IT Portfolio Management 2009: In Search of Business Value

Notes accompany this presentation. Please select Notes Page view. These materials can be reproduced only with written approval from Gartner. Such approvals must be requested via e­mail: vendor.relations@gartner.com. Gartner is a registered trademark of Gartner, Inc. or its affiliates.

IT Portfolio Management 2009: In Search of Business Value

Cassio Dreyfuss

Four Common Mistakes

Portfolio Value

Adopt a static

perspective

Keep distance from the business

perspective

Four Common Mistakes

Time

Evalute isolated initiatives

Focus on technology factors

Four Common Mistakes You Can Solve with Portfolio Management Portfolio Value

Understand Understand agility and flexibility

Align with the business

Four Common Mistakes You Can Solve with Portfolio Management

Develop a holistic

perspective

Adopt a busines value perspective

Time

The Business Value of IT Initiatives nWhat is business value of IT? nHow can business value be assessed?

Key Issues

nHow can business value be assessed?

Managing a Portfolio of IT Initiatives nHow can you optimize IT initiatives? nWhat is the process you should follow?

The Business Value of IT Initiatives What is business value of IT? How can business value be assessed? How can business value be assessed?

Managing a Portfolio of IT Initiatives How can you optimize IT initiatives? What is the process you should follow?

The Business Value of IT Initiatives nWhat is business value of IT? nHow can business value be assessed?

Key Issues

nHow can business value be assessed?

Managing a Portfolio of IT Initiatives nHow can you optimize IT initiatives? nWhat is the process you should follow?

The Business Value of IT Initiatives What is business value of IT? How can business value be assessed? How can business value be assessed?

Managing a Portfolio of IT Initiatives How can you optimize IT initiatives? What is the process you should follow?

What is Business Value of IT? Label Expectation and Focus

Transform the Business

n Fundamental changes to the business or the introduction of new business models, creating new revenue streams

Run the Business

n Cost optimization. Services delivered must reach the expected levels of efficiency and quality or higher, but at lower costs.

Grow the Business

n Business (not IT) operations improvement; enhancing or adding new features (agility, flexibility, speed, etc.)

What is Business Value of IT? Expectation and Focus Sample Project

Fundamental changes to the business or the introduction of new business models, creating new revenue streams

n Create process and infrastructure for new sales channel

Cost optimization. Services delivered must reach the expected levels of efficiency and quality or higher, but at lower costs.

n Consolidate different platforms

Business (not IT) operations improvement; enhancing or adding new features (agility, flexibility,

n Add new business process features

A Tool for Focusing IT Initiatives: Analysis of Business Value Disciplines

Product Leadership

Based on "The Discipline of Marketing Leaders," Treacy & Wieserma, 1994

Operational Excellence

Customer Intimacy

A Tool for Focusing IT Initiatives: Analysis of Business Value Disciplines

n Consider adding brand mastery as a discipline (depending on the industry you are in)

n Excel in one specific dimension of value

n Maintain threshold standards in

Based on "The Discipline of Marketing Leaders," Treacy & Wieserma, 1994

Customer

n Maintain threshold standards in the other two

n Improve value continuously n Maintain a high­standard operational model that is agile and flexible

n Refresh your strategy periodically

The Imperative for Business Value Operate Effectively, Innovate Strategically

Excel: Existing Revenue Sources

Enhance/Retire Products

Acquire/Retain/Release Customers

Penetrate/Abandon Markets

Exploit/Retire Channels

Exploit Current Business Model

The Imperative for Business Value – Operate Effectively, Innovate Strategically

Innovate: New Revenue Sources

New Products

New Customers

New Markets

New Channels

New Ventures and Business Models

Projects and Programs Can Play in Different Spaces

Excel: Existing Revenue Sources η = η =

∆ Results

∆ Resources

∆ Results

∆ Resources

Projects and Programs Can Play in Different Spaces

Innovate: New Revenue Sources

Results

Resources

Results

Resources

Increase Results: Increase Revenue, Margin,

Market Share Develop a new interactive

client interface portal

Projects and Programs Can Play in Different Spaces (with examples)

Excel: Existing Revenue Sources

Integrate independent business processes Reduce Resources:

Cut Costs

η = η = ∆ Results

∆ Resources

∆ Results

∆ Resources

Create a mobile,

web­enabled virtual store

Increase Results: Increase Revenue, Margin,

Market Share

Projects and Programs Can Play in Different Spaces (with examples)

Innovate: New Revenue Sources

Reduce Resources: Cut Costs

Results

Resources

Results

Resources

Transition to a standardized, SOA­based architecture

Increase Results: Increase Revenue, Margin,

Market Share Develop a new interactive

client interface portal

Projects and Programs Can Play in Different Spaces (with examples)

