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Optimizing IT Business Value 4 goals that Managers should foucs on

November 19, 2008

Manage the IT Budget
Manage for IT Business Value
Manage the IT Capability
Manage IT Like a Business

Managing the IT Budget

The adage that you have to spend money to make money certainly applies to the IT organization. IT organizations must spend money to deliver current and future value. Managing the IT budget is crucial in difficult economic times when there is persistent pressure on IT budgets. In fact, such conditions can be the forcing function for driving a significant industry-wide increase in IT business value practices because in times of economic slowdown, many IT organizations are able to fuel new innovations and solutions only by aggressively reducing the costs of existing operations and services.

In an incoming blog posting I will describe a set of practices and tools that can be systematically used to manage the IT budget. These practices include approaches such as service-level adjustment, supplier negotiation, and the nurturing of so-called disruptive technologies that can deliver new or equivalent services often at much lower cost than existing products or services. I will also explores different approaches for expanding IT funding options.

Managing for IT Business Value

In future blog postings I will describe an integrated approach based on taking a benefits-realization perspective, in which IT investments are viewed and managed, not just as technology projects, but as projects that are expected to deliver overall business benefits. The benefits-realization approach includes adopting core business practices, including basic ROI measures supported by enterprise-wide investment coordination, business case discipline, continuous portfolio management, re-prioritization, and increasingly sophisticated investment performance analyses. In this context, I introduce a basic maturity framework for managing IT business value. This framework organizes the key practices and provides an appropriate sequence for their adoption.

Managing and Measuring the IT Capability

In future blog postings I will explore how to manage the IT organization’s capability that is, what the IT organization and information technology can collectively do for the firm. Managing the IT capability on an ongoing basis is crucial to delivering sustainable competitive advantage from information technology. This effort demands a systematic approach to managing IT assets, the IT value chain that creates business value from IT, and the core competencies that the IT organization requires to deliver IT business value.

An important premise of this book is that sustainable competitive advantage from IT comes not from individual “stove-pipe” solutions, but from an IT capability that is especially effective in delivering new strategic applications and delivering them faster and better than competing companies. This concept is based achieving sustainable competitive advantage from IT. I will addresses the issue of IT capability assessment and measurement. It also provides metrics that have been proven to help an IT organization realize systematic capability improvements.

Managing IT Like a Business

I believe that IT needs to be managed like any other successful business. This concept is covered in a future blog entry. Running IT like a business means that the IT staff must treat their customers professionally, that account managers should make sure that customers get what they want, and that accurate charge back methods are implemented to manage demand and ensure that customers pay fairly for what they use. I will discusses IT governance that is, specification of decision rights and accountabilities for IT spending and the desirable use of IT in the firm. These governance principles are the same as those used by any successful business.

Note that while I advocate the businesslike management of the IT organization, I do not advocate running IT as a for-profit business. The drive for IT profitability could easily cause a conflict by inappropriately superseding the goal of profitability of the enterprise as a whole. The IT organization and the business organization need to collaborate to optimize IT’s contribution to overall business value.

Putting It All Together

Finally, I will describe the integrated approach that forms the basis of this book: managing IT to deliver business value. Traditionally, IT business value has been loosely defined as the contribution IT makes to help the business to reach its strategic goals and objectives. However, company executives and shareholders are increasingly asking for more specific evidence that business value improvements have occurred. At the end of the day, IT investments are of value only if they deliver increased business and shareholder value.

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