Modern Middle Manager
Primarily my musings on the practical application of technology and management principles at a financial services company.
Chapters 1 & 2 - Why IT Departments Suck

Sunday, April 27, 2003  

The first two chapters of the Executive's Guide... lay out the premise of the book -- that the IT department is perhaps the greatest source of added value in an organization and unless those resources are used wisely it is the greatest sinkhole. To which I remark...duh. Pretty conventional wisdom. Some good graphs and charts on benchmarking your organization's IT spending vis-a-vis the industry are available, although more detailed data is available from outfits like the META Group. It gets more interesting when the authors explore why IT departments are ineffective. They list a few categories: business turmoil, vendor management, staffing & communications and financial & risk management. However, they list these as proximate causes -- the ultimate cause, they argue, is IT management. Specifically, IT managers who are promoted into the position before they have the financial, political and communication skills necessary are most common source of dysfunction. Their solutions are to improve IT management, add basic project management discipline, manage vendors properly, improve fiscal management & budgeting and improve the relationship between IT and the business.

One of the more fascinating ideas for me was being able to tie a dollar of IT expenditure to the revenues of the company. Easy enough -- the IT budget is 6.7% of total revenues. Therefore it takes about $15 dollars in revenue to fund every dollar IT spends. That's a different perspective than I've used. In researching this idea I found that our net margin is 60 basis points (0.6%). That means it takes $100 in revenue to make 60 cents in profit. Now that's a management problem...

posted by Henry Jenkins | 4/27/2003 10:12:00 PM

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