Business Strategy to IT action
A
Company should spend money on IT that directly supports its business strategy
and its operational effectiveness, and should not spend money that doesn’t. The
management need to follow a methodology to control IT budgets and investments
and at the same time achieve business objectives and help increase
bottom-lines. It takes effective planning process, appropriate resource
decisions, and workable budgets and plans. All of these should work
consistently and efficiently together in tandem with business strategy to have
a positive impact on business bottom lines. Often company’s business strategy
is disconnected from IT plans as the former doesn’t drive the latter. As a
result IT projects do not cohesively support business strategies, and IT
spending on infrastructure, projects and support doesn’t seem to add expected
value to the investment that is made.
Challenges
in Current IT Scenario
After
the dot com implosion occurred and revenue growth slowed, the pipe line of new
innovations exposed poor quality of IT investments, misalignment of
strategy/objectives, and imbalance of aggregated risk. Companies no longer
afford to ignore IT interdependencies, collective support issues, resource
allocation to various projects as all these affect cost, risk and value.
The
complexity, rapid changes and volatility in technology sector continue to
proliferate, making technology investments increasingly risky and uncertain. So
the changes can occur as a result of
· Adjustment of business
needs
· Industry trends
· Economic shifts
· Customer and constituent
demands
· Regulatory requirements
· Competition and business
challenges.
In
addition, Internal Challenges and Pressures include,
· Clearly defined and clearly communicated
business strategic objectives
· Complexity of innovation
· Product VS Service focus
· Value chain partnerships
· Cost Reductions
· Responsiveness improvements
· Efficiency enhancements
Tools
and Methodology for converting business strategy to IT portfolios
The
main practices that should govern while linking the IT with business are
Business
Managers need to find a way to translate business strategy into terms that give
IT a clear direction on company’s strategic intentions. These establish main
drivers for IT strategy; IT possibilities need to be explained in business
terminology that in turn helps business in creating innovative and competitive
strategy. Ultimately IT strategy is responsible for enabling and influencing
business strategic intentions.
The
IT initiatives, assets and Projects are to be prioritized and aligned in line
with business strategic intentions.
Measures IT performance in
ways that relate to the business: While it is easy to develop metrics in
operational terms, but the need is to develop metrics to measure the impact on
business. There is a need for common taxonomy to help IT understand the
strategic intentions and manage accordingly to help business to understand the
performance metrics -qualitative and quantitative - compiled by IT and other
business units.
The
effectiveness above practices is affected by how fast the companies can able to
align with this new culture. Some kind of maturity models help companies to
identify and overcome the difficulties and factors affecting the company’s
ability to execute the above practices.
Role
of Enterprise architecture
Enterprise architecture
describes the structure of the company in terms of means of production,
customer service, strategy and objectives and use of information technology. It
provides models to portray component parts of a company and how they work
together to fulfill company’s vision. It connects company’s business structure
with information technology, and the technology architectures needed.
Enterprise architecture includes information architecture, organization and
business process architecture and Information technology architecture.
Enterprise architecture guides the construction and development of business
organizations and business processes, and supporting information systems.
Proliferation of new technologies and innovations requires a disciplined
approach to creating and maintaining Enterprise architecture. Client-Server
communication, Web technologies, related communication networks enable
distribution of information throughout the enterprise. Rapid information
technology proliferation, incompatible application systems, multiple networks,
islands of solutions, inaccessible data pronounce the need for an enterprise
architecture that can respond to demanding and changing business situations.
The framework is a simple and logical structure for classifying and organizing
the descriptive representation of an enterprise. It is significant to both the
management of the enterprise, and the actors involved in the development of
enterprise’s systems.[13] While the framework is focused the
application oriented area of enterprise architecture, it’s scope include non-IT
components such as people, processes, and time, making it an appropriate
addition to the overall IT Strategy toolkit for CIOs. Enterprise architecture
as-is model is used for knowledge management functions. The to-be model is used
to represent as a target definition for use. These models are used to generate
better projects. In this role, EA provides insight into what those projects
should be, by doing gap analysis between the as-is and to-be architectures. The
use of EA makes it a strategic planning tool - in the sense that the decisions
of the to-be models, particularly the data and function models in Zachman term,
represents strategic design for what the enterprise should look like. This
needs to occur in response to business drivers and strategic intentions.
