A New Model for IT Demand Management

Why do so many IT leaders do such a terrible job of running their departments like a business? Because they put too much emphasis on supply and not enough on demand.

By Michael Gentle
Tue, October 09, 2007

CIOExcerpted from IT Success: Towards a New Model for Information Technology by Michael Gentle (John Wiley & Sons, October 2007), $35.00.

In order to manage planning, production and delivery, any properly run business has to be able to balance orders for its products and services (i.e., demand) with its ability to produce them in terms of resource and scheduling constraints (i.e., supply). Otherwise it might produce too little of what is required, too much of what is not required, or deliver late, or have problems with product quality or customer satisfaction.

IT Success
IT Success: Towards a New Model for Information Technology

The average IT department, though not a business from a profit and loss perspective (the exceptional IT profit-center notwithstanding), has a resource base comprising highly paid specialists, produces highly complex products and services, and has an annual budget of anywhere from two to 10 percent of annual revenue. Yet it does a very poor job of managing—when managing at all—basic supply and demand. It generally has very little understanding of its demand and supply chains, and would have a hard time being able to answer fundamental questions like, "What is currently in the pipe?" or, "What do we have to deliver over the next 6 months?" or, "What is our projected resource utilization for the next quarter?"

It can also end up delivering products which don't correspond to what the customer really wants—or, paradoxically, products which do correspond to what the customer wants, but did not yield the desired results, even though built close enough to spec.

In short, when it comes to supply and demand, IT is unduly focused on the supply side of the equation, or the how (project management, software development and managing physical assets like hardware and networks)—to the detriment of the demand side, or the what (capturing and prioritizing demand, assigning resources based on business objectives and doing projects that deliver business benefits).

At the risk of exaggerating the point, it's almost as if once IT has a green light to deliver a project, it couldn't care less about whether the project makes sense or will deliver business benefits—it's only objective from here on will be to deliver it to spec, on time and within budget, and manage the underlying physical assets. Put another way, IT is only concerned with building the system right, not with building the right system. The criteria for success is defined as the delivery of solutions on time, within budget and to spec—like a building contractor—instead of the delivery of solutions which deliver business benefits.

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