.

With these truths in mind, set about building the team by addressing your workforce strategy (sites and mix); upgrading your recruiting and performance management; and revising your goals and rewards. Then execute these relentlessly while you up the training and coaching. As this begins to bear results you will then need to prune the poor performing managers and filter out the low performing staff.

So build a workforce strategy that matches the size and scale of your company. If your company is global, you will need a global workforce. If it is domestically focused, be domestic but look at near shore engineering locations as well. Establish the proper contractor staff mix based on function (again see the near term efficiencies staff post). Ensure your locations match up to where you can draw talent. For example, minimize expensive in-city locations. Choose instead locations with good commuting, very good nearby engineering universities and vibrant nearby communities. You will be rewarded with better quality engineers and lower attrition. Do you have 12 locations each with 50 to 150 engineers? Consider consolidating to 3 or 4 sites each with 300 to 500 engineers. And one or two should be global or near shore sites. And ensure you set it up so any significant IT function is done in two locations (thus eliminating the cost for BCM and establishing opportunities for work handoff between the sites yielding faster time to market). Establish strong intern and graduate programs with the universities near your key sites. If you are overweight with senior engineers, ensure that your new hires are graduates or junior engineers (even if by mandate). As you compose the plan, engage you senior business leaders to ensure you have support for the changes and potential synergies with other business sites or locations. Ensure they understand you will always locate client-facing personnel with the client, but IT ‘back and middle office’ staff will be where it is best to recruit and retain IT talent.

Make sure your recruiting practices are up to snuff. You should be doing a thorough filtering of technical talent while also ensuring that you are getting someone who can work well with others and has the same key values of quality, initiative and responsibility that you are seeking. Leverage team interview or top-grading practices as appropriate to ensure you weed out those that do not interact well (especially management recruits or team leads). Invariably, management in a IT organization can improve how they handle performance management. Because most of the managers are engineers, their ability to interact firmly with another person in a highly constructive manner is typically under-developed. Provide classes and interactive session on how to do coaching and provide feedback to employees. Even better, insist that performance reviews must be read and signed off by the manager’s manager before being given to improve the quality of the reviews. This a key element to focus on because the line manager’s interaction with an employee is the largest factor in undesired attrition and employee engagement.

Even if you execute your workforce mix and your recruiting and performance management flawlessly and you do not align your goals and rewards (and incentives) you will not get the change you desire. Quite simply, your smartest team members, will observe what you reward, and if you do not reinforce the values you are looking to achieve (productivity, quality, initiative, etc), you will not get the changes desired. So, gather your senior team. Work together to revise and update the vision and goals of your organization. Ensure they are big enough goals (e.g., Not ‘ Save $40M in costs’ instead ‘ Become top quartile in quality and efficiency in IT for our industry and company size by 201x’). And then line up quarterly awards that are very public that reward those who exemplify the values and results you are looking to achieve. The organization will then align their efforts much more keenly to your vision and goals.

Now that you have the foundation in place for long term results, execute and improve every quarter. You will need to begin pruning. And as you add new and better capability to your organization through improved recruiting techniques, you can afford to prune those marginal managers that you couldn’t lose before. This will provide another round of lift for your team productivity as they are replaced with better internal candidates who have grasped the new values and effort or better filtered external talent.

In the next post on long term tactics, we will talk about the metrics and benchmarking you will use to ensure you stay on track an enable you to identify additional and continual improvements. But you are on your way now.

What areas would you change? What pitfalls do you see or have you encountered? Post a comment and let me know. I look forward to your feedback.

Best, Jim

 

Delivering Efficiency and Cost Reductions: Long term approach

    Jim D

In the last 4 posts we have covered how you should deliver IT cost reductions in the near term. And if executed well, you will also yield some longer term benefits such as a better workforce balance or elimination of redundant or low value systems. But how do you deliver material improvements in cost and efficiency that are sustainable and material? First, you must put in place long term tactics that you will relentlessly pursue. To make a material difference here, you must be both consistent and persistent in your approach.

First, you lay the groundwork for sustainable improved cost through quality. Second, you must achieve a highly productive and well-balanced team in order to meet a world class cost profile. Third, you must have in place modern, consolidated infrastructure and well-architected core systems. And then finally, by leveraging a metrics-based, transparent framework with continuous process improvement you will achieve and then sustain the world class cost edge.

