Supply & Demand in IT

It’s a truism that one often learns by teaching, and I’ve experienced this
very phenomenon in leading the
MBA course, "Strategic Technology & Innovation,"
which I’m teaching this semester at SUNY/Stony Brook’s Manhattan campus.

What have I learned?  It’s actually something that I knew at a semi-conscious
level, but which has been driven home as indisputably true, and it has to do
with the relationship of IT to "the rest" of a law firm.  In
business school, it goes by the name "business process optimization," but don’t
be daunted.  All that "BPO" means is that it’s the core mission of IT
to help the firm (Clifford Chance, Foley, Wal-Mart, General Foods—whatever) perform
those indispensable activities at the heart of what the firm does more efficiently,
productively, reliably, with higher quality.   In the case of
Wal-Mart, then, it’s all about the supply chain and inventory management; for
General Foods, it’s manufacturing cereal; and for Clifford Chance and Foley,
it’s things such as producing briefs, negotiating and documenting corporate
transactions, and so forth.  (For all firms, "BPO" should also touch those
sexless but mandatory functions such as bringing a new employee on-board or
assessing the credit risk of a prospective client.)

As with many other domains in the world of Management, what you get often
depends largely or in part on  how you’ve organized the function.    When
it comes to IT, there are two familiar models, neither, frankly, ideal.

One is tempted to wonder if there couldn’t be a better way.

Now, courtesy of McKinsey (who
else?—pdf of the piece available here), let me introduce a different
model, the "demand/supply" model for IT.  Here’s what it looks
like, for starters, then I’ll discuss what it means:

What does this accomplish?  Essentially, it unites firm-wide
IT demand and also firm-wide IT supply.

On the demand side, the firm benefits by introducing one centralized
group of (tech-savvy) managers who can be fluent both in the language of IT
and intimately familiar with what the firm does.  Their job is essentially
that of drawing a strategic roadmap for technology development within the firm
so that, for example, developers aren’t overwhelmed implementing a host of
low-value enhancements while losing sight of the larger path.  Introducing
one and only one source of IT "demand" in the firm means whatever the firm
decides it needs can be acquired at enterprise scale rather than departmental
scale, that standards can be developed and rolled out firm-wide, that duplication
can be avoided and reuse encouraged.

On the supply side, internal and external IT developers are able
to work with a more tech-savvy customer, and one that speaks with a unified
voice rather than in the Babel of jousting departments with different views
of what constitutes a high vs. a low priority.   To the extent internal
IT resources are able to serve a broader "marketplace," as it were, opportunities
for developing career tracks and investing in training will also be enhanced.   When
the question is the familiar "build or buy?," one unified IT supply organization
will at the very least avoid inconsistent choices within the firm, and at the
best will be in a stronger position to negotiate with external vendors—and
will have the luxury of developing relatively deep expertise in the relative
capabilities and performance of different offerings.

If you’re convinced, what next?   McKinsey posits that
while some firms making this switch concentrate on the supply side, the "demand
one, however, is what distinguishes this model from the traditional IT setup,
and getting demand right is more difficult."  To increase your odds
of success, they recommend (the following are verbatim quotes):

• Align demand organizations with the business units:  Demand organizations
  align with the business to act as the true voice of customers in clarifying
  what they mean—which is not always the
  same as what they say.
• Let demand organizations own business processes.  Since business
  processes are increasingly shaped by IT solutions, businesses should assign
  the responsibility for work flow designs to a group that understands the
  underlying technology as well as the key business pain points.
• Give demand organizations a mandate to rationalize demand. Most companies
  have too many applications doing similar things, so they periodically have
  to prune their application portfolio—a costly and
  time-consuming process. Demand organizations can help prevent this situation
  from developing in the first place by minimizing the number of IT projects
  and applications at the time of funding.
• Empower demand organizations to manage suppliers. The demand organization
  should free the business units from the complex task of managing a broad
  range of IT suppliers, both internal and external.

To be sure, this is no panacea; to implement it effectively will require
persistence.   And there are pitfalls to guard against:  For
example, letting the demand organization be "captured" by a particularly assertive
business unit (I know that could never happen at your firm).  Senior
management must be entirely behind it, as well, as some user groups will invariably
feel they are being slighted if they are deprived of their "captive" IT departments.

But the benefits seem compelling:  The organizational structure is simplified;
IT investments are better coordinated and prioritized (and duplications and
inconsistencies are eliminated); systems and processes are more tightly defined;
and best of all, lawyers should begin getting greater value for their IT investment.