COMED, my power company, sends out a monthly report that shows me my energy consumption relative to my neighbors. Every month I’m considerably higher than all my neighbors. This report also has a list of things I could do to reduce my energy consumption. The problem with this report is that it doesn’t take into account my house size relative to the other houses in my neighborhood. My house is the largest model and accounts for about one-third the local sample size. If I were to attempt to reduce my energy consumption so that I would be in line with the monthly average of my neighbors, I would probably have to adopt a lifestyle akin to the Amish. Hence, I call this the Anonymous Neighbor Problem and, I believe, is responsible for driving decisions that are thrust upon IT leadership from executive business managers.

Executive business managers receive reports from analyst and management consulting firms that compare their business expenditures on IT to other “similar” firms. The businesses surveyed in this report are in a similar industry and roughly the same size. These are the anonymous neighbors. The thing this report does not, and cannot, take into account is the history your particular business. Perhaps your business is older than all your neighbors, hence, it’s a much more complex and expensive process to migrate to lower cost operational alternatives. Perhaps these same executives now asking why it costs so much more than your neighbors to operate IT decided that they didn’t want to approve the necessary capital expenditures five years ago that would have led to a more efficient IT operational footprint. Finally, there is most likely some waste as every IT organization has some inherent waste.

Unfortunately, for many CIOs, when these reports are released all heads turn to them and ask them to get in line with their anonymous neighbors. I point back to the drastic measures that would be required of me to meet cutting energy goals to be in line with the average of my neighbors, but for many CIOs they cannot ignore the mandate. The results have been devastating for many IT shops. Loss of institutional knowledge, deep cuts in labor resulting in inability to keep up with necessary maintenance cycles, and use of outsourced vendors that are not properly managed requiring additional policing are all examples of what this Anonymous Neighbor Problem has led to in IT. Moreover, it leads to lower quality of service levels from IT fostering a cycle of questions as to costs versus service provided.

Having been on the side of sales and consulting to IT for many years, I am not a fan of the, “my needs are unique” or “you don’t understand our business” answers. I’ve written before about the cost of uniqueness in IT and I do believe uniqueness can be designed out in favor of commodity business capabilities, which will can significantly lower IT operating costs. However, this does not invalidate that the current state IT environment for a given business many not be in position to achieve the goal of meeting the average IT spend when compared to its anonymous neighbors without drastic measures that impair the value that IT can deliver to the business. Achieving this goal will require IT transformation, which may incur investment before the business can expect to see reductions in IT operational costs.