IT Capital Planning & Governance

1. IT Capital Planning & Governance

2. Business Cases Justify Investment Decisions on Business Transformation Initiatives • OMB Exhibit 300 – OUTLINE • Part I, Overview • Date of Submission; Agency; Bureau; Name of Investment; Unique Project Identifier; Type of Investment; First Year to OMB; Executive Committee Approval; PM Contact Info & Qualifications; Name of FM System; FFMIA Compliance Area • Part I, Section A: Brief Summary • Section B: Summary of Funding • Section C: Acquisition/Contract • Strategy • Section D: Performance Information • Section E: Security • Section F: Enterprise Architecture • Part II, Cost & Schedule Performance • Part III, Operations & Maintenance • Part IV, Multi-agency Collaboration Source: www.whitehouse.gov/omb/egov

3. Under OMB A-11, IT investments are to be defined, selected, and managed on the basis of a well-founded Business Case • Define Business Needs • -- Derived from Strategic Plan • Performance metrics • -- Enterprise IT Architecture • -- Gap analysis (process, • organization, IT Capability) • -- Mission Derived Systems • Reqts. Analysis Agency Guidance Define Technical Alternatives -- Status Quo -- Make or Buy -- Process Re-engineering -- Technical/System/Reengineering -- Outsourcing IT Strategic Plan Modernization Blueprint Define Acquisition & Program Management Plans Business Line & IS Inputs Benefit/Cost Assessment -- $ Benefits and Costs -- Business Benefits -- CFO/Budget Spreadsheet -- Risks Business Case Refine Selected Alternative Clinger Cohen OMB A-11 ITMRA (P.L.104-106) Security Plan/ Privacy Impact Analysis SEC. 5122. CAPITAL PLANNING AND INVESTMENT CONTROL: .implement in the agency a process for maximizing the value and assessing and managing the risks of the information technology acquisitions IT Investment Guidance Risk ID, Assessment, & Define Risk Management Plan

4. Value Measurement Method for Analysis of Alternatives When Focus is Mission Performance Gaps Value Risk Results Cost

5. Initiatives must clearly support business and mission objectives Establish Linkage to Strategic Plans, PART Score, and Annual Performance Plans Define Performance Gaps; link to Performance Reference Model (PRM) Define the Functional Requirements to Address the Gap Define Alternatives Conduct Benefit/Cost Assessment Investment decision

6. Functional requirements should be defined in business terms that allow the agency the flexibility to evaluate a variety of solutions Criteria for Functional Requirements • Performance criteria of the function being acquired, developed, built, etc. • Definition of the common usage of the function • Ranking of requirements in order of importance • Decomposition of functional requirements into self-contained features • IT functional requirements should: • Support reengineered process • Reflect an "open" system architecture whenever possible • Establish a solid foundation using commercial items before customizing

7. Define alternative approaches to meeting the business requirements and analyze each alternative • Status Quo: look at the cost and/or benefits for staying "as-is" • For example, look at the costs associated with maintaining the current system for the long term • Outsourcing/cross servicing: • Contracting with a private company or a Government most effective organization to assume responsibility for the function • Current considerations: Cloud; Insourcing requirements • Stay in Business: Make a minimal investment to continue to run the system • For example, replace worn out components or operating system with current software version • Upgrading: improve the existing system • For example, reprogram the system and reengineer processes to perform functions more in line with the strategic plan • Full reengineering (process, organization, IT) • Identify Process, organization, and IT projects needed to revamp the way work is performed • Make or Buy? • Make: use internal resources to build a new system • Buy: purchase services from an external vendor to build a new system

8. 3. Execute the Plan and Control Progress 4. Evaluate 1. Define the Project 2. Develop the Project Plan Once an alternative is selected, the next step is to define a set of plans for use in implementation Program Management Process • Identify what activities/ tasks need to be done • Schedule Project Work • Task Duration • Assumptions/ Dependencies • Resources • Milestones • Potential Risks • Establish project review schedules • Conduct post-implementation reviews • Document track record • Assess the project's impact on future prospects for the project • Determine project scope and objectives • Identify project outcomes • Develop Project Mission Statement • Identify Project Sponsor • Identify Stakeholders • Establish Project Team • Task performance • Key Deliverables • Consistently monitor progress • Document all major actions/decisions • Measure interim results • Decide whether to cancel, modify, continue or accelerate the project

9. Contract Type Other Impact on Operations Acquisition Strategy and Management Planning: For a Federal Agency, alternatives need to be identified and assessed Accountability Competition Financial Mgmt. Contract Administration Technical Risk Modularity Interoperability Cost & Schedule Risk DETERMINE PROGRAM MANAGEMENT & ACQUISITION ALTERNATIVES COMPARE ALTERNATIVES Earned Value Tracking System Organization SELECTION OF ALTERNATIVE Performance Plan Competitive Demos Transition Plan Performance Based Risk Management Plan Multiple Award ID/IQ Establish IPT Full and Open Establish Oversight Reporting CONDUCT COMPETITION ADMINISTER & MANAGE CONTRACT

