Value of IT Investment.ppt

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  • SKIP
  • Relate back to the “sailing” analogy: Are we heading to somewhere that we want to/can get to? Do we have the right type of boat/equipment and a well experienced crew? Does everyone know what they are supposed to be doing? Are they doing it? Is the boat and all the equipment working as expected? Are we on course?
  • Business Led Achievable Steps Progressive Actively Managed & Monitored Integration of Benefits, Change, System support/ maintenance
  • Most benefit-producing projects are yet to come Most benefits harvesting is yet to come
  • Following is a practical checklist of seven key conditions to be applied when accountabilities for any given outcome or benefit are assigned and accepted. This list is particularly useful when applied to the design of the organization and people projects of a specific blended investment program. Condition 1: Clear mandate and scope Condition 2: Sufficient authority and latitude to act Condition 3: Requisite competence Condition 4: Commensurate resources Condition 5: Clear lines of accountability Condition 6: Understanding of rights and obligations Condition 7: Relevant performance measures And, of course, there must be acceptance of accountability.
  • Penultimate Outcome
  • Value of IT Investment.ppt

    1. 1. The Challenge of Value Governing IT Investments John Thorp, CMC, I.S.P. John_thorp @thorpnet.com ISACA Victoria, June 20 th , 2007 Val IT and slides copyright © 2006 IT Governance Institute. Used with permission.
    2. 2. “ The failed promises of the Information Age add up to the longest-running disappointment in business history. On the other hand, information technology has produced an enormous transition, something that companies should be grappling with and studying every day.” Jack Welch World Economic Forum, Davos, 1997
    3. 3. The IT Governance Institute <ul><li>Established by ISACA in 1998 to serve as “think tank” on IT governance principles and concepts </li></ul><ul><li>To assist enterprise leaders in their responsibility to make IT successful in supporting the enterprise’s mission and goals </li></ul><ul><li>To promote through publications and forums, good practices for effective control and governance over IT based on original research </li></ul>
    4. 4. Agenda <ul><li>The challenge </li></ul><ul><li>The role of governance </li></ul><ul><li>A case study </li></ul><ul><li>Introduction to Val IT™ </li></ul><ul><li>Empirical research/lessons learned </li></ul><ul><li>The road forward </li></ul><ul><li>Why are we moving so slowly? </li></ul>
    5. 5. <ul><li>The value of IT is being increasingly questioned... </li></ul>The Information Paradox … yet organizations continue to spend more and more on IT ? ? ?
    6. 6. <ul><li>Are we maximizing the value of our investments in IT-enabled change such that: </li></ul><ul><ul><li>we are getting optimal benefits ; </li></ul></ul><ul><ul><li>at an affordable cost ; and </li></ul></ul><ul><ul><li>with an acceptable level of risk ? </li></ul></ul>The Fundamental Question Over the full economic life-cycle of the investment
    7. 7. <ul><li>Gartner – more than 600 billion $ thrown away annually on ill conceived or ill executed IT projects </li></ul><ul><li>Standish Group – about 20% of projects fail outright, 50% are challenged and only 30% are successful </li></ul><ul><li>ITGI 2005 Survey findings confirm concerns </li></ul><ul><li>Low return from high-cost IT investments, and transparency of IT’s performance are two of the top issues </li></ul><ul><li>More than 30% claim negative return from IT investments targeting efficiency gains </li></ul><ul><li>40% do not have good alignment between IT plans and business strategy </li></ul><ul><li>Interest in and use of active management of the return on IT investment has doubled in 2 years (28 to 58%) </li></ul>The Reality 0% 20% 40% 60% 80% 100% 1998 2000 2002 2004 Successful Failed Challenged
    8. 8. Evolution of Use of IT Investments are increasing and... ... complexity is increasing ! Management of Information IT Business Transformation of Business Business IT IT Business Automation of Work
    9. 9. A New Perspective IT Investments Investments in IT-enabled Change
    10. 10. The Management Mind-Set Lag <ul><ul><li>Mind-set rooted in “Silver Bullet Thinking” </li></ul></ul>“ Build it and they will come” A Business Issue <ul><ul><li>An issue of business value </li></ul></ul>
    11. 11. <ul><li>Realizing the true potential of investments in IT- enabled change requires: </li></ul><ul><ul><li>Recognizing that we implementing change… NOT technology </li></ul></ul><ul><ul><li>Managing the change that IT both enables and requires through a governance approach that: </li></ul></ul><ul><ul><ul><li>Ensures clarity of, and accountability for the desired outcomes </li></ul></ul></ul><ul><ul><ul><li>Enables understanding of the full scope of effort </li></ul></ul></ul><ul><ul><ul><li>Breaks down the “silos” and “connects the dots” </li></ul></ul></ul><ul><ul><ul><li>Manage the full economic life-cycle </li></ul></ul></ul><ul><ul><ul><li>Senses and responds to changes and deviations </li></ul></ul></ul>The Role of Governance The Business Challenge This is a significant leadership challenge, opportunity and responsibility !
