Matakuliah : A0824/IT Investment Portfolio
Tahun
: 2009
EXCELLING AT ENTERPRISE
PERFORMANCE MANAGEMENT
Pertemuan 19-24
We are what we repeatedly do. Excellence,
Therefore, is not an act but a habit. ~ Aristotle
Elements of Enterprise Performance
Management (EPM)
Enterprise performance management is an enterprisewide
approach that riles on comprehensive, integrated
performance metrics, timely feeback of performance
results, and planning and management aimed at
achieving optimal enterprise performance.
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Enterprise Performance Management
• EPM’s goals of optimizing at the enterprise level affects
how decisions are made to improve business processes.
An impromvemen in a business process is measured not
only at the business-process level, but most important,
also at the enterprise level.
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Relationship ot ITPM to EPM
• The common reason given for the growing interest in
EPM is that organizations want more from their IT
investments, especially their costly investments in ERP
systems, CRM, data warehouse systems, financial
systems, etc.
• Organizations implement EPM to integrate data from
these various systems so that management can receive
more and better information for managing the enterprise.
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Relationship ot ITPM to EPM
• Focus on optimizing performance at the enterprise level,
• Regular feedback of performance information
• Complex trade-offs in determining the best ways to
improve performance
• Provide managers with custom tailored reports and
displays to support their decision making
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Relationship ot ITPM to EPM
• The major eason given for adopting EPM – to get a
greater return from large IT investments.
• Ignores the importance of portfolio-based IT investment
management in maximizing enterprise investment
returns while controlling costs and risks.
• ITPM cannot be successfully implemented without the
capabilities of BI and EAI systems, which give ITPM its
enterprise-wide reach.
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Relationship on IT Portfolio Management to EPM
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Basic Concepts
• The priorities are customer and enterprise firs, followed
by business process, and then the activities comprising
the process. Optimization is at the customer and level
• Visibility of performance results and related information
is provided at the enterprise level, the business process
level, and the activity level, with the ability to trace
results downward, upward, and across or horizontally
• Reliable and valid measurements of business and IT
performance are used at the enterprise, business
process, and activity levels
• The portfolio includes all (with minor expectations) IT
investments, including IT projects and in-place systems
Basic Concepts
• High level investment criteria are used to determine the
relative worth of competing It investments for meeting
priority enterprise performance needs
• The portfolio mix and balance are constantly monitored
and changed to improve enterprise performance, control
cost, and manage risk
• Procedures and systems are in place that ensure timely
feedback, analysis, reporting, decision making, and
implementation of change
Benefits of ITPM Approach to EPM
• Improved alignment of both business activities and IT
with enterprise strategic and operational objectives and
their performance metrics
• Increased return on IT investments because they are
managed as a portfolio, eliminating overlaps and
dulplications and managing risk
• More accurate, timely, and relevant information for
management decision making at all levels, especially at
the enterprise level
• Quicker identification of, and responses to, process
improvement needs and new opportunities
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Benefits of ITPM Approach to EPM
• Improved use of IT resources because of optimization at
the enterprise level
• Clarification of data needs for decision making,
especially at the enterprise level but also at lower levels
• Enhanced ability to evaluate benefis, costs and risks –
an trade offs among them – in terms of net impact
enterprise wide
• Other benefits – experience demonstrates other benefits,
such as improved customer retention, productivity, and
reduced cost of sales
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Performance Measures and Metrics
•
•
•
•
Cultural Resistance to Performance Measures
Number of Performance Measures to Use
Enterprise Output and Outcome Measures
Responding to Performance Feedback
– Correcting Negative Outcomes
– Correcting or Changing Output Results
– Documenting and Tracking Changes
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Examples of Performance Indicators, Performance
Measures and Performance Targets
Performance
Indicator
Performance
Measure
Performance
Profit
Financial Return
40 % ROI
Satisfied
Customer
90 % Retention
Online Response Time it Takes to
2 Second
Several common reasons for resistance to
performance measures
• Some managers lack an understanding of what
performance measures are and why they are needed
• The managers are used to managing without the new
measures and some do not change their management
approach
• Some managers may disagree with the measures
selected or being used and believe they are being
pressured to accept them
• Some managers fear the measures will reveal something
that they do not want revealed, such as an unauthorized
allocations of resources, misleading reports to superiors
or outside groups, or questionable, even illegal, activities
Benefits of ITPM Approach to EPM
• Improved alignment of both business activities and IT
with enterprise strategic and operational objectives and
their performance metrics
• Increased return on IT investments because they are
managed as a portfolio, eliminating overlaps and
duplications and managing risks
• More accurate, timely, and relevant information for
management decision making at all levels, especially at
the enterprise level
• Quicker identification of, and responses to, process
improvement needs and new opportunities
Benefits of ITPM Approach to EPM
• Improved use of IT resources because of optimization at
the enterprise level
• Clarification of data needs for decision making,
especially at the enterprise level but also at lower levels
• Enhanced ability to evaluate benefits, costs, and risk –
and trade offs among them – in terms of net impact
enterprise wide
• Other benefits – experience demonstrates other benefits,
such as improved customer retention, productivity, and
reduced cost of sales
Responding to Performance Feedback
Enterprise-Level Performance Measures Outcome Measures and Their
Linked Output Measures
Outcome
Measure
Feedback
Output
Measures
Feedback
Positive
Positive
Can assume right products and services are
being produced but continue to monitor
Negative
Positive
Investigate possible shift in customer values;
business process changes may be required to
respond to customer changes
Positive
Negative
Immediately investigate business process for
possible underperforming activities
Negative
Negative
Investigate whether right products and
services are being produced; investigate
business processes for underperforming
activities
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Comment on Feedback
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Defining Performance Measures
Goals and Objectives
Using Balanced Scorecard
Critical Success Factors
Most Important Things to Accomplish to Be Successful
High Level Business Strategies
From Updated Strategic Plan
Key Results and Measures
High Level for Strategy Map
Supporting Measures
Results Chains for Implementing the Strategies
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Measuring and Controlling Enterprise Alignment
• Monitoring Customer Values
What
Outcomes Do
Customers
Want?
