Do You Need An IT Health Check?

Today, most companies are faced with what sometimes seems like an infinite number of critical information technology (IT) issues. Executives, such as CEOs and COOs who historically delegated IT matters to CFOs and CIOs, are now expected to establish an on-going IT dialog with the board of directors, investment community, customers and suppliers. CIO and other IT staff turnover is expected to continue at record levels. Merger and acquisition (M&A) activity is increasing with more than 65 percent of the deals not achieving objectives, and with IT costs reduction targets typically in the 30 percent to 50 percent range. Outsourcing has become an accepted management practice, yet many companies still do not have a well thought-out sourcing strategy. The gap between current IT capabilities and the associated business value is increasing. Some companies are even making major technical or application architectural changes such as e-commerce or enterprise systems implementations without the benefit of an overall IT strategy tied to the business strategy-it’s like building a new factory before you know what product you will be producing. In many industries, the board of directors feels IT is a competitive differentiator, yet is not convinced that IT is prepared.

In conjunction with the above, technology change is accelerating, the faster technology changes, the more a company is in danger of falling behind the competition. Driven by an increasingly global marketplace and enabled by ever-decreasing technology costs, IT has morphed from a backroom cost-center providing basic services to a corporate asset that has become a driver of corporate strategy, profits, etc. To keep pace with technology and stay ahead of the competition, it is imperative to regularly evaluate the current IT environment and determine its future health. Is the infrastructure capable of supporting near- and long-term business objectives? If not, what’s the right prescription for success? Are the electronic information stores secured and if not, what’s the right level of immunization? Is Internet use maximized to gain market share? How is the return on IT investment measured? The questions go on and on.

One way to deal with this uncertainty is to conduct an IT physical. This check-up should focus on management’s major IT concerns. The diagnosis should:

  • Help newly appointed CIOs separate hype from reality;
  • Help corporate executives recruit CIOs with appropriate experience for current conditions;
  • Uncover poor IT and business objectives alignment;
  • Expose potential land mines with IT financial commitments;
  • Determine IT staff’s competency;
  • Point out organization’s structural weaknesses;
  • Measure the application environment’s strengths or weaknesses; and
  • Ascertain the degree of compliance with generally accepted practices and standards.

Any assessment must take a 360 degree view of IT. Evaluating strategy without examining the underlying fundamentals is extremely dangerous. A thorough assessment must also examine human resources, assets, finance, applications, technical architecture, brick & mortar, as well as telecommunications (voice, data, image, video, etc.). The assessment must provide the required information, determining IT’s overall health and pinpointing areas of concern or risk.

A health check’s specific outcomes will vary depending on the situation. For instance, in an M&A situation, the health check or due diligence should determine the suitability of integrating a target company’s IT resources and prescribe the best approach. Morgan Stanley Dean Witter reported that in 1998 the announced global utility industry M&A volume was $120 billion versus $45 billion in 1995, $70 billion in 1996 and $115 billion in 1997. In 1997, utility industry M&A activity exceeded $90 billion in the United States alone, tripling the 1989 level. The IT diagnosis should identify areas that require management’s attention before, during and after the actual acquisition. Under worst-case conditions, the health check may identify potential conditions that could cause the acquirer to consider withdrawing a previously submitted proposal. Finally, the diagnosis should provide information to help evaluate the proposed agreement’s reasonableness.

For a more sweeping health check (analogous to your regular medical exam), the procedure should answer a broad number of questions regarding people, processes, systems and infrastructure. Do key activities have adequate support? Are there appropriate plans in place to accommodate business resumption in the case of a disaster? Is there a planning methodology in place to keep IT in sync with changing business and technology conditions? Is the technical architecture designed to provide the required levels of reliability, maintainability and scalability? Will the architecture support the company’s business strategy going froward? Do the IT assets’ book value reflect the real market value? Are end-user-developed applications supported and if so, is there a process to ensure IT can maintain the application if necessary? Are there policies to govern the maintenance of legacy applications or are you investing in “buggy whips”?

IT has become a “bet your company” activity and technology change is accelerating at warp speeds. The faster technology changes, the more important it is to constantly monitor IT’s blood pressure, heart rate, temperature, body fat and IQ. A new order of critical success factors has surfaced that is deciding marketplace winners and losers. Never before have IT investments played such a major role in business success. As we enter the new millennium with evolving strategies for business-to-business and consumer-to-business e-commerce, IT will literally permeate every aspect of our business.

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Paul Pechersky is SAIC (Science Applications International Corp.) vice president and IT assessment practice manager for Telcordia Technologies Inc. (formerly Bellcore), an SAIC subsidiary. Pechersky has spent more than 25 years as an IT executive, most recently as the CIO for a global investor-owned utility as well as industry consultant. Contact Pechersky at paul.n.pechersky@saic.com for further information.

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