Cost reduction and efficiency have become a prevalent drumbeat for almost any IT shop in the past 4 years. I think it is important to recognize that just taking short term actions to achieve efficiencies for this quarter or this year are inadequate for today’s business environment. Because your business, regardless of the industry, is becoming more and more reliant on IT to deliver the services, enable the business operations. If you fall behind here because of cost-cutting, you are now impacting the viability of the business. Most importantly though, the technology, almost without regard to industry, is becoming a larger and larger portion of the product. Thus, if you do not build up better IT capability than you impact the future of your business. So, cost cutting must be done such that you build capability while reducing costs, no mean feat.

I think it is important to recognize that in many industries, the technology approach is now changed forever due to several key factors. The impact of consumerization of technology, mobility and smart phones, the growing scope of pseudo-automated workflow and application tools, and the economic upheaval of the past 3 years have changed dramatically how technology can should be applied. I will review these industry inputs and their impacts further tomorrow.

And then later in the week, I will map out the specifics for each of the four elements of achieving a sustainable and material cost advantage in IT over the long run.

IT Cost Reductions – Near term tactics: A ‘clean shop’

    Jim D

Our current topic is ever present in today’s economic climate: cost reduction. This is the third post on this critical area. Despite some willingness by companies to invest in IT (while there is a reluctance to invest in staff), IT must also deliver efficiencies. This is the second post on the near term tactics that you should employ to deliver the required cost reductions and efficiencies. As I mentioned previously, first ensure you understand the business drivers behind the cost reduction so you can appropriately shape your program to meet those needs.

Assuming you have that understanding, I recommend 5 near term areas that should provide real savings and also tighten up your organization to make it a leaner and more effective shop. The first area to tackle is what you spend on vendors and services or third party spend. This is covered in the previous post. The second area to tackle is making sure you have a ‘clean’ shop. Invariably, unless you have world class inventory and lifecycle processes, you will be able to save 1 to 3% of your budget by cleaning up. So, what is a ‘clean shop’?

A ‘clean shop’ is one where you are in control of all of your assets from PCs to mobiles to telecomm lines to software. Let me relay an interesting example of what was found through cleanup efforts. The first one was during a full data center cleanup, and not only did we find plenty of legacy server and telecomm gear that was little used or perhaps not used in 6 or even 18 months, but we uncovered DS-3 circuits that were live but no longer in use that the company had been paying for for the past 8 years! Typically, the larger the company, the more cleanup to be had. Start with making sure your inventory processes actually work, and not just the commission process but probably more importantly, the decommissioning process. Assign a small SWAT team to work your major corporate sites. Their job should be to go into every major site and sweep it of legacy, unused equipment. You may have endusers hoarding equipment no longer used in the hopes that they might need it for a new employee. If so, make sure your billing and processes do not penalize them to turn the stuff in. Hold an amnesty day by site. Publicize how much was collected and how much the company will save on maintenance, property taxes, and so on. Make sure your SWAT decomm team takes care of completing every decommission task, including getting the inventory updated and getting the decommissioned items off your vendors’ maintenance bills.

With the decommissioning processes corrected and the sites starting to be cleaned, go broader. Tackle your data centers. You should walk a few of them. If there is old equipment and boxes piled around, you have excess inventory that is costing you. Ensure your engineering teams know they must run a ‘clean shop’. Again, assign a SWAT team to decomm with server, network and storage engineers represented. Have someone from your finance team participate, you may up with required writedowns on equipment no longer in production but still on the books. That is fine, if the company is in cost reduction mode, there are invariably writeoff mechanisms for the corporation overall. And remember, for every server or device you unplug, you will get power and cooling savings.

Next, go after the user equipment, but partner with your business unit CFOs. Develop and give the the business units some nice reports that show how many users have two PCs (or more), how many have two cell phones (or more), how many home lines (even ISDN in this day and age !) that the company is paying for, and how much their business unit can save by getting rid of the excess equipment and inappropriate services (e.g., only the CEO should have the line to their house paid for). But make sure you have run a quick report on IT and you have your house in order. And make sure that when users start turning equipment in, you can decommission or reuse it effectively and it comes of their internal bill or costs.

