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Optimizing and Assessing Information Technology
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Founded in 1807, John Wiley & Sons is the oldest independent publishing company in the United States. With offices in North America, Europe, Australia, and Asia, Wiley is globally committed to developing and marketing print and electronic products and services for our customers’ professional and personal knowledge and understanding. The Wiley Finance series contains books written specifically for finance and investment professionals as well as sophisticated individual investors and their financial advisors. Book topics range from portfolio management to e-commerce, risk management, financial engineering, valuation, and financial instrument analysis, as well as much more. For a list of available titles, please visit our web site at www .WileyFinance.com.
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Optimizing and Assessing Information Technology Improving Business Project Execution
K. SCOTT PROCTOR, CFA
John Wiley & Sons, Inc.
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c 2011 by K. Scott Proctor. All rights reserved. Copyright
Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at www.wiley.com/go/permissions. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages. Microsoft, Microsoft Excel, and Windows are registered trademarks of Microsoft Corporation. For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.wiley.com. Library of Congress Cataloging-in-Publication Data: Proctor, K. Scott. Optimizing and assessing information technology : improving business project execution / K. Scott Proctor. p. cm. – (Wiley finance Series) Includes index. ISBN 978-1-118-00001-4 (hardback); 978-1-118-10261-9 (ebk); 978-1-118-10262-6 (ebk); 978-1-118-10263-3 (ebk) 1. Information technology–Management. 2. Project management. I. Title. HD30.2.P75615 2011 658.4 038–dc22 2011011000 Printed in the United States of America 10
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DISCLAIMER Every effort has been made to make this book as complete and accurate as possible. No warranty, however, is implied. The information provided is on as “as is” basis. The author and the publisher shall have neither liability nor responsibility to any person or entity with respect to any loss or damages arising from the information contained in this book. The names of individuals, companies, and products used in this book are fictitious and are not based on real entities. No association with any real company, organization, product, person, place, or event is intended or should be inferred.
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Contents
Preface
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PART ONE
Introduction to the IT Pillars Model CHAPTER 1 IT Fundamentals Optimizing and Assessing IT Introducing the IT Pillars Model Summary
CHAPTER 2 The Role of IT in Business Operations Models and Definitions Strategy Business Model Operating Model Enterprise Architecture
CHAPTER 3 The Strategy Pillar From Strategy to Delivery People Process Technology Next Steps
3 4 5 12
13 13 16 17 17 17
21 21 23 23 28 31
CHAPTER 4 The Project Management Pillar
33
From Strategy to Delivery People Process
33 37 39
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CONTENTS
Technology Next Steps
39 42
CHAPTER 5 The Operational Excellence Pillar
43
From Strategy to Delivery People Process Technology Ending with the Customers
43 47 48 49 51
CHAPTER 6 The IPM Scorecard Overview of the Process Example Scorecard Template Details Summary
55 55 57 64 64
PART TWO
Case Study 1: A Mature Organization CHAPTER 7 Introduction to Case Study 1
67
Company Background Financials Operations IT Organization Corporate and IT Goals
67 69 69 69 70
CHAPTER 8 The Strategy Pillar of a Mature Organization Background People Process Technology
CHAPTER 9 The Project Management Pillar of a Mature Organization People Process Technology
73 73 73 79 83
91 91 98 99
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CHAPTER 10 The Operational Excellence Pillar of a Mature Organization People Process Technology
CHAPTER 11 The IPM Scorecard of a Mature Organization Assessed Optimized Summary
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107 107 111 115
123 123 126 131
PART THREE
Case Study 2: A Growing Organization CHAPTER 12 Introduction to Case Study 2
135
Company Background Financials Operations IT Organization Corporate and IT Goals
135 137 137 137 139
CHAPTER 13 The Strategy Pillar of a Growing Organization People Process Technology
CHAPTER 14 The Project Management Pillar of a Growing Organization People Process Technology
CHAPTER 15 The Operational Excellence Pillar of a Growing Organization People Process Technology
141 143 147 151
159 159 165 165
175 175 182 186
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CHAPTER 16 The IPM Scorecard of a Growing Organization Assessed Optimized Summary
191 191 194 199
PART FOUR
Tools and Reporting CHAPTER 17 IT Measures, Metrics, and Indicators Data, Information, Knowledge, and Wisdom Measures, Metrics, and Indicators Benchmarking ROI
CHAPTER 18 Reporting Simple IT Assessment PPT Assessment Cost Assessment Acquisition Integration Assessment Red Flag Report Summary
203 204 204 205 205
207 208 208 208 210 211 212
CHAPTER 19 Conclusion
213
About the Web Site
221
Notes
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About the Author
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Index
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Preface
his book is a guide—its purpose is to aid you in optimizing and assessing information technology (IT). Optimizing and Assessing Information Technology: Improving Business Project Execution is designed to be both easy to use and immediately useful. Put simply, this book is focused on improving business project execution through effective IT optimization and assessment. I wrote this book based on, among other things, my experience working across the field of IT at companies both small and large, ranging from startup enterprises on one extreme, to General Electric (GE) and AstraZeneca Pharmaceuticals, at the other extreme. IT is a field and a discipline with a variety of meanings and interpretations. The working definition of IT that I will use for this book comes from the Information Technology Associations of America and is, “the study, design, development, application, implementation, support or management of computer-based information systems, particularly software applications and computer hardware.”1 This book is focused on both assessing and optimizing IT. According to the Merriam-Webster dictionary, to optimize something is to make it as “effective or functional as possible,” and to assess something is to “determine its importance or value.” As a guide, this book offers a framework for optimizing and assessing IT. It does not focus in on specific technologies per se—given the rapid and increasing pace of technical change across the world today, any such focus is likely to be out of date as soon as it is published. My focus is on a framework whose principles are designed to stand the test of time and rapid technical development. After reading this book, you will be able to (1) generate an accurate and reliable assessment of a company’s IT operations and (2) identify areas on which to focus to optimize IT. Topics such as “against what to assess operations” and “optimized as compared to what” are addressed over the course of this book. In the interest of clarity and simplicity, please note that my coverage of IT in this book extends beyond “technology” itself. I cover various aspects
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PREFACE
of the People, Process, and Technology components associated with IT as a whole. Confusion often arises around the differences between the labels of “information technology (IT)” and “information systems (IS).” Opinions vary on how and why the IT and IS labels differ. While it is perhaps an oversimplification, IT is traditionally thought of as a subset of IS. As a discipline, IS can encompass a broad range of topics, including how various technologies combine and interact, and can include disciplines such as sociology or psychology. For the purposes of this book, my focus is on optimizing and assessing how various components of IT, including people, processes, and technology, support and work with broader business strategies and operations. Some academic definitions of IT and IS may differ from the ones that I employ here; my aim in clearly articulating a definition and scope for IT is to focus on meaningful and impactful topics as opposed to labels and definitions.
NEED FOR THIS BOOK This book addresses a significant and real problem in a large market. Despite the massive scale and scope of the IT market—global IT spending stood at $3.9 trillion in 20092 —and ample evidence that few IT projects actually succeed or turn out well,3 no other useful, reputable, or easy-to-use guide exists. As a market, IT consists of spending across the IT services, software, computer hardware, and telecommunications areas. A research report from Gartner published in 2008 suggests that IT services spending far outweighs IT products spending. At the time of publication of the Gartner report, IT services and telecommunication services accounted for 70 percent of total IT market spending. This book is focused on helping anyone optimize and assess IT. IT projects typically are not executed to plan and often represent a large set of costs. Doing a better job of optimizing and assessing IT offers the potential to improve business project execution. For the sake of context, some recent examples of failed IT projects include Ford’s abandonment of a purchasing system after deployment in 2004 (costing around $400 million) and Sainsbury’s abandonment of a supply-chain management system after deployment in 2004 (costing around $527 million). IT problems have also led to a number of high-profile failures. The crash and loss of NASA’s Mars Polar Lander in 1999 has been attributed to a software bug in a single line of computer code.4 In 1997, software
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specification and design errors led to the explosion of the $350 million Arianespace 5 rocket. In contrast to these failures, there are a number of IT project success stories that underscore the value of good IT optimization and assessment. One such example is Enterasys Networks’s implementation of Salesforce CRM (Customer Relationship Management) Service Cloud. This implementation increased customer satisfaction for technical support to 95 percent while driving cost savings of 10 percent.5 In addition to these underlying drivers, Gartner predicted that “by 2015, most external assessments of enterprise value and viability will include explicit analysis of IT assets and capabilities.”6 Thus, there is a compelling need for this book and its underlying IPM framework to meet the coming demand from, among other areas, external assessments of enterprise value and viability.
TARGET AUDIENCE FOR THIS BOOK Individuals and teams working across all phases of IT project management represent the primary market for this book. Included in this market are both typical project management functions, such as project managers, business analysts, and the like, as well as functions related to more specific IT assessment areas, such as investment due diligence, mergers and acquisitions due diligence, and other functions. Secondary markets for this book include business and finance professionals with an interest in IT, consultants working in the IT space, and students interested in IT. Typical reader profiles for this book might include: a project manager working on projects with some element of IT; a business analyst responsible for mapping and/or understanding how certain IT elements relate to an overall process; a business development professional assessing the IT operations of a partner or potential partner company; and an investment manager assessing a company’s IT operations.
SUMMARY OF CONTENTS Optimizing and assessing IT involves a step-by-step process whereby various aspects of IT are evaluated. This book is organized into four discrete sections. In addition to the book itself, a companion web site offers templates, checklists, and related materials for your reference and use.
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Part One of the book introduces the concept of the IT Pillars Model (IPM) for optimizing and assessing IT. This framework is explained in detail and compared to other common frameworks currently used in a variety of ways across IT. The IPM consists of three “pillars”—Strategy, Project Management, and Operational Excellence—as well as three “components”— People, Process, and Technology. Part One provides a solid foundation for the reader in terms of where and how the IPM fits into the overall operations of a business. Concepts ranging from strategic direction to enterprise architecture are contextualized and covered. The topic of how a business’s strategic direction relates to its IT operations is covered in Part One as well. The relationship between a company’s strategic direction and how it manages and utilizes IT is a critical area for consideration and analysis. Finally, Part One covers the process involved in quantifying the IPM. Each area of the IPM is assessed and the manner in which these assessments can be quantified and summarized is described in detail. Parts Two and Three of the book examine each aspect of the IPM in the context of case studies. Using fictitious (but realistic) company information, each of the components of the framework (People, Process, and Technology) is evaluated across each of the framework’s pillars (Strategy, Project Management, and Operational Excellence). Part Two covers the IPM as it relates to a large and mature organization. Part Three covers the IPM as it relates to a midsize and growing organization. In essence, Parts Two and Three of the book offer a detailed, hands-on user’s guide to the principles and practice of the IPM. Part One offers up some important ideas and principles for strategy and IT, while Parts Two and Three present step-by-step guidance for how a company’s IT operations should be assessed and optimized. The final section of the book, Part Four, covers tools and reporting. Analytical tools such as ROI (return on investment), benchmarking, and metrics are covered in this section. In addition, Part Four discusses a series of useful reports for IT optimization and assessment. Finally, a companion web site is available for this book at www.wiley.com/go/proctorit. This web site complements the book and offers a variety of materials, including templates, checklists, and figures, that are referenced throughout the book itself.
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PART
One Introduction to the IT Pillars Model
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CHAPTER
1
IT Fundamentals
nformation technology (IT) is a label that is used in many ways in today’s increasingly technically focused world. Such wide and varied usage of the “information technology” or “IT” label can lead to confusion and unnecessary complexity. For that reason, I begin this book with an explanation of the context in which I am addressing IT. IT is more than a function within a business and more than a technical discipline. As noted in the Preface, IT may be characterized as “the study, design, development, application, implementation, support or management of computer-based information systems, particularly software applications and computer hardware.”1 Parsing even further into the formal definition of IT, the MerriamWebster dictionary defines “information” as “knowledge obtained from investigation, study, or instruction,” and “technology” as “the practical application of knowledge, especially in a particular field.” Information may also be characterized as data, or “raw symbols,” that have been given meaning by relational connections.2 Reading into the formal definitions of IT, one interpretation is “the practical application of information in commerce and industry.” This is the definition that I will use throughout this book for IT. This is but one way of contextualizing IT—while the term can take a variety of meanings, it is important to ground any IT-related conversations in a common definition and understanding of IT itself. Beyond any formal definition, however, IT may be characterized as having three “components”: People, Process, and Technology. Put another way, the practical application of information in commerce involves three components: (1) People, or the individuals and teams involved in work; (2) Process, or the manner in which certain tasks and activities are accomplished; and (3) Technology, or the systems and tools utilized to accomplish work.
