Quelle: CIO USA
GARTNER, ONE OF THE WORLD'S most influential informationtechnology research and consulting companies, makes itsliving dispensing advice on technology, strategy andbusiness-IT alignment. So it is profoundly ironic that thecompany recently faced its own misalignment woes. During thelate 1990s, the Stamford, Conn.-based consultancy sufferedfrom a chronic lack of communication between its ITdepartment and its far-flung business units. That disconnectcost the company millions of dollars every year, in theestimation of its own CIO and other observers.
These troubles were exacerbated by a no-holds-barredacquisition strategy that went awry in the dust of thedotcom bust last spring. Like some of its clients, Gartnersaw its market valuation and share price drop, and it had tosell off and take a loss on some of what it swallowed duringthe boom-time feeding frenzy. The company is now applyingits own advice internally and using the lessons it learnedin restoring alignment between its own IT department and itsbusiness side to meet the recession-time challenges ofrestoring investor confidence and bolstering itsbread-and-butter research revenue.
Here is the story of how Gartner dug itself into a hole andhow it is digging out.
Digging the Hole: Who's in Charge Here?
Gartner CIO Bart Stanco took the job in the spring of 1999at the height of the dotcom boom. At that point, the ITdepartment had no system to determine which projects wouldbest support the company's strategy. “There were multipleprojects for the same function, projects at cross-purposes,“Stanco says. “We found that we were working on too many ofthe wrong things.“
For example, when Stanco took the reins, Gartner had twoteams working on two projects, both intended to supportpricing structures for research services. One group wasdeveloping a software tool to customize research and pricesfor individual clients' needs. The other group was workingon systems to streamline pricing by offering the entirearray of research on a per-user basis.
Stanco worked with Gartner executives to pull the plug onthe project to tailor individual offerings and adopt a newcommunity-based pricing scheme. This method took the latterapproach – providing a client with the complete menuof Gartner research services. However, those changes weremade only after Gartner had wasted months working on bothprojects with approximately 50 staff members andconsultants, Stanco says. With costs of around $1,500 perday for each outside IT consultant, that kind of efforteasily added up to $1 million a month.
Lack of communication among IT groups and Gartner'sworldwide business units also caused the company to missopportunities to cut costs. For example, nearly 80 percentof the company's 4,600-member workforce uses laptops, butthere was no centralized purchasing process as there isnow. The cost of extra support and missed opportunities forvolume pricing came to more than $8 million a year,estimates Stanco.
Another troubling symptom of Gartner's misalignment was poormorale among staff and executives at all levels that wasgenerated by an almost complete lack of communication. “Youand the person you were working with in [IT] didn't know forsure whether anyone in the company was thinking aboutanything similar to what you were thinking about,“ saysMoira Collins, senior vice president of worldwide marketing.
The project-decision processes and budget prioritizationwere a mystery. In the absence of a clearly understooddecision-making process, employees often ascribed obscuremotives to any project approval decision. “It began to lookmore like a political decision than a good businessdecision,“ Collins says.
Digging the Hole, Part II: Trying to Have It All
Gartner's aggressive acquisition strategy strained thecompany further. Since it went public in 1993, Gartner hasacquired or made significant investments in 30 companies,including Inteco, the Internet research and advisory serviceformerly based in Norwalk, Conn., and San Jose, Calif.-basedmarket research company Dataquest. “We were on a course todiversify the company's product line to gain market share,and over the long run that would give us greater sustainedprofitability,“ says Gartner CFO Regina Paolillo.
Competitors like Cambridge, Mass.-based ForresterResearch were growing faster than Gartner, partly by jumpingon the Internet bandwagon, notes Sandra Notardonato, ananalyst with Boston-based investment company Adams, Harkness& Hill. “Whether they liked it or not, Gartner becameknown as the 'Y2K shop,' while competitors became known fortackling the Internet and tomorrow's technology,“ shesays.
Integrating the numerous acquisitions that resulted fromGartner's diversification strategy was a challenge. “Youwant to integrate the offerings and drive efficiencies,integrate billing and sales, check security, integrateinfrastructure, and ultimately as a research organizationyou want to take the knowledge you've acquired and plug itinto the company's intellectual capital,“ Stanco says. Whena company has existing alignment problems, though, that'stough to do, he acknowledges.
The duplication of effort and projects at cross-purposes, towhich Stanco refers, were not only a symptom of existingmisalignment during this expansion but also an indicationthat miscommunication may have impaired Gartner's ability tomake sound, strategic acquisition decisions. To catch up inthe Internet space, Gartner bought the TechRepublicprofessional IT services and news website in March 2000. Thedecision was questioned by observers and ultimatelyundermined by its timing. While TechRepublic's content waswithin Gartner's realm of expertise, its business model wasnot. As a research and consulting company, Gartner had noexpertise in fostering a revenue stream by selling onlineadvertising.
