Budget Blowout -- Strategies Companies Use to Deal with IT

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November 2001
In This Issue:

A flip through the business section of the newspaper is a pretty depressing ordeal these days. Some big name companies and some of the most innovative IT departments have recently had to deal with dreaded words like "axed" and "sacked." IT departments are now looking for the best strategies to help them deal with cutbacks and the best tactics to avoid blowouts.

With this in mind and with budget time approaching for companies, many readers of Cutter Benchmark Review may be reevaluating their business strategies and the direction that their IT departments will be taking in the upcoming year. This edition of Cutter Benchmark Review will focus on the strategies that companies are implementing to get the most value from their IT department. We examine how companies are aligning their IT strategies with their business strategies and how they are structuring their IT departments to achieve this goal. We then look at how project management impacts the bottom line and finish with an overview of how companies who have outsourced IT overseas have fared.

The first article, "With Business Strategy -- and Without" by Cutter Consortium Senior Consultant Chris Pickering, looks at how companies are aligning their business strategies with their IT strategies. Pickering explores whether companies have formal business strategies and how they are structured. He then looks at whether companies have a formal IT strategy and how well the two are aligned. The article concludes with an examination of the attitude that corporations take to their IT departments.

The next article, "Facets of Decentralized IT," also by Chris Pickering, considers the strategies that companies employ to get the most from their IT departments. He examines the way companies are structuring their IT departments -- in particular whether they have business units with independent IT operations. This article also looks at the important area of funding for IT: Pickering explores how IT infrastructure is charged and how IT projects are funded. He makes the assertion that companies should avoid swinging between centralization and decentralization based on industry mood and should choose the best method for their organization.

The third article, "Immature Project Management Practices Lead to Delays and Expense on e-Projects" by Cutter Consortium Senior Consultant Alexandre Rodrigues, looks at the impact that project management has on the business. He argues that scope turbulence in the course of an e-project leads to cost overruns, failure to meet schedules, and lowered quality. It is management's ability to cope with scope turbulence that impacts the business by reducing these problems.

Cutter Consortium's research into offshore outsourcing is scrutinized by Cutter Consortium Senior Consultant Mike Epner in "Managing Offshore Outsourcing." Epner examines the recent growth in offshore outsourcing. He looks at the number of companies that are outsourcing with nondomestic service providers and determines which offshore companies are winning these contracts. As part of his investigation, he interviews Deependra Moitra, a general manager of Lucent Technologies in Bangalore, India. Moitra stresses the importance of strategy when it comes to offshore outsourcing. He also explores the issue of software maturity -- of great concern to Indian software companies.

Epner then delves into companies' satisfaction with their offshore outsourcing programs. He explores the use of a little-known aspect of the developing Indian software industry -- the People Capability Maturity Model (P-CMM). The P-CMM is designed to guide the development of human resource management in order to execute business objectives. The offshore outsourcing industry is growing, and Epner argues that the challenges and potential impacts of failures are growing along with it.

This issue of Cutter Benchmark Review is designed to provide you with an overview of several IT strategies. Each of these IT strategies -- whether centralized, decentralized, insourced, or outsourced -- has unique advantages and disadvantages to the business. Your challenge is to identify what's most beneficial to your organization.

David Gijsbers, Editor