Using the IVI (Innovation Value Institute) IT CMF (IT Capability Maturity Framework) to Develop a Business Oriented Information Technology Strategy

Using the IVI (Innovation Value Institute) IT CMF (IT Capability Maturity Framework) to Develop a Business Oriented Information Technology Strategy Alan McSweeney

Objectives • To provide an introduction to the IVI (Innovation Value Institute) IT CMF (IT Capability Maturity Framework) • To describe how the IT CMF can be used as a basis for establishing a business-oriented information technology strategy May 23, 2010 2

Agenda • Introduction to the IT CMF (IT Capability Maturity Framework) • Using the IT CMF to Define A Business-Oriented Information Technology Strategy May 23, 2010 3

Innovation Value Institute (IVI) and IT-CMF (IT Capability Maturity Framework) • IVI is developing an the IT-CMF as a systematic framework for improving IT capability and identifying and prioritising opportunities, reducing cost and optimising the business value of IT investments (see http://ivi.nuim.ie/) − Based on an Intel framework and initially developed as part of Intel’s IT transformation (see Managing Information Technology for Business Value http://www.intel.com/intelpress/sum_bv.htm) − Reviewed and tested with 200+ CIOs • Objectives of IT CMF − To assess current practices − To understand opportunity and value of increasing maturity − To bridge structural gaps in other assessment frameworks May 23, 2010 4

Disconnect Between IT Investments and Business • 62% of organisations say they find it difficult to calculate ROI for IT investments • 45% of organisations say their business value metrics do not accurately capture the value of IT investments • 52% of organisations say that business executives are sceptical of efforts to measure business value of IT • Only 41% of organisations perform an ROI assessment for IT budget May 23, 2010 5

IT CMF High Level Framework • IT CMF structured into four high-level processes for value- oriented IT management Provides Alignment Between Business and IT Managing IT Like a Business Managing IT for Managing the IT Managing the IT Business Budget Capability Value Provides Metrics to Close the Loop on Value May 23, 2010 6

IT CMF • IT CMF is a meta-framework that identifies an IT organisation’s maturity in key critical practices − Comprehensive overarching framework that encompasses all relevant IT practices and sits above implementation frameworks − Does not mandate the use of specific implementation frameworks • Identifies the key areas where the organisation wants or needs to improve to deliver business value − Identifies critical gaps in maturity that are preventing IT delivering business value − Identifies appropriate levels of maturity for the organisation for critical IT processes • Contains benchmarks to allow an organisation measure itself against similar organisations • Defines a structure to allow improvements to be measured • Implementation of specific critical practices improvements devolved to implementation frameworks May 23, 2010 7

IT CMF Meta-Framework IT Capability Maturity Framework Contains High Level (Macro) Processes High Level Macro Processes Contains Detailed Critical Processes Detailed Critical IT Processes Provides Measurement Structure for Current and Future Status of Critical IT Specific Implementation Frameworks for Critical IT Processes Processes Implementation Implementation Implementation Framework Framework Framework May 23, 2010 8

IT CMF Meta-Framework and Implementation Frameworks Specific Implementation Frameworks for IT CMF Critical Processes ITIL (Information IT Service CMM ISPL (Information eSCM (eSourcing USMBOK (Universal ISO 20000 (ITSM ASL (Application Technology (Capability Maturity Services Procurement Capability Maturity Service Management Standard) Services Library) Infrastructure Library) Model) Library) Model) Body of Knowledge) PRINCE2 (Projects in PMBOK (Project MSP (Managing Controlled Management Body of Successful IT Balanced Scorecard Environments) Knowledge) Programmes) CMMI (Capability ISO/IEC 12207 DSDM (Dynamic RUP (Rational Unified Maturity Model Systems And Systems Development Process) Integration) Software Engineering Method) ITIM (Information Technology Gartner Total Cost of Val IT Investment Ownership Management) TQM (Total Quality ISO 9000 TickIT/TickITplus Six Sigma Management) COBIT (Control ISO 38500 (Corporate ISO 27000 / OCEG (Open Objectives for Governance of IT Baseline Protection (Information Security Compliance and Information and Information Catalogs Management System) Ethics Group) Related Technology) Technology) NASCIO EAMM TOGAF (The Open Department of Ministry of Defence Federal Enterprise (NASCIO Enterprise Group Architecture Defense Architecture Architectural Zachman Architecture (FEA) Architecture Maturity Framework) Framework (DoDAF) Framework (MODAF) Model) May 23, 2010 9