    12. 12. Leadership, process and structure to ensure the enterprise’s IT enables and supports the enterprise's strategies and objectives by defining: Focusing on five areas What is IT Governance? <ul><li>what key decisions need to be made; </li></ul><ul><li>who is responsible for making them; </li></ul><ul><li>how they are made; and </li></ul><ul><li>the process and supporting structures for making them, including monitoring adherence to the process and the effectiveness of decisions </li></ul>
    13. 13. <ul><li>Continually asking… </li></ul><ul><ul><li>Are we doing the right things? </li></ul></ul><ul><ul><li>Are we doing them the right way? </li></ul></ul><ul><ul><li>Are we getting them done well? </li></ul></ul><ul><ul><li>Are we getting the benefits? </li></ul></ul>Key Governance Questions Source: The Information Paradox , John Thorp Enterprise Governance of IT IT Governance
    14. 14. Another Definition… <ul><li>Kubernán (gr): to steer a ship – the process of continually orienting and adjusting </li></ul>“ Managing an uncertain journey to an uncertain destination” “ any organisation is multifaceted, and the range of organisational variables is mind-boggling” John Roberts The Modern Firm
    15. 15. The Good News <ul><li>“ Enterprises that actively design their top-level IT governance arrangements make and implement better IT-related decisions” </li></ul><ul><li>Gartner </li></ul><ul><li>“ Effective IT Governance is the single most important predictor of the value an organization generates from IT” </li></ul><ul><li>“ Firms with focused strategies and above average IT Governance had more than 20% higher profits than other firms following the same strategies </li></ul><ul><li>Peter Weill and Jeannie W. Ross, IT Governance </li></ul>
    16. 16. +8% +20% 1 0 +2% Management Practices Score + - Intensity of IT deployment + 75th percentile and above 25th percentile and above 75th percentile and above 25th percentile and above In October 2006 Mc Kinsey and the London School of Economics measured the increase in productivity from investments in IT versus investments in management practices in 100 enterprises. The Good News
    17. 17. IT Investment Appraisal Survey Cranfield School of Management, FT, June 17 2005 The not so good news 25 50 75 100 0 85 The IT investment process is influenced by personal or political aspirations 25 50 75 100 0 65 Assessment of the implications of business change is ‘poor’ or worse 25 50 75 100 0 47 Assessment of business benefits is ‘poor’ or worse 25 50 75 100 0 43 IT investment process too bureaucratic 100 25 50 75 0 40 Little ‘real’ involvement of business managers 25 50 75 100 0 37 Quality of IT investment appraisal is ‘poor’ or ‘very poor’ 100 25 50 75 0 88 The organisation is trying to improve the situation (49% to a significant extent)
    18. 18. <ul><li>Only 38% of executives/senior management can describe their organizations IT Governance process </li></ul><ul><li>In most cases, IT Governance has not been designed – it has just developed “piecemeal” in response to specific issues </li></ul>The Bad News Peter Weill and Jeannie W. Ross, IT Governance Only 40% of approved projects have valid (realistic) benefit statements Less than 10% of organisations ensure benefits are realised post-project Less than 5% of organisations hold project stakeholders responsible for benefit attainment Meta Group July 2004
    19. 19. Without Effective Governance Source: Fujitsu Can’t kill projects Leads to.. Too many projects Quality of execution suffers Underestimation of risks and costs Projects not aligned to strategy Budget overruns Project delays Business needs not met Lack of confidence (in IT) Results in.. Benefits not received Increased Complexity Sub-optimal use of resources Finger pointing Situation Reluctance to say no to projects Lack of Strategic Focus Projects are “sold” on emotional basis -- not selected No strong review process Overemphasis on Financial ROI No clear strategic criteria for selection SYMPTOMS
    20. 20. Value Management in an Australian Police Force Source: Fujitsu How to manage the value of your IT investments Case Study
    21. 21. <ul><li>The “return” is not financial, it is about: </li></ul><ul><ul><li>Systems that contribute to strategic outcomes – Effectiveness Benefits </li></ul></ul><ul><ul><ul><li>Improved resolution of crime </li></ul></ul></ul><ul><ul><ul><li>Reduced opportunity to commit crime </li></ul></ul></ul><ul><ul><ul><li>Improved community safety </li></ul></ul></ul><ul><ul><ul><li>Safer driver behaviour </li></ul></ul></ul><ul><ul><li>Systems that will streamline business processes – Efficiency Benefits </li></ul></ul><ul><ul><ul><li>Taking police officers away from administrative tasks and back to the front line </li></ul></ul></ul><ul><ul><li>Systems that won’t fail in critical situations – Risk Reduction Benefits </li></ul></ul><ul><ul><ul><li>Ageing infrastructure replaced </li></ul></ul></ul><ul><ul><ul><li>Unsupportable applications replaced </li></ul></ul></ul>What represents Value to Police? The Value Management Office (VMO) helps ensure the agency gets maximum value for its investment Source: Fujitsu
    22. 22. Contribution to Strategic Plan State Source: Fujitsu
    23. 23. Strategic Map Augmented with Program Initiatives IT will make a significant contribution to the achievement of strategic outcomes State Source: Fujitsu
    24. 24. Measures <ul><li>The Strategic Map requires measures </li></ul><ul><ul><li>To measure the overall contribution of the program </li></ul></ul><ul><ul><li>To guide corrective action </li></ul></ul><ul><ul><ul><li>Measuring intermediate outcomes helps identify problems and take corrective action earlier </li></ul></ul></ul>Measurement is critical to success Source: Fujitsu Prosecution Branch Number of charges withdrawn or dismissed in court. Due to brief Better Quality Briefs IMS System % of incident reports rejected by supervisor / IMU during QA (Initial Attendance Stage) Improved Quality of Initial Attendance Investigation In-house community survey Rate of participation in crime prevention activities e.g. neighbourhood watch, safety house, other community policing programs etc from actual records or via survey. Community Participation in Crime Prevention IMS System Reported Offences Reduced Incidence of Criminal Activity ABS Crime & Safety Survey Victimisation Rate, % of persons (includes unreported crime) Reduced Incidence of Criminal Activity Traffic Enforcement & Crash EIS Rate of fatal/serious road crashes by age and/or road user Reduced Road Trauma National Survey of Community Satisfaction with Policing (ACPR) % of people who felt safe or very safe walking or jogging locally during the day and night Improved Community Safety (Perception) Source Measure Outcome
