Information Technology must deliver Value!

1. Information Technology must deliver Value! “HOW WILL I EVER ADD VALUE TO THE BUSINESS WITH I. T.?”

2. Yogi SchulzBiography • Partner in Corvelle Consulting • Information technology related management consulting • Microsoft Canada columnist & CBC Radio host • PPDM Association board member • Industry presenter: • Project World - 5 years • CIPS Informatics - 7 years • PMI - Information Systems SIG • PPDM Association - several years

3. PresentationOutline Operations Planning Partnership • Is I. T. delivering value? • Characteristics of systems • Achieving I. T. value • Managing systems for value • CEO - CIO relationship • Conclusions • Recommendations

4. Dilbert ExplainsBusiness Value THE COMPANY ANNOUNCED THAT WE WILL “ABANDON OUR STRATEGY OF EFFICIENTLY PRODUCING VALUABLE PRODUCTS . . .” D960913

5. No connection between I. T. investments and business results Organizations are unhappy with I. S. department performance Strategic uses of I. T. are irrelevant to my industry I. T. investments are a good thing Organizations believe I. S. department is making an important contribution Strategic uses of I. T. provide competitive advantage Is I. T. Delivering Value? Value is difficult to measure No way Definitely

6. Consequences ofI. T. Value Ambiguity Value management can lead to a superior outcome • When we can’t articulate the value, we tend to focus on the cost • To many executives, the cost of I. T. appears: • substantial; even excessive • never-ending • not well managed • Creates I. T. direction toward: • under-investment • down-sizing • outsourcing

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8. Complex business processes/calculations Complex data/data types Large/valuable data volumes Distributed access Security requirements Characteristics ofToday’s Systems Value is challenging to achieve

9. Most industriescan’t execute without I. T. Value is imperative • Could our researchers have evaluated as many alternatives without I. T? • Could our product developers have created new products as quickly without I. T? • Could our production department have produced as many units without I. T? • Could our marketers have achieved as much margin or volume without I. T? • Could our top management have evaluated a potential acquisition without I. T?

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11. Assessing I. T. Value Traditional View Value View Cost/benefit Business Strategy includes Cost Efficiency Effectiveness Doing the Right Things Doing Things Right Easy to Sell and Accept Creative Thinking Missed Opportunities Organizational Resistance Aspects Focus Measurement Approach Advantages Problems

12. Steps ToAchieving I. T. Value - 1 Align I. T. with the Business • What are you trying to achieve? • Identify the business objectives • Define supporting business strategies • What are your competitors/peers doing? • Assess competitor actions • Check direction/thinking of other industries • Why are the business objectives important to you? • Articulate the business value to be gained • How will you know you are successful? • Identify business end outcomes • Identify what business indicators will be measured

13. Steps ToAchieving I. T. Value - 2 I. T. value is achievable • Identify required business process changes • Determine I. T. support for business: • I. T. organization style • staff competencies • application portfolio • I. T. infrastructure • Define I. T. strategy that supports business • Make I. T. investments to support business success

14. Facet GIS

15. Value vs. System Capability Tightly Integrated Solution I n c r e a s i n g Loosely Integrated Solution V a l u e Interfaced Solution Multi- Point Solution Single Point Solution Manual Support Tool Improving System Capability

16. Value vs. Integration Cost Optimum Data Integration Range I n c r e a s i n g • Complexity Drivers: • number of interfaces • number of users/departments • number of locations • amount of business change • sophistication of end-users V a l u e Increasing Costs

17. Value vs.Application Management I n c r e a s i n g Align IT Strategy with Business V a l u e Enhance for Integration Plan & Manage Operation Establish Data Custodianship Install Software Improving Application Management

18. Business/I. T.Partnership Results Meets important needs System works well Development completed Needs well addressed System doesn’t work Development ongoing Business Leadership Compromise Meets no needs System doesn’t work Development never completed Meets few needs System really works Development quick I. T. Leadership

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20. CEO - CIO Relationship • Working poorly • CIO fired • most/all of IT outsourced • business objectives under-achieved; IT value missed • Working well • CIO well-regarded member of top management team • valuable parts of IT managed internally • business objectives achieved with IT value

21. How CIOs Self -destruct • Believe that I. T. budget is beyond challenge • Insist that business must trust superior, specialist knowledge • Focus on I. T.: • performance measures • administrative tasks • Achieve no conspicuous I. T. successes • Believe in I. T. strategies • Allow a large number of active development projects

22. How CIOs Add Value • Focus obsessively on business imperatives • Interpret external I. T. success stories • Establish and maintain executive relationships • Communicate the I. T. performance record • Work to achieve a shared vision for the business • Enable business transformation • Insist on a small number of active development projects

23. How CEOs Fail the CIO • View IT as a support function • Focus on IT cost minimization • Believe that IT doesn’t apply to his industry • Manage IT as an adjunct to the business • Position the CIO as specialist functional manager • See the CIO as a high-paid technologist

24. How CEOs Support the CIO • Position the CIO as agent for change • Focus on IT effectiveness within business initiatives • Institutionalize business values for I. T. • Include the CIO on the top management team • Manage I. T. as integral to the business

25. DyadArgus Query

26. Conclusions • I. T. investments must deliver value to: • meet competitive threats • capture business opportunities • Business strategy can be successful if it incorporates I. T. strategy • All is for naught in climate of poor relationships

