Aligning the IT organization to boost financials: a well-managed IT organization can be a valuable partner in addressing change and managing risk enterprise-wide. Aligning this awareness with the primary profit drivers involves managing IT as a professional services organization.

• Author: Lutchen, Mark D.
• Position: Information Technology

Most financial executives would concur that information technology (IT) plays a leading role in an organization's success. As such, when IT fails to support corporate objectives, the results can be highly destructive to corporate economic and shareholder value.

Consider recent headlines reporting IT implementation failures--and their financial impacts to well-established, brand-conscious organizations. In one notable case, a defective database triggered a reduction in stock price that wiped out a year's worth of earnings growth. In another, a market leading company blamed a troubled enterprise resource planning (ERP) implementation for a multi-million-dollar hit to its bottom line.

These examples aren't extreme; they're merely the ones that became public. But, they serve as very good examples of the need for senior finance executives to support the development of the IT organization as an agile, effective, change-embracing contributor to corporate performance.

Some already do--at least, in principle. After years of belaboring technology's cost and the requirements imposed by regulatory compliance, a rapidly expanding cadre of senior finance professionals are, indeed, now very much aware that a well-managed IT organization can be a valuable business partner in addressing change, managing risk and improving financial performance for the company as a whole.

But translating this awareness into measurable performance depends on a critical assumption: that IT can be effectively aligned with the enterprise's primary drivers of shareholder value.

These drivers include revenue and earnings growth, capital spending, marketing and advertising expenditures or investment in research and development--depending on the organization's specific industry and objectives.

The difficulty is that while the notion of aligning IT with these drivers isn't exactly new or revolutionary, the processes for achieving this IT alignment often remain elusive. That's because relatively few C-level members of the corporate management team recognize that in order for IT to provide measurable business value, the IT organization must be managed and organized in a way that gives it the change-embracing agility it needs to keep pace with constant volatility in the business and technology environments.

Think of it this way: maneuvering IT's performance as closely as possible to the cutting edge of business performance is no longer about having IT personnel just perform a job. It's about having a high-performing IT organization deliver high-quality services at a competitive price.

And that takes commitment--a broad-based, leadership-sanctioned, C-level commitment to transforming the culture of IT from an administrative, task-oriented environment to that of a team-based professional services organization.

Support Developing IT as a Professional Services Organization

For finance executives, this should be an intuitively attractive model. Think about the outcome if IT were managed as a services organization that placed a real-world value on IT from a profit-and-loss perspective. Such an approach would make it far more likely that IT's value would be market-based, buyer-driven and shaped by the same forces--supply, demand, pricing and competition--that define capital markets.

But don't misunderstand. The point is not that embracing a services approach to managing the IT organization requires the imposition of a formal profit-and-loss structure. The more pressing call to action is that finance...