    25. 25. Value Management Approach - Life Cycle & Governance Project Execution Benefits Harvesting Change & Benefits Planning Business Case Assessment Opportunity Qualification Benefits-Led Scope Control PoW Mgt Idea/ Initiative Submission Project Initiation Benefits Reconciliation Gateway Review 0 Gateway Review 1 Gateway Review 5 Gateway Reviews 2,3 Gateway Review 4 Program Management Office (PMO) Value Management Office (VMO) Responsibilities: Pick the Winners Set up for Benefit Delivery Deliver the Benefits Corporate Projects Committee Source: Fujitsu
    26. 26. Investment Categories Mandatory Sustaining Business Growth IT Infrastructure Research & Development Degree of Freedom <ul><li>Legal requirement </li></ul><ul><li>Renewal of obsolete or ageing infrastructure </li></ul><ul><li>New assets for growth in business volume </li></ul><ul><li>Implementation of long term infrastructure </li></ul><ul><li>Test innovative ideas with no certain payback </li></ul>Business Opportunity <ul><li>Programmes providing measurable business value </li></ul>Different strategies are required to manage the different classes of assets! Discretionary Imperative Source: Fujitsu
    27. 27. Picking the Winners – Business Case COST BENEFIT Risk <ul><li>Risks: </li></ul><ul><li>Risk of not realising the benefits </li></ul><ul><ul><li>Lack of Business sponsorship </li></ul></ul><ul><ul><li>Business disruption impact </li></ul></ul><ul><li>Risk of overspending on the costs </li></ul><ul><ul><li>Scope management </li></ul></ul><ul><ul><li>Dependence on external parties </li></ul></ul><ul><ul><li>Failure to deliver </li></ul></ul><ul><li>Costs: </li></ul><ul><li>Dollar cost of project </li></ul><ul><ul><li>Up front </li></ul></ul><ul><ul><li>Ongoing </li></ul></ul><ul><li>Resources used </li></ul><ul><ul><li>On project </li></ul></ul><ul><ul><li>To support service </li></ul></ul><ul><li>Time impost on officers </li></ul><ul><li>Benefits: </li></ul><ul><li>Strategic contribution </li></ul><ul><li>Dollar costs saved </li></ul><ul><li>Time saved for users </li></ul><ul><li>FTEs saved </li></ul><ul><li>Imperatives: </li></ul><ul><li>The business cannot continue without it eg: </li></ul><ul><ul><li>would put the operation at serious risk </li></ul></ul><ul><ul><li>mandated by legislation that cannot be delayed </li></ul></ul><ul><li>Political Imperative </li></ul><ul><ul><li>eg requested by the Minister or the COP </li></ul></ul>Source: Fujitsu
    28. 28. Picking the Winners - Project Assessment <ul><li>Is the opportunity Imperative? </li></ul><ul><ul><li>If genuinely Imperative, the project must go ahead (subject to funds and resources) </li></ul></ul><ul><li>If not, project is scored (0-5) on its: </li></ul><ul><ul><li>Strategic contribution </li></ul></ul><ul><ul><li>Time savings/impost for officers </li></ul></ul><ul><ul><li>Costs and resources to build </li></ul></ul><ul><ul><li>Risk </li></ul></ul><ul><li>All projects ordered by score </li></ul><ul><li>Top projects selected until available capacity (costs and resources) filled </li></ul>Source: Fujitsu
    29. 29. Application of a Standardised Scoring Weighted score = 3.14 (out of best possible 5) Source: Fujitsu 4 3 4 4 1 Score (1-5) 4 Moderate (from instrument) Risk 2 3 officers for 6 months = 2,400 hours Internal Resources required 5 $150,000 Costs 7 Saves 30,000 officer hours per year Time Impact 6 Minor (from instrument) Strategic Contribution Weight Assessment Criteria
    30. 30. 100 80 60 40 AOJ IPA NIU … ... Program of Works Business Priorities Projects Picking the Winners - Program Management Balancing Forces Source: Fujitsu 40 30 20 10 $ $ $ $ $ A01 A02 B03 ... ... Outcome A B C D Release 1.1 1.2 1.3 1.4 1.5 1.6
    31. 31. Set up for Benefits Delivery - Change & Benefits Planning <ul><ul><li>Benefits </li></ul></ul><ul><ul><ul><li>Project contributions mapped to Strategic Map – Results Chains </li></ul></ul></ul><ul><ul><ul><li>Complementary Initiatives fleshed out </li></ul></ul></ul><ul><ul><ul><li>Expected benefits articulated, with measures, targets, timescales, accountabilities </li></ul></ul></ul><ul><ul><ul><li>Measures baselined </li></ul></ul></ul><ul><ul><li>Change </li></ul></ul><ul><ul><ul><li>Scope and impact of change </li></ul></ul></ul><ul><ul><ul><li>Change readiness assessment </li></ul></ul></ul><ul><ul><ul><li>Training and Communications Planning </li></ul></ul></ul><ul><ul><ul><li>Organisational change planning </li></ul></ul></ul><ul><ul><ul><li>Specific change interventions </li></ul></ul></ul><ul><ul><li>Business Process Redesign </li></ul></ul><ul><ul><ul><li>Mapping existing processes </li></ul></ul></ul><ul><ul><ul><li>Designing new processes </li></ul></ul></ul><ul><ul><li>Risk </li></ul></ul><ul><ul><ul><li>Risks, levels, mitigations </li></ul></ul></ul><ul><ul><li>Schedule </li></ul></ul><ul><ul><ul><li>Accountabilities - who does what </li></ul></ul></ul><ul><ul><ul><li>Resource plan </li></ul></ul></ul><ul><ul><li>System for Monitoring & Reporting Progress </li></ul></ul>Setting up for benefits delivery is an integral part of any project Source: Fujitsu
    32. 32. Set up for Benefits Delivery – Results Chains <ul><li>Results Chain done for every project </li></ul><ul><li>Clarifies how the system will contribute to strategic outcomes </li></ul>Source: Fujitsu
    33. 33. Deliver the Benefits - Business Governance <ul><li>Benefits are achieved : </li></ul><ul><ul><li>After a project is implemented </li></ul></ul><ul><ul><li>By the interested area of the Business </li></ul></ul><ul><li>Business System Owners Groups (BSOGS) </li></ul><ul><ul><li>A group of the appropriate senior business managers who take full responsibility for achieving the benefits </li></ul></ul><ul><ul><li>Actively managing the post-implementation </li></ul></ul><ul><ul><li>Taking remedial action where necessary </li></ul></ul><ul><li>BSOG Process </li></ul><ul><ul><li>Set up early to get ownership of the benefits </li></ul></ul><ul><ul><li>Monitor progress using the reporting mechanism </li></ul></ul><ul><ul><li>Identify where outcomes are off track </li></ul></ul><ul><ul><li>Set up the initiatives to bring them back on track </li></ul></ul><ul><ul><li>Monitor progress of the initiatives </li></ul></ul>Source: Fujitsu
