A Chinese proverb holds that to do good work one must first have good tools. Madeleine Fackler readily agrees. “Our whole job in IT is enabling the automation of the business,” says the CIO of LifeScan, a unit of Johnson & Johnson that makes glucose-monitoring systems. “I am responsible for a huge budget, manage thousands of assets, and oversee spending on hundreds of projects. From a departmental perspective, I am second or third behind manufacturing, marketing, and advertising in the dollars I spend on outside vendors.
“Yet,” Fackler adds, “I have had virtually no good tools to do my job.” None, that is, aside from Microsoft Excel and Microsoft Project, two PC programs that have long served many IT shops as the main bulwarks against anarchy. “It’s fascinating,” Fackler says of this dearth of IT-specific management tools. “And crazy. Our world is pretty complex.”
Indeed. Fortunately, help appears to be on the way. A growing raft of software makers — from start-ups to well-established firms, all eyeing a potentially huge opportunity — are scrambling to give CIOs and CFOs greatly improved visibility into — and control over — IT. Much of the data needed to accomplish this already exists, but it is typically scattered across the proverbial silos of information: disparate databases maintained by disparate management systems, with no easy way to assess the big picture. But now, software makers are trying to bring this data together, marry it to mainstream business-intelligence (BI) analysis techniques, and provide a depth and quality of financial understanding that just has not been attainable with stacks of ad-hoc spreadsheets. “Think of it as a consolidated system of record for IT,” says AMR Research analyst Dennis Gaughan.
No software maker has all the pieces in hand yet, but many are converging on the opportunity. Start-ups such as Adaptive, BDNA, Blazent, and Relicore have introduced products that not only capture a user’s full inventory of hardware boxes and software licenses, but also provide tools for analyzing each asset’s current and historical usage, its associated costs, and the applications and business processes that rely on it. These products can help IT managers better understand the costs of running any specific software application now or in the future, perhaps after a major extension has been completed. They can also help identify idle gear and unused software, and help IT managers enforce standardization on selected brands and negotiate better prices.
Another group of companies, including New-Scale, Centrata, and Euclid, aims to help IT departments organize themselves around delivering predefined, fixed-price services. Through strict monitoring of a service, such as provisioning new employees with PCs, network access, and E-mail accounts, IT may substantially improve its internal efficiency and perhaps even fend off pressure from above to bring in outsourced help.
Meanwhile, ITM Software and Business Engine, both venture-backed start-ups, recently bolstered their suites of IT management tools with analytic facilities licensed from BI heavyweights Hyperion and Cognos, respectively. Even Microsoft, already the top dog in project-management software, is not sitting idle. It has begun to promote its Project Server and .Net integration scheme as a platform for tying together a spectrum of tools, such as programs that can calculate the optimum mix of spending across a portfolio of development projects.
Collectively, this amounts to a new breed of software that directly addresses hard-core business and finance issues associated with IT investment, going well beyond products that simply gauge the health of hardware or the productivity of programmers. Analysts have dubbed these programs “ERP for IT,” “IT resource-planning systems,” or “integrated IT management.” Their common goal: give CIOs a cohesive set of tools that provides a “single source of truth” about all aspects of IT, particularly spending — past, present, and future.
Corporate IT warrants powerful management tools if only because of the sheer number and mind-numbing complexity of its parts: thousands of hardware and software assets, many of which carry costly maintenance contracts and complex licenses; scores, if not hundreds, of intensive design and engineering projects, all competing for scarce talent and other resources; constantly changing demands from business-unit “customers” who all compete for IT’s attention; an increasing reliance on outsourced help; and a constant flow of external pressures, from Sarbanes-Oxley to the quest for strategic alignment.
The ideal IT resource-planning system would keep track of all these entities and constraints — and, most important, how they relate to one another. It would also provide a way to analyze spending by project, business unit, vendor, or any other view that might prove useful, just as BI tools do now for virtually every other group in the corporation.
Traditionally, says Steve O’Connor, co-founder and vice president of software products at ITM Software, BI companies have sold their wares to the people running the business lines: the vice president of sales, the head of manufacturing, the CFO. “Vendors tried to neutralize the CIO, who was brought in only as an evaluator,” he says. But now, “there is an opportunity to go back and sell these products to IT, which needs tools to measure business performance as much as operational performance.”
As Phil Murphy, a principal analyst at Forrester Research, sees it, this emerging integrated IT management system might ultimately provide a level of analytic detail that could finally help IT “stop looking like incompetent managers” to their business peers. “If I’m in charge of a business unit reporting to a vice president,” he explains, “my M.O. is to get the most I can out of IT at the expense of my peers. I want it all, plus 10 percent. And this puts me in conflict with my peers and IT. The vice president of that business unit, on the other hand, wants to maintain the right balance across all those business units to ensure that the R&D group gets the right percent of the budget as approved to the human resources group. But to do that, IT needs the ability to show each of them where their money is going. Right now, IT can do this only at a gross level.”
Says AMR’s Gaughan, “We are seeing more CIOs coming from the business side of the house. And they’re saying, ‘Where are the tools I need to manage all this complexity? I don’t have visibility into what’s being done.’” For the most part, he says, IT has missed out on the very BI tools, such as dashboards and balanced scorecards, that it has been providing so successfully to CFOs and line executives all these years. “There’s a huge gap, and Excel can’t cover it anymore,” Gaughan says.