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While the purpose or role of IT may vary across industries, companies, and geographies, a lowest common denominator may be that of IT serving as an “enabler,” or a vehicle for facilitating action. There may well be exceptions to this characterization, but IT regularly serves as an aid or a tool that facilitates an activity, such as, for example, processing order transactions quickly or processing large volumes of data efficiently and accurately. As noted in the Preface, confusion can arise related to the differences between the labels of information technology (IT) and information systems (IS). My focus in this book is on IT—specifically on optimizing and assessing how various components of IT support and function with broader business strategies and operations. IT represents a large market—global spending reached $3.9 trillion in 2009.3 Despite the size of the global market, a large number of project examples indicate that few IT projects actually succeed or turn out well.4 These dynamics—a large market with poor delivery results—underscore the need for this book and the IT Pillars Model (IPM).
OPTIMIZING AND ASSESSING IT As noted in the Preface, the Merriam-Webster dictionary defines “optimize” as making something as “effective or functional as possible,” and “assess” as to “determine its importance or value.” This book is focused on optimizing and assessing IT. In order to generate an IT assessment and an idea of what “optimized” might look like, a goal, or desired end state, for how IT should work across an organization is needed. In other words, we need to define our target in order to properly assess and optimize IT. While the goal of IT may vary across companies, one common theme heard from chief information officers across a large number of surveys sponsored by the Center for Information Systems Research (CISR) of the Massachusetts Institute of Technology (MIT) is that their most important concern is “alignment with business strategy.”5 Part of the IPM entails evaluating how well the goals of an IT organization align with the rest of a business’s operations. An overarching goal of the IPM, and of this book, is to seek simplicity. IT can be a complex field and topic—a focus of mine is to distill the important, or “vital,” aspects of IT out of the otherwise often complex IT landscape. To paraphrase Oliver Wendell Holmes, there is power in “simplicity on the other side of complexity.”
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At a high level, the processes of optimizing and assessing IT involve a small number of important steps. These eight steps include: 1. Define the goal. Define the desired end state of the IT function. 2. Assess the situation. Assess the current IT function against the desired end state. 3. Quantify the situation. Translate the assessment of the current IT function into quantitative terms. 4. Identify the gaps. Determine where gaps exist between the desired IT end state and the current situation utilizing the quantified IT assessment 5. Determine a plan to bridge the gaps. Build a plan to bridge the gaps between the current situation and the desired end state of the IT function. 6. Quantify the benefits of bridging the gaps. Translate the plan to bridge the gaps into quantitative terms. 7. Execute the plan to bridge the gaps. Move forward and implement the plan to fill the gaps 8. Repeat these steps. Reassess the IT function in the future and begin the optimization process again Figure 1.1 illustrates the steps involved in optimizing and assessing IT.
INTRODUCING THE IT PILLARS MODEL The IPM is a framework for easily assessing and optimizing IT. The focus is on simplicity and driving value. As a variety of models and frameworks have been used across the field of IT, I focus here on the specifics underlying the IPM. I cover what is in scope and, in Chapter 2, how this model relates to a number of other IT models and frameworks. Put simply, the IPM evaluates the components of people, process, and technology against three “pillars,” or areas of focus for IT. By evaluating a company’s IT operations using the IPM, it is possible to both assess the IT function and identify areas for possible optimization. The IPM gets its name from three IT pillars. These pillars are (1) Strategy, (2) Project Management, and (3) Operational Excellence. In this context, a pillar refers to a fundamental principle or foundational idea. These three pillars, taken together, cover the typical areas of interest and focus for IT. Figure 1.2 presents a summary view of the IPM. For easy reference, each of the cells in the matrix is numbered. I cover the meaning and relevance of each of the cells and refer back to the numbered cells on a regular basis over the course of this book.
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FIGURE 1.1 Steps for Optimizing and Assessing IT
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FIGURE 1.2 IT Pillars Model Strategy relates to how IT services are designed. The focus here is on the long term and includes areas such as enterprise architecture and enterprise systems. Project Management addresses how IT services are built and produced. This pillar focuses on the development, or “build,” environment for IT service delivery. The third pillar, Operational Excellence (also referred to as Op Ex), relates to how IT services are delivered to clients. This pillar focuses on the production, or “run,” environment for IT service delivery. The three IT pillars are evaluated against the three components of People, Process, and Technology in the IPM. “Component” in this context refers to a part of a larger entity—a pillar in this case. The People component of the IPM relates to the human element of IT. This component addresses the issue of “who” in the IT landscape. Process, as a component of the IPM, addresses the issue of how “things get done” in the IT landscape. Put another way, the Process component focuses on how
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specific tasks and units of work are accomplished. The third component of the IPM, Technology, relates to the concept of tools in the IT landscape. The Technology component is focused on what (and how) specific tools are used and employed across IT.
Strategy The first of the three pillars of IT, Strategy, is focused on longer-term considerations than are the other two pillars, Operational Excellence and Project Management. The Strategy Pillar addresses topics of long-term IT interest, such as enterprise architecture and enterprise technology strategy. The components of the Strategy Pillar are highlighted in Figure 1.3.
FIGURE 1.3 Focus on Three Components of Strategy
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People The issue of overall IT team alignment is addressed in Cell #1 in Figure 1.3 at the intersection of the People component with the Strategy Pillar. Items including IT functional and leader alignment and organizational structure are covered in Cell #1. Process The broad topic of Process Management is addressed in Cell #2 in Figure 1.3. Cell #2, at the intersection of the Process component and the Strategy Pillar, deals with the important considerations associated with long-term process management across the enterprise. Technology Enterprise architecture and enterprise systems, among other topics, are addressed at the intersection of the Technology component and the Strategy Pillar, shown as Cell #3 in Figure 1.3. The long-term shape, scale, and scope of the enterprise’s IT function are covered in Cell #3.
Project Management Project Management is focused on developing and building IT services. This is the second of the three pillars of IT as shown in Figure 1.4. The activities and considerations associated with producing and building IT services fall in the Project Management Pillar. While Operational Excellence might be thought of as IT “run” activities, Project Management may be thought of as IT “build” activities. People The “build team,” found in Cell #4 at the intersection of the People component and the Project Management Pillar in Figure 1.4, addresses the People component of the IT Project Management Pillar. Considerations such as organizational structure and team experience are addressed in Cell #4. Process The set of processes underlying the Project Management Pillar, referred to here as “build processes,” are focused on in Cell #5 of Figure 1.4. It is here, where the Process component overlaps with the Project Management Pillar, that the processes associated with IT design, build, test, and deploy are addressed. Technology The tools associated with IT Project Management, or “build tools,” are covered in Cell #6 of Figure 1.4. The Technology component of Project Management is concerned with the nature and type of build, project management, and data management tools that are employed.
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FIGURE 1.4 Focus on Three Components of Project Management
Operational Excellence Operational Excellence, the third of the three pillars of IT, is focused on delivering services to clients. IT activities related to production systems and revenue generation fall within this category. The three components of Operational Excellence are shown in Figure 1.5.
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IT Fundamentals
FIGURE 1.5 Focus on Three Components of Operational Excellence
People The People component of the Operational Excellence Pillar, labeled Cell #7 in Figure 1.5, is concerned with the “run team.” The run team is the team of people who are accountable and responsible for delivering IT services in a production environment. Aspects covered in this cell of the IPM include the team structure, team experience breadth and depth, and outsourcing choices, among others.
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Process Cell #8 in the IPM, as shown in Figure 1.5 at the intersection of the Process component and the Operational Excellence Pillar, is focused on IT service delivery and support. The processes associated with IT run/production are addressed in Cell #8. Technology Cell #9 from Figure 1.5 covers the tools associated with IT run/production. This cell deals with the Technology components of Operational Excellence. Service management tools and technology stack reference models are addressed in this cell.
SUMMARY The fundamental elements covered in this chapter serve as the basis for the remainder of this book. In addition to the core concepts covered in Chapter 1, a number of additional aspects of assessing and optimizing IT are covered over the course of the book, including measures, metrics, and indicators as well as reporting. Assessing the performance of IT through the utilization of measures, metrics, and indicators is an extension of the IPM. This topic is covered separately later in this book. Reporting, or the presentation of relevant and focused data and information, beyond the scope of the IPM matrix is covered later in this book. The reporting focus of this book is the IPM matrix itself, which is populated with “scores” for each of the cells for an enterprise. A series of reports in addition to the IPM is presented later in this book.
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CHAPTER
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The Role of IT in Business Operations
wide variety of models and definitions for analyzing and assessing various aspects of information technology (IT) exist in today’s market. Given this wide variety, combined with the highly focused/niche characteristics of some of these models, I lay out explicitly a perspective on how IT fits within the larger context of an operating business. This chapter focuses on defining and contextualizing how IT relates to the rest of an operating business. Chapters 3 to 5 focus on the relationship between strategy and IT.
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MODELS AND DEFINITIONS For the sake of this book, the logical progression and ordering of various models flows in this order: A strategy drives a business model, which in turn informs an operating model, which is then resolved in an enterprise architecture. Many other models and orderings may exist, but for the sake of clarity and transparency, this is the context that I employ for this book. This chapter maps out the path from strategy to business model to operating model to enterprise architecture. Figure 2.1 illustrates the steps involved in optimizing and assessing IT. Figure 2.1 also was presented in Chapter 1 (see Figure 1.1); I refer to this recurring figure on a number of occasions throughout this book. My interest here is in providing a map or guide to how all the various processes and steps in optimizing and assessing IT fit together. The materials in this chapter relate directly to the first step shown in Figure 2.1, “Define the Goal,” or defining the desired end state of the IT function. Figure 2.2 demonstrates the relationship among strategy, business model, operating model, and enterprise architecture.
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FIGURE 2.1 Steps for Optimizing and Assessing IT
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FIGURE 2.2 General Business Figure
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STRATEGY Strategy is a field and discipline unto itself. Many books have been written on the topic of strategy, and entire businesses exist to do nothing but provide strategic consulting and advice. My intent here is not to cover the field of strategy but rather to highlight certain aspects and describe how strategy relates to the assessment and optimization of IT. One definition of strategy states that strategy “entails specifying the organization’s mission, vision and objectives, developing policies and plans, often in terms of projects and programs, which are designed to achieve these objectives, and then allocating resources to implement the policies and plans, projects and programs.”1 Figure 2.3 highlights the position and role of strategy. It is an organization’s strategy that provides the overall mission and vision to a business. There are a variety of levels or types of strategy. These include corporate strategy, business strategy, and functional strategy.
FIGURE 2.3 Strategy Position and Role
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Corporate strategy is the overall strategy for an entire firm. This is the broadest type of the strategies noted earlier—it is corporate strategy that guides the overall direction of a company. Business strategy is related to the strategies of particular lines of business or strategic business units. While each division or business unit within a company shares the same corporate strategy, they may have business strategies that differ from one another. Functional strategies relate to the strategies for specific business functions, such as IT. My focus in this book is on how strategy—whether corporate, business, functional, or another type of strategy—influences and impacts IT in a business.
BUSINESS MODEL A business model represents “the rationale of how an organization creates, delivers, and captures value. The process of business model design is part of business strategy.”2 Put another way, a business model demonstrates how a business goes about generating value. Figure 2.4 highlights the position and role of a business model. The “business model” terminology is used in a wide variety of contexts and has a range of meanings. For the purposes of this book, a business model may be defined as “the manner in which a business generates value.”
OPERATING MODEL The concept of an operating model is more abstract than a strategy or a business model. An operating model of a business describes the level of process integration and data standardization among trading partners and guides the underlying business and technical architecture in realizing a business model effectively and efficiently. Designing an operating model is also part of business strategy. Figure 2.5 highlights the position and role of an operating model. Framed in a different context, an operating model describes how the various pieces of a business fit together. An operating model cuts across the domains of People, Process, and Technology.
