Management by Maxim: How Business and IT Managers Can Create IT Infrastructures

  • Marianne Broadbent and Peter Weill
  • April 15, 1997

An information technology (IT) infrastructure is vitally important to companies, particularly those in industries going through dynamic change, those reengineering their business processes, and those with widely dispersed operations. Yet executives find decisions on infrastructure investments difficult because they often have to make them before forming specific business strategies.

In this paper, we explain how successful firms create business-driven IT infrastructures. Some firms do not invest in a firmwide infrastructure, while others invest up to 10 percent of their revenues in an IT infrastructure, such as communication networks, databases, and expertise that is shared across multiple business units. Both approaches may be correct, provided they match the firm’s specific needs.

Creating a business-driven IT infrastructure involves decisions based on a sound understanding of a firm’s strategic context. This understanding can be communicated by what we call business maxims, which capture the essence of a firm’s future direction. Business maxims lead to the identification of IT maxims that express how a firm should deploy IT resources and gain access to and use information. IT maxims provide a basis for a firm to make decisions on its IT infrastructure services.

Investments in IT Infrastructure

IT infrastructure investments are long-term commitments that account for more than 58 percent of the total IT budget of large firms and about 4 percent of revenues; they have increased at about 11 percent annually.1 IT infrastructure capabilities underpin the competitive positioning of business initiatives such as improving cycle time, implementing redesigned cross-functional processes, utilizing cross-selling opportunities, and capturing the channel to the customer. They are the base for computer applications to execute business processes.

A firm’s process for making decisions about these critical investments are among the most contentious and least understood. How do boards of directors judge the business cases for IT infrastructure investments? Where, for example, is the chain of evidence linking investments in an improved communication network to reduced cycle time, or linking shared databases and transaction processing to cross-selling? Too often, boards are asked to make decisions based on technical criteria rather than in the context of long-term business needs. At the same time, there are competing demands to show business benefits in short time frames.