Business
value of IT - Motivations for IT Portfolio Management
Critical
capabilities for supporting the business value of IT include
· Prioritization
and alignment with corporate vision
· Balanced
investments across business units
· Pragmatic
cost and risk control mechanism
· Rational
decision making process
· Flexibility
to reassess and re-balance priorities
· Adherence
to mandated compliance and regulatory requirements
Since
IT represents sizable portion of the budget spending, the IT became an
important asset for any organization. Recent research shows that IT spending is
currently (1.5% to 7% of gross revenue and represents greater than 70% of
capital spending for most companies. IT investments often lack in careful and
disciplined management, processes and performance measurement.
A
key discriminator for Adaptive organizations is sensing the trends, changes
earlier in the cycle and respond to the same with near real time precision.
Some of the technologies that help in achieving the required agility are Web
services, thin client architectures, composite applications, offshore IT
outsourcing, SOA, on-demand computing, ubiquitous computing... The IT
management role has evolved from managing the code development to integration
management that is based on solid standards. Number of IT studies has indicated
that there is a direct correlation between productivity and IT investments.
Broader Guideline to achieve of Portfolio
Management the goals
Communicating
effectively, with appropriate agility to rapidly re-prioritize, re-balance
investment and assets
· Creating and cataloging risk assessment
· Eliminating redundancies while maximizing
reuse
· Scheduling personnel and resources optimally
· monitoring and measuring project plans
Methodology
to achieve goals
There
are three primary areas of IT Portfolio Management
1.
Processes, Framework to plan, create, assess, communicate the execution of IT
portfolio.
2.
Tools to analyze the data, such as value, costs, risks, benefits, requirements,
architecture and alignment to business strategy.
3.
A common business taxonomy and governance that communicates and defines
principles, policies, guidelines, criteria and accountability
Following
are areas of concerns for various personnel in the organization
CEO
|
Market shares
of business units, erosion of profits, Information quality, confused debate
among different IT directors, slow implementation, disconnected IT islands at
different business units.
|
CFO
|
Difficulties
in IR ROI calculation, IT budget, declining in revenues, difficulties in
interpreting finance data from various business heads
|
BU Executives
|
Slow time to
market, competitors innovate faster, lack of business intelligence, and drop
in sales
|
CIO
|
Maintenance
and not innovation, lack of IT vision, lack of IT strategy, IT budget
viewed as an cost (Not an investment)
|
End Users
|
Unavailability
of data, Green screens, difficulty in using systems
|
Trading
partners
|
Poor
e-commerce linkage, lack of communication standards
|
Developing and evolving IT portfolio
governance and organization
IT
governance is the system by which an organization’s IT portfolio is directed
and controlled. It describes the distribution of IT decision making rights and
responsibilities among different stake holders in the organization and rules
for making and monitoring strategic IT decisions.
The
relation between IT portfolio management and IT governance is : IT
Portfolio management provides framework, tools, language to support IT
governance. It Portfolio Management also provides taxonomy between business and
IT so that governance bodies can communicate effectively on portfolios, IT
investments and risks, costs and values.
Governance
is process designed to resolve ambiguity, manage short and long range goals and
mitigate conflict between various departments. It is the systematic
relationship between policy, processes and people enacted.
Steps
to be taken for effective IT governance in support of IT portfolio management
· Organizations must
understand their strategic and business objectives and assess its portfolio
management maturity. Putting principles in place to steer appropriate behavior
that align with strategy, investment objectives and tolerance for the risk.
· IT
portfolio management should be leveraged to communicate the IT portfolio management
· IT
processes should be cleaned up and standardized
· The
existing business processes and IT activities that naturally need to be
identified.
· These
include Budgeting, program management, architecture group, quality, sourcing
relationships etc.,
· Identify
appropriate personnel
· Baselines
for measuring the effectiveness of IT governance.. For example, project
spending per revenue total IT cost per end user etc.,
· Assessing
IT portfolio management process execution
· Human
resource capabilities and core competencies
· Resource
allocation
· Timing
· Practicality
· Core capabilities
Based upon priorities and external conditions, portfolio management framework assigns weighting to criteria to the above factors. The weighting in most cases - depends upon external environment
IT
Portfolio Management Maturity Model
Due
to lack of infrastructure for real time reporting, performance measurement,
business analytics and accepted governing principles, there is a need for
model that evolves and matures as the management gets more insights into
the collection of key data and and it’s usage in various stages of IT
portfolio management. This capability maturity model allows organizations to
benefit from it not only during rudimentary stages of IT portfolio management,
but also helps in later stages as the model gets refined with the availability
of quantitative as well as qualitative data. The various stages of IT portfolio
management model are as follows...
