Organizing IT for Excellent Service

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Building IT around the business services it provides, rather than around assets or activities, pays off.

Imagine how you’d react if you went to a store to buy a refrigerator and the salesperson told you that “Compressors are on the second floor, insulation is on the third floor and shelving is on the fourth floor.”

You would probably turn around and walk out the door. Yet, that’s exactly how most IT organizations treat their internal customers. Instead of being organized to offer holistic services, IT shops are often structured based on their assets or capabilities. Business managers seeking IT services are likely to hear something that basically says, “Applications are on the second floor, servers are on the third floor and networking is on the fourth floor.”

No wonder business users are frustrated with IT. Just as consumers want to buy a whole refrigerator with all of its parts and warranties, so too do business users want one place to go for all their IT needs—including the underlying components. This article discusses the potential options and benefits of building your service-oriented IT organization around the business services that IT provides, rather than around its assets or activities.

Business services provided by IT (e.g., e-mail, credit card processing, claims processing) are often listed in a services catalog and expressed in business terms. Mature catalogs also list the unit price for each service (e.g., $X per e-mail ID per month, $Y per paycheck). Once an IT organization has developed such a business-oriented services catalog, it needs to organize itself to deliver those services with excellence.

Deloitte Consulting LLP researched IT organizations in various industries to assess the adoption of the service-oriented IT model. The findings demonstrate that IT shops are gradually transitioning toward service orientation, and with each step, they are reaping important benefits.

For historical reasons, most organizations have structured their IT departments in one of three ways:

1. organized by technology assets, such as data centers, networks and applications;

2. organized by internal capability or activity, such as analysis, programming and operations; and

3. organized by business function served, such as finance, HR and manufacturing.

These organizational models reflect an evolutionary stage similar to those that manufacturing organizations followed at the beginning of the industrial era. Large firms were structured based on the specialized activities required (such as research, engineering, manufacturing and distribution)—to provide their products. Alternatively, they were structured along product components (such as motors, electronics, displays and casings).

In such organizations, each business unit operated largely independently, with its own operating and profit-and-loss metrics. The challenge was to orchestrate the various functions in order to provide a usable product or service to the customer.

IT organizations often adopt a similar structure, organized by technology assets or capabilities. These models enable business units to easily share technology components and capabilities with one another. However, they require business units to be skilled in negotiating for, and integrating with, the support provided by different departments within IT.

For example, service-level agreements (SLAs) may be created based on business-facing applications in isolation from the supporting infrastructure and other professional service components. The drawbacks of this approach include the promotion of silos within IT, the difficulty business areas face in determining the full range of IT services they will require, and the lack of transparency of the business value of technology.

To deliver end-to-end IT services to the business, the IT organization must combine the relevant IT components into holistic “products” that are described in terms that business users readily understand. The service catalog is a way to provide this kind of business-focused IT support information. For example, it may list e-mail as an IT-provided business service that includes applications, network and data center support, desktop services, voice and communication facilities, and storage management.

This article was originally published on 2011-04-06
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