    34. 34. Deliver the Benefits – Managed Process 1) System Deployment System capabilities available to all users 2) User Confidence Users Trained Users familiar with system Users confident with system 3) User Adoption Users using system appropriately Users value system 4) Benefits Realisation Comple-mentary initiatives completed Intermediate R/C outcomes happening 5) Agency Value Strategic R/C Benefits happening Significant User enhance-ments implemented Significant Management enhance-ments implemented Best practices shared across user base BSOG Governance VMO Support Management value system Executives value system System responsive to all users Significant data quality issues resolved Significant faults fixed All stakeholders aware of what’s expected Support function operative Source: Fujitsu
    35. 35. Deliver the Benefits - Benefits Reconciliation <ul><li>Must check benefits achieved against business case </li></ul><ul><ul><li>To establish if the business case was achieved </li></ul></ul><ul><ul><li>To learn lessons for other projects </li></ul></ul><ul><li>Business case is modified during the value cycle: </li></ul><ul><ul><li>Prepared, assessed and approved prior to project initiation </li></ul></ul><ul><ul><li>Updated and reviewed at key points during Project Execution: </li></ul></ul><ul><ul><ul><li>After Preliminary Analysis (PA) </li></ul></ul></ul><ul><ul><ul><li>After Design </li></ul></ul></ul><ul><ul><ul><li>Just before Go Live </li></ul></ul></ul><ul><ul><li>Any changes to benefits approved at these times </li></ul></ul><ul><li>Final reconciliation is against last business case </li></ul><ul><ul><li>Usually the “Just before Go Live” one </li></ul></ul>Source: Fujitsu
    36. 36. Results to Date - Agency Outcomes <ul><ul><li>The IT projects have significantly improved support to officers resulting in: </li></ul></ul><ul><ul><ul><li>Appreciable time and effort savings – equivalent to 89 staff so far </li></ul></ul></ul><ul><ul><ul><li>Better targeted patrolling leading to more crimes prevented </li></ul></ul></ul><ul><ul><ul><li>Better quality court briefs leading to more successful prosecutions </li></ul></ul></ul><ul><ul><ul><li>More property returned to its rightful owner </li></ul></ul></ul><ul><ul><ul><li>More timely information for officers-in-charge </li></ul></ul></ul><ul><ul><ul><li>More crimes resolved and perpetrators arrested </li></ul></ul></ul>Property crime (eg burglaries, vehicle theft) has dropped 24% since the introduction of the Crime Management System Source: Fujitsu
    37. 37. Results To Date – Culture <ul><li>Just as important as the business outcomes, Value Management has created a culture within the Police that respects the business value to the agency of the new systems </li></ul><ul><ul><li>The culture has taken some time to build up, and the key components are: </li></ul></ul><ul><ul><ul><li>Respect for the business value to the agency of the new systems </li></ul></ul></ul><ul><ul><ul><li>Independent, objective, strategic evaluation of all candidate projects </li></ul></ul></ul><ul><ul><ul><li>“ Structuring for business success” embedded into the IT project delivery process </li></ul></ul></ul><ul><ul><ul><li>Executive Sponsorship of projects </li></ul></ul></ul><ul><ul><ul><li>Business accountability for the delivery of benefits </li></ul></ul></ul><ul><ul><ul><li>Recognition of the need for the management of people change in order to achieve benefits </li></ul></ul></ul><ul><ul><ul><li>Recognition of the need for measuring the benefits created </li></ul></ul></ul>Source: Fujitsu
    38. 38. <ul><li>IT-enabled investments will be managed as a portfolio of investments. </li></ul><ul><li>IT-enabled investments will include the full scope of activities that are required to achieve business value. </li></ul><ul><li>IT-enabled investments will be managed through their full economic life cycle. </li></ul><ul><li>Value delivery practices will recognize that there are different categories of investments that will be evaluated and managed differently. </li></ul><ul><li>Value delivery practices will define and monitor key metrics and will respond quickly to any changes or deviations. </li></ul><ul><li>Value delivery practices will engage all stakeholders and assign appropriate accountability for the delivery of capabilities and the realization of business benefits. </li></ul><ul><li>Value delivery practices will be continually monitored, evaluated and improved. </li></ul>Val IT Principles Keys to Success Results CIO Interviews
    39. 39. C OBI T Governance & management of a portfolio of technology projects, services, systems & supporting infrastructure Val IT Governance & management of a portfolio of business change programmes Val IT Initiative …a value lens into C OBI T Are we doing the right things? Are we doing them the right way? Are we doing them well? Are we getting the benefits? PO AI ME DS PM VG IM
    40. 40. What fits where? Board / Senior Executive Business Management IT Operations IT (Functional Mgt) Auditors Val IT C OBI T ITIL
    41. 41. Cases Technique Guides Empirical Analysis Bench- marking Enterprise Exchange Community Influence Val IT Initiative …a value lens into C OBI T Supporting Publications Services Research Framework Val IT Framework
    42. 42. Val IT Initiative- Deliverables Available for free download from: www.isaca.org or www.itgi.org