IT CMF High Level Framework Managing IT Like a Managing the IT Managing the IT Managing IT for Business Budget Capability Business Value Managing IT like a Managing the IT budget Managing the IT Managing IT for business business involved using involves effective capability is concerned value involves aligning IT solid professional financial management to with what information investments to overall business practices and reduce costs to free funds technology and the IT business benefits applying them to the IT for investment in organisation can do Underlying focus areas function and involves innovative IT solutions collectively for the include value and benefits shifting the focus from that deliver better value organisation. delivery and portfolio production and and performance. Underlying focus areas management. technology to a focus on Underlying focus areas include traditional IT customers and services. include budget factory functions like Underlying focus areas management and solutions delivery and include leadership, performance sustaining services provisioning governance, alignment and making new and management investments and portfolio processes. planning. May 23, 2010 10

IT CMF Framework • Contains − Assessment approach to determine an IT organisation's maturity − Best practices associated with outcomes and metrics for their measurement • Benefits − A comprehensive and detailed framework to collect and provide management information on critical processes within the IT function of an organisation − Processes designed, selected and defined as those that ensure that IT delivers business value − Provides a view of the level of maturity of the IT function − Identifies areas where effort should be focussed in order to add value − Enable IT to be responsive to business needs May 23, 2010 11

IT CMF Framework • IT CMF framework closes the loop on Managing Managing Information IT Like a the IT Technology Business Budget delivering value to the business Closing the Loop Between Cost and Value Managing IT for Realising Managing and Assessing and Value Delivering IT Capability May 23, 2010 12

IT Capability Maturity Framework - Characteristics IT Capability Maturity Framework Maturity Level Managing Managing and Managing IT for Managing IT Like the IT Budget Delivering IT Realising and a Business Capability Assessing Value Level 5 Sustainable Organisational core Optimised value IT is a value centre Optimising economic model competency Level 4 Advanced Expanded funding Strategic business Options and IT is an investment options partner portfolio centre management Level 3 Systematic cost Technology expert Return on IT is a service centre Intermediate reduction investment and business cases generated Level 2 Basic Predictable Technology supplier Total cost of IT is a cost centre performance ownership known Level 1 Ad Hoc Beginning May 23, 2010 13

IT Value Contribution Increases with Maturity Maturity Level IT Value Contribution IT enables and drives business value creation and business 5 opportunities High Optimising IT is fully aligned with business strategy and anticipates business needs 4 IT focuses on business value creation Advanced Value oriented IT management using various industry best practices Increasing 3 IT directly contributes to business value creation in some areas contribution Intermediate IT turns toward focusing on business value creation, but is mostly understood as to business service provider value as the IT mainly provides services allowing business to create value IT 2 organisation Basic IT focuses on delivering solutions for business needs, but not a value creator on its own increases its maturity Low IT disconnected from business value creation 1 Initial IT is not an integral part of value creation Organisation must be able to translate IT maturity into business value contribution May 23, 2010 14

IT Capability Maturity Framework – Sample Current High Level Maturity IT Capability Maturity Framework Maturity Level Managing Managing and Managing IT for Managing IT Like the IT Budget Delivering IT Realising and a Business Capability Assessing Value Level 5 Sustainable Organisational core Optimised value IT is a value centre Optimising economic model competency Level 4 Advanced Expanded funding Strategic business Options and IT is an investment options partner portfolio centre management Level 3 Systematic cost Technology expert Return on IT is a service centre Intermediate reduction investment and business cases generated Level 2 Basic Predictable Technology supplier Total cost of IT is a cost centre performance ownership known Level 1 Ad Hoc Beginning May 23, 2010 15

IT Capability Maturity Framework – Sample Desired Future High Level Maturity IT Capability Maturity Framework Maturity Level Managing Managing and Managing IT for Managing IT Like the IT Budget Delivering IT Realising and a Business Capability Assessing Value Level 5 Sustainable Organisational core Optimised value IT is a value centre Optimising economic model competency Level 4 Advanced Expanded funding Strategic business Options and IT is an investment options partner portfolio centre management Level 3 Systematic cost Technology expert Return on IT is a service centre Intermediate reduction investment and business cases generated Level 2 Basic Predictable Technology supplier Total cost of IT is a cost centre performance ownership known Level 1 Ad Hoc Beginning May 23, 2010 16

IT Capability Maturity Framework • Current High Level Maturity • Desired Future High Level Maturity • IT CMF defines a processes for measuring and benchmarking current and future IT organisation maturity • Identifies the key areas where the organisation wants or needs to improve to deliver business value • Identifies critical gaps in maturity that are preventing IT delivering business value • Identifies appropriate levels of maturity for the organisation for critical IT processes May 23, 2010 17

