ICT Productivity and the Failure of Australian Management

Prior Related Posts:
Quantifying the Business Benefits of I.T. Operations
The Triple Whammy - the true cost of I.T. Waste
Force Multipliers - Tools as Physical and Cognitive Amplifiers
I.T. in context

Alan Kohler and Robert Gottleibsen have been writing in "Business Spectator" about the relationship between jobs and Economic Productivity.

They note that the USA has improved productivity in the last year while in Australia it has declined (+4% and -3% respectively).  My take on this is: a gross Failure of Australian Management.

There is solid research/evidence that "ICT" is the single largest contributor to both partial and multi-factor Productivity, and is expected to be so for the next 20 years.  This is an big issue.

Defining I.T. Service Management

Objectives (The What)

Having begun around 1950, the world of Commercial I.T. is now mature in many ways. "Fields of Work" and professional taxonomies are starting to become standardised. Professional "Best Practices" are being documented and international standards agreed in some areas.

For the first time, audits of one of the most pragmatic I.T. disciplines, "Service Management", are possible with ISO 20,000. Business managers can now get an independent , objective opinion on the state of their I.T. operations - or of their outsourcers.

Being "documented common sense", ITIL and the related ISO 20,000 are good professional guides, but not underpinned by theory. Are there any gaps in the standard? How does Service Management interface with other IT Fields of Work? and What changes in those other disciplines are necessary to support the new audited practice?

Analysis of the full impact of I.T. Service Management, creation of a full taxonomy and definitions of "I.T. Maturity" are beyond the scope of a small "single researcher" project.

Approach (The How)

ITIL Version 2 and 3 and ISO 20,000, as published documents, form the basis of the project.
Prior work in the field has yet to be identified. Secondary research will be the first step.

Each of the models will be codified and uniformly described, then a 3-way comparison performed. A Gap Analysis done of the 3 models, and a formal model built describing "I.T. Service Management" and its interfaces built and each of the existing approaches mapped to it.

Importance/Value (The Why)

The global economy, especially businesses in the "Western Industrialised World" are increasingly dependent on I.S./I.T. and their continued efficient operation. Corporate failures partially due to I.S./I.T. failure have occurred. Improving delivery of I.T. Services and the business management and use of them is important to reduce those failures in the future.

The advent of ubiquitous and universal computing requires concomitant development of business management.

There assertions are considered axioms in this context:

• Organisations these days are dependent on their I.T. Operations.
  
• I.T. cuts across all segments of current organisations.
  
• I.T. defines the business processes and hence productivity of the whole organisation.
  
• What you don't measure you can't manage and improve.
  
• Improving the effectiveness of I.T. Operations requires auditable processes.
  
• Common I.T. Audit and Reporting Standards, like the Accounting Standards, are necessary to contrast and compare the efficiency and effectiveness of I.T. Operations across different organisations or different units within a single organisation.
  

I.T. is a cognitive amplifier, it delivers "cheaper, better, faster, more, all-the-same", through the embedding of finely detailed business processes into electronic (computing) systems.

For simple, repetitive cognitive tasks, computers are 1-5,000 times cheaper than people in western countries.

From this amplification effect, computers still provide the greatest single point of leverage for organisations. The underpin the requirement to "do more with the same", improving productivity and increasing profitability.

The few studies of "IT Efficiency" that are available show that IT effectiveness is highly variable and unrelated to expenditure.

The value-add to business of a complete I.T. Service Management model is two-fold:

• manage down the input costs of the I.T. infrastructure and Operations and,
  
• audit assurance for the board and management of the continued good performance of I.T. Operations.
  

[A 1990 HBS or MIT study into "White Collar Productivity" - reported a decrease in the first decade of PC's]

Previous Work (What else)

There is much opinion in the area, without substantive evidence: e.g. Nick Carr and "Does IT Matter?" The McKinsey report/book on European Manufacturers and their I.T. expenditure versus financial performance shows there is no co-relation between effort (expenditure) and effect (financial performance).

"Commonsense" IT Practitioner approaches, SOX, ITIL and COBIT and others, do not address the measuring and managing of I.T. outputs and interfaces and their business effects, utiliation and effectiveness.

Jerrry Landsbaum's 1992 work included examples of their regular business reports - quantifiable and repeatable metrics of I.T. Operations phrased in business terms.

Hope to find (The Wherefore)

• Create a formal model for I.T. Operations and its performance within and across similar organisations.
  
• From the model, generate a standard set of I.T. performance metrics.
  
• Generate a set of useful I.T. Operations Business Impact metrics.
  

Report Outline

• Coded process models of ITIL version 2, 3 and ISO 20,000.
  
• 3-way comparison of ITIL version 2, 3 and ISO 20,000.
• Gap Analysis of ITIL version 2, 3 and ISO 20,000 models.
  
• Formal I.T. Service Management model.
  
• Common I.T. Service Management internal metrics and Business Impact
  metrics flowing from the model.
• Interfaces to other I.T. and business areas and changes necessary to support audits of I.T. Service Management.
  