ENTERPRISE ARCHITECTURE The bottom “layer” of this hierarchy is that of enterprise architecture (EA). EA represents “a rigorous description of the structure of an enterprise, which
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FIGURE 2.4 Business Model Position and Role
comprises enterprise components (business entities), the externally visible properties of those components, and the relationships (e.g., the behavior) between them. This description is comprehensive, including enterprise goals, business process, roles, organizational structures, organizational behaviors, business information, software applications and computer systems.”3 Put another way, EA represents a description of the structure of the enterprise and the relationship of various business components. Figure 2.6 indicates the position and role of an EA.
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FIGURE 2.5 Operating Model Position and Role
For some additional perspective, a popular architecture framework known as TOGAF (The Open Group Architecture Framework) defines architecture in one of two ways, depending on the context.4 A formal description of a system, or a detailed plan of the system at component level to guide its implementation. The structure of components, their inter-relationships, and the principles and guidelines governing their design and evolution over time.
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FIGURE 2.6 Enterprise Architecture Position and Role
Furthermore, the Center for Information Systems Research (CISR) at the Massachusetts Institute of Technology (MIT) defines EA as “the organizing logic for business process and IT capabilities reflecting the integration and standardization requirements of the firm’s operating model.”5 This TOGAF and MIT CISR information is meant only to underscore the fundamental concepts underlying EA—those of structure and relationships.
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The Strategy Pillar
hapter 2 focused on defining and contextualizing how information technology (IT) relates to the rest of an operating business. Chapters 3 to 5 address the relationship between strategy and IT. These chapters are organized according to the IT Pillars Model (IPM) framework and trace the path leading from strategy to delivery of IT services. This chapter covers the Strategy Pillar, Chapter 4 covers the Project Management Pillar, and Chapter 5 covers the Operational Excellence Pillar. To provide some additional context, Figure 3.1 illustrates the steps involved in optimizing and assessing IT. The materials covered in Chapters 3 to 5 relate directly to the second step shown in Figure 3.1: “Assess the Situation,” or assessing the current IT function against the desired end state. As Chapters 3 to 5 address how to assess an IT function against its desired end state, it is assumed that a good understanding of the desired end state exists. In other words, Chapters 3 to 5 assume that the goals for the IT organization are known. My focus in this book is on optimizing and assessing IT; I do not cover topics such as how to create a strategy here.
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FROM STRATEGY TO DELIVERY As a company’s strategy represents its mission, vision, and objectives, it is important to understand how, and to what degree, IT supports that strategy. A good assessment and optimization plan for IT should address how IT relates to the company’s strategy. In this chapter, I cover the steps involved in moving from strategy to delivery for IT across the Strategy Pillar. There are a number of processes, resources, and technologies involved in moving from strategy to IT delivery. For that reason, I walk through each of the items connecting strategy to IT delivery in a step-by-step fashion.
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FIGURE 3.1 Steps for Optimizing and Assessing IT
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Figure 3.2 presents a view of the framework that I use to discuss the path from strategy to delivery. Note that I employ the IPM template as a guide to this discussion. Each of the major steps involved in moving from strategy to deliver is captured in the IPM over the course of Chapters 3 to 5. Figure 3.1 traces the course from strategy to deliver by moving from left to right. This course begins in upper-left-hand corner of the matrix in Cell #1 of the IPM and ends in the lower-right-hand corner of the matrix in Cell #9 of the IPM. Please note the boxes that span the bottom of Figure 3.2. The concepts of Strategy, Business Model, Operating Model, and Enterprise Architecture from Chapter 2 are represented by these boxes beneath the matrix in Figure 3.2. The path from strategy to delivery begins on the left in Figure 3.2 as a company’s stakeholders inform, or provide input to, the executive leadership team. The stakeholders of a company might include constituents such as employees, contractors, local politicians, government officials, and other businesses.
PEOPLE The People component of the Strategy Pillar is represented by the company’s executive leadership team. Cell #1 of the IPM, where the executive leadership team is found, may be seen in Figure 3.3. This team receives input and information from the company’s constituents. This input, combined with the thoughts and ideas of the executive leadership team, informs the company’s strategy. Put another way, the company’s strategy is driven by the input to, and thinking of, the company’s executive leadership team. Although a given company’s strategy may be driven by other inputs, I am using this single input for the sake of clarity and simplicity in this book.
PROCESS The Process component of the Strategy Pillar includes the company’s strategic direction, tactical direction, and a portion of the enterprise architecture. The strategic direction and tactical direction are discussed in this section—this coverage applies to Cell #2 in the IPM matrix. The company’s enterprise architecture is discussed in the “Technology” section of this chapter.
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FIGURE 3.2 High-Level Overview of Framework
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FIGURE 3.3 Executive Leadership Team Shown in IPM
Strategic Direction The company’s strategic direction, which is made up of the company strategic plan and the IT strategic plan, is driven by the executive leadership team. The strategic direction, shown in Figure 3.4, is found in Cell #2 of the IPM. The company’s strategy is captured in the company strategic plan. This document addresses the company’s overall strategy and represents a foundation on the journey from strategy to delivery. This strategic plan serves as a way to document and refer to the company’s underlying strategic direction. Comprehensive in scope, the company strategic plan influences another important document, the IT strategic plan. The IT strategic plan embodies the core principles of the company’s IT function. This plan offers both clarity of purpose and a straightforward direction for IT. As noted in the 2010 California Information Strategic Plan, “Strategy is about connecting a vision for the future with goals and actions that enable success. Strategy also provides the foundation for establishing priorities. Indeed, great strategies make tough choices easier.”1 This IT strategic plan, in conjunction with the company strategic plan, drive a number of items and areas on the path from strategy to deliver.
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FIGURE 3.4 Strategic Direction Shown in IPM
Tactical Direction The company’s tactical direction is highlighted in Cell #2 of the IPM matrix, as highlighted in Figure 3.5. Although tactics and strategy are two different concepts, I am including the company’s tactical direction in the Strategy Pillar due to the central role that elements of tactical direction play in assessing the company’s performance against its objectives.
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FIGURE 3.5 Tactical Direction Shown in IPM The two elements of tactical direction, the business scorecard and the IT scorecard, are shown in Figure 3.5. The business scorecard highlights and tracks measures and metrics related to corporate performance against certain business objectives. The company strategic plan and the IT strategic plan both drive and impact the items being tracked across the business scorecard. The IT scorecard is used to track the IT function’s performance against certain objectives. Both the IT strategic plan and the company strategic plan drive and influence the items being monitored across the IT scorecard. Although the scope of the business scorecard covers the depth and breadth of the company’s operations, the IT scorecard is focused on items related to IT.
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The measures and metrics covered by the IT scorecard extend well beyond strategic areas of interest and often include, for example, tactical items, such as service uptime over a given time interval.
TECHNOLOGY The Technology component of the Strategy Pillar includes standards and a portion of the company’s enterprise architecture. These items relate to Cell #3 in the IPM.
Enterprise Architecture The company’s enterprise architecture spans Cells #2 and #3 of the IPM matrix, as highlighted in Figure 3.6.
FIGURE 3.6 Enterprise Architecture Shown in IPM
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Enterprise architecture is a broad topic with a variety of meanings and interpretations. For the purposes of this book and the IPM, I utilize some definitions from TOGAF, or The Open Group Architecture Framework, a widely used architecture framework.2
Target Architecture The company’s target architecture defines the desired “end state” for its enterprise architecture. This target architecture is driven directly by a number of elements, including the company’s strategic direction, tactical direction, and standards, which are covered later in this section. I employ a commonly used four-level enterprise architecture for this book and for the IPM. These layers are: business architecture, data architecture, applications architecture, and technology architecture.3 1. Business architecture. Business architecture defines the business strategy, governance, organization, and key business processes. This layer of the enterprise architecture relates to overarching strategic, organizational, and business process concepts. 2. Data architecture. Data architecture describes the structure of an organization’s logical and physical data assets and data management resources. This layer of the company’s enterprise architecture is focused on data—the data itself as well as systems and processes related to the management of data. 3. Applications architecture. Applications architecture provides a blueprint for the individual application systems to be deployed, their interactions, and their relationships to the core business processes of the organization. Put another way, applications architecture is focused on applications in terms of their characteristics, how they work together, and how they interact with the company’s business processes. 4. Technology architecture. A company’s technology architecture describes the logical software and hardware capabilities that are required to support the deployment of business, data, and application services. This includes IT infrastructure, middleware, networks, and communications, among other areas. Technology architecture might be thought of as the set of technology capabilities that are required to support the functionality of the other layers of the company’s enterprise architecture. Those other layers, as described, are the business, data, and application layers. These four levels, or layers, of enterprise architecture enable a logically grouped view of a company’s target architecture.
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Standards Standards, highlighted in Figure 3.7, represent guidelines and best practices.4 Standards influence/help drive the company’s target enterprise architecture. Examples of the scope of guidelines and best practices covered by standards might include:
Data standards. Related to data and data structures and tied to the data architecture Applications standards. Concerned with application systems and tied to the applications architecture Technology standards. Apply to the technology platform and tied to the technology architecture
These standards, among others that might be employed by a company, are useful benchmarks, or reference points, for the sake of comparison to the state of a company’s target architecture.
FIGURE 3.7 Standards Shown in IPM
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NEXT STEPS This chapter covered the strategically oriented aspects of the IPM. Strategy plays a large and significant role across the disciplines of assessing and optimizing IT. The next steps on the journey from strategy to delivery are found in Chapter 4, where we explore the dimensions of the Project Management Pillar.
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The Project Management Pillar
his chapter focuses on the Project Management Pillar dimensions and considerations on the path from strategy to delivery of information technology (IT) services. Chapter 3 addressed the Strategy considerations, and Chapter 5 addresses the Operational Excellence considerations on the path from strategy to delivery. For some additional context, Figure 4.1 illustrates the steps involved in optimizing and assessing IT. The materials covered in Chapters 3 to 5 relate directly to the second step shown in Figure 4.1: “Assess the Situation,” or assessing the current IT function against the desired end state. As noted in Chapter 3, Chapters 3 to 5 assume that the goals for the IT organization are known. My focus in this book is on optimizing and assessing IT as opposed to topics such as creating a strategy. Figure 4.2 presents an overall view of the framework that I employ to discuss the path from strategy to delivery.
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FROM STRATEGY TO DELIVERY Figure 4.2 traces the course from strategy to deliver by moving from the left to the right. This course begins in the upper-left-hand corner of the matrix in Cell #1 of the IT Pillars Model (IPM) and ends in the lower-right-hand corner of the matrix in Cell #9 of the IPM (see Figure 1.2). This chapter focuses on Cells #4 to #6 across the IPM matrix under the Project Management Pillar. Please note the boxes that span the bottom of Figure 4.2. The concepts of strategy, business model, operating model, and enterprise architecture from Chapter 2 are represented by these boxes beneath the IPM matrix in the figure. The path from strategy to delivery continues beyond the Strategy Pillar through the Project Management Pillar of the IPM. This path is shown in Figure 4.3.
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FIGURE 4.1 Steps for Optimizing and Assessing IT
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FIGURE 4.2 High-Level Overview of Framework
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FIGURE 4.3 View of Project Management Pillar Shown in IPM The transition from the Strategy Pillar to the Project Management Pillar is facilitated through the company’s target enterprise architecture, as found in Cells #2 and #3 of the IPM. The target enterprise architecture guides a number of key elements in the journey from strategy to delivery. Please note the gray box labeled “Build” at the top of the Project Management Pillar in Figure 4.3. Although it is shown in the People component
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of the IPM, this callout signifies that build, or systems development, work spans across this entire pillar, not just the People component of the pillar.
PEOPLE The People component of the Project Management Pillar may be seen in Figure 4.4 as Cell #4 in the IPM (see Figure 1.2). The company’s Build function and IT projects are both covered in Cell #4. As noted, the “Build” box spanning the Project Management Pillar applies to the entire pillar, not just the People component of the pillar. The term “Build” here refers to the people, processes, and technology that combine to produce the overall systems development, or build, life cycle. The build area is highlighted in Figure 4.5. IT projects are discrete, and often interrelated, pieces of work directed towards tangible and specific outcomes. Figure 4.6 shows IT projects in Cells #4 and #5 of the IPM matrix in the context of the Project Management Pillar. IT projects span across the People and Process components of the Project Management Pillar. This is due to the fact that IT projects involve significant contributions from both people and from processes.