IT CMF Framework – Detailed View • Four high-level processes consist of 36 lower level detailed processes • Comprehensive overarching framework that encompasses all relevant IT practices May 23, 2010 18

IT CMF Framework – Detailed View IT CMF Framework Managing IT Like a Managing IT for Business Managing the IT Budget Managing the IT Capability Business Value IT Leadership and Enterprise Architecture Funding and Financing Total Cost of Ownership Governance Management Business Process Technical Infrastructure Benefits Assessment and Budget Management Management Management Realisation Portfolio Planning and Business Planning People Asset Management Portfolio Management Prioritisation Budget Oversight and Intellectual Capital Investment Analysis and Strategic Planning Performance Analysis Management Performance Demand and Supply Relationship Asset Management Management Capacity Forecasting and Research, Development Planning and Engineering Risk Management Solutions Delivery Accounting and Allocation Service Provisioning Organisation Design and User Management and Planning Training Sourcing User Experience Design Programme and Project Resource Management Management Innovation Management Supplier Management Performance and Quality Value Chain Management Management Service Analytics and Capability Assessment and Intelligence Management May 23, 2010 19

Managing IT Like a Business High Level Process – Constituent Critical Processes (1) Managing IT Like a Business IT Leadership and Provides the decision rights and accountability framework to encourage behaviours that lead to the achievement of the organisation’s IT business value goals. Top performing companies Governance show 20% better performance when governance is aligned with enterprise goals. Business Process Document and manage the IT organisation’s work flows and business processes. An accurate inventory of processes and work flows can substantially improve IT efficiency. Management Business Planning Define and anticipate the company’s demands for IT capabilities and services. Business planning identifies key objectives and areas for IT investments. Strategic Planning Sets the vision, mission and objectives for the IT organisation which directs IT capability to directly address the organisation’s overall strategies. Business and IT strategy is aligned on a clear set of concrete actions that ensure an effective translation of plans into IT capability requirements and business value. Demand and Achieve a balance between supply and demand for IT services which is both efficient and sufficient. Cost-effective and business-proficient IT systems are delivered at an optimal cost. Supply Management Capacity Anticipate the shifting needs for IT capabilities and plan to deliver them in a timely fashion. Capacity planning provides the company with the right amount of IT resources, sometimes Forecasting and more and sometimes less, to meet shifting needs. Planning Risk Management Analyse threats and their potential impacts and develop strategies to mitigate those threats. Business continuity is ensured by systematically mitigating IT operational risk. May 23, 2010 20

Managing IT Like a Business High Level Process – Constituent Critical Processes (2) Managing IT Like a Business Accounting and The policies, processes and tools used for calculating and distributing the costs of IT. Range of methods such as chargeback, transfer pricing, and allocation may be used to manage the cost Allocation of IT services and to influence the demand for IT services within an organisation. Organisation Review and reorganise as necessary the alignment between the IT organisation and company needs. Stable organisations are increasingly rare in the dynamic world of today’s business. Design and Planning Sourcing Identifying and forming supply agreements with vendors and internal providers. Sourcing results in placing some enterprise activities outside the company, that is, outsourcing. Resource Optimise the use of IT resources deployed in response to business or organisational priorities. Dynamic resource allocation provides agility to IT organisations and the companies they serve. Management Innovation Creating, identifying, funding and measuring information technology based innovations to generate business value. Companies systematically monitor their environment, adapt with Management new solutions, and prosper. Performance and Close the loop through the use of balanced scorecard or other techniques to maximise aligned output. Continuous multi-dimensional management leads to higher levels of performance and Quality value. Management Service Analytics IT performance monitoring, modelling, and analysis to establish a clear understanding of the relationship between business processes and the underlying IT infrastructure and processes to and Intelligence sustain and optimise the delivery of IT services for business value. Provide required data for planning activities. The IT organisation leverages this knowledge as an integral component for efficient operations and effective planning. May 23, 2010 21

Managing the IT Budget High Level Process – Constituent Critical Processes Managing the IT Budget Funding and Understand how, why and from where IT is funded. Determine the scale, scope and sources of funding for IT the IT Budget and assign financial resources to IT activities. Financing Budget Active, ongoing review and adjustment of the IT spending plan to systematically ensure that allocated budgets are being spent effectively and are within budget parameters and Management governance model. Careful budgeting leads to continuous unit cost reduction for IT services. Portfolio Planning Allocate the IT budget to projects and activities based on factors such as risk management. Historical returns data informs portfolio planning to improve the investment mix. and Prioritisation Budget Oversight Periodic offline review of IT spending vs. IT plan, which provides stimulus for re-profiling or reprioritisation of budgets. Oversight certifies that the budget targets are being met and and Performance variance analysis improves forecasts in the future. Analysis May 23, 2010 22