• Further Work and Research Questions
  

Execution Phases

• Learn ITIL Version 2 - Service Managers Certificate course [complete]
• Learn ISO 20,000 - IT Consultants training [in process]
  
• Acquire and learn ITIL Version 3 [depends on OGC availability. mid/late 2007]
• Create/identify process codification.
• Codify ITIL version 2, 3 and ISO 20,000
• Compare and contrast coded descriptions. Report.
• Create/adapt process description calculus for formal model.
• Create formal I.T. Service Management model.
• Derive interfaces to business and other I.T. processes
• Derive internal metrics, role KPI's and business impact metrics
• Finalise report.
  

Quantifying the Business Benefits of I.T. Operations

Objectives (The What)

That "I.T. is done for a Business Benefit" seems axiomatic.

But where's the evidence after 50-60 years of computing? It's not coming out our ears - just the reverse.

Businesses understand the importance of hard data and it's through analysis for marketing, but don't apply the same techniques or management principles to their I.T. Operations.

I'd like to model and quantify the Business Benefits of I.T. Operations across multiple organisations to provide baselines, benchmarks and trend analysis. The impact of all aspects of I.T. is beyond the scope of a single researcher project.

Approach (The How)

Data is fundamental input for analyses. Leveraging what's available means the outputs can be commercially reproduced and aer within the project budget (zero cost).

Three separate data streams will be mined:

• Historic "ITSM" tool data from multiple organisations.
• Detailed I.T. accounting information from selected organisations.
• Primary research in one organisation to collect and report "FTE equivalents provided" by I.T.

[FTE = Full Time Employee. Otherwise, "virtual employees". What head count and cost would be needed to provide similar services with 1965 technology.]

Importance/Value (The Why)

There propositions are to be tested:

• I.T. is done for a Business Benefit.
• Business Benefits, tangible or intangible, should be measurable.
• Organisations these days are dependent on their I.T. Operations.
• I.T. cuts acros all segments of current organisations.
• I.T. defines the business processes and hence productivity of the whole organisation.
• What you don't measure you can't manage and improvve.
• Improving the effectiveness of I.T. Operations requires reliable metrics.
• Commin I.T. Reporting Standards, like the Accounting Standards, are necessary to contrast and compare the efficiency and effectiveness of I.T. Operations across different organisations or different units within a single organisation.

I.T. is a cognitive amplifier, it delivers "cheaper, better, faster, more, all-the-same", through the embedding of finely detailed business processes into electronic (computing) systems.

For simple, repetitive cognitive tasks, computers are 1-5,000 times cheaper than people in western countries.

From this ampflication effect, computers still provide the greatest single point of leverage for organisations. The underpin the requirement to "do more with the same", improving productivity and increasing profitability.

Subtle shifts in this whole-organisation amplification ratio (e.g. from 100:1 to 95:1 or 105:1) are impossible for isolated individuals to detect unaided. But they make very large differences to the 'global' organisation output and productivity.

In retail businesse, the gross margin is often around 2.5%. Reducing whole company productivity by 5% will destroy it's profitability, and without any metrics, will be impossible for any management team to identify and resolve.

The few studies of "IT Efficiency" that are available show that IT effectiveness is highly variable and unrelated to expenditure.
My proposition is that "intuitive management" of IT is stretched well beyond it's useful limits and needs to be replaced by evidence-based management.

The value-add to business is two-fold:

• manage downt he input costs of the I.t. infrastructure and,
• quantify the "cognitive amplifier" effects across the whole organisation to make informed decisions on optimum 'global' investment/expenditure on I.T. Operations.

[There's the 1990 HBS or MIT study into "White Collar Productivity" - reporting a decrease in the first decade of PC's]

Previous Work (What else)

There is a dearth of published material/research in this area.
The "State-of-Practice" is "NEVER DONE".
There is much opnion in the area, without substantive evidence: e.g. Nick Carr and "Does IT Matter?"

"Commonsense" IT Practitioner approaches, ITIL and COBIT (others?), do not address the measuring and managing of I.T. outputs and their business effects, ultilisation and effectiveness.

The McKinsey report/book on European Manufacturers and their I.T. expenditure versus financial performance shows there is no co-relation between effort (expenditure) and effect (financial peformance).

Jerrry Landsbaum's 1992 work included examples of their regular business reports - quantifiable and repeatable metrics of I.T. Operations phrased in business terms. This work seems entirely disregarded.

Hope to find (The Wherefore)

• Model I.T. Operations performance within and across similar organisations.
• generate tools usable within organisations to collect/report their own metrics.
• Define a set of useful I.T. Operations performance and Business Impact metrics.
• Model inputs to Business and Business Utilisation/Outcomes.

Report Outline

• Analyse ITSM tool data. Derive KPI's, Internal Baselines/Trends, Cross-section Benchmarks
• Annual I.T. Operations Report
• FTE Employee equivalents - Count and Cost
• Why IT Matters to the Business.
• Gaps in Service Management models - ITIL and COBIT
• Adding I.T. Operations to Management Theories.
• Advancing I.T. as a Profession
• Further Work and Research Questions

Execution Phases