Why are some firms able to deliver new IT projects and innovations three times faster than their competition with the same IT budget?
Today every company is a technology company. Technology has invaded almost every aspect of our businesses and personal lives with the seemingly simplistic idea of making us more efficient, helping us find productivity gains, or enabling us to unlock innovations that provide a market advantage, find ways of differentiating ourselves, and stay one step ahead of the competition.
So, is it a company's underlying philosophy on technology innovation that makes it a better innovator than another? There are indeed some companies that have built an innovative mindset into their organizations. Others see technology, at best, as a necessary evil and, at worst, a hole in the floor that, like a bad Las Vegas slot machine, will take all the money anyone cares to give it and never payout.
Over the years, I have met with hundreds of organizations that want and invest in innovation, talking the talk and backing it up with resources, but that are still serially unsuccessful at achieving their goal. Meanwhile, some of their peers, seemingly without a focus on innovation, can crank out major and minor approvements continually. Why?
If it is not budget or a focus on innovation or lack thereof, what is it? More importantly, is there any report or metric that can be monitored to identify the problem? As it turns out, the answer is yes.
Last year's actual IT spend in both dollars and time can be a good indicator of just how an organization is doing on innovation. But wait, didn't we say that budget makes no difference? Yes, the key is looking at how the budget was spent. We recommend looking at how much time and money was spent managing the IT infrastructure in place vs. allocated to new projects. Looking at labor specifically, you’ll want to understand the correlation between structured and unstructured work time.
But what is unstructured work? The short answer is it’s any work that was not scheduled, including support incidents, like broken printers, employees not being able to log in, someone forgetting their password, etc. All the issues that take priority that need to be addressed to keep employees productive and the organization moving forward.
Okay… so what is structured work? It’s any work that is scheduled, like projects.
The rule of thumb generally has been that unstructured work is less predictable and almost always takes precedence over structured work. This is valid for IT departments where the support organization is separate from the project teams, but the impact may be reduced.
For everyone else, if there is an end-user with a critical support issue and the only resource available is working on completing a project, the project will almost universally stop to address the critical issue. Time immediately shifts away from the planned project work to unplanned operational support, which is important to understand as we continue.
Looking at overall IT spend for the previous year and how IT time was allocated, normalizing for massive one-time purchases, we ideally want 70 percent or less of the time and resources spent maintaining legacy infrastructure. This guideline, however, is not an endorsement of simply skipping ongoing maintenance expenses as that builds technical debt, potentially creating more of the problem we are trying to prevent.
Organizations that can stay on top of their refresh cycles, rotating out end-of-life equipment and upgrading applications and operating systems before they reach end of life/end of support typically experience a direct correlation in reduced time spent maintaining these systems. By keeping deferred maintenance and technical debt in check, time and resources spent in support of these systems are typically reduced, keeping the overall time and resource spend closer to 60-70 percent of IT's resources, leaving around 30 percent of IT's resources focused on delivering new projects and innovations to the organization.
As technical debt, system age, and deferred maintenance increase, so does time required to maintain these systems, borrowing from the future, and forcing a shift of more dollars and resources to maintain existing systems. Forward-facing innovation, growth, and project completion times begin to suffer.
Organizations that reach a ratio of 90 percent of IT resources going to maintenance and support of existing systems with only 10 percent of resources available for forward-looking innovation and projects typically carry the most technical debt.
The outward evidence of a 90/10 ratio may be a lack of hardware refresh cycles, PCs averaging more than eight years old, copiers and fax machines with a yellow patina to their once grey or white plastic cases, etc.
All of which takes us back to the original point. Organizations that can keep maintenance and support to 70 percent of their IT budget or less can spend 30 percent on innovation vs. 10 percent for those organizations carrying a higher technical debt. With the same IT budget and project load, the company with 70 percent of their IT budget/time going to maintenance can accomplish in three years what it takes the company with 90 percent of their budget/time going to maintenance costs 10 years to achieve.
Whitehat Virtual helps companies identify and solve these problems. Discover how Whitehat can help your organization get back on the road to innovation and help level the playing field with the benefits of a managed services model. Reach out today to see how we can help.