10. Performance Based Contracting techniques are emerging as a best practice to obtain IT solutions • Continuous Competition • Use of Past Performance as a Selection Criteria • Performance-Based Progress Payments • Incentive Fee Awards • Contract Administration System

11. Risk Management Planning Requires identification of risk factors, impact assessment, and contingency plans Risk assessment and management continue throughout the life cycle of a program as additional information becomes available and additional risks appear Risk Assessment: Identify Key Risks Risk Analysis: Define Potential Implications of Risks Documentation and effective use of lessons learned will improve future acquisitions and help address recurring problems in existing programs Risk Treatment: Prepare/Update Risk Management Plan

12. A Strategic Management Approach Integrated Framework for Alignment • Organizational Alignment • Aligning with priorities of the agency Governance • Industry studies and practices overview

13. Framework for Effective Performance Integrated Performance Management Framework Direction Set by White House, Congress and Agency Leadership Agency Priorities & Initiatives Assess Program Results Establish Policy Execute Programs Oversight • Metrics • Program Assessment • Program Decisions • Accountability • Transparency • Mission Outcomes • Targets • Initiatives • Strategy • Budgeting • Funding Strategy • Process Efficiency • Acquisition • IT as Enabler • Workforce strategy • Program Management • Governance • Compliance Review • Risk Management Programs, CFO, CIO, HR, Acquisition, Performance Management Office Program Offices and Management Offices Interaction Required to Enable Program Performance

14. Change Management Agency’s culture will be critical to achieving effectiveness • Requires continuous collaboration by leadership who establish policy direction and strategic initiatives and workforce who will be implementing programs. Requires agency leadership to drive a performance orientation into the fabric of the entire organization • A significant change management effort. • Leadership participation can’t just be an executive reporting exercise • Performance orientation has to become part of the culture • Take action during the delivery cycle as opposed to an end of period scorecard review • Monitored in a near continuous way

15. Change Management Back office initiatives of the CIO, CAO, CHCO, CFO have to support programs. • The right IT investments that enable program delivery have to be funded and tracked, • Human capital competencies and recruiting goals have to align with program needs, • Procurement capability has to align with contract management requirements, • Financial management needs to develop approaches to fund and track true costs

16. A Transition plan is usually required • Stakeholder Impact • IS People & Organization • Business Lines • Employee Unions • Change Management • Stakeholder Buy-In • Leadership • Training • Tracking, Measurement & Management • Responsibility and Accountability - emphasize consequences of achieving program results, effective oversight and transparency

17. The focus of change management is to help companies to accommodate change and to help people adapt to new environments H Change Management helps companiesminimize the depth andlength of performancedisruptions brought about by transformations Performance L Time

18. Approved Business Case INVESTMENT CONTROL Updated/ Approved Business Case Once IT investments are selected and captured in the business plan, apply an investment monitoring process is applied to the portfolio The principle objective of periodic reviews is to proactively monitor the investment Updated IT Plan & Performance Info Go Watch Stop • A set of standard criteria is applied to assess program, technical, and mission-related factors • Business cases are used, and updated, to monitor the progress on ongoing initiatives against projected cost, schedule, and performance measures • The investment monitoring process helps to: • Manage risk and identify and correct potential problems early in the life cycle • Ensure benefits are being accomplished and incorporate lessons learned during early phases of implementation • Provide information to enhance overall IT performance and support to business managers • Meet external program management requirements, such as 90% cost and schedule compliance

19. Governance and Value Survey after survey has revealed that from 20 to 70 percent of large-scale investments in IT-enabled change is wasted, challenged or fails to bring a return to the enterprise 1 A 2002 Gartner survey found that 20 percent of all expenditures on IT is wasted—a finding that represents, on a global basis, an annual destruction of value totaling about US $600 billion.4 • A 2004 IBM survey of Fortune 1000 CIOs found that, on average, CIOs believe that 40 percent of all IT spending brought no return to their organisations. A 2006 study conducted by The Standish Group found that only 35 percent of all IT projects succeeded while the remainder (65 percent) were either challenged or failed 1 ENTERPRISE VALUE: GOVERNANCE OF IT INVESTMENTS – IT Governance Institute and Val IT

20. Six Typical Challenges in Creating Value Problems in delivering technical capabilities—Often an enterprise’s delivery processes and competencies within its IT function are not mature enough. This challenge highlights the need to improve IT governance and management processes. Limited or no understanding of IT expenditures—Rarely do executives enjoy a sufficiently transparent view of IT expenditures and IT-enabled investments. Business abdication of decision making to the IT function—When the roles, responsibilities and accountabilities of the IT function and other business functions are unclear. Communication gaps between the IT function and the business—Close collaboration between the IT function and other business functions is crucial to value creation. When such a partnership is absent, communication suffers, inefficiencies Questioning of the value of IT—Ironically, while most enterprises continue to invest more and more in technology, many of their key executive decision makers continue to question whether value is actually realised from these investments. Major investment failure—When IT projects stumble, the business costs can be enormous—and highly visible. Project cancellations can trigger unexpected ripples of impact across the business. Delays can cost millions.