FIGURE 4.4 People Component of Project Management Pillar Shown in IPM
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FIGURE 4.5 Build Shown in IPM
FIGURE 4.6 IT Projects Shown in IPM
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As the term is used in this book, an IT project refers to work that the IT function undertakes in the service of delivering a successful project. An IT project might relate to IT project work on a project whose main focus is not IT. The “IT project” label here highlights the idea that IT, as a function, can play a significant role in areas outside of strict technology projects.
PROCESS The Process component of the Project Management Pillar includes the company’s transitional processes and IT development environment. This coverage applies to Cell #5 in the IPM matrix. Although the IT development environment consists of a number of process-specific elements, I am covering it in the Technology component of the Project Management Pillar due to the heavy impact of technology on the environment. The IT development environment spans the Process and Technology components of the Project Management Pillar. Transitional processes, highlighted in Figure 4.7, relate to the changes needed to move from company’s current architecture to the target architecture.1 I focus on two specific transitional processes, investment review and portfolio management, in this book. A number of other processes, such as, for example, procurement practices, also may be included in IT assessment and optimization work.
TECHNOLOGY The Technology component of the Project Management Pillar includes the IT development environment and acquisition integration. The IT development environment overlaps with the Process component of the Project Management Pillar and is discussed in this section. The IT development environment is shown in Figure 4.8 in the context of the IPM matrix. In the interest of clarity and simplicity, I have highlighted three aspects of the IT development environment: tools, platform, and processes. An IT development environment can be assessed in a more detailed and complex manner; my intent here is to offer sufficient depth without overcomplicating the path from strategy to delivery. Note that the IT development environment expands into the Operational Excellence Pillar in Figure 4.8. This is due to the fact that often processes and technologies from the Operational Excellence Pillar, such as the
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FIGURE 4.7 Transitional Processes Shown in IPM support processes, root cause analyses, and fix processes that are addressed in Chapter 5, apply to the IT development environment. The tools aspect of the IT development environment focuses on the applications and software/systems development toolsets that are employed across the build cycle at the company. Tools can range widely and might include commercial packages such as Microsoft Visual Studio, services such as Heroku, or open-source systems such as Git, among many other possibilities. The systems and technologies employed in the IT development environment make up the platform aspect of the environment. A variety of models
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FIGURE 4.8 IT Development Environment Shown in IPM and frameworks exist that focus on how to classify and categorize IT platforms. I cover this topic in more detail when I discuss the IT production, or Run, environment. The processes aspect of the IT development environment addresses how the environment is run and managed. This includes topics such as development methodologies (for example, the Iterative, Waterfall, and Agile development methodologies) as well as broader process concerns, such as how a system specification becomes a working application or system. Acquisition integration is highlighted as a discrete step on the path from strategy to delivery in Figure 4.9. Acquisition integration often involves work and activities across a number of functions in a business, including IT, finance, and others. The practice of acquisition integration is a field unto itself. My focus in this chapter, and this book, is on the systems integration aspects of acquisition integration.
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FIGURE 4.9 Acquisition Integration Shown in IPM
NEXT STEPS The Project Management–oriented steps covered in this chapter followed the Strategy-oriented steps addressed in Chapter 3. This logical step-by-step flow from one pillar to the next enables a comprehensive view of the process involved in assessing and optimizing IT. The next steps on the journey from strategy to delivery are found in Chapter 5, where the dimensions of the Operational Excellence Pillar are explored.
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CHAPTER
5
The Operational Excellence Pillar
hapter 5 focuses on the Operational Excellence Pillar dimensions and considerations on the path from strategy to delivery of information technology (IT) services. Chapter 3 addressed the Strategy Pillar considerations and Chapter 4 addressed the Project Management Pillar considerations on the path from strategy to delivery. For some additional context, Figure 5.1 illustrates the steps involved in optimizing and assessing IT. The materials covered in Chapters 3 to 5 relate directly to the second step shown in Figure 5.1: “Assess the Situation,” or assessing the current IT function against the desired end state. As noted in Chapter 3, Chapters 3 to 5 assume that the goals for the IT organization are known. Figure 5.2 presents an overall view of the framework that I employ to discuss the path from strategy to delivery.
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FROM STRATEGY TO DELIVERY Figure 5.2 traces the course from strategy to deliver by moving from the left to the right. This course begins in the upper-left-hand corner of the matrix in Cell #1 of the IT Pillars Model (IPM) and ends in the lower-righthand corner of the matrix in Cell #9 of the IPM, as shown in Figure 1.2. This chapter focuses on Cells #7 to #9 across the IPM matrix under the Operational Excellence Pillar. Please note the boxes that span the bottom of Figure 5.2. The concepts of strategy, business model, operating model, and enterprise architecture from Chapter 2 are represented by these boxes beneath the IPM matrix in the figure. The path from strategy to delivery continues beyond the Project Management Pillar through the Operational Excellence Pillar of the IPM. This path is shown in Figure 5.3.
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FIGURE 5.1 Steps for Optimizing and Assessing IT
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FIGURE 5.2 High-Level Overview of Framework
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FIGURE 5.3 View of Operational Excellence Pillar Shown in IPM
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The transition from the Project Management Pillar to the Operational Excellence Pillar is facilitated through a number of conduits. IT projects, the IT development environment, acquisition integration, and a number of other items guide the journey from strategy to delivery through to the Operational Excellence Pillar. Please note the gray box labeled “Run” at the top of the Operational Excellence Pillar in Figure 5.3. While shown in the People component of the IPM (see Figure 1.2), this “Run” callout signifies that run, or production IT systems, work spans across this entire pillar, not just the People component of the pillar.
PEOPLE The People component of the Project Management Pillar may be seen in Figure 5.4 as Cell #7 in the IPM. The company’s Run function is covered in Cell #7. As noted, the “Run” box spanning the Operational Excellence Pillar applies to the entire pillar,
FIGURE 5.4 People Component of Operational Excellence Pillar Shown in IPM
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FIGURE 5.5 Run Shown in IPM not just the People component of the pillar. In this context, “Run” refers to the people, processes, and technology that combine to produce the overall production, or “Run,” systems. The run area is highlighted and may be seen in Figure 5.5.
PROCESS The Process component of the Operational Excellence Pillar includes the company’s support processes and root cause analysis (RCA) and fix processes. This coverage applies to Cell #8 in the IPM matrix. Although the support and RCA and fix processes consist of a number of people-specific elements, I am covering it in the Process component of the Operational Excellence Pillar due to the strong influence of processes in these areas. The support and RCA and fix processes span the People and Process components of the Operational Excellence Pillar. Support processes, shown in Figure 5.6, relate to the processes and people involved in addressing and resolving IT problems as they arise. In the context of this book, support processes address the triaging, or prioritizing, of IT problem severity and the short-term resolution of IT problems. Longer-term fixes to IT problems are addressed by RCA and fix processes, which are described next. Because a large body of work exists in today’s marketplace on the topic of supporting IT systems, I cover this topic at a high level. In addition, I utilize generic terms, such as “problem,” that are not meant to reference standards or frameworks, such as ITIL (Information Technology Infrastructure Library).
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FIGURE 5.6 Support Processes Shown in IPM RCA processes represent methods utilized to identify and understand the underlying causes of a problem. RCAs focus on the underlying problem as opposed to simply addressing symptoms of the problem. Figure 5.7 highlights the RCA and fix processes in the Operational Excellence Pillar. The processes associated with fixing a problem relate directly to the RCA work. Once the underlying causes of a problem are identified through a RCA exercise, these underlying causes are addressed by “fixing” the problem. The support processes covered earlier in this chapter relate to short-term triaging and addressing problem symptoms; RCA and fix processes relate to identifying and fixing the true underlying causes of a problem.
TECHNOLOGY The Technology component of the Operational Excellence Pillar includes the IT production environment. The IT production environment overlaps with
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FIGURE 5.7 RCA and Fix Shown in IPM
the Process component of the Operational Excellence Pillar and is discussed in this section. The IT production environment can serve as a mirror, in terms of the structural model, of the enterprise architecture covered in Chapter 3. The difference, however, is that the IT production environment represents the current state of the company’s architecture whereas the enterprise architecture represents the target state of the company’s architecture. The IT production environment is shown in Figure 5.8 in the context of the IPM matrix. The differences between a company’s target and current architecture may vary widely, but I am employing the same commonly used four-level enterprise architecture model. These layers are business architecture, data architecture, applications architecture, and technology architecture.1
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FIGURE 5.8 IT Production Environment Shown in IPM
ENDING WITH THE CUSTOMERS The full path from strategy to delivery may be seen in Figure 5.9. This path leads from the elements found across the Strategy, Project Management, and Operational Excellence pillars and ends with the
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FIGURE 5.9 Path from Strategy to Delivery Shown in IPM
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customer. All of the People, Process, and Technology components of these pillars contribute to the transition from a strategy through to the delivery of IT services to customers. Although the path from strategy to delivery ends on the right side of Figure 5.9 with customers, it is important to note that customers serve as stakeholders and provide input to the company’s executive leadership team in Cell #1 of the IPM matrix, where the People component overlaps with the Strategy Pillar. The path from strategy to delivery moves from left to right as shown in the figure, but it often continues to evolve with feedback and input from customers and other stakeholders.
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CHAPTER
6
The IPM Scorecard
discuss an approach to quantifying an information technology (IT) assessment utilizing the IT Pillars Model (IPM) in this chapter. This process of quantifying the IPM is part of the practice of assessing and optimizing an organization’s IT function. The steps and processes covered thus far in this book are the fundamental building blocks in the optimization and assessment of IT; quantifying such assessments is a next logical step. The output of the quantification of the IPM results in a report card or “scorecard” for a company’s IT function. I refer to this output as the IPM Scorecard. The IPM Scorecard, discussed in greater detail later in the chapter, summarizes and documents the results of an IT assessment. Generating an IPM Scorecard is an important step as such a scorecard can both standardize the rating process for an IT function and enable easier comparisons across companies. Such a scorecard can also facilitate benchmarking and comparison work over time using a consistent and understandable framework. To offer some additional context, Figure 6.1 illustrates the steps involved in optimizing and assessing IT. The materials covered in Chapters 3 to 5 focused on the second step shown in Figure 6.1, “Assess the Situation,” Chapter 6 focuses on the third step in Figure 6.1, “Quantify the Situation.” As noted in Chapter 3, it is assumed that the goals for the IT organization are known. My focus for this book is on optimizing and assessing IT as opposed to topics such as creating a strategy.
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OVERVIEW OF THE PROCESS Quantifying the IPM involves assigning a rating or grade to each of the cells in the IPM. For the sake of reference, Figure 6.2 presents a summary view of the IPM as was presented in Chapter 1.
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FIGURE 6.1 Steps for Optimizing and Assessing IT
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FIGURE 6.2 IT Pillars Model Summary View A template to be used in quantifying the IT assessment may be seen in Figure 6.3. Once populated with data, the template shown in the figure represents the IPM Scorecard. The IPM Scorecard offers a mechanism, or tool, to quantify various inputs related to IT assessment and optimization work. Many elements of the assessment and optimization process are qualitative in nature. Translating these qualitative elements into quantitative elements can make intra- and cross-company comparisons more straightforward and effective.
EXAMPLE SCORECARD To populate the IPM Scorecard with data, each of the nine cells in the IPM Scorecard is assigned a numerical value between 1 and 5 (positive integers only). These values represent the rating for each given cell.