Excel: Existing Revenue Sources η = η =

∆ Results

∆ Resources

∆ Results

∆ Resources

Reduce Resources: Cut Costs

Integrate independent business processes

The CFO Playpen

Create a mobile,

web­enabled virtual store

Increase Results: Increase Revenue, Margin,

Market Share

Projects and Programs Can Play in Different Spaces (with examples)

True Business

Transformation

Innovate: New Revenue Sources

Results

Resources

Results

Resources

Reduce Resources: Cut Costs

Transition to a standardized, SOA­based architecture

How to Optimize ∆ Resources: Broad, Balanced Cost Management

Architecture & Standards

Formal Processes

Homogeneous Environment

IT Utility IT Utility

Shared Services

“Vanilla” IT Options

Simplification, Standardization and Integration Drive Costs

DOWN

Resources: Broad, Balanced Cost Management

Complexity, Customization,

and Independence Drive Costs

Compliance

New Functionalities, Constant Change

Agility, Flexibility

Heterogeneity

Redundancy

Legacy

Drive Costs UP

Complexity of Information Structures

“Marketing”

How to Increase ∆ Results: Focused, Targeted Busines Value Initiatives

“Back Office”

“Finance”

Results: Focused, Targeted Busines Value Initiatives

Complexity of Business Process Rules

“Supply Chain”

Complexity of Information Structures

Market Advantage

How to Increase ∆ Results: Focused, Targeted Busines Value Initiatives

Operational Excellence

Advantage

Complex Management

Business Transformation

Results: Focused, Targeted Busines Value Initiatives

Complexity of Business Process Rules

Process Effectiveness

The Business Value of IT Initiatives nWhat is business value of IT? nHow can business value be assessed?

Key Issues

nHow can business value be assessed?

Managing a Portfolio of IT Initiatives nHow can you optimize IT initiatives? nWhat is the process you should follow?

The Business Value of IT Initiatives What is business value of IT? How can business value be assessed? How can business value be assessed?

Managing a Portfolio of IT Initiatives How can you optimize IT initiatives? What is the process you should follow?

IT Portfolio Management Is a Tactical Approach to Projects and Programs...

… but it all starts with business Corporate

Strategic Committee n CEO n CXOs n CIO

Business Committee

n CIO n COO n BU Mgrs.

… to arrive at business value

IT Portfolio Management Is a Tactical Approach to Projects and Programs...

… but it all starts with business­IT strategy … Corporate

Strategic Committee

n Business Strategy n Corporate Architecture

Business­IT Committee

n Corporate Architecture n IT Principles

n Priorities for IT Initiatives n Resource Allocations n Portfolio Decisions

… to arrive at business value

IT Portfolio Management

A management discipline aimed at optimizing overall business value

of IT investments

nAims at yielding more overall results with less risks nAims at yielding more overall results with less risks and fewer projects. nDrives forward a business approach to investment decisions nRequires business case comparability at board level nRequires well­developed project management competencies

IT Portfolio Management ­ Characteristics

A management discipline aimed at optimizing overall business value

of IT investments

Aims at yielding more overall results with less risks Aims at yielding more overall results with less risks

Drives forward a business­aligned, phased approach to investment decisions Requires business case comparability at board level

developed project management

The Core of Portfolio Management: Balancing ∆ Results and

nBusiness value nEconomic­Financial Results nAlignment

There’s more to results than money

There’s more to resources than money nCosts, Cash Flow & On nResources nTimeline & Time to results nOrganizational Impact nBusiness Risks, Operational Risks

The Core of Portfolio Management: Results and ∆ Resources

Business value Financial Results

There’s more to results than money

There’s more to resources than money Costs, Cash Flow & On­going Costs

Timeline & Time to results Organizational Impact Business Risks, Operational Risks

Balance Goes Beyond IT Consider Business’ Conflicting Objectives

Organizations need to... Manage costs

Manage the risk in their actions

Support business priorities

Strive for the ultimate efficiency levels

Streamline IT

Preserve stability

Organizations need to...

Balance Goes Beyond IT Consider Business’ Conflicting Objectives

But also need to… Maintain competitiveness

Manage the risk of inaction

Consider technology implications

Develop and innovate the business

Transform the business

Manage change

Strive for the ultimate efficiency levels

But also need to…

The Phased Portfolio Management Process

Evaluate Initiatives

Define Initiatives

A four­step process goes from idea to the end of the project life cycle

Initiatives Initiatives

The process is sequential, but admits intense feedback loops

The Phased Portfolio Management Process

Manage Portfolio

Prioritize & Balance

step process goes from idea to the end of the project life cycle

Portfolio Balance

The process is sequential, but admits intense feedback loops

Define Initiatives – Build Business Cases: Be Thorough, But Don’t Overdo It

n Assumptions, scenarios and probabilities n Alternatives, results, business value, recommendations n Business Alignment (links to strategy and business drivers) n Phases (small, value­yielding chunks), plan and timelines n Transition, change requirements, implementation strategy n Organization and resources n Constraints (business, financial, organizational, etc.) n Risks (environment, organization, technology, execution) n Economic­financial plan, costs, cashflow and payback n Business­driven, value metrics (not technology