Last, but not least, tackle software licenses. Most often the case is that you are over-licensed — all those PCs turned in mean you can recycle their software licenses for new users. And you may find you are paying maintenance for old  software that is not used, or the maintenance assumes a much higher number of devices. Software asset management is a very complex and consuming area, but it is also an area where IT shops spend significant sums.

So, by cleaning up your IT assets, and putting in place good asset management processes, you should be able to save at least 1% to 3% of your annual budget. In the next post we will discuss the 3rd near term cost reduction tactic to employ — with staffing, but not in the manner typically implemented.

Have you tried any of the ‘clean shop’ techniques? What were the results? Any practices that really improved the results?

Best, Jim

 

IT Cost Reductions – Near term tactics: 3rd Party savings

    Jim D

As I outlined in the previous post, cost reduction is ever present in today’s economic climate. And that includes IT. But, it is worthwhile to note, that during this ‘jobless’ recovery, businesses are investing in IT and other infrastructure to boost productivity and reduce costs. Thus, IT is one of the few areas where investment is occurring (versus hiring more staff). While you may have some investment increase coming in, what are the near term tactics that you should employ to deliver the required cost reductions and efficiencies? As I mentioned in the previous blog, first ensure you understand the business drivers behind the cost reduction so you can appropriately shape your program to meet those needs.

Assuming you have that understanding, where do you start? I recommend 5 near term areas that should provide real savings and also tighten up your organization to make it a leaner and more effective shop. The first area to tackle is what you spend on vendors and services or third party spend. In order to address this area you must understand the details and trends behind your third party (3P) spend. This can be anywhere from 30 to 70% of an IT shop’s total budget. And, unfortunately it is often not well-leveraged. Use your finance and procurement team to get the spend facts and trends. And then engage your team to ensure they understand that you will be driving a new level of leverage from this area. The first rule with any vendor is: they must deliver to the same high standards you hold for yourself and your team. And the second rule is: partner effectively together. How do you get savings in this area? Start by calling the every significant vendor in and explain to them the pressures facing you and your company and that you need their ideas on how to cut costs. If they are any good, they have been waiting for this call. If they are really good, they have proposals at the ready. Remember they will suggest that you must give them more revenue to save you money. While there may be a great idea buried in that sales pitch, avoid the suggestion and ask them to save you significant monies on your current costs and their current revenues. Tell them every area of your budget is getting reduced and they must contribute. Assign strong members from your team to each vendor, partnered with your procurement organization and review and track every savings proposal. Assign the vendors appropriate challenges — do they provide contractors? how about a 10% per hour rate cut? Many of the big banks have already done this (and perhaps 15 or 20%). Look to reduce the maintenance fees, identify unused licenses and return them for refund or maintenance reduction, negotiate for bigger discounts for anything you buy. Eliminate distributors and middlemen where ever possible. Use a procurement benchmarking service to ensure you are getting a good discount. Make every purchase a level playing field with competition. Make sure you personally review every major 3P contract and new deal — and when you do, ensure it is up to a high standard. Ensure your team understands these new principles. You should be spending your company’s money as if it is your own.

Is your team using consulting services? or expensive senior level contractors? These may be required for specific critical efforts or tasks but they should all have a turnover period where critical work is handled by your team, not the consultants. Figure out how to eliminate or dramatically reduce these third party expenses. The same goes for expensive contractors. It will be tough to keep up your team’s morale when you are reducing staff and yet you have lots of expensive contractors in your shop. Figure out how to transition the work to your team at much lower cost and improved control.

Track all of your cost reduction initiatives, vendor by vendor, task by task. Assign your finance lead and procurement lead to track these for you and ensure results. Have one of your most senior staff be responsible for the 3P reductions broadly — this also helps uncover areas where vendor relations may be too cosy. These actions will get you started on the 3P costs and should save you 10 to 20% of your 3P costs. I will cover other near term tactics in the next post that should yield a significant near term gain, typically 2% to 5% quick hit savings.

