THE RIFT, or communication gap, between IT and businesspeople has long been blamed for late, overbudget, or off-target IT projects. Successful e-business implementations have helped better align IT with business goals, but today's competitive business environment is driving the need for a clearer articulation and measurement of IT's value.

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At Nasdaq, alignment of business and IT is the bedrock of corporate strategy. That's no surprise because the New York-based electronic financial marketplace, now actively expanding internationally and preparing to go public, allocates over half of its expenditures for IT.

To view both sides of the relationship between IT and business, InfoWorld editors talked with the CIO, CTO, and CEO of Nasdaq. All three are committed to the notion of collaboration between IT and business and securing a business champion for all projects. But Nasdaq's culture and management practices go further: Nearly all IT expenditures are attached to a product line and a business division's P&L (profit and loss). This gives way to better metrics for IT's ROI -- a practice that effectively puts the business-IT divide to rest.

CIO


The CIO and executive vice president of Nasdaq, Gregor Bailar, has taken an active role in business expansion since CTO Steven Randich came on board in October. Bailar tends to use building analogies when discussing the need for IT and businesspeople to speak a common language.

"Increasingly, the fusion of a technical and a business-oriented solution [and] the ability to be adept at that is just a reality," Bailar says. "It's like saying to a builder or an architect, 'Go design buildings, but I'm not going to tell you what the materials are that you're going to use. In fact, I'm not going to really give you the code book that says how people have built buildings over the years. You're going to have to invent that every time.'

"Businesses that are built on that kind of stovepipe [division] are anachronistic. They really are going to fall greater and greater distances behind the leaders who have the architect and the builders and the operators in a really close conversation at the beginning," Bailar says.

To pave over that disconnect, Nasdaq enlists a business owner for each project, even an infrastructure upgrade.

"[Project approval] is done in the businesses, and it's prioritized at a business leader who owns the P&L -- no outside necessity for them to vet that across the company. When they believe they've got a project that requires some investment, people, resourcing, and scheduling and they've got some ideas about the business implications of it, then they take it to the next level of detail, and they prepare a return on investment, if you will, to have that enter the portfolio of projects. And this process, by the way, isn't taking months and years; it's taking weeks. The intention is for it to be lightweight and responsive and yet have some rigors so we have some understanding of where we're spending our money and our people," Bailar says.

This accountability gives Nasdaq powerful tools for measuring ROI. A daily P&L helps reinforce business-IT alignment.

"All of our computer systems and our capital assets are also allocated or directly charged to business products. That drill-down lets us see what we call 'product profitability.' So the revenues and the returns, the costs, the vendor contracts -- all of that is aligned with this product picture and a view, a laser-shot through the corporation for each one of those products. And they sum up to the total. So it is increasingly easy for us to say, 'That product cost us this much, per transaction, per customer, per CPU cycle, per disk space utilization, per terminal, per square foot of our space.' We're slicing and dicing that every day," Bailar says.

CTO

In October, Nasdaq brought on CTO and Executive Vice President Steven Randich to handle system design and day-to-day responsibility for Nasdaq's core systems while CIO Bailar took on business expansion and new projects. Randich, former CIO of the Chicago Stock Exchange, says a natural conflict exists between IT and businesspeople, in part because of personalities but also because of roles.

"What happens is that the technology team that builds and installs new systems has really attained a very deep and comprehensive understanding of the business, because the business processes are, in essence, the algorithms encoded in the technology. And as a result, in many organizations you find that the vast understanding of the business in the technology area. And, to a degree, I think it causes some concern on the part of the business, whether it is a threat, or competition, or whatnot. But that tends to happen, and it causes tension and relationship issues," Randich says.

Randich advocates a deep understanding of end-user concerns within IT and has created projects to increase that understanding.

"I've initiated a number of efforts to bridge that [IT-end-user] gap. That kind of leaps over the business relationship, but really in effect, indirectly but very effectively, addresses that gap [between the two]. Because a lot of the reasons that technology people have [a] lack of communication, lack of relationship, lack of collaboration with their business counterpart [is due to a] lack of understanding and interest," Randich says.

"I've specifically initiated a number of efforts to bring technology people out to see customers -- traders -- [and] build relationships with traders in order rooms on Wall Street so that they can see traders using Nasdaq workstations and other systems," Randich says. "The traders see it as a way to help Nasdaq. And the technology people see it as a way to really understand the fruits of their labor, as well as the other side: what the costs of [problems are], which are significant in this industry."

Despite Nasdaq's formal process in building new products, Randich says that Nasdaq isn't blinded by numbers.

"And if [a project] is not generating revenue, then it would have to be in there for purposes of risk reduction, marketing share, retention -- some other business justifiable purpose. Because there's always going to be cases where you're going to have projects that need to be justified with softer metrics, as opposed to hard numbers," Randich says.

CEO


In December, Nasdaq named Hardwick "Wick" Simmons as its new CEO. With 30 years' experience in the finance industry, he barely perceives the IT-business divide.

"There are situations where, in some cases, systems have been designed from the inside out, as opposed to the outside in. And that's created some rift down the road," Simmons says. "But I think most everybody's now come to the point where IT literacy on behalf of anybody running a business is an absolute must."

Although IT executives are often reminded that understanding business is the key to success, Simmons says it's a two-way street: Businesspeople have to garner a better understanding of IT.

"When you're running a business, you've got to be able to ask basic questions about the key areas of your business, and you've got to make sure that you're not getting smoke in return.

"[Business executives] may not be able to write code, but on the other hand they can certainly ask the right questions. I think it's mandatory that you do that," Simmons says.

According to Simmons, tying IT projects closer to business ties the company closer to the customer and allows businesspeople to have the final say on technology decisions.

"Even if you make components, most of us have gotten to the point now where we're selling systems, and so you've really got to understand the buyer's need," Simmons says. "And on that basis, you just simply have to build it the way the customer wants, which is the way the business wants. And on that basis IT does not have the final say. They're going to tell you the best way to build it, but only the business knows precisely what it is the client wants."

How can a CEO promote effective business-IT collaboration? By example, Simmons says. As he spoke to InfoWorld, Simmons was on his way to Nasdaq's "factory" (its datacenter in Trumbell, Conn.) to congratulate the IT team on a successful stock-price decimalization project.

"As night follows day, if the individual in charge is interested in these matters and wanders the halls, everybody else understands and gets themselves ready as well," Simmons says.

Return to our Special Report on the True Value of IT.