Managing the IT Capability High Level Process – Constituent Critical Processes (1) Managing the IT Capability Enterprise Provide the necessary models and practices for defining, planning and managing the business and IT capabilities by developing the IT Capability business, data, application, and technical Architecture architecture of IT systems. Achieve effectiveness and agility with technical standardisation and Management system integration. Technical Optimise IT infrastructure (including client, network, storage, and server) to support the business. Provide an on-demand capability which is efficient and reliable as a platform for Infrastructure delivering IT services. Management People Asset Manage and train personnel to be successful contributors to the IT organisation. Create a culture where IT is customer focused to provide the company with business value. Management Intellectual Capital Cultivate the suite of applications, the information in the company databases, and the accumulated knowledge of how to deploy IT. Support all aspects of the company’s value chain Management and gain information or execution superiority. Relationship Asset Enhance the relationship between the IT organisation and the company’s business units. IT will share in the risks and rewards associated with the overall business of the company. Management Research, Formally investigate new information technologies and the opportunities they provide. IT R&D can deliver prototypes of innovative IT systems, white papers, or patent filings. Development and Engineering Solutions Delivery Deploy systems and solutions which efficiently address the company’s IT requirements and opportunities. IT solutions are delivered with the cost, schedule, functionality, and quality the company needs. May 23, 2010 23

Managing the IT Capability High Level Process – Constituent Critical Processes (2) Managing the IT Budget Service Provide reliable IT services to support the company’s objectives and strategies. Data centres, help desks, and service solutions are in position to support IT’s customers. Provisioning User Management Maximise user proficiency and ensure users acquire the right skills at the right time. Usefulness and ease of use are the hallmarks of a successful IT solution. and Training User Experience Create solutions based on user experience to deliver what users want and need. Business value is maximised when excellent IT solutions are put to maximum usage. Design Programme and Cultivate the ability to manage programs and projects to be on time, on budget, and on target. The costs of schedule overruns are avoided and the quality of IT solutions is matched to Project customer needs. Management Supplier Encourage cooperative relationships with contractors to create shared value. Achieve more value from the company’s primary supply base. Management Value Chain Optimise integration and performance of overall IT value chain processes in support of overall value delivery. Successful alignment leads to maximum leverage of the IT organisation’s Management efforts. Capability Regularly inventory the IT organisation’s capabilities and realign its organisational structure as needed. Demonstrate gains in IT maturity and efficiency with capability and performance Assessment and measurements. Management May 23, 2010 24

Managing IT for Business Value High Level Process – Constituent Critical Processes Managing IT for Business Value Total Cost of Track and control direct and indirect costs associated with IT infrastructure and systems. Total cost of ownership better informs the budgeting and portfolio management processes. Ownership Benefits Establishing a common business value vocabulary, measurement and valuation methodology to express the potential and document the actual business value returns. Constructing high Assessment and quality business cases and managing the realisation of actual benefits versus original forecasts Realisation ensures organisations achieve business value delivery. Portfolio Regularly examine the mix of IT projects and the allocation of resources among them. New investments can be compared to ongoing projects in the portfolio. Management Investment Investigate the success of different IT portfolios to inform decisions and make predictions. These techniques lead to a more precise understanding of investment choices, Analysis and Performance May 23, 2010 25

Business Strategy • The business develops a business Business Vision strategy that contains defined high level aims and lower level objectives Business Strategy • Each objective will be subject to challenges that have to be overcome. Business Strategic • Achievement of the strategic Aims objectives needs to be subject to measurements Business Strategic Objectives Critical Success Challenges Measurements Factors May 23, 2010 26

Business Strategy Links to IT Strategy • IT strategy follows from business Business Vision strategy • Ensure the organisation is making Business Strategy the best use of IT to deliver on its strategy Business Strategic Aims • Ensure the organisation is using IT effectively and efficiently Business Strategic Objectives IT Vision IT Strategy IT Architecture IT Implementation Plans and Business Cases May 23, 2010 27

IT CMF Provides Framework to Link Business Strategy to IT Strategy Business Vision Business Strategy Business Context Business Strategic Aims Business Strategic Objectives Managing IT Like a Business IT Context Managing IT for Managing the IT Managing the IT Business Budget Capability Value May 23, 2010 28