27. Recommendations • Allow no I. T. initiatives; only business initiatives with I. T. partnership • Build an I. T. strategy aligned with business strategy • Strengthen the CEO - CIO relationship

28. I. T. must deliver Value! • Yogi Schulz 300, 400 - 5th Ave. S.W. Calgary, Alberta Canada T2P 0L6 Phone: (403) 249-5255 E-mail: YogiSchulz@corvelle.com Web: www.corvelle.com • Partner in Corvelle Consulting • Information technology related management consulting • Microsoft Canada columnist & CBC Radio host • PPDM Association board member

29. IT Organization Metrics Productivity/efficiency • IT spending as a percentage of revenue • IT spending as a percentage of income • IT spending per employee • revenue per IT $ • income per IT $ • business/IT staff ratio Source: Meta Group, Stamford, Connecticut

30. IT Organization Metrics Quality/effectiveness • IT yield (ratio of projected value of IT projects to actual benefits attained) • IT cost of quality (cost of canceled projects and system failures) • business IT cost of quality (the true cost of the IT cost of quality) • internal IT customer satisfaction

31. IT Organization Metrics Delivery Process • Total on-time delivery percentage across all IT services • backlog cost (total $ value of all work waiting to be executed by IT) • backlog aging (projected $ value of work beyond 30, 60 and 90 days of originally planned start date) • rework cost (internal cost of rework across all IT processes)

32. IT Organization Metrics Asset Management • Systems portfolio size (lines of code and/or application count) • hardware asset base size (by type of asset) • unit costs associated with asset categories • allocation of funds across functional categories (development, maintenance, data center, network, packages and so on)

33. IT Organization Metrics Human Resources • Total IT staff size • staff size by function • average staff cost • turnover & turnover reason distribution • training days per staff member • change in value of staff inventory because of training • work hours per professional/productive work hours per professional

34. Bibliography - 1 • Center for Research on Information Technology and Organizations (CRITO) • http://www.crito.uci.edu/ • A Decision Style Approach for Creating Customer Value through Business Information Systems • http://www.enersearch.se/research/ISES/ises4/mi/market.html • An Empirical Analysis of the Determinants of Information Systems Productivity and the Role of Outsourcing Policy • Yogesh Malhotra, 1995 • http://www.brint.com/papers/outsourc/intro.htm

35. Bibliography - 2 • Becoming the New Technology Executive • CIO Canada, June 1996, p. 39 • DMR Group - Driving Up Investment Success Rates • http://www.dmr.ca/corporatif/en/services_and_solutions/benefits.htm • Glomark’s Economic Value Creation Methodology • http://www.glomark.com/maine.htm • The Information Paradox • John Thorpe & DMR Consulting Group staff, 1998 • Information Technology and Tomorrow’s Manager • Linda M. Applegate, James I. Cash Jr., D. Quinn Mills • Harvard Business Review, Nov. - Dec. 1988, p. 128

36. Bibliography - 3 • Information Technology for the 21st Century • http://www.inpo.navy.mil/it-21/outsrc.html • International IT Strategy Census 1999 • COMPASS Analysis • IS & IT Management: Delivering Value With Information Technology • http://www.info-edge.com/5406toc.htm • Is Your CIO Adding Value? • Michael Earl & David Feeny • Sloan Management Review, Spring 1994, p. 11

37. Bibliography - 4 • IT Outsourcing - Operational Improvement or Strategic Imperative? • C. Lawrence Meador, MIS Quarterly • http://www.mstnet.com/mstnet/articles/wp_outsrc/wp_outsrc.html • IT/Strategy Alignment - Identifying the Role of Information Technology in Competitive Strategy • C. Lawrence Meador, MIS Quarterly • http://www.mstnet.com/mstnet/articles/wp_it/wp_it.html • A Lean, Mean IT Machine • Lynda Radosevich, Infoworld, 26 July 1999 • http://www.infoworld.com/cgi-bin/display/Archive.pl?/99/30/z01-30.64.htm • Managing for Benefits in Information Technology Projects • Jolyon E. Hallows, PM Network, December 1998, p. 47

38. Bibliography - 5 • Measuring Information Technology Investment Payoff: Contemporary Approaches • Mo Adam Mahmood and Edward Szewczak, 1999 • http://www.idea-group.com/investment.htm • Measuring the Strategic Value of Information Technology Investments • Kurt Conrad, The Sagebrush Group • http://www.sagebrushgroup.com/value.htm • Positive Support Review Inc. • http://www.psrinc.com/slides/sld001.htm

39. Bibliography - 6 • The Role of IT in Business Process Reengineering • http://www.mentorgrp.com/pubs/mrrison.htm • S. C. Johnson, A portfolio-value approach • http://www2.computerworld.com/home/print9497.nsf/All/SL0815jwax 15 August 1994 • The Value of IT in the Manufacturing Sector • A Compass Business Consulting White Paper • Tim Randall, Manufacturing Consulting Services • http://www.compass-analysis.com/ • What Factors are Impacting IT’s Effectiveness? • PM Network, June 1999, p. 31

40. Insource Maintain control Set priorities Build unique specialized skills Create competitive advantage Minimize costs? Outsource Access superior expertise Minimize infrastructure investments Avoid mistakes Minimize schedule? Benefits of Alternative Strategies for Achieving Value Check out the bibliography