Modern Middle Manager
Primarily my musings on the practical application of technology and management principles at a financial services company.
Divvying Up the Department

Sunday, November 30, 2003  

Some things I've read say there are two parts to any Information Services department functions -- the ones that add value and the ones that keep the little things going (aka operations).

Operations are those activities that maintain the existing infrastructure. We all know what these activities are: backups, upgrades, patches, adding and deleting users and fixing bugs/troubleshooting user issues. This is the kind of stuff that only earns IS grief; the best you can do is never have something go wrong. That's an awfully high bar. Worse yet, this is the kind of stuff that is classified as an expense on the budget and gets subject to cost-cutting measures.

The value-added activities tend to be centered around application development. What would be considered a value-added system? The website that publishes customized reports to clients, the web services that tie a client's accounting system to our banking system and the router that's set up to give priority to client traffic over internal users -- all drive revenue in some way. Of course, doesn't everything in the IS department in one way?

This is a problem I have with most ideas on the subject: what divides value-added activities from operational ones? Does anyone working in IT actually believe that the servers aren't as crucial to the operation of the business as the applications running them? That Microsoft security patch that doesn't get installed on time may lead to a hefty loss of revenue. Isn't that as important as the client-facing web application running on the unpatched server? I'd say so.

Let's look again at that operational list: backups, upgrades, patches, adding and deleting users and fixing bugs/troubleshooting user issues. Backups are certainly a non-revenue enhancing activity but it should also consume almost no staff time. Ours certainly doesn't. Upgrades and patches need to be addressed in light of their value -- Microsoft security updates need to be applied about as soon as they appear; software upgrades should only be applied based on their value to the organization (e.g., do you really need Office 2003?). Adding and deleting users don't occur all that often, although they take a while when first setting up. Fixing bugs and troubleshooting user issues are probably the largest time-consuming activity among all of these. Even those continue to be driven down in my department due to the application of thin-client technology (or server-based computing or whatever the hell you want to call it this week...).

Otherwise, what doesn't add revenue? What about those apps and systems that simply enhance efficiency, forcing down costs or raising productivity in other areas? Are those simply "operational?" Probably, according to most definitions. I can see the point of making these kinds of activities second-tier, as they can only drive down existing costs a certain percentage. From that perspective, what kinds of systems would be considered "operational?" What about: e-mail, accounting, storage, switching & routing, deployment, reporting, customer relationship management, disaster recovery, compliance, third-party data integration and network & systems management? All of these are certainly important, yet the prevailing wisdom is to minimize expenditures on these in pursuit of revenue. So, um, what happens as the infrastructure starts rotting? Isn't this like saying you love to drive on highways but you'll be damned if you want to pay taxes? Infrastructure costs money and time to build and maintain. It's the foundation upon which those revenue-driving activities are built. Is this really want management wants to starve? Certainly you shouldn't build an eight-lane superhighway for Model T's but don't be foolish and expect your 18-wheel tractor-trailer Internet banking system to run on a one-lane dirt road, either.

Finally we get to the revenue-building activities. These are easy to classify -- whatever brings the client to do business with you. Examples would be our Internet banking system, wire processing and custom reports to enhance a client's reconciliation process. These are the fun activities, the ones that stretch your mind and skills. Unfortunately if all the department's time is spent on this, the infrastructure rots and can no longer support the fruits of the department's creativity. Things to think about.

posted by Henry Jenkins | 11/30/2003 10:55:00 PM

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