Admitting --> communicating --> governing --> managing --> optimizing
Admitting --> communicating --> governing --> managing --> optimizing
SOA
and its role in IT Portfolio Management
Service
Oriented Architecture is a framework for integrating business processes and
supporting IT infrastructures as secure standardized services that can be
reused and combined to address changing business priorities. The goal of an IT
portfolio is to deliver measurable business value while aligning and improving
business and IT strategy. Portfolio management looks for opportunities for
reuse and reduces redundancy. Also it requires near real time measurement of
business processes and quick response from IT systems (or any other systems) so
that the portfolio can be optimized and balanced to the changing and demanding
requirements.
SOA
helps organizations realizing the goals of IT Portfolio management, such as,
Business-IT alignment, performance measurement, value delivery, risk
management, effective risk and resource management. Over the time many business
processes are implemented using IT systems, applications and products; many
technologies are used to integrate these systems using various protocols; many
new technologies like ubiquitous computing, messaging virtualization made the
things complex labyrinth.
In
order for organization to be agile and for IT portfolio management to be more
effective, the role of SOA is a prominent one. SOA governance ensures various
elements of the architecture function as expected and and maintaining a certain
level of quality. A
critical aspect of IT portfolio management and effective governance is the
ability to track where resources are deployed across the organization, and
determine the true cost of IT initiatives and associated risks. This
comprehensive view is only achieved by managing IT like a business, leveraging
systems to automate core processes and provide real-time visibility into key
performance metrics
Planning aspects of SOA
To
reduce the risk in adapting SOA in an organization, to fall inline with
portfolio investment objectives and, at the same time, to ensure successful
adaption of SOA we may consider following progressive levels of adaption. Each
level may be mapped to the value investment categories as explained
earlier.
Initial
adaption:
In this level, enterprises go through a technology validation and risk
assessment that analyze technical and business impact from defined scope. These
impacts can be later in actual implementations. This also involves early pilot
testing of creating and exposing services from business operations conducted on
existing or new applications. This gives early insights into capability to
transform existing systems, non-functional requirement capabilities, and
required organization structure.
Line
of Business adaption:
At this stage enterprise will identify the line of business and prioritize the
processes where agility and flexibility offers increase in business value. At this
stage we need to identify key metrics and critical success factors.
Enterprise Adaption: This level of
adoption involves construction of business view of a service oriented
enterprise, with complete Prioritization of projects based upon business value
followed by architecture and implementation phases. Also, the enterprise
activities need to be separated into different business domains and components
that constitute the enterprise. At this stage, SOA governance council needs to
be established with required power to empower, monitor and authorize the
changes to services.
Enterprise and partner network adaption: At this level, there
is a broad transformation of existing business models or deployment view of new
business models involving not only the enterprise, but also it’s business
partners, suppliers, or customers. For each of the business services and
components, the road map follows the typical phases of IT project development
with the established RUP phases for development (Inception, elaboration,
implementation, and test production phases)
SOA Governance
Governance
provides an overarching structure to prioritize and then support the
enterprise business objectives at strategic, functional and operational level.
SOA governance functions under larger context of IT governance -which in turn
functions as per the corporate policies and objectives. So SOA governance not
only helps portfolio management to provide sufficient input on resources and
infrastructure elements involved in the SOA engagement, but also provides feedback
on functioning of business processes (IT implemented) in the form of metrics
and views. Also SOA governance constructs rules, processes and organizational
constructs needed for the effective planning, decision making steering and control
of effective engagement to meet business strategic objectives. SOA governance
thus takes the business architecture and architecture and portfolio as major
inputs and prioritizes the services accordingly, and finally arrive at
governance model.
Key
SOA Governances processes include,
·Business
component identification and Prioritization.
·Business
exception fall back process.
·Architectural
review and approval process.
·Architectural
vitality process.
·Architecture
communication process.
Bibliography
The standard for portfolio management
Second Edition
No comments:
Post a Comment