Current and Future Critical IT Process Maturity IT Leadership and Governance Business Process Management Business Planning Strategic Planning Demand and Supply Management Capacity Forecasting and Planning Risk Management Accounting and Allocation Organisation Design and Planning Sourcing Resource Management Innovation Management Performance and Quality Management Service Analytics and Intelligence Funding and Financing Budget Management Portfolio Planning and Prioritisation Budget Oversight and Performance Enterprise Architecture Management Technical Infrastructure Management People Asset Management Intellectual Capital Management Relationship Asset Management Research, Development and Solutions Delivery Service Provisioning User Management and Training User Experience Design Program and Project Management Supplier Management Value Chain Management Capability Assessment and Total Cost of Ownership Benefits Assessment and Realisation Portfolio Management Investment Analysis and Performance 0.0 1.0 2.0 3.0 4.0 5.0 Current Maturity Level Targetted Maturity Level May 23, 2010 29

Critical IT Process Maturity and IT Strategy • Use the IT CMF to IT Leadership and Governance identify gaps in critical Business Process Management Business Planning Strategic Planning IT processes and Demand and Supply Management Capacity Forecasting and Planning Risk Management Accounting and Allocation practices that deliver Organisation Design and Planning Sourcing Resource Management Innovation Management business value Performance and Quality Management Service Analytics and Intelligence Funding and Financing Budget Management Portfolio Planning and Prioritisation • Implementation of IT strategy is the process Budget Oversight and Performance Enterprise Architecture Management Technical Infrastructure Management People Asset Management Intellectual Capital Management Relationship Asset Management Research, Development and Solutions Delivery for filling these Service Provisioning User Management and Training User Experience Design identified gaps Program and Project Management Supplier Management Value Chain Management Capability Assessment and Total Cost of Ownership Benefits Assessment and Realisation • Creates a business- Portfolio Management Investment Analysis and Performance 0.0 1.0 2.0 3.0 4.0 5.0 oriented IT strategy Current Maturity Level Targetted Maturity Level that is comprehensive and realistic May 23, 2010 30

Using IT CMF to Define a Business Oriented Information Technology Strategy Identify Gaps Where Perform High Level Define Overall Plan the Organisation Current State to Achieve Planned Wants or Needs to Maturity Process Maturity Improve to Deliver Assessment Levels Business Value Perform Optional Detailed “Deep Dives” Into Specific Critical Processes, if Required, to Identify Detailed Gaps and Issues May 23, 2010 31

IT CMF Provides Framework to Link Business Strategy to IT Strategy Creating the Business-Oriented IT Strategy Delivering on the Business-Oriented Business Vision Business Context IT Strategy Business Strategy Business Strategic Aims Business Strategic IT Context Managing IT Objectives Like a Business IT Leadership and Governance Business Process Management Business Planning Strategic Planning Demand and Supply Management Managing IT Capacity Forecasting and Planning Managing the Managing the Risk Management Accounting and Allocation for Business Organisation Design and Planning IT Budget IT Capability Sourcing Resource Management Innovation Management Value Performance and Quality Management Service Analytics and Intelligence Funding and Financing Budget Management Portfolio Planning and Prioritisation Budget Oversight and Performance Enterprise Architecture Management Technical Infrastructure Management People Asset Management Intellectual Capital Management Relationship Asset Management Research, Development and Solutions Delivery Service Provisioning User Management and Training User Experience Design Program and Project Management Supplier Management Value Chain Management Capability Assessment and Total Cost of Ownership Benefits Assessment and Realisation Portfolio Management Investment Analysis and Performance 0.0 1.0 2.0 3.0 4.0 5.0 Current Maturity Level Targetted Maturity Level May 23, 2010 32

Benefits of Using the IT CMF Framework to Create the Business-Oriented IT Strategy • IT CMF is a comprehensive overarching framework that encompasses all relevant IT practices − Agnostic of specific implementation frameworks • IT CMF is business-value oriented • Contains benchmarks to allow an organisation measure itself against similar organisations • Defines a structure to allow improvements to be measured • Identifies the key areas where the organisation wants or needs to improve to deliver business value • Identifies critical gaps in maturity that are preventing IT delivering business value • Identifies appropriate levels of maturity for the organisation for critical IT processes • Ensures the IT strategy is soundly anchored on delivering business value May 23, 2010 33

More Information Alan McSweeney alan@alanmcsweeney.com May 23, 2010 34

Using the IVI (Innovation Value Institute) IT CMF (IT Capability Maturity Framework) to Develop a Business Oriented Information Technology Strategy

by Alan McSweeney on May 23, 2010

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Using the IVI (Innovation Value Institute) IT CMF (IT Capability Maturity Framework) to Develop a Business Oriented Information Technology Strategy — Presentation Transcript

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