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FIGURE 6.3 Template for Quantifying IPM
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The values can range from 1, which represents a low or poor score, to 5, which represents a high or excellent score. Additional detail and context on assigning ratings are provided in the case studies covered in Parts Two and Three of this book. Figure 6.4 illustrates an IPM Scorecard populated with nine rating data points—one for each of the nine cells of the IPM matrix. These data points are used simply for the sake of illustration. They do not—nor do any other data from this chapter—relate to any real scenario. Subsequent chapters walk through examples using data tied to fictitious companies. This chapter is focused on illustrating how to quantify the IPM. For the IPM Scorecard, a higher score is better, both for input and output values. More detail on the possible ranges of outputs is provided later in this chapter. As a next step, it is often helpful to populate each of the nine cells of the IPM with a list of issues associated with each respective cell. Doing so can lend additional context and insight into each numerical rating. Figure 6.5 offers a view of an IPM Scorecard populated with both rating data and issues data. Once the inputs for the IPM Scorecard have been populated, the pillar ratings and overall rating may be calculated. The pillar ratings calculate a rating for each of the three pillars across the IPM: Strategy, Project Management, and Operational Excellence. The overall rating represents a total/summary rating for the IT function. To calculate a pillar rating, multiply the three data points for that pillar together; the product represents the pillar rating. Each of the three pillars has its own rating. Figure 6.6 illustrates the calculation of each of the pillar ratings. By way of example, the pillar rating of the Strategy Pillar is equal to 27 in Figure 6.6. This was calculated as: People Rating × Process Rating × Technology Rating = 3 × 3 × 3 = 27 After each of the pillar ratings has been calculated for the IPM Scorecard, the overall rating may be calculated. The overall rating is calculated as the sum of the three pillar ratings. A view of the populated IPM Scorecard may be seen in Figure 6.7. In the example shown in Figure 6.7, the overall rating is equal to 47. This was calculated as: Strategy Pillar Rating + Project Management Pillar Rating + Operational Excellence Pillar Rating = 27 + 8 + 12 = 47
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FIGURE 6.4 IPM Scorecard with Rating Data
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FIGURE 6.5 IPM Scorecard with Rating Data and Issues Data
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FIGURE 6.6 IPM Scorecard Pillar Ratings
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FIGURE 6.7 IPM Scorecard Overall Rating
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TEMPLATE DETAILS A number of items are worth noting regarding the IPM Scorecard template that I am using in this book. First, the template is available as a Microsoft Excel file (in .xlsx format) on this book’s companion web site (www.wiley.com/go/proctorit). Even if you are not an experienced user of Microsoft Excel, the template is designed to work easily and accurately. Also, I have implemented conditional formatting and some data validation rules for the inputs into the Microsoft Excel template. These additions to the template are meant to make use, and interpretation, of the model as simple and effective as possible. The conditional formatting varies the color of the input and output cells with numerical values. This formatting makes the cell fill color more “red” for a lower score, more “yellow” for a midlevel score, and more “green” for a higher score. Note that the template itself is in color, while the printed book is in black and white. As such, references to color refer to the template. The shading, or conditional formatting, of the cells in the IPM Scorecard template is based on the possible range of values for each cell. The nine input cells take the positive integers from 1 to 5, inclusive, as input values. The three pillar total values (one for each pillar) can range from 1 to 125. This is because, for each pillar, the three inputs that are multiplied together to return the pillar total value each range from 1 to 5. The minimum possible value for the pillar total value is thus 1 × 1 × 1 = 1, and the maximum possible value is 5 × 5 × 5 = 125. The conditional formatting for each of the three pillar total values varies the color of the cells from red to green based on a range of positive integers from 1 to 125, inclusive. The overall rating value from the IPM Scorecard can range from 3 to 375. This is due to the fact that, as just described, each of the three input values (the pillar ratings) can range from 1 to 125. Thus, the overall rating value can take on a minimum possible value of 1 + 1 + 1 = 3 and a maximum possible value of 125 + 125 + 125 = 375. The conditional formatting for the overall rating varies the color of the cell from red to green based on a range of positive integers from 3 to 375, inclusive.
SUMMARY This chapter introduced and covered the IPM Scorecard. This scorecard offers a tool through which the data and insight gained by assessing each of the three pillars of the IPM may be quantified. Utilizing the framework and tools covered thus far in this book, next I walk through two separate case studies to illustrate how the IPM and IPM Scorecard can function in practical applications.
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Two Case Study 1: A Mature Organization
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7
Introduction to Case Study 1
arts Two and Three of this book are focused on case studies. More specifically, Part Two walks through a case study using a large and mature organization as its subject, and Part Three covers a case study using a midsize and growing organization as its subject. Chapters 7 to 11 of Part Two cover the full information technology (IT) assessment and optimization steps outlined over Chapters 1 to 6 for a large and mature company with a host of legacy IT systems. Figure 7.1 illustrates the steps involved in optimizing and assessing IT. The case study in this part of the book covers all of the steps shown in Figure 7.1. For context, the materials covered in Chapters 3 to 5 focused on the second step shown in the figure, “Assess the Situation,” and Chapter 6 focused on the third step, “Quantify the Situation.”Let us begin by discussing the background for this case study.
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COMPANY BACKGROUND The fictitious company that is the subject of the case study for Part Two of this book is named Uppland Industries; I refer to the company as Uppland. Uppland was founded in 1903 in Philadelphia, Pennsylvania, and continues to maintain its corporate headquarters in Philadelphia. The company is a diversified industrial concern with a number of lines of business. Although founded as a technology design and production business for the healthcare industry, Uppland has evolved into a large conglomerate. The three lines of business at Uppland are healthcare, aerospace, and energy. Uppland’s evolution into a large conglomerate has been due to both a long history of organic growth as well as two recent large acquisitions. One of these acquisitions was in the aviation industry; the other was in the energy industry.
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FIGURE 7.1 Steps for Optimizing and Assessing IT
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FINANCIALS Revenues for fiscal year 2010 for Uppland were $25 billion (all figures, unless otherwise noted, are in U.S. dollars). The company is profitable, and it generated $2.5 billion in net income over fiscal 2010. Although each of Uppland’s three lines of business contributes equivalent revenues to the company as a whole, the dynamics—and earnings— across the business units vary. In particular, the healthcare business generates consistent earnings off a mature and established set of products and services. In contrast, both the aerospace and the energy business units exhibit lower profit margins compared to the healthcare business. This is due, in part, to the less mature nature of the aerospace and energy businesses—and the correspondingly higher investment needs—as compared to the healthcare industry.
OPERATIONS Today, Uppland designs, builds, and supports a variety of technology systems utilized across a number of industries. Uppland leverages this long history of technical innovation to supply advanced diagnostic equipment to the healthcare industry, avionics for the aerospace industries, and power control systems for the energy industry. Active in 105 countries, Uppland employed 85,000 individuals at the close of fiscal year 2010. Approximately 60 percent of these employees are based in the United States. In terms of items specific to each line of business from an operational perspective, the healthcare line of business has been in operation for more than 100 years, and it is burdened with a raft of legacy issue and concerns. The healthcare business has grown, in large part, organically and consistently. The aerospace and energy businesses are more recent additions to the Uppland corporate portfolio, and they both have grown largely due to the two recent acquisitions. Both of these acquisitions added new products and services to the set of Uppland’s commercial offerings.
IT ORGANIZATION As part of the IT overview, there are three main considerations: organizational, financial, and operational. Uppland’s IT organization consists of 2,750 employees spread across 75 countries. The IT headcount has grown significantly over the past year
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due to the two acquisition integrations. Uppland employs a matrixed organizational structure in which a number of functions, including IT, provide services to each of Uppland’s business units. A new chief information officer (CIO) recently joined Uppland from outside the company. This new CIO, Arora Foxton, and the IT function report up through the Uppland chief financial officer and the finance function. Although the organizational structure is matrixed in nature, the IT organization is not functioning as a centralized or “shared services” organization. Rather, the two IT organizations associated with the recent acquisition integrations continue to function in many respects in a manner independent from the historical, or preacquisition, IT team. A variety of different IT approaches and disciplines across the three business units has led, organizationally, to a fragmented IT function. Uppland has had mixed success historically with aligning the IT function geographically and by business unit. The company’s IT budget for fiscal year 2011 is approximately $1.5 billion. This budget applies to both ongoing/operating costs and one-time capital expenditures. Due to a variety of issues, including an extensive set of legacy IT concerns and two recent large acquisitions, the Uppland IT team is finding it increasingly difficult to monitor, develop, and support systems. More broadly, Uppland’s senior executive team believes the company’s overall operational, performance, and growth opportunities are being hindered by IT issues and concerns. Uppland as a whole has spent an increasing amount each year for the past three years on the IT function. Despite this increase in spending, the delivery of IT services, the systems development time, and agility are all suffering and trending downward in terms of quality. There are 815 major IT systems in use across Uppland. The IT organization is adopting a number of standards to varying degrees across the business units. Such standards include ITIL (Information Technology Infrastructure Library), Lean Six Sigma, and the PMI PMBOK (Project Management Institute Project Management Body of Knowledge), among others. Uppland heavily utilizes third-party providers of IT services. Such providers cover areas including systems development, testing, and support.
CORPORATE AND IT GOALS Uppland is focused on increasing profitability and efficiency across the business. The company as a whole is concentrating on making the performance of the business units and functions clear and understandable.
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In support of driving increased efficiency across the company, Uppland has a strong interest in a “shared services” approach to a number of functions, including IT. Moreover, the company is focused on maximizing IT’s contribution to increased profitability as a function. Additional details regarding Uppland’s corporate and IT goals are covered throughout this case study. I discuss each of the three pillars of the IPM and then conclude with the IPM Scorecard for this case study. The core concepts discussed in Chapters 1 to 6 serve as the foundation for the qualitative and quantitative assessment and optimization of IT at Uppland.
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CHAPTER
8
The Strategy Pillar of a Mature Organization
hapters 7 to 11 walk through the full information technology (IT) assessment and optimization steps outlined over Chapters 1 to 6 for a large and mature company with a host of legacy IT systems. For illustration’s sake, the company I am discussing is Uppland Industries, a fictitious diversified industrial concern introduced in Chapter 7. Figure 8.1 illustrates the steps involved in optimizing and assessing IT. The case study presented in this chapter covers all of the steps shown in Figure 8.1.
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BACKGROUND A view of the Strategy Pillar in the context of the IT Pillars Model (IPM) is shown in Figure 8.2. The Strategy Pillar is illustrated in the context of the path from strategy to delivery in Figure 8.3. Over the remainder of the chapter, I both assess and cover optimization thoughts for each of the components of the Strategy Pillar—those of People, Process, and Technology.
PEOPLE A view of the People component of the Strategy Pillar for Uppland is offered in Figure 8.4.
Assess Arora Foxton, Uppland’s new chief information officer, joined the company approximately six months ago. Foxton was hired into the executive
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FIGURE 8.1 Steps for Optimizing and Assessing IT
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FIGURE 8.2 Strategy Pillar in Context of IPM leadership team at Uppland to, among other things, assess and optimize the company’s IT function. Foxton reports directly to Uppland’s chief financial officer (CFO), and her IT team reports up through the finance function. The IT function is organized, in principle, as a matrix. In this structure, IT is meant to provide services across each of the business unit “verticals” of healthcare, aerospace, and energy. In reality, the two recent acquisitions have left IT functioning in a somewhat disjointed and unconnected manner across all of Uppland. Each of the three IT leaders from the three business units reports directly to Foxton and indirectly to the heads of their respective business units. In terms of input into this People and Strategy cell in the IPM matrix, a number of large institutional investors have sent strong signals to the Uppland executive team. In essence, these investors are pushing for greater profitability and efficiency across the company.
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FIGURE 8.3 Strategy Pillar in Context of Path from Strategy to Delivery
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FIGURE 8.4 People Component of Strategy Pillar Given all of this data, this People component of the Strategy Pillar is rated as a 3 using the IPM Scorecard. Please review Chapter 6 if necessary, to learn more about the rating system for the IPM Scorecard or the IPM Scorecard itself. A view of an IPM Scorecard for Uppland may be seen in Figure 8.5.
Optimize Given the increasing focus on both overall profitability across Uppland as well as the interest in maximizing IT’s functional contribution to profitability, I believe an organizational change makes sense. In particular, I believe Foxton’s reporting relationship should change and that she should report directly to Uppland’s chief executive officer as opposed to the company’s CFO. The increased visibility for the IT function across Uppland’s businesses that stems from this organizational change should provide some good momentum to the push for increasing profitability. Beyond increased visibility, this shift should help improve communications across the executive leadership team with respect to IT. To optimize here, another shift in reporting relationships may make sense as well. For each of the IT leaders supporting the three business units,
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FIGURE 8.5 Evolving View of Uppland IPM Scorecard
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I believe they should shift their direct managers from Foxton, the Uppland CIO, to the heads of their respective business units. By making this change, while making Foxton a dotted-line manager, lines of accountability should become clearer and a better focus on business unit–level profitability is possible as compared to the existing reporting relationships. The changes noted here should lead to an increase in the IPM Scorecard value for the People component of the Strategy Pillar from the previous value of 3 to the new value of 4. A view of the optimized IPM Scorecard for Uppland may be seen in Figure 8.6.
PROCESS A view of the Process component of the Strategy Pillar for Uppland is offered in Figure 8.7.