As I mentioned, it is a tough economic climate out there, make sure that you are holding the vendors to the same standards to which you are holding your shop. And make sure you listen when they come back with ways that if you change processes in your shop, can save them time and rework which they can pass back to you in the form of lower costs.

I would very much like to hear if you have implemented such an approach with 3Ps and how it went. And you will see the next post with more near term actions very soon.

Best, Jim

How to approach cost reduction

    Jim D

Given the current economic climate, IT shops everywhere are under pressure to reduce their costs. And often this has been the case for several years running. So where do you turn for either new areas, or better approaches that do not cut critical function or value? Over the next two weeks, I will cover both short term tactics and long term initiatives to get your costs down and deliver more value to your company. And if you happen to be the rare IT shop where cost reduction is not a primary goal, count your blessings, but be sure to apply these approaches in the background anyway, as it will enable you to build a stronger and more valuable shop.

Assuming that you have been given a task for either this year or next year’s budget to achieve cost reductions, what should your high level approach be? First, ensure you understand the business drivers for the cost reduction — are you losing market share? Are your overall corporate efficiency ratios too high? especially versus the competition? Is the view in the business that IT costs too much? Does not deliver value for the cost? Or, are there quarterly projections that must be met to satisfy the Street?
It is critical to understand the drivers of the request as your response should vary. For example, a focus on overall efficiency ratios would imply you require a long term plan and you should be working closely with business operations teams to jointly drive down total cost. Or, a focus on meeting near term targets indicates you will have concrete savings goals that must be met, but that it may be possible to simply defer critical spend into later quarters where revenues are higher. And if there are questions on IT value, then you must assume you have work to do with your business partners to communicate and demonstrate the value your team is bringing to the business.
Assuming you have ascertained the underlying drivers and you have cost reduction requirements that are enduring, what is the best overall approach?
First, it is critical to engage your team and ensure they are brought into full knowledge of the challenge. I strongly recommend against arbitrary or parceled out reductions. The opportunity to achieve savings varies widely within each group and assigning across the board targets will actually hurt some teams and will not put enough pressure on others. Even worse, next year, the lesson is that everyone will now sand bag on their budget because they will assume they will get an arbitrary cut. Instead, set an overall goal for the team and begin a bottoms up list of initiatives to achieve the savings. My next series of blogs will cover how you build a comprehensive and effective list of initiatives so you can achieve that target.
Once you have a draft of how to achieve the target, I recommend you always go back to the business with options. Typically you want to provide at least three: a series of minimal cuts that are very doable and have minimal business impact; second, a set of moderate cuts that meet the target and have some level of business impact; and lastly, going beyond, but where major business decisions must be made to confirm the level of impact is acceptable. By going back to the business with options, and your recommendation of course, you will enable the business to be in control and view you and IT as a partner in jointly solving the business imperative.

Over the next week we will cover how to get a comprehensive and doable set of initiatives that have both short term impact and long term benefits.

That is all for now, let me know your thoughts on the approach and how the cost environment is out their today.

Best, Jim

Hello world!

    Jim D

Hello! This is the first post for the Recipes for IT blog. As I outlined in the introduction to the site, I am looking to provide a good reference discussion site for best practices in IT and in particular for IT management. I will try to touch on 1 or 2 themes or topics each week and I look forward to the responses and discussion that they spark.

As some of you may know, I have worked as a senior leader in IT for over 20 years and I have spent most of my time in IT being responsible for turning poor-performing shops into high performance teams that provide competitive advantage. Over the years, I believe I have been able to ascertain numerous best practices and approaches that enable IT leaders to be much more successful. Delivering IT today, with all of the cost reduction demands, the rapidly changing technology, the impact of IT consumerization, and security and risk demands, is, simply put, tough work. It is complicated and hard work to get the complex IT mechanism, with all the usual legacy systems issues, to perform as well as the business requires.

So to help those IT leaders out, I have started this site to provide recipes and ideas on how to tackle tough but solvable problems they face.

I will cover topics from how to recruit and develop a high performance team, to how to deliver projects predictably with speed, to how to vastly improve your production availability. And we will discuss and provide perspective on the latest trends from cloud to mobile to agile.

Later this week, I am thinking the first topic should be how to tackle cost reductions in a tough environment given the economic situation.

Best, Jim