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19 July 2005

Demand side management in IT

By Andrew Clifford

You can only make order-of-magnitude savings in IT costs by reducing demand for IT. You need to focus less on what changes are required and how they will be carried out; and concentrate more on why you believe the changes are necessary.

Let's consider a simple model for change. Change involves establishing three things:

  • Demand: why we need to change
  • Requirements: what we need change
  • Supply: how we will change

These need to be established in order. You've got to know why you're trying to change before you can establish what change is required. And you have to know what change is required before you can work out how.

In IT, we are very good at the hows of supply. The performance and capacity of IT hardware increases every year. There is an ever-growing supply of packaged applications. We have developed commercial models to improve the efficiency and flexibility of IT supply, such as hardware rentals, hosted services, and all manner of outsourcing.

But we are very bad at the whys of demand. In IT, our idea of demand is to get a list of requirements that someone will sign off. It is very much a suppliers' view of demand. We have little idea of how IT brings benefit to the organisation; we establish the what without ever really understanding the why.

This lack of understanding leads to two demand side inefficiencies: unrequitable demand, and supply-induced demand.

Unrequitable demand is when we look to IT for benefits that it can not deliver. We think IT can solve commercial or political problems, such as problems with customer perception, or difficulties with organisational structure. If we don't know what to do, we put in a strategic IT system. But this type of demand is ignorant of what IT is and does. This demand can not deliver value.

Some supply-induced demand is overt. IT suppliers (including in-house IT departments) convince their customers of additional requirements for capacity or functions. Without a good model of how the IT would bring benefit, the customer can not distinguish between the necessary and the excessive.

Some supply-induced pressures are more subtle. IT is an immature area, and all sorts of disciplines, such as project managers, architects, designers and technicians, are trying to establish their professional position. Every project is an opportunity to "do things right" and "show the way". But this well-meaning professionalism adds to the what and the how of the activity, without reference to the why.

We need techniques which we can apply in our day-to-day work to identify and avoid demand-side inefficiencies. As a starter, here are three techniques which I hope to describe over the coming weeks.

  • Requirements classification. A simple analysis which separates the why from the how provides much simpler and effective statements of requirements.
  • Value modelling. This simple analysis establishes whether IT activity is likely to deliver value.
  • IT delegation. Rewriting requirements as a set of computer job descriptions flushes out problems with the acceptance of IT into the organisation.

I would be fascinated to know of your experiences of demand side inefficiencies in IT, and techniques you've used to overcome them.

Next: Classify requirements to separate the whys from the hows


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