Monday, September 25, 2006
- Startsmart Consulting
What if we could quantify and see business and IT alignment?
Business leaders, across industry, are continuously trying to maximize returns on their Information Technology (IT) investments
Eliminate investments that are not producing results
Fine tune remaining investments to improve results
This task is made difficult because of the fundamental nature of IT
It is an internal investment hence clear assignment and quantification of results is difficult if not impossible
The impact of decisions is felt only after a substantial investment has been made. Hence, course correction does not result in substantial savings
IT assets are highly interrelated and not amenable to easy renewal/replacement hence value at risk is much greater than the cost of an initiative
The approaches and frameworks in use today cannot address the key issues related to IT alignment and value:
Are we in alignment? How do we know for sure?
What is the misalignment costing us?
How do we get in alignment?
How much will that cost and make?
How do we know when we are done?
How do we stay aligned?
We believe that improving IT ROI and making better IT decisions requires a differentiated approach and framework that provides a mechanism to
Quantify and verify benefits
Assess the impact of decisions prior to any real investment being made in them
Monitor and track benefits on an ongoing basis to enable mid course corrections
We believe that IT alignment is critical to value creation. However, it is a necessary but not a sufficient condition.
Alignment and value are two interconnected yet distinct measures of IT Capability
Alignment, by directing all IT investment towards business imperatives, sets the stage for value creation
However, value creation requires other things such as process coverage and asset productivity.
This value must be weighed against the costs and risks to make meaningful decisions around IT initiatives
We also believe that:
All IT decisions are subordinate to IT Alignment and value.
The best way to analyze a decision is to assess its impact on alignment and value
Better decisions result in higher alignment and value creation
Bad decisions have the exact opposite effect
IT Alignment and value can demonstrated – quantifiably and verifiably
More importantly, doing so does not require moving mountains i.e. it can be accomplished through an easy to use framework
Consequently, a framework that is practical, quantifiable and easy to use will result in substantial benefits to IT Organizations:
Better ROI
Reduce Costs: Our analysis and experience lead us to believe that over 10% of IT investments are not in alignment with business imperatives. By eliminating these one can shave 10% off IT budgets
Improve returns: The remaining 90% is not in perfect alignment or not delivering the desired value. Hence, fine tuning IT decisions, can result in greater returns on these investments
Make better IT decisions by assessing the impact of these decisions prior to any investment being made
IT budgeting
Application lifecycle such as ERP selection or system sun-setting
Project or Asset Portfolio Rationalization
Enterprise Architecture Planning
Outsourcing
Staff Hiring and Reduction
With such a framework, we should be able to:
See the current state of business and IT alignment and the resulting value loss
Help identify the root cause of misalignment
Help assess the impact of key management decisions, such as outsourcing, on IT Alignment and value creation
For example, the following diagrams depict the current state of business and IT alignment and the resulting value loss…
…IT Component Map to help identify the root cause of misalignment…
…assess outsourcing decision…
…and its impact on alignment…
…and value creation…
An IT Strategy framework provides an easy mechanism to continuously monitor and manage IT Alignment and value creation
IT Strategy: IT Cannot be a Profit Center (Friday, September 08, 2006) IT Strategy: Of late, there is a lot of emphasis on IT ROI. While this is commendable, extending this argument to convert the IT Organization into a profit center is taking it to another extreme. For example, are HR, finance, and marketing profit centers? Why not?
IT Value Mapping (Friday, September 08, 2006) Why do some IT organizations create unprecedented shareholder value, while others earn the contempt of their business leaders? It is no secret that aligning IT with business improves IT ROI, what is often in doubt is how to make it happen. Can you say with certainty that your IT is aligned with business? Can you prove it? If improving IT ROI is an imperative for you, read on. This paper will show you how to improve ROI by 10% or more…and
What is IT Strategy? (Saturday, October 14, 2006) There are many definitions of IT Strategy. Which one is true?