    43. 43. <ul><li>The strategic question. Is the investment: </li></ul><ul><li>In line with our vision? </li></ul><ul><li>Consistent with our business principles? </li></ul><ul><li>Contributing to our strategic objectives? </li></ul><ul><li>Providing optimal value, at affordable cost, at an acceptable level of risk? </li></ul><ul><li>In the value question. Do we have: </li></ul><ul><li>A clear and shared understanding of the expected benefits? </li></ul><ul><li>Clear accountability for realising the benefits? </li></ul><ul><li>Relevant metrics? </li></ul><ul><li>An effective benefits realisation process? </li></ul><ul><li>The architecture question. Is the investment: </li></ul><ul><li>In line with our architecture? </li></ul><ul><li>Consistent with our architectural principles? </li></ul><ul><li>Contributing to the population of our architecture? </li></ul><ul><li>In line with other initiatives? </li></ul><ul><li>The delivery question. Do we have: </li></ul><ul><li>Effective and disciplined delivery and change management processes? </li></ul><ul><li>Competent and available technical and business resources to deliver: </li></ul><ul><ul><li>the required capabilities; and </li></ul></ul><ul><ul><li>the organisational changes required to leverage the capabilities? </li></ul></ul>Some fundamental questions about the value enabled by IT The Four “Ares”- continually asking: Source: The Information Paradox
    44. 44. Portfolio Management Programme Management Project Management Projects, Programmes, and Portfolios Programme – a structured grouping of projects designed to produce clearly identified business value Project – a structured set of activities concerned with delivering a defined capability based on an agreed schedule and budget Portfolio – a suite of business programmes managed to optimise overall enterprise value
    45. 45. Val IT – Processes Value Governance (VG) Portfolio Management (PM) Investment Management (IM)
    46. 46. Val IT Relationship between Processes & Practices Provide strategic direction Establish portfolio parameters Maintain resource profile Maintain funding profile Evaluate & prioritize investments Move selected investments to active portfolio Manage overall portfolio Monitor & report on portfolio performance Identify business req’ts Define candidate programme Analyse alternatives Assign accountability Manage programme execution Document business case Launch programme Monitor & report on programme performance VG1-4, 6 -7 VG5, 9-11 VG8 PM1-5 PM6 PM7-10 PM11 PM12-13 PM14 IM1-2 IM3, 5-7 IM4 IM9 IM8, 13 IM10 IM 11-12 IM14 Establish governance framework Retire programme IM15 VG PM IM
    47. 47. Val IT Processes & Key Management Practices
    48. 48. Val IT Framework - Detail Domain: Value Governance (VG) Process CobiT RACI Chart Description Key Management Practices Cross Ref. Exec Bus IT C R A Primary: PO1.1, ME3.1 - 3, ME3.3 Secondary: ME3.2 VG4 Ensure appropriate and accepted accountability Establish a supporting and appropriate control framework that is consistent with the overall enterprise control environment, and generally a accepted control principles. The framework should provide for unambiguous account - abilities and practices to avoid breakdown in internal control a and oversight. Accountability for achieving the benefits, delivering required c capabilities and controlling the costs should be clearly assigned and monitor ed. C R A Primary: PO4.6, PO4.15 Secondary: PO4.8, PO4.9 VG3 Define roles & responsibilities Define and communicate roles and responsibilities for all person nel in the enterprise in relation to the portfolio of IT - enabled business investment programmes, individual investment programmes and other IT assets and services to allow sufficient authority to exercise the role and responsibility assigned to them. These roles should include, but not necessarily y be limited to: an investment decision body; programme sponsorship; programme management; project management; and associated support roles. Provide business with procedures, techniques, and tools e nabling them to address their responsibilities. Establish and maintain a n optimal coordination, communication and liaison structure between the IT function and other stakeholders inside and outside the enterprise. C R A Primary: PO4.1, ME1.1, ME1.3, ME3.1 Secondary: PO5.2 - 5, PO10.2 VG2 Define and implement processes Define, implement and consistently follow processes that provide for clear and active linkage between the enterprise strategy, the portfoli o of IT - enabled investment programmes that execute the strategy, the ind ividual investment programmes, and the business and IT projects that mak e up the programmes. The processes should include: planning and budge ting; prioritisation of planned and current work within the overall bu dget; resource allocation consis - tent with the priorities; stage - gating of invest - ment programmes; monitoring and communicating performance; taking appropriate remedial action; and benefits management such that t here is an optimal return on the portfolio and on all IT assets and serv ices. C C A,R Primary: PO1.2, PO4.4, ME3.1, ME3.2 VG1 Ensure informed and committed leadership The reporting line of the CIO should be commensurate with the im portance of IT within the enterprise. All executives should have a sound understand - ing of strategic IT issues such as dependence on IT, technology ins ights and capabilities, in order that there is a common and agreed und erstanding between the business and IT of the potential impact of IT on the business strategy. The business and IT strategy should be integrated clea rly linking enterprise goals and IT goals and should be broadly communicated . <ul><li>Establish </li></ul>governance, monitoring and control framework <ul><li>Establish </li></ul>Strategic Direction <ul><li>Establish </li></ul>portfolio characteristics
    49. 49. VG2 RACI Chart C C A/R Primary: PO1.2,PO1.4 PO4.4, ME4.1 ME4.2 VG2 Define and implement processes Define, implement and consistently follow processes that provide for clear and active linkage amongst the enterprise strategy, the portfolio of IT-enabled business investment programmes that execute the strategy, the individual investment programmes, and business and IT projects that make up the programmes. The processes should include planning and budgeting, prioritisation of planned and current work within the overall budget, resource allocation consistent with the priorities, stage-gating of investment programmes, monitoring and communicating performance, taking appropriate remedial action, and benefits management so there is an optimal return on the portfolio and on all IT assets and services. IT Bus Exec C OBI T Cross-references Key Management Practices
