Managing IT as a Business
Capstone 4596
April 2011
Managing IT as a Business
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Managing Organizations in the 21st Century
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Organizations must become more agile,
transparent, and innovative.
There is great pressure to increase efficiencies
and productivity to reduce cost while improving
customer value.
Organizational visibility and governance is more
important than ever.
Business as usual won’t cut it! The dramatic
economic and global pressures have placed
extreme pressure on organizations to accelerate
these changes.
Managing IT as a Business
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Managing Organizations in the 21st Century
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Common Organizational Challenges
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Do More with Less – Productivity, Cost Reduction
Need for Innovation
Revenue and Expense Pressures
Transparency
Be Smarter
Increase Service Value
Collaboration – Internally & Externally
Variable Cost Structure
Managing IT as Business
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Managing Organizations in the 21st Century
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Common Organizational Requirements
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Visibility into the Organization
Control – Metrics & Process to Manage
Optimization – Continuous Improvement
Transformational Change
Leverage the Power of IT to Enable the Change
Managing IT as a Business
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The Importance of IT / Business Alignment
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Business execs have high expectations of
technology — but lower confidence that IT can
deliver to these expectations. This is the new
business technology alignment gap — a gap
between expectations for technology and
confidence in the IT organization. Members of the
Forrester Leadership Boards CIO Group discussed
this gap during recent meetings and shared their
practices for closing it. Their strategy: Make sure
IT is integrated with business planning — and
make sure barriers between business and IT are
minimized. Forrester, Dec 2008
Managing IT as a Business
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The Importance of IT / Business Alignment
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A recent article in Harvard Business Review
(“Radically Simple IT,” March 2008 Issue)
advocates that Business and IT shouldn’t just be
aligned, they should be “forged together.”
It is important that IT and Business work together
in a team based collaborative process and develop
a common set of metrics to measure performance.
Managing IT as a Business
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Key Questions that Strategic Plans
Should Address - Gartner
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Does the IT Strategy Substantiate Mutually Owned Expectations
Developed by All Stakeholders?
Are Critical Drivers Influencing the Direction of the IT Strategy
Accounted For?
Is the IT Investment Direction and Alignment With Business/Mission
Needs and Priorities Made Explicitly Clear?
Does the IT Plan Contain Performance Measures That Can Gauge
Progress and Success
Does the Plan Outline the Governance Process to Execute the
Strategic Planning Process and Approved IT Investment Decision?
Managing IT as a Business
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The Importance of IT / Business Alignment
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Why is it so difficult?
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Most IT plans do not indicate the business value and
what strategic or tactical organizational benefit that the
organization is trying to achieve.
The CIO must report the IT value and guide other
executives on achieving and reporting the contribution of
the investment on the other executives goals.
The CIO must have the ability to relate IT investments
into business value. Art Jahnke
Managing IT as a Business
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The Importance of IT / Business Alignment
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Software Project Disasters
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The 1995 Chaos Report was a landmark survey made by
the Standish Group. This report is the study of IT project
failure and is widely cited when IT project failures are
being discussed
The respondents to the Standish Group survey were IT
executive managers.
The total sample size was 365 respondents representing
8,380 applications.
Managing IT as Business
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The Importance of IT / Business Alignment
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Findings - The Standish Group research showed a staggering
31.1% of projects would be cancelled before they ever get
completed. Further results indicated that 52.7% of projects
will cost over 189% of their original estimates. Based on this
research, The Standish Group estimated that in 1995
American companies and government agencies would spend
$81 billion for cancelled software projects and paid an
additional $59 billion for software projects that would be
completed, but exceeded their original time estimates and
projects completed by the largest American companies had
only approximately 42% of the originally-proposed features
and functions.
Managing IT as a Business
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2009 Chaos Report -“This year's results … highest failure
rate in over a decade”
Projects
33%
44%
24%
Succeeded
Challenged
Failed
CHAOS Summary 2009 - Standish Group
Managing IT as a Business
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A Review of the IT Environment
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The Challenge : How to Leverage New
Technology to be more Innovative?
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Financial Pressures to cut spending
Legacy Computer Systems
78% of IT Dollars spent to “Run the Trains”
Human Capital Challenges
Non Alignment between IT & Stakeholder
Requirements
Managing IT as a Business
Current State
Unpredictable
Transformation
Process
Three-Phase Implementation
Future State
 Reliable
Missed Transforming
Delivery
IT to Achieve Dramatic Business Improvement
 On Time
Dates
Over Budget
OPTIMIZATION
Ineffective
Productivity
Measurements
Rationed Staff
High Cost
CONTROL
 Within Budget
 High Productivity
 Variable Capacity
VISIBILITY
 Lower Fixed Cost
Managing IT as a Business
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A Review of the IT Environment
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Legacy Systems
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Run on Mainframe Technologies
Senior Programmers Close to Retirement
Work not Generally Documented
Operating Systems Expensive
Not Agile or Client Centric
Difficult to Integrate with Newer Technology
Managing IT as a Business
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A Review of the IT Environment
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Legacy Systems
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Recent research reports indicate that integration is
increasingly becoming the focus for many businesses.