Help! We are being treated as a cost center! (Wednesday, October 18, 2006) Let’s face it. An IT organization that has to justify its budget as a “cost center” has lost the respect of the business community somewhere along the line.
Talk to Me: The Disconnect Between Business and IT (Monday, May 07, 2007) The disconnect between business and IT is often lamented. A lot is spoken and written about this chasm. Ostensibly, a lot is done to bridge it. Yet, most would agree the chasm still exists.
Why IT ROI doesn't matter? (Friday, November 03, 2006) Does IT ROI matter? Great many intelligent people are spending sleepless nights and countless dollars calculating IT ROI. The author argues that they are wasting their time and shareholder dollars!
Achieving and Sustaining Business and IT Alignment (Thursday, November 16, 2006) This article was originally published in 1999. However, it is on the money even today. Authors Jerry Luftman and Tom Brier walk through the issue of business and IT Alignment with specific examples and advice on how to achieve this goal. A must read!
7 Steps to Business and IT Alignment (Monday, November 20, 2006) No business will ever reach the goal of “business and IT alignment”. Should this discourage you from pursuing business and IT alignment? NO! It is a worthy goal to pursue. Indeed, it is a critical one to pursue. You might never reach alignment but you can take steps to get ever closer. This requires a process. Often, we ignore the fact that business and IT alignment is a process. This process does not have a starting point nor does it have an end. It is a series of “learn and do” cycles that incrementally get towards alignment. Let me explain.
IT Alignment Maturity Model (Wednesday, December 06, 2006) One of the toughest questions to answer is: is my business is alignment with IT?
Prof. Luftman tries to answer this question in this paper originally published in 2000.
IT Strategist's Dilemma (Saturday, December 09, 2006) Every strategist faces the "stay the course" or "cut and run" choice, at least once in their careers. How do you decide which course is the correct one? More, importantly, is this even a correct or complete set of choices?
IT Strategy Template (Friday, January 12, 2007) Enclosed is a simple template to create an IT Strategy for your organization. This is intended to be the starting point not a definitive or exhaustive workbook on creating an IT Strategy.
7 Signs of Trouble in Paradise (Monday, February 26, 2007) Ever wonder what happens when business and IT are not aligned? Well, like most other things in life, there are symptoms of misalignment. Monitoring them and analyzing them can help you avert disaster.
Part II: A Framework for IT Value (Monday, April 09, 2007) Last week, we lay the foundation for a discussion on IT Value. This week, we look at specific areas where IT creates value.
Part III: A Framework for IT Value (Monday, April 23, 2007) Last week, we focused on revenues. This week, we look at the costs in the IT value equation.
Part IV: A Framework For IT Value (Monday, April 30, 2007) Last week, we discussed the cost dimension of IT Value. This week, we will discuss the time to market dimension.
Talk to Me: The Disconnect Between Business and IT (Tuesday, May 08, 2007) The disconnect between business and IT is often lamented. A lot is spoken and written about this chasm. Ostensibly, a lot is done to bridge it. Yet, most would agree the chasm still exists.
Part V: A Framework for IT Value (Monday, May 14, 2007) Last week, we discussed the time to market dimension of IT Value. This week, we will discuss the quality dimension.
Focus on Customer Service (Monday, May 14, 2007) Is it time to relearn the no.1 rule of business? Some airline companies seem to have gone back to school. Unfortunately, this was an expensive education because their customers took them there!
The Importance of Risk Management (Monday, June 25, 2007) A very good discussion on the importance of risk management. The content is rudimentary but the discussion fundamental to IT Governance.
Is Your Company World Class in IT? (Monday, July 09, 2007) Metrics make us feel secure because of the implicit promise of control. However, metrics are as meaningful as the spin surrounding them!
Measuring IT Value Using Intel's Business Value Index (Friday, August 17, 2007) Want to measure the value of IT? Intel has proposed a solution based upon its "Business Value Index." Attached is an introduction to the methodology
Avoiding the Alignment Trap (Sunday, September 09, 2007) Alignment is an issue but are you focused on the right strategy to fix it?