Assess In this section, we discuss the strategic direction and tactical direction of the process component of the Strategy Pillar. Strategic Direction Uppland’s strategic direction has shifted over the past 12-plus months due to the two recent acquisitions and the increased focus on profitability and efficiency. The company strategic plan has been utilized to varying degrees over the past three to five years. The recent acquisitions and enhanced focus on profitability have led the executive leadership team to revisit this strategic plan for the company. The plan itself is poorly documented and consists primarily of summary presentation slides with bullet point ideas. Uppland hired an external consultant to help build a formal IT strategic plan three years ago. This plan, while helpful in the past, has not been updated since its creation, and it does not incorporate the recent shifts in corporate makeup or strategy. Tactical Direction The recent shifts in the company’s strategic direction have immediate implications for Uppland’s tactical direction. Uppland’s business scorecard has not been fully updated to reflect all the implications of the recent shifts in the company’s strategic direction. The company built a rough IT scorecard in conjunction with its work three years ago with a consultant on building out an IT strategic plan. The executive leadership team was never really happy with the way in which the
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FIGURE 8.6 Evolving View of Optimized Uppland IPM Scorecard
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FIGURE 8.7 Process Component of Strategy Pillar IT scorecard turned out, and the scorecard has not been updated since its creation. Based on all of these data, this Process component of the Strategy Pillar is rated as a 3 using the IPM Scorecard. A view of the evolving IPM Scorecard for Uppland may be seen in Figure 8.8.
Optimize Strategic Direction A key to optimizing this area of Uppland’s IPM Scorecard—that of the Process component of the Strategy Pillar—is to solidify and document the company’s updated strategic direction. The company
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FIGURE 8.8 Evolving View of Uppland IPM Scorecard
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is changing its strategic direction, but the “to be” future state should be more clearly articulated. Updating and formalizing the company strategic plan is an important step on the journey to optimizing this aspect of the IPM. A more rigorous and orderly approach to building and documenting the company’s strategic plan will help move Uppland in the right direction toward optimization. An up-to-date IT strategic plan that maps to the updated and formalized company strategic plan should be created and formalized as soon as possible. Given the downstream implications on the path from strategy to delivery, the sooner this IT strategic plan is finalized, the better. Tactical Direction Updating the tactical direction for the company and for IT, as appropriate, to reflect any changes in the strategic direction is integral to a successful optimization of the IT function. The business scorecard should be updated to ensure alignment with the company’s overall strategic direction. Uppland should update its IT scorecard to bring it in line with the company’s overall strategic and tactical directions. Keeping this document in sync with the business scorecard—and the overall direction of the company—is important to fully optimize Uppland’s IT function. The changes outlined in this section have the potential to enable an increase in the IPM Scorecard value for the Process component of the Strategy Pillar from the previous value of 3 to the new value of 4. A view of the evolving optimized IPM Scorecard for Uppland may be seen in Figure 8.9.
TECHNOLOGY Assess The Technology component of the Strategy Pillar for Uppland may be seen in Figure 8.10. Enterprise Architecture The recent shifts in Uppland’s overall strategic direction may well provide support for changes across the company’s enterprise architecture. Target Architecture Uppland has not updated its target architecture since the work undertaken by consultants on the IT strategic plan. The target architecture needs significant updates due to the changes across the company since its last refresh three years ago.
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FIGURE 8.9 Evolving View of Optimized Uppland IPM Scorecard
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FIGURE 8.10 Technology Component of Strategy Pillar
The target business architecture has not changed over the past three years. Given the significant recent changes across the business, the architecture should be updated to reflect changes to strategy, organization, and business processes, among other areas. Uppland’s data architecture, or the manner in which data is handled and processed, has not been formalized in a cohesive way. Although each of the business units may have some documentation related to data and data management standards, no formal or functional corporate-wide data architecture exists. The manner in which Uppland’s applications function, how they interact with one another, and how they work with the company’s business processes has not been documented or fully determined. No formal technology architecture exists today for Uppland. On separate occasions in the past, various efforts have been undertaken across
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each of the business units, but no unified view of the company’s technology architecture was completed and none exists today. Standards Uppland has implemented a comprehensive set of technology, applications, data, and security standards across each of the business units. Compliance with these standards is enforced widely and well. Given all of these data related to the company, I rate the Technology component of the Strategy Pillar as a 3 using the IPM Scorecard. A view of the evolving IPM Scorecard for Uppland may be seen in Figure 8.11.
Optimize Enterprise Architecture A solid enterprise architecture is a key component of optimizing the Technology component of the Strategy Pillar for Uppland. Any changes to the People and/or Process components of the Strategy Pillar should be reflected in suitable changes across the Technology component of the Strategy Pillar. Target Architecture The target architecture should be updated in line with updates to the rest of the documents and artifacts noted earlier in this chapter. Uppland’s target business architecture should be refreshed to align with updates to the other documents and processes relevant to the Strategy Pillar. The company should put a formal set of data architecture policies and procedures into place across the organization. Such an exercise should follow—and be informed by—the other important changes to the People, Process, and Technology components of the Strategy Pillar. Following the other suggested optimization steps already noted, the company should undertake a project to formalize its applications architecture. Such an effort has the potential to make the applications domain of the company’s enterprise architecture more effective. Creating a formal technology architecture for Uppland is a next logical step for the rest of the company’s enterprise architecture. Mapping out such a formal technology architecture stands to make the path from strategy to delivery of IT services more effective and efficient. Standards The company has done a good job on the standards front. Any suggested items for optimization in this area relate to continuous improvement. In other words, Uppland should continue its good leadership when it comes to standards in this context.
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FIGURE 8.11 Evolving View of Uppland IPM Scorecard
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FIGURE 8.12 Evolving View of Optimized Uppland IPM Scorecard
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These proposed changes have the potential to enable an increase in the IPM Scorecard value for the Technology component of the Strategy Pillar from the current value of 3 to the new value of 4. A view of the evolving optimized IPM Scorecard for Uppland may be seen in Figure 8.12.
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9
The Project Management Pillar of a Mature Organization
hapter 9 is focused on the Project Management Pillar of the Information Technology (IT) Pillars Model (IPM) for the IT assessment and optimization work related to Case Study 1—the case study on Uppland Industries. As noted in Chapter 7, Part Two walks through the full IT assessment and optimization steps outlined over Chapters 1 to 6 for a large and mature company with a host of legacy IT systems. As a reminder from earlier chapters, Figure 9.1 highlights the steps involved in optimizing and assessing IT. The case study in Part Two of the book covers all of the steps shown in Figure 9.1. The Project Management Pillar in the context of the IPM is shown in Figure 9.2. The Project Management Pillar’s place in the context of the path from strategy to delivery is shown in Figure 9.3. I both assess and cover optimization thoughts for each of the components of the Project Management Pillar—namely, those of People, Process, and Technology—over the course of this chapter.
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PEOPLE A view of the People component of the Project Management Pillar for Uppland is presented in Figure 9.4.
Assess The majority of the Build team had been with the company for the past 15-plus years prior to the two recent acquisition integrations. The recent acquisitions did not add significantly, however, to the headcount of the
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FIGURE 9.1 Steps for Optimizing and Assessing IT
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FIGURE 9.2 Project Management Pillar in Context of IPM
IT organization. Of the IT professionals who did join Uppland from the acquisition integrations, the majority had less than five years of tenure at their respective companies. Uppland makes extensive use of third-party contractors for systems development/build work. Although not a positive or negative aspect in isolation, this characteristic should be kept in mind for the overall IT assessment and optimization. The teams responsible for project management across Uppland’s business units have a varied base of experience and expertise. Overall, the team is lagging in the area of IT project professionals. Based on these data, I rate this People component of the Project Management Pillar as a 2 using the IPM Scorecard. A view of the updated IPM Scorecard for Uppland may be seen in Figure 9.5.
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FIGURE 9.3 Project Management Pillar in Context of Path from Strategy to Delivery
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FIGURE 9.4 People Component of Project Management Pillar
Optimize The long tenure of a large portion of the IT team brings significant knowledge and expertise to the base business, but the changing nature of Uppland’s business argues for a new approach to IT. Such a shift may entail significant turnover across the IT organization as new leaders and individual contributors are brought onboard. The suggested optimization effort here is to “upgrade” the IT team— either through training of existing employees or through new hires. The scale and scope of third-party contractor involvement in the Build process should also be considered when optimizing the People component here. The IT projects team should be a focus area for training and new hires. The team is far from optimized and represents a weak link in the path from strategy to IT delivery. These suggested changes focused on optimization should lead to an increase in the IPM Scorecard value for the People component of the Strategy Pillar from the previous value of 2 to the new value of 3. A view of the updated optimized IPM Scorecard for Uppland may be seen in Figure 9.6.
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FIGURE 9.5 Evolving View of Uppland IPM Scorecard
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FIGURE 9.6 Evolving View of Optimized Uppland IPM Scorecard
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PROCESS A view of the Process component of the Project Management Pillar for Uppland is offered in Figure 9.7.
Assess The two transitional processes of interest in the context of this book, investment review and portfolio management, are best assessed as average but disparate. A range of robust investment review and portfolio management policies and procedures exist across each of the three business units.
FIGURE 9.7 Process Component of Project Management Pillar
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These policies and procedures, however, vary widely in scale and scope and differ across each of the business units. They are fairly consistent within each business unit yet inconsistent across the business units. Based on these data, the Process component of the Project Management Pillar gets a 2 rating using the IPM Scorecard. Despite the mature and robust nature of some of the transitional processes here, my expectation for how a large and mature company such as Uppland should perform in this area exceeds the company’s historical performance. A view of the evolving IPM Scorecard for Uppland may be seen in Figure 9.8.
Optimize Standardizing and mandating the utilization of transitional processes— specifically investment review and portfolio management—is an important step on the path from strategy to IT delivery for Uppland. The changes outlined here have the potential to enable an increase in the IPM Scorecard value for the Process component of the Project Management Pillar from the current value of 2 to the new value of 3. A view of the evolving optimized IPM Scorecard for Uppland may be seen in Figure 9.9.
TECHNOLOGY The Technology component of the Project Management Pillar for Uppland may be seen in Figure 9.10.
Assess Uppland’s IT development environment, prior to the two recent acquisition integrations, was fairly static and stable. Integrating the IT functions of the two recently acquired companies, however, has changed the IT development environment landscape. A range of build tools are utilized across the company. The legacy IT organization (the function that existed prior to the two recent acquisitions) worked strictly with Microsoft Visual Studio for its IT development toolset. The IT teams from the two recently acquired companies work with a number of build tools, including some open source tools. The platform for the IT development environment extends beyond the development tools. In Uppland’s case, this platform includes an internally hosted build, or development, environment combined with an externally
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FIGURE 9.8 Evolving View of Uppland IPM Scorecard
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FIGURE 9.9 Evolving View of Optimized Uppland IPM Scorecard
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FIGURE 9.10 Technology Component of Project Management Pillar
hosted build environment run by a third-party application development partner. Prior to the two recent acquisitions, Uppland’s IT development process followed what is best characterized as a modified waterfall approach. In this approach, quick cycles to account for scope changes are allowed for short intervals over the course of a development effort. The IT functions of the two recently integrated acquisitions both follow a mix of “Agile” development and traditional waterfall development. Integrating the IT functions from the two recently acquired companies has gone moderately well. Key enterprise systems, such as e-mail, were integrated successfully shortly after the acquisitions closed. Standardizing processes and technologies across the Project Management Pillar, which offers a number of potential benefits to Uppland, has had more of a mixed record of integration success. The data related to Uppland lead me to rate the Technology component of the Project Management Pillar as a 2 using the IPM Scorecard. Given its size and maturity, the company should, I believe, have a more standardized set of processes and technologies than exist today. A view of the evolving IPM Scorecard for Uppland may be seen in Figure 9.11.
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FIGURE 9.11 Evolving View of Uppland IPM Scorecard
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FIGURE 9.12 Evolving View of Optimized Uppland IPM Scorecard
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Optimize Agreeing on IT development environment standards—and following such standards—is a good and reasonable goal for the Uppland organization. Given the company’s focus on improving profitability and efficiency, it makes sense to standardize the tools utilized across Uppland’s IT development environment. The primary area for optimization across the platform is to standardize the internal development platform and enforce the use of a single outsourced development platform. The support and maintenance of IT development platforms is an important, and often neglected, step on the path from strategy to delivery of IT services. Agreeing on, and following, a standard set of IT development processes should help move Uppland’s IT efficiency and profitability in the right direction. A single methodology here should make the IT development process more predictable and more efficient. Uppland should continue to focus on successfully integrating acquired companies in terms of both existing and potential acquisitions. Addressing any IT systems integration issues early and often typically pays off in the future for acquiring companies. These proposed changes should warrant an increase in the IPM Scorecard value for the Technology component of the Project Management Pillar from the current value of 2 to a new value of 3. A view of the evolving optimized IPM Scorecard for Uppland may be seen in Figure 9.12.
