Architect Your IT Portfolio
Use technology architecture to reduce costs and avoid redundancy.
by Jeff Tash

December 6, 2004

If I could show you how to reduce your IT organization's technology portfolio costs by at least 10 percent, would you be interested? You can achieve these savings by following a simple pragmatic approach.

First, focus on your technology architecture (see "Harness Your Technology Architecture"). Technology architecture is a formal way of organizing, classifying, and categorizing your technology investments. Think of it as a taxonomy, roadmap, or blueprint. Generally, technology architecture is depicted using a three-layer model. The bottom layer corresponds to infrastructure, the middle layer to applications, and the top layer to data.

Once you've organized your technology portfolio into a set of meaningful classification hierarchies, the next step is to establish and communicate technology standards. Finally, you want to measure how well your technology portfolio complies with your governance standards.

By following the above process, the resulting combination of product consolidation and standardization will, in most cases, decrease your overall technology portfolio expenses by between 10 and 25 percent.

All too often an enterprise's IT investments reflect an uncoordinated collection of too many products, most of which were purchased over an extremely long period of time, by numerous people, from many different parts of the organization. Unfortunately, these assets often become liabilities when a business requires agility.

Who in your enterprise has the fiduciary responsibility to determine whether existing technology investments have been, and still are, cost effective? Who is measuring the total cost of ownership (TCO) for technology assets? How, and to whom, is TCO information reported?

Even though all large enterprises spend significant amounts of money on IT year after year, few business executives truly understand what their enterprise actually owns in terms of technology investments.

The most fundamental problem facing IT today is the same fundamental problem that has plagued IT since the dawn of the information age: IT leaders seem to have an innate inability to communicate with the business people they serve.

If you work in IT, stop and role-play for a moment. Imagine yourself as a nontechnical businessperson. In order for you to communicate with somebody else about IT, you need to have in your head some kind of cognitive model that serves as a roadmap guiding your understanding of IT.

For years, IT has repeatedly failed to explain to business executives why and how IT is like nothing else in their business universe. Nevertheless, IT has been the primary springboard from which most productivity gains have been, and continue to be, attained. This is true across virtually every facet of every industry. Similarly, IT is still the best weapon a business can use to achieve a competitive advantage. IT is fueled by multiple technologies, each advancing along exponential growth curves (the combined geometric explosion of Moore's Law, bandwidth expansion, and store-width growth is awesome).

Since the turn of the millennium, there has been a major upheaval in the relationship between IT and business leaders. In 2000, approximately 45 percent of all capital expenditures were spent on IT investments. Then suddenly, by mid-2003, the IT spending spigot was shut off. The IT industry, as a result, suffered the most severe economic recession in its 50-year history.

Power has shifted away from CIOs and toward individual lines of business. Many surviving CIOs now mistakenly believe business people know what they want. Nothing could be further from the truth. As a result, problems get defined in terms of available solutions. And so we've seen a huge growth in the commercial off-the-shelf (COTS) applications market from vendors like SAP and PeopleSoft.

IT is constantly bombarded by paradigm shifts. The waste and inefficiency associated with IT technology investments is typically staggeringly high. The main culprit is overlapping product functionality. Nowadays, it's the rule rather than the exception that companies own multiple database managers, multiple e-mail systems, and multiple accounts receivable applications.

Owning redundant products is indeed expensive. Each product involves its own acquisition costs and annual maintenance fees, plus each tool requires its own unique set of nontransferable technical support skills.

The primary challenge is clustering together products that offer redundant overlapping functionality. Additionally, IT needs to greatly improve and simplify how technology standards are communicated and explained to the diverse constituency of people who use, develop, operate, manage, evaluate, or purchase technology offerings.

Most importantly, IT leadership is required now more than ever to provide a technology architecture that can increase understanding and improve communication. There must be a dialog. There must be a common vocabulary. There must be a shared vision. Technology is as important to an enterprise as money, people, and property. Unfortunately, CIOs' track records for managing technology are generally quite dismal, especially when compared to how well CFOs manage money, or CHROs manage people, or COOs manage property.

IT has a long way to go. I recommend starting with a focus on technology architecture, portfolio, and standards.

About the Author
Jeff Tash is CEO of Flashmap Systems. He's also the creator of the Flashmap Roadmap series of wall posters that cover IT infrastructure, business intelligence, application development, and commercial off-the-shelf (COTS) applications. Register on Jeff's personal Web site, www.ITscout.org, for interactive versions of Jeff's roadmap models.