Your investments in IT infrastructure are going nowhere fast

I don’t care if you are developing mobile apps or extracting minerals. You might be a young start-up, a national government body or a global corporate - it doesn’t matter. If you make bad decisions about your IT infrastructure you will be saddled with a burden that sucks up money, puts obstacles in the way of innovation and will turn away customers, partners and your best people. You would think that organisations would do all they can to help their CIO avoid such a fate but, unfortunately, you would be wrong.

Death by 10,000 cuts

IT infrastructure is dangerous because it is the foundation for other IT services and, ultimately, the products and services you provide to your end customers. Each $1 put into IT infrastructure supports $100 of other IT services and $10,000 of revenue. These kinds of multipliers make it hard for businesses to make good decisions and support their CIO.

One way decisions become distorted is due to the way the multipliers create a bias in favour of the status quo. The risk to customer services and revenues are often thousands of times greater than the direct costs of the infrastructure change and are almost impossible to accept. A basic financial assessment will always favour maintaining established infrastructure long after it has ceased to be a real asset to the organisation.

Unfortunately, the prospect of new customer revenues or efficiency savings doesn’t help to make a positive case for infrastructure investment either. Better IT infrastructure might be an enabler for launching a new product or entering a new market but there are so many other dependencies. The direct financial return on IT infrastructure investment is typically negative. Adding short-term risks into the analysis can often make things appear worse as, almost by definition, the organisation will not have deep technical experience and a delivery track record with the new tools.

The impact of these distortions is cumulative. As more and more financial and intellectual capital is put into the current infrastructure it gets more difficult to set aside capacity to develop alternative options. Eventually, dependence on a few knowledgeable staff and some reluctant suppliers can grow into a substantial threat to the organisation. Unfortunately, it is hard to balance this threat against the, more obvious, financial and operational risks involved with moving to something new. Sometimes, it takes a severe loss of service to shock an organisation into changing tack - potentially with a new CIO.

Please don’t assume this is only a problem with traditional IT equipment and facilities. Many organisations struggle with software infrastructure such as their finance and HR systems. Even pioneering adopters of radical new business models and cloud computing cannot sidestep infrastructure issues altogether. They might not worry about data centres and servers but intellectual and intangible infrastructure, such as technical know-how, is just as important as the physical sort. Just as spending money on assets you can’t use is a bad idea so is putting effort into a development platform you can’t exploit. These softer kinds of infrastructure can take longer to change if you make a mistake and so CIOs need to manage the time and talent of their teams even more carefully than their organisation’s money.

Avoiding the Return on Investment Trap

What can CIOs do to avoid getting trapped like this? The first step is to acknowledge the source of the problem - and it is not technology. There are technical and commercial considerations (e.g. can we acquire the skills to service the infrastructure components that we are considering) but these are constantly changing. It used to be said that no one ever got fired for choosing IBM. Today the safe option is AWS but, tomorrow, it will be someone else. The enduring problem is how executive teams collectively make decisions about where to invest money and effort. CIOs needs to focus on fixing the scales organisations use to make these decisions, which generally put too much faith in financial evaluation and are too optimistic about other kinds of risk. IT infrastructure decisions need to be based on plans to exploit opportunities and not on a financial return on investment.

The next step is to develop or acquire the right capabilities and tools. These two aspects go hand-in-hand. Capability without good tools can lead to duplication, conflict or even chaos. Tools without capability usually results in waste, delay and bureaucracy. Leaders need to be able to preserve the key principles of things like IT governance, enterprise architecture, programme management and business cases without being slave to a particular method.

If you begin to see the following signs you can have some confidence that you are moving in the right direction and not heading into an IT infrastructure crisis.

• IT infrastructure is visible in the register of operational risks which are managed by senior executives. IT specialists are involved in risk mitigation but do not own the risks.
• IT asset management is not just a financial process but includes active consideration of asset and product life-cycles.
• There are sufficient supporting services, including marketing and education, to make sure the IT infrastructure assets are fully exploited.
• The IT architecture manages, rather than eliminates, diversity in IT infrastructure. Architecture controls prompt the right questions rather than insisting on predetermined answers.
• Long range financial and resource plans include decommissioning your current infrastructure. It is not reasonable to assume that any of it will last forever.

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@swardley has some useful tools for making sense of architecture choices.