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10
The Operational Excellence Pillar of a Mature Organization
hapter 10 is focused on the Operational Excellence Pillar of the IPM for the information technology (IT) assessment and optimization work related to Case Study 1. As noted in earlier chapters, Chapters 7 to 11 of the book walk through the full IT assessment and optimization steps outlined over Chapters 1 to 6 for a large and mature company with a host of legacy IT systems. Figure 10.1, presented for the sake of context, highlights the steps involved in optimizing and assessing IT. The case study in this part of the book covers all of the steps shown in Figure 10.1. The Operational Excellence Pillar is shown in Figure 10.2 in the context of the IT Pillars Model (IPM). The Operational Excellence Pillar’s place on the path from strategy to delivery is shown in Figure 10.3. I cover both assessing and optimizing each of the components of the Operational Excellence Pillar—those of People, Process, and Technology—over the course of this chapter.
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PEOPLE A view of the People component of the Operational Excellence Pillar for Uppland Industries is presented in Figure 10.4.
Assess Uppland’s Operational Excellence team is organized to support a “triage” approach, whereby different levels of problem severity are addressed by different members of the Operational Excellence team.
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FIGURE 10.1 Steps for Optimizing and Assessing IT
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FIGURE 10.2 Operational Excellence Pillar in Context of IPM There is a balance between internally and externally sourced resources (or people) on the Run team. This balance is struck in such a manner to optimize the output of the team while controlling for the location of each team member (onshore versus offshore) and the cost level of each team member (high cost versus low cost). Based on this data, I rate the People component of the Operational Excellence Pillar as a 4 using the IPM Scorecard. The company does a good job in this area. It performs better than might be expected given the maturity, size, and scale of the business, but there is still room to improve. A view of the updated IPM Scorecard for Uppland may be seen in Figure 10.5.
Optimize Uppland does a good job with the People component of the Operational Excellence Pillar. Continued optimization of the balance between internally
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FIGURE 10.3 Operational Excellence Pillar in Context of Path from Strategy to Delivery
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FIGURE 10.4 People Component of Operational Excellence Pillar and externally sourced resources is the best area on which to focus for the company. The suggested optimization steps should help improve the company’s People component of the Operational Excellence Pillar. These suggested steps, however, are not sufficient to improve the IPM Scorecard rating to a 5. For that reason, the IPM Scorecard value for the People component of the Operational Excellence Pillar remains at a value of 4. To increase this rating, the company would need to invest significant resources and time. The cost of such an increase outweighs the benefits, given the other areas across the IPM Scorecard with ratings well below 4. A view of the updated optimized IPM Scorecard for Uppland may be seen in Figure 10.6.
PROCESS A view of the Process component of the Operational Excellence Pillar for Uppland is presented in Figure 10.7.
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FIGURE 10.5 Evolving View of Uppland IPM Scorecard
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FIGURE 10.6 Evolving View of Optimized Uppland IPM Scorecard
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FIGURE 10.7 Process Component of Operational Excellence Pillar The Run processes for Uppland address the steps involved in providing IT services.
Assess The processes and people involved in triaging and addressing problems as they arise work well at Uppland. Even with the two recent acquisition
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integrations, the company applies an effective and strong focus on the area of support. Uppland is strong across its support processes and even stronger across its root cause analysis (RCA) and fix processes. The IT team does an excellent job identifying the true underlying, or root, causes of problems and subsequently addressing those causes and fixing the problems. The Process component of the Operational Excellence Pillar gets a 4 rating from me using the IPM Scorecard. The manner in which Uppland is functioning across this pillar is superior to my expectation for how a large and mature company should perform in this area. A view of the evolving IPM Scorecard for Uppland may be seen in Figure 10.8.
Optimize Although the company does a good job with its IT support processes, it could optimize these processes further by a tighter integration of the IT function among the three business units. A tighter integration could enable better visibility across all of Uppland for the IT support team. Given the company’s strengths in this area, any optimization suggestions should be focused on improvements at the margin. Put another way, the IT function should focus on continuous improvement across the RCA and fix processes. Other areas across the IPM Scorecard with scores less than 4 warrant more attention than does this area. The changes outlined here are incremental and marginal in nature. The company is already doing a good job in this Process component of the Operational Excellence Pillar. Any improvements made in this area are unlikely to be sufficient to increase the IPM Scorecard rating beyond the currently assessed value of 4. A view of the evolving optimized IPM Scorecard for Uppland may be seen in Figure 10.9.
TECHNOLOGY The Technology component of the Operational Excellence Pillar for Uppland may be seen in Figure 10.10.
Assess Uppland’s IT production environment is a parallel—it represents the present, not the future—to the company’s enterprise architecture as covered in Chapters 3 and 8. Given the host of changes likely to flow through the path from
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FIGURE 10.8 Evolving View of Uppland IPM Scorecard
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FIGURE 10.9 Evolving View of Optimized Uppland IPM Scorecard
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FIGURE 10.10 Technology Component of Operational Excellence Pillar
strategy to IT delivery, the IT production environment may well undergo some changes. The company keeps tight control over its IT production systems and environment. No deliberate changes have been made to the fundamental IT architecture over the past two-plus years. The target business architecture has not changed over the past three years. Given the significant recent changes across the business, the business architecture here may need to be updated. Uppland’s data architecture has not been formalized in a cohesive way. The individual business units may have some documentation related to data and data management standards, but no formal or functional corporatewide data architecture exists. There is a lack of knowledge, rigor, and discipline in terms of the company’s approach to applications architecture. Information on how Uppland’s applications function, how they interact with one another, and
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FIGURE 10.11 Evolving View of Uppland IPM Scorecard
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FIGURE 10.12 Evolving View of Optimized Uppland IPM Scorecard
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how they work with the company’s business processes has not been documented or fully determined. Uppland has no comprehensive or official technology architecture blueprint. Data exist in a number of places across the organization, but they are disparate and not integrated in a useful manner. Weighing these data related to the company, I rate the Technology component of the Operational Excellence Pillar as a 4 using the IPM Scorecard. A view of the evolving IPM Scorecard for Uppland may be seen in Figure 10.11.
Optimize The move to an increased focus on profitability and efficiency at Uppland merits a close examination of how the company’s current architecture might be modified. Any changes to the current architecture should be in support of the company’s target architecture. Optimizing here implies close tracking of how changes in the target architecture should be captured in the current architecture. The company’s business architecture, as reflected in the IT production environment, should be updated to reflect changes to strategy, organization, and business processes, among other areas. Uppland should protect and enforce any data architecture policies and/or procedures that might be put into place across the organization. Building a formal and useful applications architecture for the company is a logical move on the path from strategy to the delivery of IT services. Building a formal technology architecture in support of the company’s overarching goals is an important area of focus for the company. Given Uppland’s relative strengths across the Operational Excellence Pillar, supporting such efforts is important for the company’s continued strength in the area of Operational Excellence. The changes suggested have the potential to improve the company’s performance across the Technology component of the Operational Excellence Pillar. The improvements, though, will not be sufficient at this time to increase the rating on the IPM Scorecard beyond the currently assessed value of 4. Moving the rating from a value of 4 to a value of 5 would require more extensive optimization efforts in this area. Given the numerous areas across the IPM Scorecard with ratings below a value of 4, the company’s efforts are best spent outside the Technology component of the Operational Excellence Pillar for the time being. A view of the evolving optimized IPM Scorecard for Uppland may be seen in Figure 10.12.
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11
The IPM Scorecard of a Mature Organization
ppland’s Information Technology (IT) Pillars Model (IPM) Scorecard is reviewed in this chapter. The IPM Scorecard translates qualitative assessment and optimization work into quantitative representations. As I covered the individual ratings for each cell across the scorecard over the past three chapters, I address the pillar and overall ratings for both the assessed and optimized IPM Scorecards in this chapter.
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ASSESSED Figure 11.1 offers a view of the completed assessed IPM Scorecard for Uppland Industries. The company’s assessed values were lower for the Strategy and Project Management pillars than for the Operational Excellence Pillar.
Pillar Ratings Uppland has room to improve across the Strategy Pillar. Each of the three components of the pillar—People, Process, and Technology—rate as average. Given the maturity and size of this business, this is an area that should be given special attention. Weakness across the Strategy Pillar can imply a lack of flexibility or agility in terms of the company’s ability to change direction. The assessed Strategy Pillar from the IPM Scorecard is shown in Figure 11.2. Uppland is clearly weak across the Project Management Pillar. This is an area where each of the three components (People, Process, and Technology) warrant significant attention. Figure 11.3 offers an illustration of the assessed Project Management Pillar.
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FIGURE 11.1 View of Assessed IPM Scorecard for Uppland
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FIGURE 11.2 View of Assessed Strategy Pillar in IPM Scorecard
The company is strong across all components of the Operational Excellence Pillar. Uppland is consistently above average when assessed against peer companies across Operational Excellence, which is reflected in the company’s assessed IPM Scorecard. The assessed Operational Excellence Pillar from the IPM Scorecard is shown in Figure 11.4.
FIGURE 11.3 View of Assessed Project Management Pillar in IPM Scorecard
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FIGURE 11.4 View of Assessed Operational Excellence Pillar in IPM Scorecard
Overall Rating The company’s overall rating for the assessed IPM Scorecard is below average. Although Uppland does many things well, the balance of the efforts across the IT function yield an overall rating in need of attention and improvement. Figure 11.5 presents a view of the full assessed IPM Scorecard for Uppland. Now that the assessed values for the IPM Scorecard have been reviewed, the next step is to examine the optimized values.
OPTIMIZED The company’s optimized values are projected to increase from the assessed values across the Strategy and Project Management pillars yet remain level across the Operational Excellence Pillar.
Pillar Ratings The ideas presented for optimizing across the Strategy Pillar offer up a good level of improvement for Uppland. The overall pillar rating is projected to improve from an assessed value of 27 to an optimized value of 64.
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FIGURE 11.5 View of Full Assessed IPM Scorecard for Uppland
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FIGURE 11.6 View of Optimized Strategy Pillar in IPM Scorecard The optimized Strategy Pillar from the IPM Scorecard is shown in Figure 11.6. The proposed steps to optimize across the Project Management Pillar should bring Uppland into an acceptable range, albeit lower than I would prefer. The IPM Scorecard rating is slated to improve to 27 from an assessed value of 8. Figure 11.7 offers an illustration of the optimized Project Management Pillar. Given the company’s strong assessed position across the Operational Excellence Pillar, none of the suggested optimizations is projected to improve Uppland’s good starting position. Looking across the overall IPM Scorecard, other areas merit additional attention before attempting to optimize the Operational Excellence Pillar any further. The optimized Operational Excellence Pillar from the IPM Scorecard is shown in Figure 11.8.
Overall Rating The suggested optimization efforts are projected to yield a good and measurable improvement across Uppland’s overall IPM Scorecard. The suggested efforts should increase the overall IPM Scorecard rating from an assessed value of 99 to an optimized value of 155. Figure 11.9 offers a view of the full optimized IPM Scorecard for Uppland.
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FIGURE 11.7 View of Optimized Project Management Pillar in IPM Scorecard
FIGURE 11.8 View of Optimized Operational Excellence Pillar in IPM Scorecard
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FIGURE 11.9 View of Full Optimized IPM Scorecard for Uppland
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SUMMARY Uppland serves as a good case study for assessing and optimizing IT across a large and mature organization. The scale and scope of a company’s IT function is driven by a number of factors, and the size and maturity of an organization often play a significant role in this respect. This case study offers some themes that should apply across a variety of large and mature companies.
