Key organizational enablers for effective demand management

Chapter 18 IT Demand Management: Supply Management is Not Enough1 T he need for demand management is well established in business. Gentle (2007) explains, “In order to manage planning, production, and delivery, any properly run business has to be able to balance orders for its products and services (i.e., demand) with its ability to produce them in terms of resource and scheduling constraints (i.e., supply). Otherwise it might produce too little of what is required, too much of what is not required, or deliver late, or have problems with product quality or customer satisfaction.” Based on this, one might assume that IT organizations, being in the business of fulfilling organizational demand for their services, would have developed mature practices for managing IT demand. Nothing could be further from the truth. In fact, IT demand management has only recently been ranked as one of the top four priorities by IT leaders (Potter 2010). This lack of attention is explained by the fact that IT managers have been ­preoccupied with the supply side; that is, delivering products and services faster, better, and cheaper. Concentrating on the supply side makes perfect sense for two reasons: first, it allows IT organizations to concentrate on the things that they can actually control; and second, most IT organizations interpret any role in manipulating IT demand as a political minefield to be conscientiously avoided. As a result, demand management practices have been underutilized. A study by the Hackett Group as reported by Betts (2009) concurs: IT has traditionally been more focused on how to meet ever-growing demand than on implementing processes to curb that demand and ensure that the highest value work gets done. As a result, demand management techniques are less mature than other cost control techniques. What best explains the current interest is that IT demand management offers the means for IT organizations to work more effectively with their business partners. In fact, 1 This chapter is based on the authors’ previously published article, McKeen, J. D., H. A. Smith and P. Gonzalez, “Managing IT Demand.” Journal of Information Technology Management XXIII, no. 2 (2012): 17–28. Reproduced by permission of the Association of Management. 292 M18_MCKE0260_03_GE_C18.indd 292 12/3/14 8:53 PM Chapter 18 • IT Demand Management: Supply Management is Not Enough 293 some see demand management as the next frontier in IT cost efficiency (newScale 2010). They argue that focusing exclusively on the supply side of the equation without visibility into demand leaves IT organizations unable to perform effective capacity planning. The reality is that better demand management enables better supply management. In order to make good capacity plans, IT must understand the future needs of the business. According to newScale (2010), Demand management not only helps IT organizations to shape demand, it also helps them plan for demand and respond to changes in demand to meet business needs while controlling their IT budgets. This increased visibility into demand can help ensure more accurate and business-driven capacity planning. So, after years of squeezing incremental costs out of the supply side of IT only to see those gains disappear into the vortex of mushrooming demands, perhaps it is time to turn attention to the demand side and tackle some key questions such as “How critical is the need for demand management?” If there is interest/pressure for demand management, where is this pressure coming from? What are the key drivers behind the demand for IT services? How does demand management impact the existing business– IT relationship? What are the key steps toward managing IT demand? This chapter first examines the root causes of demand for IT services, the economics of demand management, and the importance of this issue. It then reviews a set of standard tools recommended for managing demand and concludes with identifying five key enablers vital for effective demand management. Understanding IT Demand In order to better understand demand management, the focus group first discussed the root causes of IT demand. One manager suggested that IT demand is driven by two forces in her organization: “IT initiatives that deliver new capability to the business in support of the broader corporate strategy, and IT initiatives that are required from within to sustain IT’s ability to deliver future work or new capabilities.” She explained, “Although these drivers mostly represent market and investor pressures, IT is also d ­ riving change with its own renewal goals after years of underfunding.” Another organization identified “historical autonomy, proliferation, lack of structured architecture and weak standards” as the key drivers of much of her organization’s current demand for IT services. This particular organization was deluged with duplicate and, in some cases, redundant applications that collectively produced a “black hole” for IT resources. Clearly IT demand needs to be considered from a development as well as an operational point of view. From an operational perspective, organizations need to “run” the business and this translates into baseline demand for IT. Organizations also need to “maintain” their IT assets and this too represents significant demand for IT resources. From a development perspective, IT is called upon to deliver new capability to enable the business to remain competitive in the marketplace. So, whether it is a “keep the lights on” or a “new channel to market” initiative, both place demands on (and compete for) available IT resources. One organization simply classifies IT demand as discretionary (i.e., strategic), maintenance (i.e., keep the lights on), and M18_MCKE0260_03_GE_C18.indd 293 12/3/14 8:53 PM 294 Section IV • IT Portfolio Development and Management regulatory, which his organization light-heartedly refers to as “I want,” “I need,” and “I must,” respectively.