Build Business Cases: Be Thorough, But Don’t Overdo It

Assumptions, scenarios and probabilities Alternatives, results, business value, recommendations Business Alignment (links to strategy and business drivers)

yielding chunks), plan and timelines Transition, change requirements, implementation strategy

Constraints (business, financial, organizational, etc.) Risks (environment, organization, technology, execution)

financial plan, costs, cashflow and payback driven, value metrics (not technology­driven)

Evaluation criteria Concept

Business value

Econ­Fin Results

Concrete business value (hard & soft)

Economic

Use Objective Criteria for Evaluation, Allow comparison at Board Level

Focus

Results

Results

Alignment Connection with business

Costs Total life cycle costs

Resources Resources, IT “ fit” , interdependencies

Time & Timeline

Disruption, change

Biz & Oper Risks

Org Impact

Failure, overspend, reduced benefits

Total time, results milestones

∆ Results

∆ Results

∆ Resources

∆ Resources

Concept

Concrete business value (hard & soft)

Economic­financial metrics

Use Objective Criteria for Evaluation, Allow comparison at Board Level

Connection with business­IT strategy

Total life cycle costs

Resources, IT “ fit” , interdependencies

Disruption, change

Failure, overspend, reduced benefits

Total time, results milestones

Evaluation criteria Concept

Business value

Econ­Fin Results

Run, Grow, Transform

Use Objective Criteria for Evaluation, Allow comparison at Board Level

Focus

Results

Results

Economic Monetary metrics

Alignment Connection with business

Costs Total life cycle costs

Resources Resources, IT “ fit” , interdependencies

Time & Timeline

Disruption, change

Biz & Oper Risks

Org Impact

Failure, overspend, reduced benefits

∆ Results

∆ Results

∆ Resources

∆ Resources

Business

From design to retirement

Total time, results milestones Schedule of deliverables

New roles, skills, processes, principles

Parallel operations, bisiness immobility

HW, SW, telecom, services, etc., etc.

Concept

Run, Grow, Transform

Use Objective Criteria for Evaluation, Allow comparison at Board Level

Economic­financial metrics Monetary metrics

Connection with business­IT strategy

Total life cycle costs

Resources, IT “ fit” , interdependencies

Disruption, change

Failure, overspend, reduced benefits

Business­IT Strategy, Business Case

From design to retirement

Total time, results milestones Schedule of deliverables

New roles, skills, processes, principles

Parallel operations, bisiness immobility

HW, SW, telecom, services, etc., etc.

Prioritize through Interaction Obtain Input Representing All Perspectives

Stakeholders Evaluation Comparison

among Business Areas

Value

X

Score

Areas

Prioritize through Interaction – Obtain Input Representing All Perspectives

Stakeholders Evaluation Comparison

among Business

Corporate Objectives

Values Mission Strategy

Constraints

Rank

X =

Score Weight

Constraints

… and Balance – Consider the Different Project and Program Characteristics

High

Home Run

∆ Results ∆ Results

Low

Low

Low Hanging Fruits

Consider the Different Project and Program Characteristics

Must Haves

High

Money Pits

∆ Resources ∆ Resources

… and Balance – Select a Manageable Set

Home Run

Go for Them

Low Hanging Fruit

Consider some of these

Select a Manageable Set

Must Haves

Consider some of these

Money Pits

Drop

Manage the Portfolio: Implement Feedback and Drive Continuous Improvement

Formally review proposed and current initiatives periodically

Manage the Portfolio: Implement Feedback and Drive Continuous Improvement

n Incorporate new initiatives

n Improve current portfolio – Improve value

Formally review proposed and current initiatives periodically

– Improve value – Reduce length – Reduce complexity – Reduce risk

n Drop losers – Replace troubled initiatives – Retire old process – Cut losses (act early)

Recommendations

n Adopt a business value approach to IT and n Adopt a business value approach to IT and IT­intensive initiatives

n Adopt a portfolio approach to managing those initiatives

n Adopt a life cycle approach to the portfolio, with continuous feedback and improvement

Adopt a business value approach to IT and Adopt a business value approach to IT and intensive initiatives

Adopt a portfolio approach to managing those

Adopt a life cycle approach to the portfolio, with continuous feedback and improvement

IT Portfolio Management 2009: In Search of Business Value

Notes accompany this presentation. Please select Notes Page view. These materials can be reproduced only with written approval from Gartner. Such approvals must be requested via e­mail: vendor.relations@gartner.com. Gartner is a registered trademark of Gartner, Inc. or its affiliates.

IT Portfolio Management 2009: In Search of Business Value

Cassio Dreyfuss