Technology continues to evolve at a breathtaking pace. Complacency and lack of IT governance is a sure company killer, regardless of your size or industry. It is without a doubt the ultimate game changer: businesses deploy new technology to reduce costs, increase efficiency, improve transactions, streamline information flows, and, at the end of the day, drive revenue.
Did you know that the average age of a director in New Zealand is 60*? I work closely with a number of boards and the reality of the situation is that many of the members don't have the experience or technology background necessary to rein in IT and inject the direction necessary to really get it working for the business.
Reading between the lines, I'd say that this disconnect is why many IT budgets prematurely get the chop, forcing companies to make do with what they have, tacking on and patching up as they go. While this may be a true test of Kiwi ingenuity, it does mean they are left limping along, slowly falling behind and exposing themselves to some pretty big risks.
To appreciate the importance of overseeing IT, here is a very real example.
Server hardware and software age at about the same rate and should normally be upgraded every three years. But the hangover from the dreaded GFC is seeing many organisations doing their best to stretch this out to five years, sometimes more. Not a good idea: Warranties start wearing thin, productivity declines (and with it your bottom line) and when those servers eventually die the organisation faces huge disruption - it may not even be able to function. Let me put this into perspective for you. Consider a law firm that has 25 team members and let's say they each have an average charge out rate of $180 per hour. If their system crashes then they'd be losing $4,500 every hour and $33,725 every day they are down.
The flip side is also true. Chasing technology, without fully understanding its role in your business, could leave you out of pocket and without the improvements you were hoping for. Last year we upgraded our phone system, twelve months behind schedule. What was the hold up? We have a technology road map that is closely aligned to our three and five-year business strategy. So I knew what performance and infrastructure prerequisites had to be in place first - and we were short. Had we gone ahead with the installation the resulting compatibility issues and disruptions would have negated any benefits – i.e. it would have been dead spend.
Given our reliance on technology, my view is that companies should consider a more structured approach to overseeing IT. In my experience, this involves establishing new forums, re-thinking the board structure and the conversations with your management team. Payroll company Talent2 whose Novopay system consistently botched up our teachers' pay is a perfect example of what can happen if IT is left unchecked; in this case it resulted in an operational and PR disaster.
We should expect more from our CIO or IT manager. Their roles must extend beyond simple "procurer of technology" to "business architect".
They need to be able to facilitate conversations about the potential of IT and its role in the business; conversations which also serve to up-skill today's board members and flesh out the bells and whistles in to tangible business benefits. Smaller organisations I work with tend to bring in outside talent with an IT background to sit on their advisory board, such as a current or former CIO. Once these conversations start it will soon become clear what areas matter most to your business (e.g. data recovery, cloud services, mobile technology) and you can then start to build an IT road map around these mission critical areas.
From here you need to ensure that IT gets regular air time, at least quarterly would be my suggestion with the board spending at least 10 percent of their time here responding to four simple questions:
- Are we doing the right things? - road map
- Are we doing them the right way? - architecture
- Are we getting them done well? - delivery
- Are we getting the results? - value
The more embedded IT becomes in your business' overall strategy; the more important it will be to understand how technology is used across the business. Boards should be actively having conversations with the management team to understand new IT developments in specialist areas such as finance, HR and marketing. This can help prevent a silo approach to IT and the emergence of multiple strategies, which compete for resources and end up being more costly and counterproductive.
Matt Bellingham is business improvement director at Hayes Knight