In the downturn that followed the acquisition, it would havetaken years to realize TechRepublic's revenuepotential. Gartner ended up selling it for $23 million inApril, after buying it for $80 million and sinking $50million into the site for maintenance and updates, thuslosing about $107 million on the deal. A few weeks afterthat, Gartner experienced a slump in share price – whichdropped from about $18 in March 2000 to about $6 a yearlater – that kicked off a conversion provision for the $300million bond Gartner had used to help fund its aggressiveexpansion strategy. As a result, bond issuer Silver LakePartners became a 36 percent owner of Gartner, diluting thevalue of other investors' shares. Sources familiar with thecompany's plans say Gartner was also in talks to be acquiredby Reuters, but its offer price was too low.
“Investors are a little unhappy,“ CFO Paolilloacknowledges. “Where we wandered off the farm was to say wewere gonna get into the Internet space.“
Digging Out: Better Budgeting
Though Gartner's alignment problems were exacerbated byacquisitions, they had other roots as well, according toStanco. Gartner is organized geographically, with differentexecutives responsible for different countries and regionsand different functional units. That makes communication andenterprise-level thinking a challenge.
To spark communication between IT and the business units atGartner and get them thinking about companywide strategy,Stanco introduced elements of what he would later callproject-based budgeting. The project-based budgeting processconsists of a three-tier advisory council in which IT andbusiness-unit leaders from around the world participate inthe project planning process. There's also a formal proposalsystem requiring project sponsors to tie project goals tocorporate strategy, prioritize projects based on criteriaderived from corporate goals, and generate a return oninvestment and total cost of ownership analysis afterlaunching projects. Paolillo and Stanco both point to theGBIS, or Gartner Business Information System, an analysisprogram designed to help managers control profit and loss,as an example of a new tool developed using Stanco'sproject-based budgeting methodology.
One of Stanco's first steps toward establishing that processwas to appoint strategic business partners (SBPs) from theIT side to each business unit and establish a review processto vet and approve projects under $100,000 that are limitedto one business unit. The SBPs and business unit leadersdiscuss project merits and have the power to give them thegreen light. By summer 2000, in time for fiscal 2001 budgetplanning, a three-tier advisory council was in place. Thishierarchy included a council for larger projects thatassembled senior business and IT managers from around theworld.
To ensure that project proposals are tied to companystrategy, the lead project sponsor, who can be from IT or abusiness unit, fills out planning templates that identifythe goal the project is supposed to facilitate. One of theadvisory council members then prioritizes the project in a“stack ranking,“ using criteria weighted according to therelative importance of the project goals. For example, sincegrowing research revenue and profitability are paramount,those projects will end up on top of the stack.
A key component of this methodology is its flexibility, saysPaolillo. If the company needs to reconsider strategic andcorporate priorities midyear, then the top-level advisorycouncil can rework stack rankings and reprioritize projectsusing a new or reweighted set of criteria.
Digging Out, Part II: Getting Aligned
Project-based budgeting was derived in part from Gartner'sown consulting and research advice, applying what Stancocalls “Gartner at Gartner.“ For example, Gartner has longstressed the necessity of an ROI analysis after launching aproject – something the IS department now does religiously asan integrated part of the project-based budgetingprocess. The planning templates used in these analyses askthe types of questions espoused by Gartner's “IT valuescorecards,“ which are used to align IT and business.Thoughapplying Gartner's consulting advice to itself may seemobvious in retrospect, some of the initiatives met withresistance. For example, the advisory councils “took alittle time to get traction,“ says Mike Zboray, chieftechnical officer and a former analyst. Stanco's proposal toestablish these councils goes beyond the types of projectsand proposals usually expected of IS.
To ease cultural issues, Stanco and his team strove toearn the confidence of the business units by continuing totake care of the basics, such as running the database centerand help desk, managing the desktops and telecommunications– what Paolillo calls “right-to-life“issues.
Still, Stanco felt a key challenge in his efforts to becomea partner with the business side of the house wasarticulating a vision that would help drive the IT alignmentmission from the CEO and CIO all the way down to departmentmanagers.
With that in mind, Stanco enlisted Hunter Muller, who runsprofessional management company Hunter Management Group inWestport, Conn., to help spell out the principles behind thecriteria Gartner now uses to prioritize projects. Thoseprincipals are as follows: The IT department should delivera competitive advantage to increase shareholder value; itshould form a partnership with the business side to focus oncreating value, increasing efficiencies and reducing costs;and it should focus on organizational development of people,process and technology.
The project-based budgeting methodology has made an amazingdifference, says Paolillo. “What it's done is helped closethe gaps, not just between corporate services and businessunits but between the business units themselves.“ Bybringing those groups together, Stanco and Paolillo hope tohave made Gartner's misalignment woes a thing of the past.