Skip to content

Managing IT Demand new ideas for an old problem

October 3, 2008

Using the fundamental premise that not all demand from the business will be approved, because of business priorities on the one hand, and IT resource and scheduling constraints on the other, the best way of representing demand would be via a funnel. Demand from the business enters at the top, follows one or more decision-making processes, and then either exits at the bottom as approved work to be executed, or remains in the pipeline pending further evaluation.

The first stage (or gate, or stage gate) of the funnel represents ‘ideas’ or opportunities, which comprise only high-level information and estimates for timescales, costs and benefits. Ideas generally represent work intake that IT has not yet had the chance to evaluate in detail, but which needs to be acknowledged as having entered the pipeline.

From blog

As part of a filtering and screening process, these ideas then move down to the next stage, called ‘project requests’, during which they are further qualified with quantifiable cost and benefit information, to a level of detail which makes high-level planning and a cost-benefit analysis possible. It is during this stage that the business case is built for executive sponsorship and approval.

Finally, once the business case has been approved, the project request moves down to the stage where it becomes a project — though strictly speaking these would not just be new projects, but also work related to production applications, e.g. upgrades. At this stage detailed planning, budgeting and resource allocation (where possible) takes place. Note that though the project is approved (as in ‘this is a good idea and we should be doing it’) it will only exit the funnel for execution if funding is available.

This approach is analogous to a sales funnel or sales pipeline in SEA (Sales Force Automation) and CRM (Customer Relationship Management), in which leads enter at the top, then pass through various ‘funnel stages’ before finally falling out as a signed deal. This stage gate approach can also be represented horizontally, and maps to most project methodologies, e.g. in Prince2, project ideas move to project mandates, then to project briefs and finally to a project initiation document.

Whether demand is portrayed horizontally as sequential steps, or vertically as a pipeline, the overall idea is the same, namely a structured approvals process characterized by milestones or stage gates. The funnel approach probably has the advantage of reflecting the reality that not all demand is ultimately approved.

From blog

There are two categories of demand — planned and unplanned:

* Planned demand arises as part of the annual planning process, which results in the IT Plan (which is what IT is supposed to deliver) and the corresponding budget for the next financial year. This would be the case for large, departmental or enterprise-wide projects which cannot be funded on-the-fly during the current budget cycle, but also for keeping the lights on, which by definition lends itself to annual planning (the term ‘keeping the lights on’ implies that even if a company was unable to launch new projects because of budgetary constraints, it would still have to fund these fixed IT costs in order to run its day-to-day operations if it wanted to stay in business).
* Unplanned demand corresponds to the huge amount of unpredictable work that IT does which is not contained in well-defined project structures. These include things like change requests, feature requests and bug fixes which arise from changing business and regulatory environments, changes in strategy, company reorganizations, mergers and acquisitions, insufficiently tested systems, etc. Some of these requests will become input for the next planning cycle, but most will have to be done inside of the current budget cycle.

From blog

Prioritizing and Approving Demand

Ideas which pass the first level of screening and validation move down to the next stage and are transformed into project requests, for which executive sponsorship and approval is sought. Project requests are further qualified in order to build a business case, which will be based on a combination of business alignment, costs, benefits, technology alignment, risk and IT resource and scheduling constraints. Let us look at each of these in turn.

Business Alignment
Technology and Architecture Alignment
Approving the Business Case

Portfolio planning is as applicable to IT investment as it is to personal investment. An IT portfolio would be well-balanced across new projects and running and enhancing production systems, based on business objectives, expected return and risk. It would also be managed over time to ensure it continues to meet business objectives, with the category mix varying based on changing business requirements like acquisitions, competitive threats or regulatory compliance. For example, a serious downturn in a company’s market sector might result in it reducing the funding for everything except keeping the lights on, just as an upturn in the market might lead it to increasing funding on strategic innovations.

A basic example of investment categories that can be used for IT portfolio management is:

* Keep the lights on

* Generate revenue

* Reduce costs

* Regulatory compliance

* Strategic initiatives

From blog

By scoring all demand against an appropriate portfolio mix (e.g. 70% keeping the lights on, 10% generate revenue, 5% reduce costs, 10% regulatory compliance and 5% strategic initiatives), a company is better able to select and manage its IT investments so that limited resources are assigned to achievable, business-aligned goals. This would be done in the project request stage as part of the approvals process, in conjunction with the business case.

Portfolio planning would also allow a company to launch projects and fund applications which would otherwise stand little chance of being approved based solely on a business case. For example, an experimental, high-risk, high-return project would in all probability not be approved if viewed in isolation, nor would it continue to receive funding once it went into production as an application. However, when viewed in the overall scheme of things from a portfolio perspective, it might be approved as say, part of the ‘strategic initiatives’ category.

Portfolio planning would not only look at demand to see whether it corresponds to business objectives — it would also take the reverse approach and look at the business objectives to see whether there are too few or too many corresponding project requests. For example, an analysis of the sample project investment portfolio might reveal that the business objective ‘decrease costs’ has too much project funding, whereas the arguably more important objective of ‘increase revenue’ has too few projects. This might result in a decision to modify the portfolio mix to obtain a more balanced portfolio in terms of investment objectives.

No comments yet

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: