Friday, March 20, 2009

What is IT Transformation?

It’s one thing is to sell to your company the idea that technology can be used to leverage competitive strengths and that the future belongs to those who use modern technology more effectively, and another to precisely define what you mean by IT Transformation. If you fail to explain what IT Transformation is truly about, you could risk ending up with projects that ultimately miss the mark.

For example, while IT Transformation encompasses the investment strategies and tactics needed to leverage modern technologies by refreshing the old with the new, it shouldn’t be confused with Business Process Reengineering (BPR). Yes, BPR may well be either a driver or a consequence of IT transformation, but IT Transformation is not simply an exercise in reengineering. Just replacing something old with something new, such as adding a newer version of a module does not a transformation project make. Even something with a bigger scope such as changing a database vendor, while an important effort, it’s one that's just strictly tactical in nature.

Lastly, transforming basic administrative chores that are similar to those found in millions of other companies is certainly worthy of respect and support, but this type of effort is not IT Transformation. That new ERP system you plan to deploy in your company? You are probably better off hiring an ERP vendor, or a very qualified third party to deal with this transformation. My point is this: not every technology project, regardless of its size, is an IT Transformation project.

What then is an IT transformation project?

IT Transformation is more than mere optimization or modification of engineering components, but is rather a holistic revamp of the existing technology base used to support the company’s mission-critical business. Ironically, IT Transformation is not about changing things for the sake of change, but about better aligning the IT system to the needs of the business. Indeed, based on the results obtained from an April 2000 conference held at MIT, 90% of attendees agreed that matching IT to strategic corporate requirements was the most important factor in a technology strategy; 80% believed that decreasing time to market for new products to be another major factor, and 70% felt managing IT with constrained resources was the driver.[1] This is a key point: IT transformation should ultimately be aligned with the strategic business view.

Because it deals with core business processes (by core, I mean revenue generating), technology transformation will intrinsically be both complex and risky. A failure in introducing this type of technology is not the kind of failure one can sweep under the rug.

IT Transformation deals with substantial core changes to the information systems technology, including the hardware and software of the system, the way the system is architected, and the way the data is structured and accessed. Technology in this definition also includes the algorithms, the IT command and control governance, and the actual and potential functionality supported by the system.

Software projects are hard to execute, and IT Transformation is bound to include a large software element at its core. Multiple studies done on the success rates of software projects reveal numbers that give pause. For example, the Standish Group has found that only about one-sixth of all projects are ever completed on time and on budget (and I suspect that figure includes many less complex projects); that nearly one third of all projects were canceled outright, and well over half were considered "challenged." Also, the typical challenged or canceled project was on average 189 percent over budget, 222 percent behind schedule, and contained only 61 percent of the originally specified features.[2]

In other words, IT transformation is serious business and is reminiscent of those prescription medicine advertisements shown on TV. Any consideration to apply it should come with a similar disclaimer.

Warning: Technology transformation may cause financial hemorrhaging in badly managed companies, resource bloating when done without professional supervision, and abnormal levels of bad media. Other symptoms might include executive insomnia, board irritability, aggression, growth suppression, and Tourette’s syndrome associated with project delays and budgetary overruns. Consult expert advice prior to embracing this solution.

Well, it’s one thing to understand what IT Transformation is all about and another to decide whether we need to take this type of medication.

In the next blog I’ll dive into reasons to undertake a transformation effort. . .

[1] Enterprise Architecture and Next Generation Information Systems—Dimitris N. Chorafas

[2] Major Causes of Software Project Failures--
Lorin J. May. This reference can be found at http://www.stsc.hill.af.mil/crosstalk/1998/07/causes.asp and it goes on to cover reasons for project failures.