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IT management is being squeezed. On one side is the IT infrastructure budget, which at most organisations is pegged or even falling. On the other are the demands of line of business (LOB) managers who are increasingly in control of their own IT spend and who also expect a rapid return on that investment.

The result is an uncomfortable tension. "The draconian budget cuts of the past two years have flattened [spend], while demand [for applications] continues to build," observes Al Case, an analyst at technology market researcher company Gartner. This phenomenon, he believes, has created a yawning gap between IT budgets and IT demand that will last well into 2003.

The perception is shared among IT decision-makers. "Business cycle times are out of step with IT cycle times," says Chris Jones, IT director of supply chain integration at pharmaceutical giant GlaxoSmithKlein. "We can't build IT as fast as business is demanding it."

Senior IT management is being forced to walk a tightrope, agrees Forrester Research analyst Bobby Cameron. "CIOs face a dilemma: Tight budgets collide with opportunities that require spending. But CIOs feel misaligned with other functions and business units and [at the same time] cannot get approval for IT's long-term needs."

Reacting to that situation, some mangers are re-examining some of the fundamentals of the IT organisation's structure and practices, and trying to bring clarity to the governance of IT projects.

Tactical viewpoint

The real issue centers on IT governance, argues Forrester's Cameron. Successful IT governance balances IT and business control across three dimensions, he suggests: the adaptability of IT resources, accountability for the impact of IT, and budget planning and timing.

At the heart of this is the IT department's ability to work more closely with LOB executives on IT decisions and implementation. By doing so, IT managers can better understand divisional needs, and can better prepare the infrastructure to meet their changing requirements.

Arguably, the traditional centralised structure of IT departments is not particularly suited to those demands. Indeed, LOB managers often see the IT department as a gating factor, a drag on the rapid delivering of projects.

"We are always looking at the bigger picture, the end-game three years down the road, which means we are resistant to tactical spend," explains Ian Takats, group information systems director for health club chain Holmes Place. "The result is that centralised IT is perceived as having a problem in delivering to business needs."

But how can IT get more of a tactical, business-responsive head on its shoulders? Some say the solution is to disband elements of the IT department and spread its influence on IT planning deep down into business divisions. Not only would this approach create more chance of aligning tactical projects with strategic IT goals, but it would also improve IT's grasp of the business unit imperatives. Moreover, it would make business managers appreciate (in some cases, for the first time) the underlying IT issues.

A simple illustration might be a marketing team deciding it desperately needs a customer management system. On the surface, a best-of-breed, specialist package may fit its requirements perfectly. But IT has to be close to that decision-making process early on in order to point out that in many cases the package may be unable to directly draw customer data from the company's enterprise resource planning system without extensive and expensive data transformation and integration.

Often the IT department gets blames whatever the outcome: blamed because they forced the department to buy a 'second-best' package but one that is directly integrated with the ERP system; or else blamed because they did not warn of the perils of tactical buying.

However, the responsibility rest with both sides. "The bottom line is that the business benefits [of IT] must be determined by the lines of business. When defining the benefit elements, the LOB must quantify each aspect [of the project]," says Bernt Ostergaard, an analyst at IT market watcher Giga.

Getting LOB managers to carry the can for their IT decisions is a difficult task, though. Ian Takats at Holmes Place should know. He has been working long and hard to get the company's managers (most of whom worked their way up from the gym floor) to understand the challenges of IT.

For the past year, Takats has tried to improve this understanding by cultivating internal corporate sponsors for each IT project. But the success has been mixed. "Typically, managers just do not see the IT role as sexy and do not play their part," says Takats.

Undeterred, he is now trying to force the issue by making LOB executives themselves carry out the cost benefit justification for their IT projects and to sign off on these. But this is proving difficult to implement because of business executives' inexperience in this area.

"Often business units don't know how to put forward a business case [for IT spend],"says Takats. While this is a commonplace activity for IT, Takats says he has had to teach LOB managers how to prepare such a case, even going as far as designing a template for their use.

At the same time, they should be made aware of the wider IT issues. "The IT department has to make it clear that there are strategic long-term investments required to support a line of business's IT spend," says Takats. "Often the LOB will plan the whole project and not tell us about it until the last few weeks - and still expect us to have it up and running in time."

Of course, while making business people IT aware, an IT executive could try to force IT staff into becoming more business savvy. But there are questions about how practical any direct participation of IT in business units might be - despite all the talk of aligning IT more closely with the business.

In theory, it would be much better if we were devolved into other departments," says Takats. "So you would, for example, have an IT professional in marketing. But it's a horrendous dilemma because marketers don't have IT knowledge and vice versa."

His reticence for IT devolution is echoed elsewhere. "Its not realistic to put IT people into the business setting because most IT guys are very technical people and they are not suddenly going to wake up one morning as business people," says Chris Jones at GlaxoSmithKlein.

The solution, according to Royal Mail Group's business architectures director, David Ferguson, is more to do with aligning teams. "We don't need hybrid managers, but a hybrid team of IT and business."

Furthermore, assigning IT managers to other departments can actually have a negative impact on overall IT budgets. Ian Takats at Holmes Place believes that putting people with too much IT knowledge into each LOB will actually create more work for the IT department because these staff come to appreciate additional areas where IT could help the department - stretching resources further. "If you put IT people out into the business they will only cause you grief, " he concludes.

Carry the can

Clearly, devolving IT into LOBs will not necessarily produce the desired results. Many see the roles of IT staff and business managers as simply too distant, and the number of people that can cross that line as few and far between.

For the Royal Mail's David Ferguson, there is no simple answer to the dilemma. He suggests that IT decision-making has to reflect the nature of the department. "You have got to have a governance style in line with how mature IT is within the business and [one that is] specific to the type of organisation," he says.

According to Ferguson, the most important thing IT directors can do is understand their organisation's management culture. "Information systems management has to understand how the body politic sees things. I have worked with some very strong managers who believe in one way of doing things and in using a centralised IS department to enforce this," says Ferguson.

For Takats it all comes down to communication. "Communication is key to building credibility. Make it crystal clear why you have made a decision and that the decision is shared between IT and business. You need to explain the different options and implications of any new project and make business executives take part of the responsibility."

But no-one is fooling themselves into thinking that ultimate responsibility can be shared too widely with the rest of the business. "At the end of the day, the IT department is still mainly responsible for a project. If it goes wrong then we have to take the underlying blame," warns Takats. "It is utopian to expect LOBs to carry the can for the return on investment."