Findings – The Best Best Practices

On $%*&)$ Audits… Audit is a terrible word. It implies someone who shows up after a battle and bandages the wounded. We do lessons learned after each project. It’s a one or two hour discussion, not an audit. If a project went to hell, then yes, we’d do an official audit.

-Bob Weir, CIO, Northeastern University

As a CIO, you have more than enough responsibilities as chief technology strategist, vendor manager, Web overlord and security officer. Now, with the mandate to run the IT function like a business, you also have to be a CEO?planning and executing IT financial controls, marketing campaigns, HR strategies, customer service efforts and all the other disciplines that make a business run. There are probably hundreds of discrete practices that fall into these areas. We focused on more than 40 in our survey, “How to Run IT Like a Business,” which was completed by more than 100 IT executives at companies hand-picked for their excellent IT reputations. But you don’t have to master all of these to do a credible job and capture the benefits. A handful of practices emerged as must-dos, common denominators for you to use as a foundation. And since respondents rated each practice in terms of its effectiveness and difficulty level, we’ve been able to draw conclusions about their relative return on investment. You can see at a glance in the following pages which practices will reward you more (or less) profitably for your effort.

For further discovery, use our online “IT as a Business Profiler” (www.cio.com/ritlab). With this tool, you can input your specific goal for running IT like a business and, based on the data, we’ll compute a profile of practices optimized for achieving that benefit.

Running I.T. like a business is not only about efficient operations and financial controls. CIOs need to leverage practices in all the processes and functions typical of any business?customer service, HR, supplier management, marketing and, of course, leadership and governance. Use this chart to find out what the practices are, which are being used most and how each rates in terms of relative effectiveness and difficulty of implementation. The data is compiled from more than 100 respondents to CIO’s survey “How to Run IT Like a Business.”

5 Most EFFECTIVE practices

1. Regularly use portfolio management or other project prioritization methodology: 4.11

2. Employ an IT-dedicated financial officer: 3.98

3. Make the CIO a member of the corporate board or executive committee: 3.97

4. Employ IT department-dedicated business-type positions: 3.69

5. Win and showcase IT awards: 3.66

(Ratings based on a scale of 1 to 5, where 1 was least effective and 5 was completely effective.)

Top 10 Most Utilized Practices

1. Regularly use project management methodologies: 96%

2. Conduct regular strategic planning meetings to achieve alignment: 93%

3. Conduct internal customer satisfaction surveys: 86%

4. Create and use performance metrics: 81%

5. Regularly use portfolio management or other project prioritization methodology: 80%

6. Perform financial audits: 79%

7. Use leadership development programs: 79%

8. Make the CIO a member of the corporate board or executive committee: 76%

9. Employ internal relationship managers/account executives to work with the business: 75%

10. Conduct post-implementation audits: 74%

(Percentages refer to number of respondents using this practice.)

5 ROI winners & losers

The most effective practices that were relatively easy to implement

1. Employ an IT-dedicated financial officer

2. Make the CIO a member of the corporate board or executive committee

3. Issue IT P&L statements

4. Regularly use portfolio management or other project prioritization methodology

5. Win and showcase IT awards

The least effective practices that were most difficult to implement

1. Price IT services based on value (versus cost)

2. Implement quality improvement methodologies such as Six Sigma or Capability Maturity Model

3. Create risk-and-reward-sharing arrangements with vendors

4. Forecast demand for IT services based on metrics

5. Benchmark operations against best-practice IT shops

5 Worth the Extra Effort

Relatively difficult but highly effective practices

1. Formally manage risk

2. Conduct IT staff talent gap analysis

3. Use a chargeback model

4. Create and use performance metrics

5. Establish a project management office

How to Read the Charts

We broke down the IT business into seven functions, then asked respondents about specific practices.

The first column, “% Practicing,” indicates which of the specific practices our respondents employ.

In the second column, “Effectiveness,” we asked how effective the specific practice was in achieving their goals. Respondents were given a sliding scale of 1 to 5, with 1 indicating not at all effective and 5 indicating completely effective. We then took the average of those ratings for each practice, and rounded to two decimal points.

The third column, “Difficulty,” shows how difficult the specific practice was to implement. Again, respondents were given a sliding scale of 1 to 5, with 1 indicating not at all difficult and 5 indicating very difficult. We then took the average of those ratings for each practice, and rounded to two decimal points.

Use the Profiler

Want to find what to do to best suit you? Use our online IT as a Business Profiler. Choose your specific goal for running IT like a business, and based on survey data, we’ll compute a profile of practices optimized for achieving that benefit. Go to www.cio.com/ritlab.

Methodology: CIO conducted the study, “How to Run IT Like a Business,” online from

Nov. 1 through Dec. 15, 2003. We identified a select group of CIOs recognized by CIO editors and industry leaders for effectively managing IT, and invited them to take the survey,

which itself was crafted with input from respected IT leaders and topic experts. Results are based on the responses of 103 IT executives, 82% of whom held the title of CIO. Four percent were CTOs, 5% were vice presidents of IT, and the remaining 9% were directors of IT for their

organizations. Survey respondents represented a broad range of industries including manufacturing (20%), finance (12%), insurance (12%), federal, state and local government (10%), and wholesale, retail and distribution (10%). Twenty-six percent of executives included in our study came from very large organizations with greater than 10,000 employees, while 51% were with companies that have 1,000 to 10,000 employees. Less than one-quarter (23%) came from companies with fewer than 1,000 employees.