    50. 50. IM8 RACI Chart IM8 Develop a detailed programme business case. Develop a complete and comprehensive business case for the programme consistent with the enterprise’s standard business case requirements. The business case should include an executive summary; a description of the programme purpose, objectives, approach and scope; programme dependencies, risks and milestones; organisational change impact of the programme; a value assessment and a programme plan. The programme value assessment should include full economic life cycle costs and benefits, both financial and nonfinancial; overall financial worth; strategic alignment; risks, both delivery and benefits risks; the programme’s overall relative value scoring and any key assumptions. The programme plan should include component project plans, a benefits realisation plan, the approach to risk and change management, and the programme governance structure and controls. The IT function manager signs off on the technical aspects of the programme. The business sponsor approves and signs off on the business case. C A/R Primary: P01.1, P05.3 IT Bus Exec C OBI T Cross-references Key Management Practices
    51. 51. IM - The Business Case 1. Fact Sheet 2. Alignment 3. Financial Benefits 4. Non-fin. Benefits 5. Risks 6. Optimising risk & return 7. Documentation 8. Maintenance
    52. 52. Complete and Comparable Business Cases Results Focused Programmes INITIATIVE Clear understanding of outcomes Clear accountabilities Relevant Measurement Source: The Results Chain™, Fujitsu Full scope of effort - all necessary IT and business initiatives including change management
    53. 53. IM9 RACI Chart C A/R Primary: PO1.1, PO6.1, PO10.1 IM9 Assign clear accountability and ownership Accountability for achieving the benefits, controlling the costs, managing the risks, and coordinating the activities and interdependencies of multiple projects should be clearly and unambiguously assigned and monitored. Where accountability is assigned, such accountability must be accepted, there must be a clear mandate and scope, and the person accountable must have sufficient authority and latitude to act, requisite competence, commensurate resources, clear lines of accountability, an understand of rights and obligations, and relevant performance measures. IT Bus Exec C OBI T Cross-references Key Management Practices
    54. 54. 7+1 Key Conditions for Activist Accountability <ul><ul><li>Condition 1: Clear mandate and scope </li></ul></ul><ul><ul><li>Condition 2: Sufficient authority and latitude to act </li></ul></ul><ul><ul><li>Condition 3: Requisite competence </li></ul></ul><ul><ul><li>Condition 4: Commensurate resources </li></ul></ul><ul><ul><li>Condition 5: Clear lines of accountability </li></ul></ul><ul><ul><li>Condition 6: Understanding of rights and obligations </li></ul></ul><ul><ul><li>Condition 7: Relevant performance measures </li></ul></ul><ul><li>Plus... there must be acceptance of accountability </li></ul>Source: The Information Paradox
    55. 55. VG9 RACI Chart C R A Primary: PO5.1 VG9 Define investment categories The governance processes must recognise that there are a variety of investment types that differ in complexity and the degree of freedom in allocating funds. These different investment types must be categorised. Categories could include, but are not limited to, mandatory, continuity or sustaining, and discretionary. Discretionary could include, but is not limited to, strategic or transformational (to gain competitive advantage or major innovation), informational (to provide better information), transactional (to process transactions and reduce the cost of doing business) and infrastructure (to provide shared services and integration). IT Bus Exec C OBI T Cross-references Key Management Practices
    56. 56. Categorisation VENTURE GROWTH NON DISCRETIONARY CORE Discretionary Projects Non-Discretionary Costs Transform the Business DISCRETIONARY ENHANCEMENTS Grow the Business Run the Business Degrees of freedom to allocate funds Clarity of connection with desired business outcomes Source: Meta Group <ul><li>Every investment need not follow: </li></ul><ul><ul><li>The same level of value analysis </li></ul></ul><ul><ul><li>The same level of control </li></ul></ul>Value Assessment Little Analysis Impact Analysis Cost Benefit Analysis 18% 82% Source: Forrester
    57. 57. PM8 RACI Chart C A/R Primary: PO1.1, PO5.1, PO5.2, ME4.3 PM8 Evaluate and assign a relative score to the programme business case Perform a detailed assessment of the programme business case evaluating strategic alignment; benefits, both financial and non-financial; financial worth; risk, including delivery risk and benefits risk; and availability of resources. Assign a relative score to the programme based upon evaluation criteria and their weighting for this category of investment. IT Bus Exec C OBI T Cross-references Key Management Practices
    58. 58. Evaluation Criteria Are we doing the right things? Are we doing them the right way? Are we getting them done well? Are we getting the benefits? Picking the Winners Alignment Business worth Risk
    59. 59. Value Assessment - Alignment Source: Fujitsu Alignment with movement toward desired future state Alignment with intent of business plan for information Broad access to information services To what extent does this initiative improve people’s ability to access information services wherever they are working? No contribution to broad access 0 Provides some enhancement in information services provided: no systemic or extensible beneficial effect on information access across the organization Capabilities will significantly extend the ability to access information either geographically, or in breadth of information available for one major process area Capabilities will significantly extend the ability to access information either geographically, or in breadth of information available for more than one major process area Provides key component needed to supply “universal” access to information services in the form needed 1 2 3 4 Scoring grid Question to address specific indicator of alignment Anchored “typical” answers Alignment element
    60. 60. Value Assessment – Business Worth <ul><li>Financial </li></ul><ul><ul><li>Value = (benefits-costs)*risk adjusted for time value of money, where </li></ul></ul><ul><ul><ul><li>Benefits and costs are over the full economic life-cycle of the investment </li></ul></ul></ul><ul><ul><li>Many ways to calculate and many “religious arguments” over what is the best way…key is to ensure completeness and consistency…look for same level of rigour on benefits as costs </li></ul></ul><ul><li>Non-financial </li></ul>
