14 June 2009 • 1:42 pm

The IT Change Agenda – Part I: Cost and Quality

In 2001, I developed a model for organizing the change agenda for IT organizations that was published in Harvard Business School’s Balanced Scorecard Report. The model arose from observations of the many IT organizations with whom I had been consulting, and described four broad domains of desired change in IT organizations: Cost, Quality, Agility, and Innovation. I had observed that in older, more traditional IT organizations, the main concern of IT leaders was to lower (or at least manage) costs, and to improve quality. By contrast, in those enterprises where IT was essential to the value proposition (e.g. firms born during the “dot-com” era), IT leaders tended to focus more on the agility of the IT organization and infrastructure, and their ability to innovate with technology on behalf of the parent firm.

In a future post, I’ll discuss the sometime tense relationship between IT and business leaders arising from divergent expectations for performance in each of these domains. But first, let’s look more closely at these four broad domains, which have proven an especially useful tool when guiding IT leaders to identify the strategic objectives. Here, we look at Cost and Quality. Next: Agility and Innovation.


When asked about the information technology organization, senior executives are genuinely puzzled at cost increases over time. They certainly understand that some costs for information technology, especially hardware, goes down over time. Yet IT spending in the enterprise goes up continuously, and while they intuitively understand the benefits of information technology they lack a quantified understanding of those benefits. They’re frustrated with the IT leadership who construct complex, and at times incomprehensible, models of IT ROI (return on investment).

As a result, IT executives feel continuous pressure from senior executives to reduce overall spending. They’re painfully aware that any dollar not spent on information technology drops to the bottom line profitability for the firm. IT executives aggressively pursue cost savings where they are available, but they have little control over the increased demand for technology services from business unit managers (BUMs). So the IT executives are caught in the middle of a squeeze: pressure from senior executives to reduce spending, in almost direct opposition to pressure from BUMs to increase the provision of technology services, without regard to the impact on the firm’s aggregate spending on IT.


The domain of quality in information technology performance is a moving target. BUMs are painfully aware of the implications of low quality and service delivery. Often the failure of a single component such as a network, a server, a database for, or another piece of critical hardware results in periods of reduced or no productivity for large numbers of end-users and customers. In organizations where fundamental availability is an issue, the predominant topic of discussion between ITO leadership and BUMs is system availability.

When systems become more reliable, expectations for IT quality diverge; while nearly everyone is concerned about system security and data integrity, some BUMs mingle the domains of cost and quality, describing a belief that a high quality system is the one that costs them less. Others are focused on the idea of responsiveness. This can be as simple as how quickly is the phone answered when IT receives a phone call for support, the time it takes to actually resolve an end-user’s problem (such as a failure of a desktop computer), or a richer set of expectations about functionality of applications, ability to move information between disparate systems, and usability of end-user interfaces such as web sites. Unfortunately for IT leadership, the satisfaction of one quality issue does little to satisfy the overall expectations of quality; the BUM or the end-user simply shifts attention to their next most important issue.

Cost and Quality are the Domains of Competency

Satisfactory performance in the domains of Cost and Quality is merely hygienic; it is expected of every competent IT organization. But achieving objectives for Cost and Quality are absolutely necessary, but not sufficient, to realize the full strategic potential of IT in the enterprise.

Next: Agility and Innovation

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