21. Value Delivery Source: ISACA, Val IT Provide strategic direction for investment decisions Define the characteristics of portfolios required to support new investments and resulting services, assets, and other resources Improve value management on a continual basis, based on lessons learned COBIT’s Val IT: a comprehensive approach to value delivery • Val ITprovides a consistent, repeatable, and comprehensive approach to governing BT investments • Mission and business become equal shareholders because Val IThelps management to answer the following key questions

22. Structure and Goals of Val IT There are three overall domains in Val IT: Value Governance, Portfolio Management, and Investment Management. Each domain comprises a number of processes and key management practices Value Governance (VG)—The goalof value governance is to optimize the value of an organization's IT-enabled investments Portfolio Management (PM)—The goal of portfolio management is to ensure that an organization's overall portfolio of IT-enabled investments is aligned with and contributing optimal value to the organization's strategic objectives Investment Management (IM)—The goal of investment management is to ensure that an organization's individual IT-enabled investment programs deliver optimal value at an affordable cost with a known and acceptable level of risk Source: ISACA, Val IT

23. In Summary, Capital Planning and Governance should: • Be integrated across the agency • Meet Performance Improvement • Link to OMB requirements and Capital Planning needs to be supported with effective business cases that are not done for compliance but as a management tool • Have a high probability of achieving cost, schedule, and performance objectives • Formalize way to prioritize decisions • Oversight and Governance to review progress, be more transparent with Dashboard and internal review teams

24. The OCIO as a Governance Entity to Facilitate Innovation Provide Direction Governance: Set Objectives Compare Organization: Perform Activities Measure Performance • An organization facilitates the planned, coordinated, and purposeful actions of people • Governance effects organizational, process, and cultural change by translating objectives into actions Traditionally, organizational structures were relied upon to align decision-making with enterprise goals and strategies • Organizational structures have proved inadequate to the task • Governance compensates for the limitations of organizations and transcends organization charts Governance is made more effective by changing the status quo to introduce improved organizational processes and practices Changes impact the organizational culture by altering the work and management climate • Governance aligns resources and incentives with performance targets

25. Assessing the Enterprise’s Current State One of the best ways to assessthe enterprise’s readiness to undertake a value management program is to evaluate the degree to which management is aware of the need for value management approaches based on the adoption of the following principles:

26. Taking Action Approach 1: Build Awareness and Understanding of Value Management Approach 2: Implement or Improve Governance Approach 3: Undertake an Inventory of Investments Approach 4: Clarify the Value of Individual Investments Approach 5: Conduct Investment Evaluation, Prioritization and Selection

27. A Best Practice Description from Industry Health Care Insurer Multi-State Business Process Teams setup for Governance Councils organized by business process – Member Services, Health Care Delivery, Information Technology, etc. Initiatives reviewed need to align with strategy and mission

28. Process – Value to the Business Starts with an “opportunity document” – an idea estimated at scale level, not yet detailed Submitted to the project portfolio management team - reviews for completeness and for tracking purposes Opportunity documents are reviewed by appropriate business process council. Each comes up with a list of what they want to see as the TOP List At this point they are focused on the strategic impact and strategic support they will need As the list of the TOP projects are compiled, then they do a business case Business cases are prioritized by each business process council

29. Decision Making & Governance The business process council determines which investments will be advanced to the overarching governance council At this point there is a better understanding of costs, but still broad The Portfolio Management Team (PMT) then looks and starts the fulfillment planning (resources, HR, Procurement, Financial, Schedule for execution) The overarching council, along with the PMT develops a priority list for • Active projects • New projects • The PMT will also look at changed business cases and changes to business priorities • For instance right now they would look at regulatory projects to the to the HC law.

30. Other Items in Governance Small Projects done differently Individual business divisions have their own internal councils • CIO gets a pool of funding and spends as desirable for instance infrastructure – as long as it doesn’t cross boundaries and stays within boundaries

31. Value Proposition Before • First Come First Serve • Didn’t really prioritize strategic impact or even good link to strategy Today • They are able to do fulfillment planning – back to being on same page or integrated framework • People have leverage on getting support as they focus on strategy and performance – projects are aligned Change Management • This process has been refined over years • People still learning

32. Closing Final Discussion and Question How you perceive next steps in your agency