The Importance of IT Strategic Demand Management in Achieving the Objectives of the Strategic Business

Planning

Igor Aguilar Alonso Faculty of Computer Science

Technical University of Madrid Madrid, Spain

iaguilar@zipi.fi.upm.es

José Carrillo Verdún Faculty of Computer Science

Technical University of Madrid Madrid, Spain

jcarrillo@fi.upm.es

Edmundo Tovar Caro Faculty of Computer Science

Technical University of Madrid Madrid, Spain

etovar@fi.upm.es

Abstract—This paper describes demand management and its strategic planning life cycle as related to a company’s businesses. A key to good demand management is to know the demand management process life cycle, starting with strategic planning. Strategic planning is important for aligning an enterprise’s IT and business goals in order to successfully complete projects on schedule and on budget. This way effective strategic demand management will be feasible. To achieve these goals, senior business executives must liaise well with the CIO responsible for managing IT.

CIOs are currently playing a very important role in decision-making of the company's business and are responsible for strategic initiatives to help with strategic planning and identifying opportunities for automation to improve business processes and reduce costs of investment in IT.

Keywords-component; Demand Process Life Cycle, Strategic Demand, Strategic Planning, Strategic Alignment, IT – Business Objectives Alignme.

I. INTRODUCTION Information technology (IT) strategy varies from one

organization to another, and it must apply to all IT departments. The IT departments are managed by the chief information officer (CIO).

The best CIOs use a set of sophisticated techniques to develop strategies and ensure that the routine IT operations work properly at the least possible cost, giving added value to the enterprise. Released from routine operating problems, they are free to focus on maintaining effective working relationships to create thorough business knowledge, recruiting the best talent for their team, and maintaining a clear vision of industry and the evolution of technology that could add value for the

enterprise. This way, the CIO is able to identify, promote and implement significant business change initiatives.

CIOs, along with the chief executive officer (CEO) and the board of directors, are responsible for enterprise strategic planning.

Strategic planning is one of the key business process stages and is directly related to the demand process life cycle stages. The CIO will participate very actively with other senior executive members to develop business planning, thus ensuring that demand management is efficient.

Section 1 is an introduction setting out the importance of IT strategic demand management for achieving the business strategic planning objectives.

According to the classification of demand [1], (1) strategic demand, (2) tactical demand and (3) operational demand, strategic demand is the hardest to manage. This is why the CIO and the board of directors require thorough business knowledge to implement and carry out a very detailed planning. This article presents the importance of strategic planning in the organization by aligning the IT goals with business objectives, as well as a model for establishing priorities for projects and IT resources.

Section 2 defines strategic demand and the demand process life cycle. Section 3 presents strategic planning, CIO skills and strategic planning activities. Section 4 discusses strategic alignment. The last section lists the conclusions.

II. ESTRATEGIC DEMAND Strategic demand is managed through the project portfolio.

Ideas are managed within this portfolio that spawning new

2008 International Conference on Computer Science and Software Engineering

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DOI 10.1109/CSSE.2008.1307

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businesses or project innovation Strategic demand "represents the most significant opportunity to increase business value”. [2].

Project portfolio management (PPM) offers an event-based process that can evaluate, prioritize and monitor projects.

Pressure to maximize profit can come from internal factors, i.e. business partners, board of directors or other business units, or from external factors, such as regulatory frameworks, market competition, etc. For this reason, there needs to be a very close link between strategic planning and project processes from the very start.

Strategic demand management depends on (1) strategic planning units, (2) strategic process planning, (3) resource location, (4) budget location, (5) project selection and implementation and (6) project "post-mortem" metrics to improve good practice in the organization. By implementing these best practices, we can manage demand at a management process level, such as:

• Clearly identify strategic objectives [3]

• Use an event-based decision-making process [4]

• Take a life cycle approach to investment and profit realization. [5].

A. Demand Process Life Cycle The demand management life cycle [6], shown in Figure 1,

has the following states:

• Strategic planning

• Portfolio management

• Delegation of authority

• Financial planning

• Prioritization and funding, and

• Value management.

Figure 1. Demand process life cycle

Now that we know what the demand process life cycle is, we need to find out how mature the enterprise is with a view to carrying out these projects.

A mature enterprise manages demand efficiently by delivering quality products on schedule and within budget, using the planned financial resources. One of the most important and seldom used stages is strategic planning.

III. STRATEGIC PLANNING Strategic planning is the first stage in the demand process

life cycle. It, is the process on which much of a business’ success will depend. It is this process that sets the priority for all investments (including establishing strategies, values, risks, and architecture).

At this stage the chief executive officer (CEO), the CIO, the chief financial officer (CFO) and senior executives of the enterprise must work very carefully to make the right decisions for the business to succeed.

Strategic IT management should take into account the following factors: the external and political economic environment, competitor knowledge and competency strategies, regulatory frameworks, skills and availability of human resources and other additional factors. Thanks to the knowledge of these factors, it will be possible to assess the company and determine its growth, decide on its target markets, whether to pursue a cost reduction strategy, whether to go for a wide product diversification or focus on a single market and find out what the expectations of external stakeholders are.

From all this information, which must be confined to the realm of the CEO, board of directors and the most senior business executives, it will be possible to put together a strategic planning to achieve business success.

