Category Archives: IT Portfolio Management
>Optimizing IT and Enterprise Architecture
Enterprise Architecture helps to align business strategy and IT implementation. However, one of the big problems for IT these days is that it is viewed as a utility and not as a strategic business partner.
The Wall Street Journal, 10 March 2008, reports that “Too often, there’s a wall between a company’s information technology department and everything else. That wall has to go.”
What’s the problem with how executives view IT?
“Simply put, top executives at most companies fail to recognize the value of IT. It can help a company transform data from its operations, its business partners, and its markets into useful competitive information, It can be the source of profitable innovations in the way a company interacts with its customers and suppliers. But there is still a tendency to think of IT as a basic utility, like plumbing or telephone service.”
IT doesn’t even have a seat at the table!
There is a “metaphysical glass wall that separates the IT group from the rest of the business at most companies. The wall prevents IT from being part of the discussion at the highest levels of company planning, robbing a firm of its full potential.”
Even in the federal government where there is legislation (The Clinger-Cohen Act) to support a CIO reporting directly to the agency head, often the CIO remains buried layers down in the hierarchy.
How can the CIO develop a viable enterprise architecture to support the business with needed technology if IT is viewed as computer geeks and walled off?
IT must become a true partner with the business!
Why is IT walled off and how can this change?
- Mind-set—Business is focused on business problems and IT is focused on the technology (instead of focusing on solving the business problems).
- Language barriers—“much is lost in translation” between IT and business folks.
- Outsourcing—“IT professionals are almost pitied as dinosaurs whose jobs will soon be sent offshore.”
- IT governance—isn’t done collaboratively with the business and “the resulting IT failures drive a wedge between senior [business] managers and their IT colleagues.”
- Rapid pace of technological change—technology “is subject to fads,” which can be confusing in terms of direction, create competitive demands on scarce business resources, and causes IT to lose credibility with each and every subsequent change. Also, IT can be viewed as an endless sinkhole for investment and so the focus becomes not on optimizing value from IT, but rather on containing runaway cost.
- Executive commitment—to understand the strategic value of IT and develop effective IT management.
- Strategic IT leadership—hire an IT leader who understands more than just technology; s/he needs to really understand the business and how IT can enable it.
- Value IT for its business potential—“managers at all levels across the organization need to be convinced that innovations in IT-related areas such as knowledge management, business intelligence, information security, change management, and process integration are essential to the success of the enterprise.”
- Translate business to IT and back again—“a company must have people at all levels who can translate IT language for those outside that department and translate the language of management to those in IT.”
- Sound IT governance—“ensure that every part of the organization that is affected by IT decisions is part of the decision making process…with a full understanding of all their implications.”
- IT portfolio management—“analyze the costs, benefits and risks of all IT projects to determine how to get the most benefits from the dollars invested in technology.”
Interestingly enough, enterprise architecture plays a key role in almost all the strategies to get IT to become an integral partner with the business:
- EA helps build executive commitment through effectively communicating the current, target, and transition plan and how it aligns to the business strategy and benefits the mission.
- The chief enterprise architect is a strategic, big picture, IT leader that focuses on business needs and how IT can solve those with current and emerging technologies as well as process improvement.
- User-centric EA develops information products for the organization that are useful and usable and support knowledge management, business intelligence, requirements management, change management, and so on.
- EA synthesizes business and technology information and is a bridge between the two for the organization to understand performance results desired, business processes to produce those, information required by the business processes, and systems and technologies to serve those up.
- The EA Board supporting the IT Investment Review Board implements sounds IT governance and brings business and technology subject matter experts to the table to vet decisions in the best overall interest of the enterprise.
- The EA governance process takes into account ROI, risk, strategic alignment, and technical compliance to drive better decision making and sound IT investments for the organization.
EA is central to bringing down the glass wall between business and IT and in bringing the two together to optimize IT solutions for the business needs.
>IT Portfolio Management and Enterprise Architecture
IT portfolio management (ITPfM) is the application of systematic management to large classes of items managed by enterprise Information Technology (IT) capabilities. Examples of IT portfolios would be planned initiatives, projects, and ongoing IT services (such as application support). The promise of IT portfolio management is the quantification of previously mysterious IT efforts, enabling measurement and objective evaluation of investment scenarios.
Debates exist on the best way to measure value of IT investment. As pointed out by Jeffery and Leliveld (2004), companies have spent billions of dollars into IT investment and yet the headlines of misspent money are not uncommon…IT portfolio management started with a project-centric bias, but is evolving to include steady-state portfolio entries such as application maintenance and support, which consume the bulk of IT spending. (Wikipedia)
- ITPfM is related to the federal requirement for capital planning and investment control (CPIC), especially the select phase in which investments are authorized and funded.
The IT Management Reform Act of 1996 (Clinger-Cohen Act) specifies that executive agencies “establish effective and efficient capital planning processes for selecting, managing [controlling], and evaluating the results of all its major investments in information systems.”
The Architecture Alignment and Assessment Guide by the Federal CIO Council, November 2000 defines capital planning and investment control (CPIC) as—“a management process for ongoing identification, selection, control, and evaluation of investments in information resources.”
- CPIC/ITPfM and EA are closely linked processes. Enterprise architecture conducts technical reviews of proposed new IT projects, products, and standards and provides findings and recommendations to the IT Investment Review Board for decision-making on authorizing, prioritizing, and funding IT.
The Architecture and Assessment Guide states that “CPIC and enterprise architecture functions are closely linked…both have a common focus: the effective and efficient management of IT investments.
Further, the Office of Management and Budget (OMB) Circular A-130 requires that agencies establish and maintain a CPIC process and that they “must build from the agency’s current enterprise architecture.”
According to the Architecture Alignment and Assessment Guide, the three phases of CPIC align to EA as follows: CPIC’s select, control, and evaluate align to EA business alignment, technical alignment, and architecture assessment.
The Journal of Enterprise Architecture, February 2008, has an article by George Makiya that discusses “Integrating EA and IT Portfolio Management Processes”.
Makiya states “at the strategic level, the EA has to agree with the business side, what objectives the IT portfolio will be designed to achieve. It is imperative that the EA negotiate with the business side what constitutes value-add. The EA must then use ITPfM to engage the business to document or articulate its strategy and business objectives.”
Further, “at the operational level, the EA using ITPfM employs prioritization and selection processes to ensure that IT investment reflects the objectives and priorities of the business…through proactive management EAs can help the CIO align the IT budget with the demands of the portfolio.”
According to the Federal Enterprise Architecture Practice Guidance, November 2007, the performance improvement lifecycle starts with the agency’s strategy, and then has the three phases of architect (“develop and maintain EA”), invest (select investments and “define the implementation and funding strategy”, and implement (“execute projects”), which in turn yields strategic results.
- Generally speaking, ITPfM decisions are made on the basis of return on investment, risk mitigation, strategic alignment, and technical alignment to the EA.
There are many touch points and linkages between EA and CPIC.
- EA’s target architecture and transition plans drives the investments and portfolio make-up in the CPIC process.
- CPIC investments are used to provide updates on systems, technologies, and standards to the EA.
EA and CPIC/ITPfM are truly mutually dependent and create synergy and value for the organization through enhanced decision making and IT resource control.