    61. 61. Types of Risk <ul><li>Delivery risk </li></ul><ul><ul><li>Risk of not being able to deliver the required capabilities (functionality) on time and on budget </li></ul></ul><ul><li>Benefits risk </li></ul><ul><ul><li>Risk of not being able to use the capabilities to realise and sustain the expected benefits </li></ul></ul>
    62. 62. Delivery Risk <ul><li>Quality of the programme and project plans (completeness and reasonability) </li></ul><ul><li>Clarity of scope and deliverables </li></ul><ul><li>Unproven technology </li></ul><ul><li>Compliance with technology architecture and standards </li></ul><ul><li>Project duration </li></ul><ul><li>Size of the project in relation to earlier successful projects </li></ul><ul><li>Level of interface required to existing systems and processes </li></ul><ul><li>Senior business department staff involvement </li></ul><ul><li>Key staff availability during project deployment </li></ul><ul><li>Experience/quality of project managers </li></ul><ul><li>Experience/quality of project teams </li></ul><ul><li>Reliance on vendors </li></ul><ul><li>Dependency on factors outside control of project teams </li></ul><ul><li>Quality of risk control mechanisms </li></ul><ul><li>Ability to provide ongoing operational support </li></ul>
    63. 63. Benefits Risk <ul><li>Non-alignment with commercial policies or strategy </li></ul><ul><li>Non-alignment with technical standards, architecture, etc. </li></ul><ul><li>Compliance with security guidelines/policy </li></ul><ul><li>Clarity and credibility of desired business outcomes </li></ul><ul><li>Measurability of outcomes (lead and lag indicators) </li></ul><ul><li>Benefits monitoring processes </li></ul><ul><li>Sensitivity of outcomes to timing or external dependencies, including changes in the economy, market conditions or a specific industry sector. </li></ul><ul><li>Extent of organisational change required (depth and breadth) </li></ul><ul><li>Clarity of the scope of organisational change required </li></ul><ul><li>Quality of the change management plan </li></ul><ul><li>Preparedness and capability of business to handle the change </li></ul><ul><li>Level of business organisational understanding of and commitment to the programme </li></ul><ul><li>Quality and availability of business sponsorship </li></ul><ul><li>Senior business department staff engagement </li></ul><ul><li>‘ Big bang’ programme or ‘do-able chunks’ </li></ul>
    64. 64. Value Assessment – Risk Scoring grid Anchored “ Typical” Answers Risk topic Topic Scoring Back-up Questions Risk is the degree to which the program is susceptible to loss of potential value Source: Fujitsu 0 1 2 3 4 5 6 7 8 9 10 Are the outcomes and benefits sought credible? Clarity of benefits How clear are the benefits from the program, and the logic for their derivation from project results? Clear, specific benefits, derived directly through project results Key benefits are specific and derived from project results through simple logic chain Vague, broad benefits, derived through complex chain of transformations requiring project results 0 1 2 3 4 5 6 7 8 9 10 Future State Definition How well defined is the desired future state implied by implementation of the program ? Clearly articulated target future business state Concepts of desired future well understood No clear picture of future business state 0 1 2 3 4 5 6 7 8 9 10
    65. 65. Evaluate & Select (PM9-10) Financial Worth vs. Risk Legend Green = “Are” Risk score between 1 & 3.9 Yellow = “Are” Risk score between 4 & 6.9 Red = “Are” Risk score between 7 & 10 Right Things Confirmed Benefits Right Way Done Well Program 10 9 8 7 6 5 4 3 2 1 0 10 9 8 7 6 5 4 3 2 1 0 Overall Risk Financial Worth Program 21 Program 13 Program 03 Program 02 Program 24 Program 19 Program 17 Program 09 Program 01 Program 06 Program 23 Program 08 Program 11 Program 16 Program 12 Program 07 Program 15 Hold Proceed Stop
    66. 66. PM12 RACI Chart C R A Primary: PO1.1, PO5.1, PO5.2, ME4.3 PM12 Stage-gate (and fund) selected programmes Determine required stage-gates for the programme’s full economic life-cycle. Confirm business case requirements at each stage-gate. Commit total programme funding, release funding to next stage-gate and identify funding requirements at next stage-gates. Move the program into the active portfolio. IT Bus Exec C OBI T Cross-references Key Management Practices
    67. 67. Portfolio Management TRANSPARENCY Categorise Transformational Informational Transactional Infrastructure Mandatory Sustaining Discretionary Evaluate <ul><li>Alignment </li></ul><ul><li>Business Worth </li></ul><ul><li>Financial </li></ul><ul><li>Non-Financial </li></ul><ul><li>Risk </li></ul>Select & Monitor Design Programme Define Programme Concept Commission Programme Execute Programme Transfer to Operations Mgmt Approved Mgmt Approved Mgmt Approved Mgmt Approved Mgmt Approved
    68. 68. Getting ahead of the Curve! <ul><li>Requires an Effective Full Cycle Governance Process that… </li></ul>Prevent / Plan Contain / React Recover / Throw away or start again $’s “ How does a project get to be a year behind schedule? One day at a time.” Fred Brooks Develops complete & comprehensive Value-driven plans Senses & responds to deviations early, quickly and decisively Eliminates the risk of getting to the crisis stage
    69. 69. IM12 RACI Chart C A/R Primary: PO5.5, PO10.13, ME1.4, ME4.3 IM12 Manage/track benefits Implement a benefits monitoring process to ensure that planned benefits are achieved, sustained and optimised. Benefit delivery should be monitored and reported. The performance against targets should be regularly reviewed and root cause analysis performed for deviations from plan. Remedial action to address the underlying causes should be initiated and controlled. IT Bus Exec C OBI T Cross-references Key Management Practices
    70. 70. Benefits Register Source: Fujitsu
