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Tuesday

IT value


Here are some key points from a good article in CIO Magazine about demonstrating IT value to the business.

There are three components to the concept of value from a business perspective
1. Understanding exactly what IT delivers,
2. Believing that the cost is fair
3. Evaluating the contribution of those deliverables to the bottom line.

In many cases, clients' poor perception of IT value is as basic as not understanding the full bundle of products and services that IT delivers.Sure, everybody knows that IT delivers essential services like desktop computers, network services, applications engineering and applications hosting. But that sounds simple. Many clients don't understand why IT has to cost so much just for that. The problem is, many IT departments don't clearly define the specific products and services they deliver for a given level of funding. Typically, there's a lot more in that bundle than clients know. When the specifics are defined, clients come to understand why IT needs the budget that it does.

Does IT contribute to business value? To optimize its contribution to the bottom line, IT must install processes that ensure two things: that the enterprise is spending the right amount on IT, and that the IT budget is spent on the right things.

What can IT do? There are two things.

First, IT can ensure that clients are in control of what they buy and are accountable for spending the IT budget wisely. This means implementing a client-driven portfolio-management process. Note that portfolio management is far more than rank ordering projects on an unrealistically long wish list. Clients must understand how much is in their "checkbook" (a subset of the IT budget), and what IT's products and services cost, in order to know where to draw the line. That is, they must work within the finite checkbook created by the IT budget as well as understand the deliverables that they will (and won't) get. Thus, true portfolio management is predicated on the above steps of defining IT's catalog, costing it, and presenting a budget in terms of the cost of its deliverables. Once all that is done, an effective portfolio-management process can be implemented.

Second, even if clients know the costs of their purchases and are working within the limits of their checkbook, they'll make better purchase decisions if they understand the returns on technology investments. IT can help clients estimate ROI of their proposed purchases. The cost side of the ROI equation was handled by calculating a budget by deliverables and rates. The remaining challenge is to quantify the benefits. Cost-displacement benefits (which include both cost savings and cost avoidance) are easy to measure. The real challenge is measuring the so-called "intangible" strategic benefits

In summary, the question of IT value is fully addressed when:

- IT has defined its product and service catalog in detail, associated all its costs with its products and services, and calculated rates that can be compared with the market.
- Clients understand exactly what they're getting for the money spent on IT, and indeed can control it by deciding what they will and won't buy from IT.
- IT can help clients assess the value of their IT purchases by measuring the benefits.


The full article can be found at : http://cio.com/article/161150

Thursday

CIO Blog


Discovered a good blog written by a real CIO. He had a few topics about governance, which are a good read and related to the topic of this blog.

http://geekdoctor.blogspot.com/2007/12/it-governance.html



Wednesday

Benefits Realization Case Study and Outcome Management


While doing some research on-line I recently read a presentation about the Benefits Realization experience of the Government of Canada. Here are some interesting concepts raised in the presentation that are applicable to any organization - public or private.

Benefit Realization Principles:
        1. Benefits realization is the pre-planning for, and ongoing management of benefits promised to be enabled by the successful implementation of change projects.
        2. Sound project management can only enable a business owner (program) to realize intended benefits
        3. Accountability for the realization of intended benefits must rest with the business function, not with the IT project  [This is very true and I would make it my first principle]

 Outcome Management is a set of methods, processes, tools and techniques for planning, selecting, managing and realizing results and benefits:
        1, An outcome (benefit) is the desired result of an initiative undertaken to meet a need or solve a problem (e.g. to reduce gun related crime by 25% within 5 years by implementing a national gun registry system)
        2. Outcomes are final results supported by intermediate outcomes (benefits milestones).
        3. Cost benefit analysis is a subset of Outcome Management
        4. Focuses on realizing benefits not just providing the deliverables. Facilitates on-going and ex post evaluation of "hard" and "soft" benefits

I think the whole presentation is worth reading and can be found at : http://www.tbs-sct.gc.ca/emf-cag/outcome-resultat/benefits-avantages/benefits-avantages_e.ppt



Monday

Key Requirements for a Portfolio Management System


Following on from my previous post, here are the best practice capabilities to look at for a portfolio management system:

1. Managing demand. Requests for projects are generated by multiple sources in an
organization. All projects, regardless of their size, represent work efforts in the organization
that have to be evaluated and, if appropriate, planned and executed. The
portfolio management system acts as the repository of all project requests and
allows for the standardization of requests for more objective evaluation of projects
based on uniform criteria.

2. Project topologies. Within an organization, requests will be generated for different
types of projects that vary in size, cost, and deliverables. The portfolio management
system permits grouping of projects into multiple portfolios for comparison on an
equivalent basis for similar project types.

3. Stakeholder involvement. The importance of portfolio management systems has
increased with the focus on corporate governance. Organization wide decisions with
significant impact now require greater oversight. Portfolio management systems
now have workflow capabilities out-of-the-box. All stakeholders from the project
requestor to the financial managers, project managers, and finally senior leadership
can be involved in the creation of a project request, its completion, and signoff by
different participants.

4. Strategic alignment. The ability to bridge strategic objectives to projects that will
support their achievement continues to be an important capability of portfolio
management systems. With the development of more sophisticated strategic planning
models, portfolio systems have maintained the ability to define the impact of
projects on the organizational strategy.

5. Prioritization and optimization. Together with strategic alignment, prioritization
continues to be one of the main objectives of using a portfolio management system.
Although Excel is a viable alternative for ranking projects, portfolio management
systems now have more sophisticated modeling capabilities for multiple prioritization
perspectives and optimization based on different types of constraints.

6. Budgeting and cost tracking. The planning of budgets at a summary level has
always been a project attribute taken into consideration in portfolio selection and
prioritization. A portfolio management system provides the capability to disaggregate
costs by cost types and cost centers. In addition, the tracking of project cost

7. Executive dashboards. Reporting of status at the portfolio and individual project
level is a requirement for the portfolio manager and the senior leadership involved
in the governance process. Because the portfolio management system acts as the
central repository of all portfolio information, executive dashboards with summary
performance metrics can be produced directly from the portfolio management
system.

8.Integration To enable both inputs and outputs from the portfolio system to other
line-of-business systems, integration becomes a key component for leveraging
project- and portfolio-level data. Status updates of selected projects in their respective
portfolios might come from disparate systems making the need for system interfaces
even greater. Therefore, an application programming interface becomes a
critical component of any portfolio system.

Any others you can think of?