A. Strategic Skills for CIOs Generally, enterprises that have a "strategic CIO" are

companies using IT for product and service innovation [7], where technology can be used more effectively throughout the enterprise.

A Center for CIO Leadership study [8] reveals that CIOs benefit significantly from developing the following skills:

• Promote collaboration between IT and lines of business

• Persuade senior management about the importance of IT

• Contribute to strategic planning and growth initiatives

• Identify business process automation and improvement opportunities

• Improve internal and external users’ experience and satisfaction

CIO abilities to interact and collaborate are related to the following activities leading to strategic and innovative success:

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• Political skill

• Influence, leadership, power

• Relationship management

• Inventiveness

• Strategic planning

• Determination

• Employee management

B. IT Strategic Planning and Priorities Model Strategic planning aligns IT goals with the enterprise’s

business objectives. This alignment is a phase of strategic planning and is positioned at IT priority level IV, as shown in Figure 2. [9]. Figure 2 shows the IT use priority levels for an organization, according to a hierarchy similar to Maslow’s basic human needs ladder.

Figure 2. IT priority levels

Levels I, II and III, based on operations, infrastructure and applications have an internal target. Levels IV and V are geared to IT governance and have an external target. It is at level IV where IT has to align with business

IV. STRATEGIC ALIGNMENT The strategic alignment is one of the five domains within IT

governance [10]. For good governance to achieve IT alignment, leaders and senior members of the company’s board should be committed to and assume responsibilities for:

• Ensuring that the IT strategy aligns with the business strategy

• Ensuring IT deliveries go according to plan

• Directing the IT strategy to achieve a good balance of investments across business support systems like business change or business growth

• Making informed decisions concerning IT resource targeting and prioritizing.

• Ensuring adequate IT and business-related resources are available to deliver IT that meets expectations.

A. IT - Business Objectives Alignment The alignment of corporate strategic plans with business

unit strategic plans is a key requirement for business executives.

At this level, all decisions are made in keeping with the business priorities. This is reflected at all levels through staffing, budget, projects and applications architecture.

The business priorities should provide a perspective for answering the following questions:

• What hardware should be purchased?

• What staff should be hired?

• What are the staffing levels for different tasks and activities?

• What vendors are our partners?

• How is capital allocated and how are budgets drafted?

• What projects are going to be run?

• What projects can be carried out simultaneously?

The IT department should also exhibit the following additional features:

• The IT department has developed the skills needed to manage and develop projects. Demand management is done methodically and focuses IT efforts on high performance initiatives. The number of competing projects under way is appropriate to the organization's capacity. The rate of completion of projects must be reasonable and long-term projects must not be lagging behind unnecessarily. Demand management processes are used and the projects are completed to the business’ satisfaction and with high return on investment (ROI).

• The IT department should have implemented a steering committee for governance and should meet frequently with its members.

• The IT department should have implemented all major policies required, should also be aware of the need for compliance with any industry regulation or internal company requirements.

• The CIO must have an effective relationship with senior management and vice versa.

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• IT budgets must be in keeping with industry averages and should target the costs of appropriate activities.

V. CONCLUSIONS The conclusions can be drawn are as follows:

• The demand management strategy will succeed if senior company managers liaise well and implement sound strategic planning.

• As part of the demand management life cycle, strategic planning is regarded as one of the keys to an enterprise’s business success.

• At present there is no set model for maximizing IT -business alignment in all situations, and a great deal will depend on the nature of the business, the its capacity, its markets, the IT unit, leadership style deployed in the business and entrepreneurial culture and on the maturity of IT governance in the organization.

• Business managers want to have the technology and return on investment but do not work properly with CIOs to achieve this.

• It is very important for the strategic planning committee to meet regularly to evaluate company performance and be able to make the necessary adjustments to strategies for ongoing projects.

• If IT projects have not been prioritized, aligning the objectives of the project portfolio with corporate objectives, it is very hard to tell whether they are successes or failures. Unless this condition holds, an organization is unlikely to be able to tell whether the projects it develops maximize the profit expected by the shareholders of investments in IT.

• At present, the challenge is to build a business model for which the CIO, senior executives and business line managers are responsible.

REFERENCES [1] S. Cray, “How IT Must Shape And Manage Demand”, Forrester,

Cambridge, June 15, 2006. [2] B. Andrew, “Defining The MOOSE In The IT Room”, Forrester,

Cambridge, October 18, 2005. [3] S. Cray, “Relationship Managers: Focal Points For Innovation”,

Forrester, Cambridge, June 15, 2006. [4] V. Margo, “What Successful Organizations Know About Project

Management”, Forrester, Cambridge, May 26, 2006. [5] G. Chip, V. Margo, “Moving Up The Portfolio Management Ladder”,

Forrester, Cambridge, March 22, 2004. [6] Susan, “Maturing Your Demand Management Practices”, Valuedance, [7] Center for CIO leadership, “La Profesion del CIO”, IBM, New York,

October 2007. [8] Center for CIO leadership, “La Profesion del CIO”, IBM, New York,

October 2007.

[9] John, B., Jon P., Nicholas G. C., The Executive's Guide to Information Technology, Second Edition, Publisher: John Wiley & Sons Pub, March 23, 2007.

[10] A. W. Paul; IT Alignment: Who is in Charge?, IT Governance Institute, Roling Meadows USA, 2005.

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