IT Strategy Framework

IT Strategy requires a process and a framework. The former provides the steps and the latter the toolkit. Together they help an organization get to an IT Strategy that maximizes IT ROI. This article addresses the latter.

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

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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

 

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Posted on 05/18/2009 by


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