CIO Challenge - IT/Business Alignment
THE CHALLENGE: Despite the attention paid to aligning IT projects with business priorities, many CIOs still struggle to understand the business' needs. To truly achieve IT/business alignment, firms must integrate their management teams closely to build trust over time.
It's a recurring nightmare for CIOs - their IT department builds a full-blown workflow application to simplify, automate and streamline a business, spending millions of dollars in the process, only to have the business side refuse to use the system because the technology managers did not understand the requirements, let alone the business.
Hopefully, for most CIOs, this is just a nightmare. But the fact is, most CIOs spend much of their time making sure that this bad dream doesn't become reality. Aligning IT with a firm's business strategy is critical to a firm's success, and yet, it remains an ongoing challenge. "All my CIO colleagues struggle with this same issue - 'How can I align IT strategy, resources and budget with the areas that are important to the business side?'" says Ra'ad Siraj, CIO at Eaton Vance.
In essence, according to Kevin Shearan, CIO of Mellon Financial Corp., technology should have the same end goal as other disciplines in the business, including sales, product development and operations. These disciplines all work "toward the overall success of the firm, but the challenge is how each group can align around common goals, what are the drivers and how we can work together to achieve them," he says.
Most CIOs have tried to address the problem. But, despite everyone's best efforts, the process the IT department puts into place to align with the firm's business strategy often does not fit into the culture of that particular organization, notes Eaton Vance's Siraj. Or the CIO may have tried to change procedures too quickly or set expectation too high. "Aligning IT with business takes time - it can't be done overnight," he says.
Both the business and IT must be involved throughout the development life cycle of all projects in order for IT and business to be truly aligned, adds Siraj. "There are different ways to get aligned, and different organizations do it differently, but as long as they have it in mind with a common goal, they'll be successful," he says.
Avoiding Communication Breakdowns
Setting up a system of communication is imperative, suggests Siraj. The IT department needs to listen to the feedback it receives from the business side, and it needs to let the business side set the priorities and drive the project requirements. At the same time, the business side must keep its expectations of IT realistic and be open to the experience and knowledge that the IT department has to offer.
A common challenge that many firms face, according to Mellon's Shearan, is that individuals have different perspectives on hierarchy - what are the real decision criteria, who has valuable input and who has the authority to make decisions. Everyone must have the appropriate say in the process and be able to take direction and go forward, he notes.
At Mellon, there is a technology subcommittee of the board that meets as often as six times a year to discuss the firm's technology direction, the tech challenges the firm faces and how IT can link with the business. "We have frequent dialogue at the top level and good representation on senior management committees," says Shearan. "We have sessions set around technology that are less educational and more interactive; we discuss and preview what we are trying to achieve and where we are going," he says.
Also key to Mellon's success at aligning IT with business strategy is the participation of a technology team as an integral part of a line of business' management team, Shearan continues. "We have a CTO for each line of business who is part of the management team, so their goals and input are just the same as the sales and marketing individuals," he says. "That interaction on a day-to-day management level is what's most important."
To improve communication between IT and business and achieve better alignment, the Buckingham Research Group, a privately owned broker-dealer and institutional research firm, and Buckingham Capital Management, its investment advisory subsidiary, recently overhauled the enterprise IT department. Buckingham hired Magnum Technologies, a software solutions and consultancy firm, to help navigate the initiative.
Magnum advised Buckingham to internalize IT support and hire its own IT staff. "In light of our firm's growth, it made sense for us to bring our outsourced IT support in-house, so we asked Magnum to assist us in evaluating our entire IT infrastructure, including staffing, hardware, connectivity and software applications," relates Lloyd Karp, Buckingham's COO. To oversee the transition, Buckingham hired Michael Marrano as vice president of management information systems in April 2004.
Throughout the business/IT alignment process, Magnum identified weaknesses in Buckingham's organizational structure and procedures and suggested ways to eliminate them. Meanwhile, Marrano implemented new systems and processes and hired an internal IT staff. The firm's overall goal was to identify mission-critical applications and establish the infrastructure - including application monitoring - so that IT could easily pinpoint problems with those applications and rapidly fix them.
According to Karp, the plan has been successful. "Rather than Mike [Marrano] spending his time chasing down problems in terms of basic infrastructure, we are now on firmer ground," he says. "As a result, his role has become that of a proactive planner."
Partnering for Success
Siraj had a similar experience when he became head of IT at Eaton Vance six years ago. At the time, the IT department was very small. "It was basically invisible to the rest of the organization and operating in a reactive manner," Siraj says. So he came up with a two-part plan for aligning the IT department with the business.
Siraj's first step was to give several of the IT staff members the role of IT client relationship manager (CRM). "Each one of them is now responsible for three to seven key areas in the firm, essentially as co-CIOs working with me to understand and keep tabs on what the various business areas are struggling with and shooting for, and making sure we are part of the solution," explains Siraj.
As a result of the organizational structure, the IT staff now is focused on what really matters to each department, instead of what they thought mattered, according to Siraj. "Unless we know about the businesses struggles throughout the firm and understand key opportunities that are coming up for them, we will not be able to participate, except on a reactive basis," he says.
The second part Siraj's plan includes the development of a governance mechanism in which the CIO, CFO and CAO become part of the IT subcommittee that overseas all IT expenditures. While the IT subcommittee helps centralize IT expenses and capital expenditures, the governance mechanism is responsible for overseeing how the business spends money on IT. "It is the link to senior management discussions," Siraj says.
The heart of any good relationship, Siraj notes, is trust and communication. He calls it "the trust curve" - making sure you are connecting with the key decision makers in the business and gaining their trust. "I tell the IT CRMs that as they take care of the basics, they will go up the trust curve and start to get invited to departmental meetings," he says. "Now, we are being tapped in key brain-storming and decision-making meetings as partners."
Mellon's Shearan also stresses the importance of IT and business partnering to achieve success. "It's sitting down with business executives and figuring out what can or cannot be done at a given time and working through compromises," he says. "Without the glue between the tech and the business, you can't be successful."
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