Monday, June 22, 2015

Understanding the Importance of Business Outcome

This was a post I wrote for the VMware TAM blog that I wanted to share on my personal blog. 

As technologists, most IT professionals have a hard time connecting the dots between technology solutions and business value. This predicament isn’t something relegated only to system engineers and middle managers; it can extend to IT directors and CIOs, too. When working with business leadership, it can be difficult for most IT professionals to describe the benefits of deploying IT solutions.

Even in my role as a Technical Account Manager, when talking about technology solutions I focus on the expected business outcome. This is especially true during my TAM Business Reviews (TBR), which is my opportunity to make sure I am in alignment with my customer’s business priorities.

Why is it so important to understand the business value of technology?

Walking down the hallways of enterprise organizations, you will still hear business leaders rationalize that their company is not an IT organization; I would like to refute that assertion.

Let’s use an insurance company for example. More than 10 years ago when an applicant applied for insurance coverage the typical process included filling out a paper form with an insurance agent and gathering health records to submit to an underwriter. That insurance agent would send the forms to the home office of the insurance company where an underwriter would add the files to a folder, review the documentation, and then decide if the customer would be approved for the coverage he/she was seeking. Some information was entered into a legacy mainframe, but the majority of the records were maintained in that folder. After the application was approved or declined, the customer folder was sent down to the application vault, which held thousands of customer records.

Living in the electronic age, we can look back and recognize the process was laborious, slow, and man-hours intensive; there was no dependency on technology. Today, the process has evolved; competition in the market place has required insurance companies to offer online resources to fill out enrollment forms, and the expectation is that you are notified of approval with a click of a button. If you need to talk to a specialist, you can chat with a representative online. Suffice it to say, if the enrollment systems and customer-facing applications are not available it has an immediate and significant impact on the company. Any company facing the prospect of going out of business because the IT systems are down for more than a few days is an IT organization.

If it is so critical to the organization, then why is it so important for IT leaders and CIOs to understand the business value of technology solutions?
  • All eyes are on IT investments
  • IT consumes significant resources relative to other functions because of the cost to operate and manage the IT infrastructure
  • How does a company know they are getting value for money from their IT investments?
  • How can they maximize the likelihood of success in their IT investment choices?
  • How can they tell if they need to make future investments in IT if they cannot show the relative value now?

I think you would be hard-pressed to find a company that hasn’t invested capital on a technology solution that didn’t meet expectations and didn’t provide the expected value. If you begin an initiative without understanding the full capabilities and limitations of a solution, then you were not able to set the right expectations of the business outcome either. How many enterprise companies have overlapping monitoring tools because of traditional silos? This translates to a significant amount of corporate waste. It is these past failures that have made business leadership skeptical of the value that IT investments bring to the business; that is the primary reason IT operations must become more business savvy.

Take a look at some of the key phrases that define value from the Merriam-Webster Online Dictionary:

According to the entry, value translates to “fair return,” “monetary worth” and “relative worth, utility, or importance.” The focus for the CIO isn’t on the technology; it is on the desired business outcome and the value of return to the business.

“Business outcomes from technology investments are all that really matter,” according to Stephanie Overby at CIO Magazine.

Richard Hunter, a Gartner Vice President and Fellow, provides a great example that illustrates the different perception of the value of technology solutions; one is focused on the machine and the other on the user.

If you ask a room full of engineers, “What is the value of an exercise machine?”most of them would talk about the number of workout apps, the maximum incline, and the horsepower rating of the motor. But the value of an exercise machine has nothing to do with the machine itself; the benefit of an exercise machine is the number of pounds lost since the person started an exercise program.

Hunter states that when it comes to IT solutions, “It is never about the machines, it’s about the performance of the people using the machines.”

You must describe technology solutions in business terms, not technical terms. As technologists, we have grown to understand technology; we can talk about the machines because that has been our focus for decades, such as the amount of processing power of a server or the benefits of a Type 1 hypervisor. When talking with our business partners in the enterprise we need to focus on the benefits to the users and not on product features or specifications. Technology has a limited shelf life a workstation may last three years, a server five years, and a software application three to five years; the true value of technology is the lasting change it has on business operations.

So what are some business terms we can use when discussing the value of an IT solution to the business?
  • Capital hardware and software avoidance
  • Business innovation
  • Factory and software uptime
  • Risk avoidance
  • Time to market
  • Open new markets
  • Optimizing existing markets
  • Headcount productivity
  • Improve profitability

If I was going to discuss the value of automating virtual machine builds with VMware vRealize Orchestrator, I would point out that it will decrease the time required to provision resources and accelerate time to market for new products. For VMware vRealize Business, I would indicate the business value is to improve the understanding of operational cost drivers to improve profitability.

In the end, we should remember the old business adage from Harvard marketing professor Theodore Levitt: “People don’t want to buy a quarter-inch drill. They want a quarter-inch hole.”
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