Enabling the Strategy Focused Organization (Monday, January 14, 2008) Is IT Value compromised because of the strained relationship between business and IT? How can the CIO overcome this challenge?
A Framework for IT Investment Management (Monday, January 21, 2008) A framework for IT Investment Management - also covers the process and maturity model. Must Read!
IT Strategy: Does IT Matter? (Monday, February 04, 2008) This paper presents results from investment in IT at a macro economic level. Proof positive that IT Matters? You decide.
IT Strategist as a Race Car Driver? (Tuesday, February 12, 2008) Learning from Mario Andretti sounds like fun but what has that got to do with IT Strategy? Read on!
Mission Impossible: Demonstrating the Value of IT (Monday, February 25, 2008) CIOs are caught in a vicious circle of "cost cutting" begetting more cost cutting expectation! How can you get out front and demonstrate IT's value?
Measuring Information Productivity (Monday, March 03, 2008) Excellent paper on IT value measurement. This framework powered Baseline's 500. Very informative.
Influences on IT Strategy (Monday, March 03, 2008) Excellent overview of IT Strategy and things that have an influence on its outcome. Must read!
IT Strategy For Business Value (Monday, March 10, 2008) The paper presents a framework for developing an IT Strategy for business value.
IT Strategy Framework with SOA (Monday, March 10, 2008) A very good presentation that takes IT Strategy to solutions architecture using SOA. Good read!
Developing an IS/IT Strategy (Monday, March 17, 2008) A very good presentation on developing an IT Strategy. Must Read!
A Framework for Developing IT Strategy (Monday, March 17, 2008) A very good discussion on developing IT Strategy including detailed steps and explanations. Must Read!
IT Strategy for the Law Firm (Monday, March 17, 2008) A presentation on the challenges facing CIOs at law firms and how to create an IT Strategy to overcome them.
Cracking the IT Value Code (Monday, March 24, 2008) Does IT Spending Matter? The answer is an emphatic no. Then what does? Read on...
Understanding the Value of IT (Monday, March 24, 2008) Understanding the IT Value equation is critical to making IT Decisions. This article provides guidance using the education industry.
Managing IT For Value (Monday, May 12, 2008) "We conclude that no existing method is suitable for assessing the business value created by IT assets." Read On...
Beyond EVA (Monday, June 23, 2008) A good discussion on EVA and how to plug its shortcomings.
The History and Future of Value Management (Monday, July 07, 2008) An excellent presentation on measuring and managing "value" - discusses various frameworks. MUST READ!
Frameworks for Organisational Capability Analysis (Monday, July 14, 2008) The good professor hits upon this key topic with an assortment of tools/frameworks - SWOT, Balanced Scorecard, 7S Framework etc. - and case studies. Excellent Read!
A Framework for Strategic IT Alignment (Monday, September 15, 2008) Is IT Alignment a strategic weapon to gain competitive advantage? Duh! But do you know to what extent information intensity affects competitive advantage? Hmm...
The Strategy Cycle (Friday, October 24, 2008) Often, the talk about the connection between Business and IT Strategy does not translate into action. At other times, IT Strategy is devised in isolation. This is a good discussion on the big picture of strategy in an organization - soup to nuts framework to connect ALL the organizations strategic processes, people and technology. Good Read!
DAM/VAM: A Structured Methodology for Developing and IT Strategy (Monday, November 17, 2008) Demand and value assessment methodology is a structured approach to quantifying the demand for and the value from IT investments. This guide provides a step-by-step approach to implementing DAM/VAM. Excellent Read!
A Common Framework for Business IT Value (Tuesday, December 02, 2008) What is the biggest problem facing IT Value? Lack of single framework that connects business and IT - top to bottom; left to right. Can a single framework connect the organizational stovepipes and frameworks within each? This is a good start but the problem is far from fixed. Good Read!
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