What Outputs
Are Needed to
Produce the
Outcomes
What Work
Activities Are
Needed to Produce
the Outputs?
What IT
Investments Are
Needed to Enable
the Activities
Outcomes
Measures
Outcomes
Measures
Activity
Measures
Investments
Criteria
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Measuring and Controlling Enterprise Alignment
• Investment Criteria as an Alignment Tool
Aligned
Investment
Criteria
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Used to Select
Aligned
Investments
That Produce
Desired Outputs
That Result in
Desired Outcomes
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Decision Criteria Used During the IT Investment
Management Life Cycle
~ IT Investment Management Life Cycle ~
Select Phase
Control Phase
Evaluate Phase
Selected
Projects
Ongoing
Projects
Completed
Projects
Evaluated with :
Screen-Out criteria
Investement Criteria
Portfolio Balance
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Evaluated with :
Planned vs actual
Investment Criteria
Portfolio Balance
Evaluated with:
Planned vs actual
Investment Criteria
Portfolio Balance
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Life Cycle Alignment Control
• The same investment criteria are used by proposal teams
organization-wide and by the Investment Review Board, so
everyone uses the same criteria for investment decision making.
• The investment criteria are used in all three of the investment
phases and measure the degree of alignment with, and expected
contribution to, the organization’s goals and performance objectives
• The contribution of the investment to portfolio balance is evaluated
throughout its life cycle; an investment must not only be aligned but
also contribute to portfolio balance
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Life Cycle Alignment Control
• “Screen out” criteria are used in the select phase to screen out
proposed investments that are not aligned, are unworthy, should be
decided at a level below the Investment Review Board, or otherwise
do not meet the requirements for board consideration
• Planned versus actual performance is measured and assessed in
both the Control Phase and the Evaluate phase, the degree of
alignment is also evaluated
• All existing and proposed investments are in competition with each
other for the same scarce funds regardless of investment phase;
those that are best aligned have a greater likelihood of receiving
funding.
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Performance Feedback
The Business Case and Enterprise Performance
Enterprise Performance
Business Process Performance
IT Portfolio
Analysis of
Problem/
Opportunity
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Investment
Business
Case
Investment
Board
Decisions
Approve
Change
Delay
Replace
Cancel
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Standard Information Requirements
• What is the problem or opportunity and why does it have to be
addressed now?
• What have others done to solve the problem or address a similar
opportunity?
• What alternative solutions were considered and why was this one
selected?
• What is the cost and when are the funds needed?
• How long will it take to recover the investment?
• What risks are involved and how will they be managed?
• What changes will the project make and when must the project
start?
• How will the project be managed and who will be the project
manager?
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Making the Business Case
• Without IT Investment
• With IT Investment
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Measuring Financial and Non Financial Benefits
• The calculation of financial ROI is a fundamental
measure used in business cases. Characteristics of ROI:
–
–
–
–
Relatively easy to quantify (e.g. cost savings)
Easy for senior executives to understand
Long history of use to justify investments
Much credibility because the quality of the source data,
assumptions, and computation method can generally be verified
– Can determine impact on financial condition of the organization
– A strong financial case is always appealing to executives
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“Intangible” does not mean Unmeasurable
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Software Systems
•
•
•
•
Increased Comprehensiveness
Facilitating Integration
Importance of the Underlying Process
Benefits of Designing the Underlying Process First
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Related Software Systems
• IT Portfolio Management (ITPM)
• Business Intelligence (BI)
• Enterprise Application Integration (EAI)
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Convergence of Software Systems
Project
Office
Enterprise
Application
Integration
Project
Management
Resource
Management
IT Portfolio
Management
Business
Intelligence
One IT Portfolio
Management
Software System or
Software Suite
Others
Capabilities
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EPM Software Software
“What we need is a highly scalable platform that can
provide collaboration on an integrated set of metrics from
all areas of the organization that can link to a distributed
set of hierarchical goals and objectives. Unfortunately,
the focus on the sizzle of the end-user interface has
pushed out consideration of the enterprise architecture
and information integration required for adaptability and
customization of this new breed of application platform. “
– Mark Smith, CEO of Ventana Research, after a review
of EPM Systems, in Intelligent Enterprise, June 30, 2003
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EPM Software Systems
• A satisfactory EPM software system must either have an
IT portfolio managemenct capability or it must be able to
integrate seamlessy with an IT portfolio management
system.
• The more advanced IT portfolio management sofware
systems are encompassing much of the funcitionality
desired of a comprehensive EPM System
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