    71. 71. <ul><li>Framework </li></ul><ul><li>Business Case </li></ul><ul><li>Case Study (initial) </li></ul>DONE Val IT Initiative Status Available for free download from: www.isaca.org or www.itgi.org <ul><li>Business Case v2.0 </li></ul><ul><li>Empirical Analysis </li></ul><ul><li>Benchmarking </li></ul><ul><li>Forums </li></ul>PLANNED <ul><li>Extend FW to services & other IT assets/resources </li></ul><ul><li>Maturity Models </li></ul><ul><li>Management Guidelines </li></ul><ul><li>Taxonomy </li></ul><ul><li>QuickStart Guide </li></ul>IN PROCESS
    72. 72. Val IT – Empirical Research <ul><li>Overall: </li></ul><ul><ul><li>Very little data collected/exists on benefits or benefits realization </li></ul></ul><ul><li>Maturity: </li></ul><ul><ul><li>Entities with a CMM level 2 are more likely to bring in their projects on budget and realize benefits </li></ul></ul><ul><ul><li>Anticipated return not influenced significantly by past solution delivery performance </li></ul></ul><ul><li>Risk/return: </li></ul><ul><ul><li>Expectation of higher returns (based upon net present values) lowers likelihood of budget overrun, BUT… </li></ul></ul><ul><ul><li>Solution delivery performance of higher risk projects, where risk is recognized up front, perform as well as lower risk projects </li></ul></ul><ul><li>Cancellation: </li></ul><ul><ul><li>Cancellations of projects happen at any time within the life cycle </li></ul></ul><ul><ul><li>Relatively few projects do get cancelled (average is 5%) </li></ul></ul>
    73. 73. <ul><li>Recognize that the introduction of Val IT (or similar approaches) is a major change </li></ul><ul><ul><li>It’s about behavioral change </li></ul></ul>Lessons learned
    74. 74. Behavioural Change <ul><li>Taking the Enterprise view </li></ul><ul><ul><li>We thinking vs. I thinking </li></ul></ul><ul><ul><li>Collaboration vs. competition </li></ul></ul><ul><ul><li>Program scope crosses “traditional” organizational management boundaries </li></ul></ul><ul><li>Embracing shared visibility </li></ul><ul><ul><li>Openness vs. “hidden agendas” </li></ul></ul><ul><li>Program ownership </li></ul><ul><ul><li>Activist accountability - “successful realization of a business outcome” vs. “delivery of a capability” </li></ul></ul><ul><li>Learning to say and accept “no” </li></ul><ul><ul><li>Management system worked vs. somebody “screwed up” </li></ul></ul><ul><li>Willingness to change course </li></ul><ul><ul><li>Managing “an uncertain journey to an uncertain destination” vs. “we don’t want to hear bad news” </li></ul></ul>
    75. 75. <ul><li>Strong and “cascading” sponsorship is key </li></ul><ul><li>Align the reward system </li></ul><ul><li>IT and “the business” must work as partners </li></ul><ul><li>Measure what’s important and manage what you measure </li></ul><ul><li>There is a place and need for tools </li></ul><ul><li>Recognize that one size does not fit all </li></ul><ul><li>Integrate with existing processes </li></ul><ul><li>Avoid excessive beaurocracy </li></ul><ul><li>Don’t fall into the “analysis paralysis” trap </li></ul><ul><li>Pick the right place to start </li></ul><ul><li>Take an incremental approach </li></ul><ul><li>Recognize that the introduction of Val IT (or similar approaches) is a major change </li></ul><ul><ul><li>It’s about behavioral change </li></ul></ul>Lessons learned
    76. 76. <ul><li>IT Value </li></ul><ul><li>IT Governance </li></ul><ul><li>IT Alignment </li></ul><ul><li>IT Strategy </li></ul><ul><li>IT Architecture </li></ul><ul><li>Optimizing Enterprise Value requires: </li></ul><ul><ul><li>an integrated approach to IT Governance, within </li></ul></ul><ul><ul><li>an integrated approach to Enterprise Governance </li></ul></ul>The Problem with Labels <ul><li>Enterprise Value </li></ul><ul><li>Strategic Governance </li></ul><ul><ul><li>Integrated Enterprise </li></ul></ul><ul><ul><li>Enterprise Strategy </li></ul></ul><ul><ul><li>Enterprise Architecture </li></ul></ul>
    77. 77. A Strategic Governance Framework Total Benefits – Total Costs Performance Management Management of Change Strategy Management Program Management Project Management Portfolio Management A sset Mgmt A r c h i t e c t u r e Management Operations Management VALUE RISK Val IT C OBI T Future
    78. 78. The Evolving Role of the CIO <ul><li>Deliver required technology services at an affordable cost with an acceptable level of risk </li></ul><ul><li>Work in partnership with the (other parts of the) business to help them </li></ul><ul><ul><li>optimize value from existing services </li></ul></ul><ul><ul><li>understand the opportunities for business change enabled by current, new or emerging technologies </li></ul></ul><ul><ul><li>understand the changes they will have to make (BPPTO) to realize value from these opportunities </li></ul></ul><ul><ul><li>select opportunities with highest potential value and execute such that value is maximized </li></ul></ul>
    79. 79. Why are we moving so slowly? <ul><li>ADD </li></ul><ul><ul><li>No “burning platform” </li></ul></ul><ul><li>Abdication to IT </li></ul><ul><ul><li>Anything with an “IT” label is an IT problem! </li></ul></ul><ul><ul><li>Culture of blame </li></ul></ul><ul><li>Denial </li></ul><ul><ul><li>It’s not that complex! </li></ul></ul><ul><li>Vested interests </li></ul><ul><ul><li>Internal: </li></ul></ul><ul><ul><ul><li>Governance is about the power structure of the organization </li></ul></ul></ul><ul><ul><li>External: </li></ul></ul><ul><ul><ul><li>“ I’m alright Jack - don’t rock the boat!” </li></ul></ul></ul><ul><li>It’s not easy! </li></ul><ul><ul><li>No appetite to tackle the changes </li></ul></ul>
    80. 80. The emerging challenge – The “Value Ceiling” IT-enabled value Organizational governance and structure
    81. 81. What does this mean to you? <ul><li>Delivering the IT capability is not enough </li></ul><ul><ul><li>Necessary but not sufficient </li></ul></ul><ul><ul><li>Value comes from how the business manages and uses IT </li></ul></ul><ul><ul><li>This increasingly requires significant organizational change </li></ul></ul><ul><ul><li>Business engagement and accountability are essential </li></ul></ul><ul><ul><ul><li>Business/IT partnership </li></ul></ul></ul><ul><ul><ul><li>Enterprise governance of IT vs. IT governance </li></ul></ul></ul>You can make a difference!
    82. 82. The Challenge of Value Governing IT Investments John Thorp, CMC, I.S.P. John_thorp @thorpnet.com ISACA Victoria, June 20 th , 2007 Val IT and slides copyright © 2006 IT Governance Institute. Used with permission.

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