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.