IssueAlert Emerging Technologies ~ August, 2004

Today, the requirements for your Customer Information System (CIS) change quicker than ever before. New competitors are always on the horizon forcing you to: 1) increase efficiencies in customer service, or 2) roll-out new products and services to remain competitive. Frequent regulatory and auditing changes may require you to capture information or add new operational processes not available within your current CIS. Changes to internal strategic objectives may require enhancements to the CIS environment. Whatever the catalyst, your CIS functionality and operations are constantly being evaluated and altered. But who within your organization is responsible for the change? Who initiates the change? And most importantly, who makes the final decision and approves the change?

In the challenge to react to the ever-changing business requirements, there exists a constant struggle between Line of Businesses (LOBs) and Information Technology (IT) entities within a company. Though the LOBs are ultimately responsible for bottom-line profits and customer satisfaction, often the IT organization is the entity that is handed the responsibility of identifying, initiating and implementing operational changes in response to the changing business environment. When the IT organization is the driver, there exist inherent conflicts within the organization. This article will briefly discuss these conflicts and emphasize the need for the business to be the key driver and decision maker for any changes or investments, whether technical or process oriented.

To understand this conflict, consider the differences in the goals, responsibilities and priorities of the IT organization and the LOBs. First, to justify the IT organization, the user community must perceive that IT brings value to the company. This is not an easy task. Many business executives are not comfortable allocating a dollar value to technology-based business initiatives which may (or may not) result in increased revenues, reduced business risk, reduced time-to-market or reduced costs. Other benefits are purely intangible (limiting the ability to allocate a dollar value to these benefits). Examples of intangibles include high customer satisfaction, reduced customer turn-over and cost avoidance issues (e.g. litigation costs or regulatory penalties). The IT group is essentially running their own business as a service organization and must sell their services and justify their existence.

IT Organizations
Information Technology is a service organization and is the enabler of the operational processes that support the business. Without this service, the company is rendered ineffective and unable to meet customer and market demands. As business competitors continue to accelerate delivery of new products and services, and as market rules rapidly change, IT organizations find it difficult to quickly deliver changes to satisfy business users in a timely manner. As a result, IT groups today tend to maintain a tight control of business operations, assuming ownership and responsibility of any changes to the operational environment. This role goes beyond their role as an enabler and can hinder the ability of an LOB to react to changes in the market.

Information Technology organizations that function as the key drivers of operations (as opposed to just supporting them) become high risk and high cost to the business. This is one reason that Business Process Outsourcing (BPO) has become an attractive alternative for businesses. A BPO arrangement allows the organization to concentrate on core business processes while relying on external technology experts to keep an updated technical environment, execute operations tasks and retain highly-skilled personnel. If you are considering a BPO arrangement ensure the vendor knows you business very well and that you establish detailed Service Level Agreements (SLAs). The BPO contract must be well written with penalties against the vendor in the event SLAs are missed. This requires close vendor management to ensure performance metrics are achieved. Realistically, you should be measuring the performance of your internal IT service provider in a similar manner. However, monetary penalties against an internal service provider are usually not an option. Whether IT services are provided internal or external to your company, the LOBs must be the key drivers of operational changes.

The IT organization provides significant business knowledge as well as technical expertise. Due to their role in supporting operational activities, the IT organization becomes the expert in business functionality. This is an expected bi-product of IT's responsibilities, including:

1. Development and/or maintenance of the applications which support the business.
2. Executes all backend processing.
3. Maintains the technical infrastructure.
4. Understands the underlying data models.
5. Understands the integration points between disparate systems.

This is why IT can quickly assess the need for additional functionality and/or improvements to current operations. This is also the reason IT often recommends system changes without LOB involvement or approval. However, the IT organization must remain the enabler and service provider only. The LOBs must assume ownership of business functionality and operational processing.

Barriers Between IT & LOBs
Another inherent barrier between IT and LOBs, result from traditional corporate planning and budget cycles. These annual cycles define strategies and establish business performance metrics. However, the LOB may require a business process change within 60 days to react to changes in market conditions or increased competition. The IT organization may be unable to deliver changes in services due to a constrained budget established the year prior, nor able to meet a 60 day delivery schedule (requirements analysis alone may exceed a 60-day window). This conflict must be addressed to ensure goals can be achieved.

Overcoming the Challenges
How do you overcome the challenges presented by conflicting goals and objectives between IT and LOBs? The most significant step is to establish a strong relationship between the client (LOB) and the service provider (IT). Communication barriers must be broken. Establish communication forums to discuss and resolve current issues. Most companies rely on a Change Control Process to track system issues. This process facilitates the flow of system change requests from initialization to completion. This process is often perceived as a black-hole by the user community, which results in little or no action. However, if managed effectively, the Change Control Process is the best tool for the LOBs to monitor the performance of the IT service provider and to ensure that critical issues receive appropriate attention and accountability for resolution.

A strong partnership must exist between IT and the LOBs. The IT organization must be an integral part of business planning and share accountability for corporate financial performance (not just the LOBs). LOBs must take an active role in managing and monitoring operational activities. They must understand how the systems interrelate and how system changes impact their business. LOBs must assume ownership of projects requesting change to business operations. Remember, IT is only the enabler, providing a service to the business. Though IT is responsible for delivering the system changes, they should not be the "owner" of the initiative. Of course, this is not achievable without a strong relationship between IT and the LOBs.

In Summary
the LOBs have the final responsibility of a successful CIS implementation, enhancement project and daily operations. The end result must support business processes to ensure your corporate goals are achieved including sales targets, revenue growth, customer satisfaction and regulatory compliance. The project should not be driven by the IT organization. IT is only an enabler of the system. If the project is given to the IT group, the resulting solution may consist of the latest technology and fastest processing environment, yet contain functional gaps that may paralyze your business operations or significantly reduce your ability to react to market changes.

Curtis Tarr is a Manager and Senior Consultant for TMG Consulting. He has 14 years experience in the energy industry, providing IT management services to energy retailers, energy producers and RTO organizations. For more information on TMG Consulting visit www.tmgconsulting.com

UtiliPoint's Emerging Technologies IssueAlert articles are compiled based on the independent analysis of UtiliPoint consultants, researchers, and analysts. The opinions expressed in UtiliPoint's Emerging Technologies IssueAlert articles are not intended to predict financial performance of companies discussed, or to be the basis for investment decisions of any kind. UtiliPoint's sole purpose in publishing its Emerging Technologies IssueAlert articles is to Offer an independent perspective regarding the key events occurring in the energy industry, based on its long-standing reputation as an expert on energy issues.

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