Organizations face the challenge of integrating various
and distinct business applications together with their
existing legacy systems, in order to create an effective
business and enhance productivity.
Top IT experts conclude that 78 percent of an
IT budget is spent just managing existing
system and software infrastructures
Managing IT as a Business
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A Review of the IT Environment
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Legacy Systems
 This is bad news for any organization looking to
reduce IT costs. The fact that 78 percent of
your IT budget is spent maintaining existing
systems means less money for IT innovation
and for alignment with business processes. It
means that psychologically, IT managers have
more of a stake in keeping current systems
running, rather than looking for better ways to
manage technology.
Managing IT as a Business
“Do it right”
Assets of the Company Efficiency
“Do the right thing”
Strategic Vision Effectiveness
IT Consulting
Services
Construction Management
Services
“Plan”
“Build”
Corporate Direction
and Strategy
Application Services
Tracer
Desktop Services
“Run”
IT
Strategy
Core
K
K
K
K
Migrate the IT investment $
and/or resources to the
high pay-off areas to the
business.
Business
Enable Change
Information Technology
K = Knowledge Workers
Increase levels of
productivity – Run/Build
Managing IT as a Business
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Standard Processes
Managing with Metrics
Automation
Managing IT as a Business
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Defined Standard/Repeatable Processes
Process/Performance/Product Metrics
Quality Focus
Standard Cost Model
End to End Process Management
Rock Solid Metrics Based Management
Continuous Improvement
 Productivity
 Quality
Managing IT as a Business
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Dramatically Lower Unit Costs
Continuous Cost Reductions
Higher Quality
Improved Visibility
Increased Controls
Asset Optimization
Increased IT Business Value
Improved Capability Level
Managing IT as a Business
OPTIMIZATION
Streamline & Craft
Work Processes
CONTROL
VISIBILITY
Implement Workflow
Processes
Classify and Capture
Work, Metrics,
Resources and Time
4-7 months
Cumulative Timeline
Managing IT as a Business
Software Process –
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a set of
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activities,
methods,
practices and
transformations
that people employ to Develop and Maintain
Software and associated products.
- Mark Paulk, et al., The Capability Maturity Model, SEI
Managing IT as a Business
Standard Process Enables …
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Realization of Methodology Benefits
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Repeatable (Consistent, Reliable, Predictable)
Execution
Common Language to Communicate Activity,
Status, Issues
Managing IT as a Business
Standard Process Enables …
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Realization of Methodology Benefits
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Quality Plans and Improvement Strategies
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Discrete Units of Work for Performance
Specification and Impact Assessment
Defined Quality Control Activities Implement
Quality Assurance Strategy
Meaningful Process Metrics
Managing IT as a Business
Standard Process Enables …
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Realization of Methodology Benefits
Quality Plans and Improvement
Strategies
Tool Usage Benefit Maximization
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Deployment of Tool Across Organization
Feedback/Tuning Experience
Managing IT as a Business
Managing With
Metrics
Managing IT as a Business
Why Metrics are Important
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Business Goals - Define and Track Progress
View Support Costs by Application/Program
Enables Capacity Planning
Conduct Periodic Customer Reviews
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Based on Facts
Managing IT as a Business
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There is general agreement among
practitioners that Standard Process and
Managing with Metrics need to occur,
but they haven’t.
Why?
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Hard
Hard
Hard
Hard
to
to
to
to
Get Started
Achieve Consistency
Avoid Entropy
Institutionalize
We need help to ease the effort –
The Answer - Automation
Managing IT as a Business
Software maintenance
productivity can improve at
rates of 10% to 40% PER YEAR
-
Capers Jones, Calculating the Value of PI
Managing IT as a Business
“Do it right”
Assets of the Company Efficiency
“Do the right thing”
Strategic Vision Effectiveness
IT Consulting
Services
Construction Management
Services
“Plan”
“Build”
Corporate Direction
and Strategy
Application Services
Tracer
Desktop Services
“Run”
IT
Strategy
Core
K
K
K
K
Migrate the IT investment $
and/or resources to the
high pay-off areas to the
business.
Business
Enable Change
Information Technology
K = Knowledge Workers
Increase levels of
productivity – Run/Build