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April 4, 2004

Dell CIO encourages IT departments to prove their worth

IT departments need to be prepared to measure their performance and present it in terms the business can understand if they are to prove their worth and retain a seat on the board, according to Dell Inc's chief information officer.

By CBR Staff Writer

Speaking to ComputerWire, Randy Mott said that company executives and the IT department also have to learn to understand each other if businesses are to achieve the optimum efficiency from their IT investments.

Mott knows something about the efficient use of IT resources. He has been CIO of Round Rock, Texas-based Dell since March 2000, during which time the company has continued and increased its famous efficiency drive. The company had operating expenses of just 9.7% of its $41.4bn revenue in the year ended January 31, 2004, down from 9.9% of its $35.4bn revenue the previous year.

This is a figure the company expects to reduce to just 8% over the forthcoming years. Meanwhile, the percentage of revenue spent on IT is also being forced down. Four years ago 1.91% of Dell revenue was spent on IT. Today that figure is 1.44%. Over the next four-to-five years Dell wants to reduce it to just 1%. Mott is even more aggressive, aiming to achieve that in only two-to-three.

Part of that increase in efficiency has come from increasing the percentage of Dell’s IT staff focused on development rather than maintenance from 32% three years ago to 60% today. This has been achieved by measuring everything the IT department does by business metrics, said Mott, and identifying where money is being spent on mundane tasks.

This past year we’ve had over 480 projects delivered to the business. Companies that view IT as an enabler to the whole company rather than one big project are the ones who get it. Even in companies where that’s not the case there’s some of the same fundamentals to have in place, he said, defining those fundamentals as measurement, managing IT and reporting on IT.

You’ve got to find the right metric that works in your company that gives IT some revenue, he said. You can’t have an organization that’s only a cost base. Based on Dell’s metric, Mott’s team delivered $1.1bn in annualized benefits to the company last year, a significant return and one that is worth proving if the IT department is to build trust, he said.

It’s one thing to have the benefit, but if you can’t see it at the P&L what are you spending money on IT for? If it’s a mystery you’ll have a hard time trying to convince anybody about it, he said. To be treated like a business you need to act like a business. You need to figure out what the metrics of IT are and be accountable for that.

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The role of the CIO and the IT department is a controversial one at the moment with many CIOs being forced out of executive decision-making in favor of chief financial officers. Mott maintained that it is those companies that understand the role of IT that will be most successful.

Companies that recognize the value of IT in terms of competitive advantage, those companies tend to have an IT person as part of the executive team to ensure that the IT is involved in aligning the business and not just an order-taker, Mott said. It comes down to that being a core competency of the company.

That is not to say that the IT department should be wagging the dog, however, and Mott was quick to point out that IT departments also need to understand the business. It’s certainly not IT as a leader, it’s IT as an enabler of what they’re already doing as a company, he said.

This article is based on material originally published by ComputerWire

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