And neither, it appears, can traditional financial and BI systems. “I have hundreds of systems and hundreds of projects to manage,” says Charlie Curcio, CFO of IT at Axa Financial. “Typical G/Ls do not easily delve into that level of detail. I need to set up matrices of information that show what’s going on by individual IT manager, the different areas of the business they’re supporting, and the nature of their expenses.” To accomplish that, Curcio has actually turned to a business-performance management (BPM) tool called TM1, supplied by Applix. But because it was not designed specifically for IT, he says, the software has required some customization.
So far, only a few firms have set out to combine more than a handful of IT business-management functions in a single software product. ITM Software offers a five-application suite centered around a relational-data model. The company designed this model to ensure that each of its applications, including the Hyperion-supplied analytics, has immediate access to any updates related to IT personnel, assets, vendor relationships, proposed and current development projects, financial budgets and expense data, and governance and compliance issues.
LifeScan is one of ITM’s early, and pleased, customers. Although the CFO was not involved in choosing ITM, Fackler says that he and his staff, as well as her own, have already made good use of the information that the tool provides. Fackler views the overall working relationship between her team and the finance department as one of her most important. She says she appreciates having a tool that lets her more quickly address questions raised by finance.
Another suite provider is Business Engine, which can trace its roots to 1986, when it launched software that helped aerospace, pharmaceutical, and financial services companies plan and manage complex research and development projects. The firm later narrowed its focus to IT, using project planning as a platform on which to add budgeting and other capabilities.
Lehman Bros. is one of several hundred companies relying on Business Engine’s software to monitor and analyze its IT budget spend across its IT project portfolio. Sharing data with 12 other systems inside Lehman, the software captures many attributes of each project and enables rich analyses that weren’t possible in the past, when the company managed IT spending using a general-purpose financial-accounting system. “It shows us hardware and software spend, automatically calculates depreciation and amortization, and feeds the procurement system, the general ledger, and the systems that generate invoices,” says Brian Greenberg, a vice president in Lehman’s IT group.
Mercury Interactive is after the same market with a competing suite called IT Governance Center. And so is Enamics, with a set of “business technology management” services that include processes, templates, and analytics.
As in all categories of software, there is a tension between the all-in-one suites and the narrowly focused, best-of-breed products. The former integrate a variety of functions, which can make them easier to use (though it may take some work to populate their databases). The latter, with dedicated development teams behind them, often evolve more quickly and may show benefits faster.
Analysts agree that customers have plenty to gain from a unified tool set based on a shared view of IT resources and activities. “The suite is absolutely the endgame here,” says Murphy at Forrester. Over time, major players like IBM, and perhaps even ERP vendors such as SAP and Oracle, will likely acquire point products to create their own suites for IT management. In the meantime, though, the specialist firms are continuing to work out ways for their products to share information with one another. “The big gripe is double entry of data,” says Greenberg at Lehman Bros. “Don’t make me tell another system data it already knows.”
If there is a major weakness in these emerging IT-management tools, some observers say, it is their heavy, almost exclusive focus on discretionary spending — that is, managing development projects — instead of on the maintenance activities that actually consume the bulk of most IT budgets. Says Charles T. Betz, author of the erp4it.com Weblog, “these products have no story to tell about bringing efficiency to maintenance-related spending. It’s really a challenge for them. But maintenance is the biggest IT risk for many companies. Some are looking at maintenance expenses that actually exceed their entire IT budgets, leaving them no money [with which] to innovate.”
This lopsided focus is largely the legacy of a long-standing project-centric worldview. Using portfolio-optimization techniques to decide how much funding to give to IT projects is now common and has been seized upon by software vendors. AXA Financial, for instance, relies on software from UMT “to prioritize projects in a rational, objective way,” says CFO Curcio. “It’s an interactive process. We’re constantly adjusting as we decide if we have more or less money to spend.” And close to 20 companies, including Business Engine, ITM, Mercury, Niku, ProSight, and even SAP, now sell similar products.
But Forrester and other consultants say that “application portfolio management” is getting more attention. Some new products attempt to discover all software objects and hardware boxes in an enterprise and map their many interdependencies, while other products scan an application’s source code and, with some degree of accuracy, determine its structure and complexity. In theory, at least, this information can provide transparency that would be helpful to projects focused on integrating applications, as well as to the ongoing maintenance of the systems involved in such tasks. It can also help, of course, with charge-backs to the business units in an enterprise, providing reports that show each unit exactly what assets are deployed in its name, the number and degree of changes made to its systems, and other costs.
“I’m a fairly curmudgeonly type,” says Murphy at Forrester. “I’ve been in IT for 23 years and I don’t get excited too easily. But I’m highly optimistic about these new tools. It won’t happen overnight, but it’s going to happen sooner rather than later.”
Murphy says that companies should avoid viewing this software, still in its “preconception phase,” as a cure-all. First, he advises, have a project-management office in place, or at least feel good about your company’s approach to IT oversight. Start small, with an obvious area of weakness, and extend the use of this software over time. Large companies have the most to gain from these new applications, he says, and at smaller firms, a focus on improving IT-management processes should achieve the same results.