Six IT Decisions Your IT People Shouldn’t Make Jeanne W. Ross and Peter Weill

1. Six IT Decisions Your IT People Shouldn’t MakeJeanne W. Ross and Peter Weill EnFuego Kacey Baxter, Ashish Mistry, Dan Myers-Power and Mark Rose April 10, 2004

2. Strategy Decisions How much should we spend on IT? Define IT’s role in the company Decide how IT fits the company strategy Determine the funding needed to achieve objective Source: Ross and Weill

3. Strategy Decisions How much should we spend on IT? Which business processes should receive our IT dollars? Make clear decisions about what initiatives receive funds Prevents overloading the IT department Source: Ross and Weill

4. Strategy Decisions How much should we spend on IT? Which business processes should receive our IT dollars? Which IT capabilities need to be companywide? Determine which functions should be centralized Balance centralization and flexibility of business units Source: Ross and Weill

5. Execution Decisions How good do our IT services really need to be? Which features are needed based on costs and features Prioritize service options Source: Ross and Weill

6. Execution Decisions How good do our IT services really need to be? What security and privacy risks will we accept? Examine the trade-offs between security/privacy and convenience Find balance Source: Ross and Weill

7. Execution Decisions How good do our IT services really need to be? What security and privacy risks will we accept? Assign an executive to be accountable for every IT project Monitor metrics to realize value of business systems Whom do we blame if an IT initiative fails? Source: Ross and Weill

8. Bush Boake Allen • Bush Boake Allen’s Project Mercury appears to be a pet project, no initial buy-in from full management team • Strategy is lacking • Want to spend, spend, spend with no clear direction on IT needs • Senior Manager is ignoring his IT responsibility

9. Bush Boake Allen How much should we spend on IT? No strategic direction for Project Mercury No real idea of costs, could be up to $500,000 per site Which business processes should receive our IT dollars? Trying to fund everything due to lack of focus One technologist assigned—overwhelming initiative Better spent in R&D? Project Mercury launched without full team buy-in Decentralization has been key to company strategy How will “the Spider” fit into strategy? Which IT capabilities need to be companywide? Source: Ross and Weill

10. Alibris -- Strategy How much should we spend on IT? There was no budget for IT Spending If a problem occurred, they threw more money it Which business processes should receive our IT dollars? Database conversion and eCommerce launch How could they automate fulfillment? How do they deal with SKUs? Consultants were doing lots of customization What were the future staffing level requirements? Would there always be a need for consultants? Which IT capabilities need to be companywide? Source: Ross and Weill

11. Alibris -- Execution How good do our IT services really need to be? Did they need Oracle? Did they need Thunderstone? What were the consequences of not launching? Could they afford to have the system “down?” What security and privacy risks will we accept? Case pre-dates attention on identity theft issue Do we need to protect the booksellers data? Who secures the customer data? Everything was delegated to the consultants No one internally had ultimate responsibility Too willing to jump platforms Whom do we blame if an IT initiative fails? Source: Ross and Weill

12. Oracle at Oregon Steel Mills • Oracle Implementation/Upgrade Goals • Upgrade Portland from 9.4 (Character) version to 10.7 (Windows) • Convert Pueblo from legacy to version 10.7 (Windows) -- Legacy not Y2K Compliant • Standardized General Ledger across all companies (15 in consolidated group) • Reduce support requirements • Faster closes • Interchangeable staff between locations • What happened? • Two database installations: one in Pueblo, one in Portland (KPMG’s Idea) • Two license fees (Oracle didn’t mind) • Standardized General Ledger to start, slowly drifted apart as each location added new accounts and functionality • Manufacturing resisted conversion so only Financials used • Lots of customization = Additional fees when upgrading to 11i • Why did it happen? • Turnover: Controller, Project Manager, Lead Accountant, Business Analysts • CFO clueless about IT and not involved • No one was ultimately held responsible for the project

13. Outsourced IT at SEH-A • Goals of Outsourcing IT (aka “Fantasy Land”) • Reduce head count = reduce costs • Better level of support because of better trained staff • Flexibility with staffing levels • Overall lower cost of IT • The Results (aka “Reality”) • No drop in staffing -- same people work there as before • Savings in benefits offset by higher hourly rates • No incentive to upgrade or standardize operating systems (95, 98, 2000, XP) • “Guinea Pigs” for Lotus Notes R5 (very buggy) • Still spending $2M per year on customized programming for manufacturing • They love “closing tickets” • Not very flexible in terms of finding solutions • Current person in charge of IT isn’t even Manager level and reports to Facilities

14. Key’s to IT Success • Senior Managers need to take a key role in IT decisions and be accountable • Delegating responsibility without active involvement is a bad idea • Business process may also change • Training for non-IT executives • Consultants don’t know everything