The 5% Solution?

I don't usually deal in absolutes.  The traditional consulting answer to any question is always "it depends."

However, in this case, I'm going to propose a rule.  Or perhaps as in "Pirates of the Carribian" it's more like a guideline.

"Never commit more than 5% of IT resources to any one project."

Perhaps we should refer to this as "Jauch's Law of IT Portfolios."

As loyal readers know, I'm a big fan of IT Portfolio management.  For those new to the program, this concept basically says that IT is just like any other investment.  You must balance your risk and actively manage your investments to maximize your return. 

This philosophy has some additional parallels.  I'm sure that any decent financial advisor will tell you to spread out your risk.  Not to get too deep into any one investment.  The same thing goes for IT.  For IT shops that are managing their IT portfolio, this rule is something to consider also.

If you are looking at overall IT resources and a single project starts sucking up more than 3 or 4 percent of total resources, you should be carefully considering that investment.  By committing, say, 10% of IT resources you are basically saying that your company is going to live or die based on the outcome.  A major failure in such a large project will be difficult to recover from.

This is an interesting reason why SaaS is so interesting.  By reducing capital outlay and spreading out payment to a vendor (basically a leasing scheme rather than outright purchase) SaaS has the side effect of pushing not only cost but also risk into the future.  Normally, SaaS can reduce the amount of internal labor required also because you don't need to build out your own infrastructure.

Does this mean that SaaS is good all the time?  Not at all.  Remember, that you want to have a broad portfolio.  Spending all your money on SaaS doesn't make any more sense that spending all your money on a huge SAP installation.  It's all about balance.

Don't Be Lazy. Create Value!

It's funny how cyclical the technology business is.  I guess that's not surprising since humans do tend to make the same mistakes over and over.  You would think that the rapid cycle time of our business would mean that folks haven't forgotten the old mistakes before making them again.  However, reality keeps proving me wrong again and again.

In this case, the failure is one of cost savings vs. value creation:

http://gigaom.com/2013/04/11/cloud-adoption-its-not-about-the-price-stupid/

I cannot tell you how many times I have seen companies chase the cost savings rabbit down the customer rabbit hole.  In the end, this strategy almost never works.  Eventually, you have to go back to the actual reason why you are in business:  to create value for your customers.

I'm not trying to say that cost cutting doesn't work.  Clearly, it does.  Just look at Walmart.  However, we are not talking about retail here.  In the technology business, we are not operating in an efficient commodity marketplace.  The object of our game is to create customer value by delivering IP in the form of technology.  Retail transactions are about providing the exact same goods to the consumer.  You really can't innovate much there.  It's about price, convenience and service.  This is not the business that we are in.

Perhaps some day the pace of innovation in the IT marketplace will slow down to the point where we're basically all selling the same thing but we're not there yet.

In the meantime, you really need to be focused on value and the customer's perception of your product's value to them.  If you can do this successfully then you will do well overall.

I've discussed this topic in the blog before, but for those who are new to this blog, you really should check out Mahan Khalsa's book:  "Lets Get Real or Let's Not Play."  Highly recommended even if you're even marginally involved with talking to customers.  As a non-sales guy, it's easy to think of sales as sleazy or icky in that used care salesman kind of way.  And this is a sad thing.  The reality is that most sales people suck.  It's only when you're in the presence of a highly functional sales team that you realize how powerful it can be to transform your customer's lives.

If you take Khalsa's precepts to heart, then your function is always to seek the customers needs (as opposed to their stated desires or wants) and then to satisfy those needs.  If the customer relationship is focused on this very important transaction, it becomes a very positive experience for everyone.

Thus, short term strategies like selling based on a largely fictional TCO reduction don't really work.

How IT Can Stay Relevant

Interesting discussion today about IT relevance in the modern cloud era:

http://gigaom.com/2013/03/31/technology-is-king-so-why-are-so-many-it-departments-playing-backseat-roles/?go_commented=1#comment-1324633

As pointed out in the comments section, this is definitely a topic that’s been discussed at length.

I would argue that the discussion goes back much farther than most realize. My first job in IT was part of a “shadow” IT organization. Our job was to help the business deploy technology that was readily available on the open market but that IT was not willing to provide for us.

Except that this was in 1989 and the technology was Macintosh computers.

As I wrote in my book "Why We Fail" this is part of a larger struggle between IT as a source of control for the organization and IT as a service provider. You cannot do both well.  In many cases, IT organizations feel it is their responsibility to control technology to protect the organization from it's internal users.  While this is a valid concern, it does not promote a culture of service that is required for IT to remain relevant.

I strongly believe that IT must transform into a customer centric model to help drive businesses forward.   Consider the chart below:

 

Traditional IT	Customer Centric IT
Sets IT Standards	Supports Business Requirements
Focus on Operations Excellence	Focus on Customer Satisfaction
Engineering is key skill set	Consulting is key skill set
Sets Policy	Seeks Input
Focus on Large Projects	Focus on Smaller Projects
Organized by Technology	Organized by Customer
Technology Focus	Business Value Focus
Delivers most projects in house	Brokers external vendors as needed

 

Customer centric IT organizations do not seek to set or enforce policy.  Rather, they seek input and they are organized around the customer.  It is the focus on the customer's needs that ensures that a customer focused IT organization will remain relevant in a modern cloud era.