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Three Case Study 2: A Growing Organization
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CHAPTER
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Introduction to Case Study 2
oth Parts Two and Three of this book are focused on case studies. Part Two walked through a case study using a large and mature organization as its subject; Part Three covers a case study using a midsize and growing organization as its subject. Chapters 12 to 16 walk through the full information technology (IT) assessment and optimization steps outlined over Chapters 1 to 6 for a midsize and growing company with a base of existing IT systems. Figure 12.1 illustrates the steps involved in optimizing and assessing IT. The case study in Part Three of the book covers all of the steps shown in Figure 12.1. For context, the materials covered in Chapters 3 to 5 focused on the second step shown in Figure 12.1, “Assess the Situation,” and Chapter 6 focused on the third step in Figure 12.1, “Quantify the Situation.”
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COMPANY BACKGROUND The subject of the case study for Part Three of the book is a company named Sigtuna Technologies. I refer to the company as Sigtuna. Sigtuna was founded approximately 10 years ago in 2000 in Baltimore, Maryland. The company’s headquarters remain in Baltimore. The company designs, builds, and supports a cloud-based enterprise software system. This system, named the Sigtuna Infinity System (or Infinity System), runs in the cloud, or remote from system users over the Internet. The Infinity System offers a suite of enterprise resource planning (ERP) tools that help companies run and build their companies. The product provides features and functions targeted at the human resources and finance functions. Sigtuna has posted a number of years of impressive revenue growth, and it has significant growth potential ahead. The company’s growth has been a combination of organic growth and three small- to midsize acquisitions
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FIGURE 12.1 Steps for Optimizing and Assessing IT
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over the past 18 months. These acquisitions were competitors in Sigtuna’s primary line of business.
FINANCIALS Sigtuna’s revenues for fiscal year 2010 were $1.5 billion (all figures, unless otherwise noted, are in U.S. dollars). The company typically operates at a break-even or minor loss level in terms of net income. The company has a single line of business focused on designing, building, and supporting its Infinity System product. The market for cloudbased enterprise software is in its early stages and shows significant growth potential.
OPERATIONS Sigtuna’s business is based on its Infinity System product. This product offers enterprise-grade ERP software through the cloud. The company serves a wide range of companies of various sizes across a number of different industries. Active in five countries, Sigtuna employed 6,000 individuals at the close of fiscal year 2010. Approximately 90 percent of these employees are based in the United States. Sigtuna has, since its founding in 2000, focused on its single line of business. This focus has enabled the company’s organic as well as its acquisitionrelated growth to date. The company’s three recent medium-size to small acquisitions have added incremental functionality to its main Infinity System product. Each of these companies was focused on offering add-on functionality to the Infinity System prior to their acquisition by Sigtuna. These companies continue to focus on Infinity Systems work.
IT ORGANIZATION This overview includes a discussion of organizational, financial, and operational considerations. Sigtuna’s IT organization consists of 650 employees spread across five countries. The IT team has not grown significantly over the past year despite the recent acquisitions (due to the smaller nature of those acquisitions).
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Sigtuna operates in a siloed organizational structure. There is no formal and centralized IT function—the IT team currently is focused on the Infinity System business unit it supports directly. Tim Alderbush, the new Sigtuna chief information officer, recently joined the company from another business in the enterprise software industry. Alderbush and the IT function report up through the head/executive vice president of the Infinity System business. Due to the siloed nature of the IT function and most of the rest of the Sigtuna business, IT’s role has been somewhat fragmented across different areas of Sigtuna. The IT teams and functions that came to Sigtuna via the three recent acquisitions continue to operate in an independent manner from the company’s core IT function. A variety of different IT approaches and disciplines across the core business and the three recent acquisitions has led, organizationally, to a fragmented IT function. Sigtuna has taken a hands-off approach to integrating the IT functions of the recent acquisitions. Each of the IT teams spread across these different areas focuses on the same Infinity System product line yet operates in independent and different ways. Sigtuna’s IT budget for fiscal year 2011 is approximately $90 million. Both ongoing/operating costs as well as one-time capital expenditures are included in this budget. The company’s continued growth, combined with the three recent acquisition integrations, is making systems monitoring, development, and support increasingly challenging. Sigtuna’s leadership team is concerned that these changes, combined with the siloed nature of the IT function, may be hindering the company’s growth prospects. Sigtuna has spent more money each year over the past two years on the IT function. This growth has been fueled both by increased sales and by additional product development. Despite the increased spending, operational metrics, such as systems uptime, have started to suffer in terms of delivery. In terms of the systems landscape, 105 major IT systems are in use across Sigtuna. The IT function is evaluating how to best leverage standards and frameworks such as ITIL (Information Technology Infrastructure Library) and PMI PMBOK (Project Management Institute Body of Knowledge). No widespread use of frameworks such as these are in place today at the company. The company does not make much utilization of third-party providers for systems development or support.
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CORPORATE AND IT GOALS Sigtuna is focused on growing sales across the business. The company is concerned that its IT function may hinder its future growth potential due to its siloed nature and the decrease in quality of delivery for IT services. Given the company’s size, maturity, and growth potential, Sigtuna’s senior executive team has a strong interest in increasing the IT function’s operational efficiency. The company is poised to grow from a midsize to a large company, and the leadership team wants to bolster IT’s ability to enable that growth. Additional details regarding Sigtuna’s corporate and IT goals will be covered as I progress through this case study.
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13
The Strategy Pillar of a Growing Organization
s noted in Chapter 7, Parts Two and Three of this book are focused on case studies. More specifically, Part Three covers a case study using a midsize and growing organization as its subject, while Part Two walked through a case study using a large and mature organization as its subject. As I did in Part Two, I walk through the full process of assessing and optimizing a company’s information technology (IT) function over the course of Part Three. Part Two addressed some aspects that are unique to a large and mature organization; Part Three covers a number of the characteristics unique to a midsize and growing company. Chapters 12 to 16 walk through the full IT assessment and optimization steps outlined over Chapters 1 to 6 for a midsize and growing company with a mix of both older and more recent systems. Figure 13.1 illustrates the steps involved in optimizing and assessing IT. The case study examined here covers all of the steps shown in Figure 13.1. For the sake of context, the materials covered in Chapters 3 to 5 focused on the second step shown in Figure 13.1, “Assess the Situation,” and Chapter 6 focused on the third step in Figure 13.1, “Quantify the Situation.” Figure 13.2 presents a view of the Strategy Pillar in the context of the IT Pillars Model (IPM). The Strategy Pillar is shown in the context of the path from strategy to delivery in Figure 13.3. I both assess and cover optimization thoughts for each of the components of the Strategy Pillar—those of People, Process, and Technology—over the remainder of this chapter.
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FIGURE 13.1 Steps for Optimizing and Assessing IT
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FIGURE 13.2 Strategy Pillar in Context of IPM
PEOPLE The People component of the Strategy Pillar is offered in Figure 13.4.
Assess The company’s new chief information officer, Tim Alderbush, was hired into Sigtuna Technologies approximately two months ago. One of his primary charges/mandates is to assess and optimize Sigtuna’s IT function. Alderbush reports to the executive vice president (EVP) of the Infinity Systems division. The IT function operates, for all intents and purposes, as a silo. In fact, each of the three recently acquired companies has its own IT silos. Each of the separate IT leaders reports to the counterpart/direct report of the EVP of the Infinity Systems division.
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FIGURE 13.3 Strategy Pillar in Context of Path from Strategy to Delivery
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FIGURE 13.4 People Component of Strategy Pillar
A number of investors, including a host of mutual fund managers, have been pressuring the company to focus on top-line, or revenue, growth. Other stakeholders are exhibiting similar pressure, and it appears that the market is interested, first and foremost, in top-line growth from Sigtuna. Given these data, I rate the People component of the Strategy Pillar as a 3 using the IPM Scorecard. Please review Chapter 6 if necessary to learn more about the rating system for the IPM Scorecard or the IPM Scorecard itself. A view of an IPM Scorecard for Sigtuna may be seen in Figure 13.5. Note that, for the sake of comparison, the manner in which the People component of the Strategy Pillar functions with Sigtuna likely would not offer a good fit for other companies, such as, for example, Uppland Industries, the subject of Case Study 1 covered in Chapters 7 to 11.
Optimize Given the focus on top-line growth across the company, Sigtuna’s senior management team is interested in finding operational efficiencies across the IT function.
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FIGURE 13.5 Evolving View of Sigtuna IPM Scorecard
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I believe that shifting the reporting relationships for all IT leaders across the three recent acquisitions to Alderbush makes sense. By aligning each of the IT leaders in a more streamlined fashion, the company stands to leverage efficiencies across the entire base of operations. Such an organizational shift should include changing the existing line managers for the IT leaders at the three acquired companies to their dottedline managers. Such a shift stands to offer good lines of communication and balanced accountability for the business as a whole. These changes stand to generate an increase in the IPM Scorecard value for the People component of the Strategy Pillar from the previous value of 3 to the new value of 4. A view of the optimized IPM Scorecard for Sigtuna may be seen in Figure 13.6.
PROCESS A view of the Process component of the Strategy Pillar for Sigtuna is offered in Figure 13.7.
Assess Strategic Direction Sigtuna’s strategic direction has not shifted over the past 12 to 24 months. The company remains focused on its core product line and is targeting continued revenue growth. The company does not have a centralized or formalized strategic plan. Sigtuna’s potential transformation into a larger company has led the executive leadership team to think more seriously about a strategic plan for the company. Sigtuna has not built a formal IT strategic plan. An unofficial internal working group once attempted the completion of such a plan, but internal politics, among other factors, prevented any plan from obtaining broad exposure or acceptance. Tactical Direction Although the company’s strategic direction has not changed in the recent past, the increased focus on top-line growth may have some near-term implications for Sigtuna’s tactical direction. Sigtuna’s business scorecard does not cover all aspects of the company’s goals reliably or consistently. The core business’s business scorecard is upto-date, but the scorecards of the recently acquired companies have not been incorporated into the overall business scorecard.
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FIGURE 13.6 Evolving View of Optimized Sigtuna IPM Scorecard
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FIGURE 13.7 Process Component of Strategy Pillar
The company has not built a comprehensive IT scorecard to date. Certain metrics are tracked in the Run, or production, environment, but a company-wide IT scorecard does not exist at Sigtuna. Based on all of this information, I rate this Process component of the Strategy Pillar as a 2 using the IPM Scorecard. The evolving IPM Scorecard for Sigtuna may be seen in Figure 13.8.
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FIGURE 13.8 Evolving View of Sigtuna IPM Scorecard
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Optimize Strategic Direction Despite the lack of changes to Sigtuna’s strategic direction over the past 12 to 24 months, now is a good time to formalize and document the company’s strategic direction. The company is poised to move beyond a medium-size business, and it should focus more on strategic foundational items, such as its strategic direction. Formalizing and institutionalizing the company strategic plan is an important next step for Sigtuna on its journey toward optimizing its IT function. A well-reasoned company strategic plan should have positive influences on a number of areas “downstream” the path from strategy to IT delivery. An IT strategic plan that maps to, and supports, a formal company strategic plan should be created. The creation of the IT strategic plan should be done parallel with, or after, the creation of the company strategic plan. Tactical Direction The lack of recent strategic change across the company suggests that maintaining the current tactical direction for the company and for IT is the best path forward for now. The business scorecard should be updated to include data and input from the business scorecards of the three recently acquired companies. Sigtuna should create a formal IT scorecard, and this scorecard should be utilized in the running and managing of the IT function. The elements of the IT scorecard should be informed by the contents of the business scorecard and all other upstream items on the path from strategy to IT delivery. The changes outlined in this section should enable an increase in the IPM Scorecard value for the Process component of the Strategy Pillar from the previous value of 2 to the new value of 3. The evolving optimized IPM Scorecard for Sigtuna is shown in Figure 13.9.
TECHNOLOGY Assess The Technology component of the Strategy Pillar for Sigtuna may be seen in Figure 13.10. Enterprise Architecture The consistency in Sigtuna’s overall strategic direction provides support for limited, if any, changes across the company’s enterprise architecture. Balanced against this factor, however, is the recent degradation in levels of operational IT service delivery. Although such delivery is outside the
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FIGURE 13.9 Evolving View of Optimized Sigtuna IPM Scorecard
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FIGURE 13.10 Technology Component of Strategy Pillar
scope of the Strategy Pillar, it is worth noting in the context of enterprise architecture.
Target Architecture Sigtuna does not have a comprehensive target architecture documented or in place. A lack of a target architecture does not work in the company’s favor. Sigtuna’s target business architecture has not changed over the past two-plus years. The increased focus on top-line growth, however, may have downstream impacts on the path from strategy to IT delivery. Sigtuna’s data architecture, or the manner in which data are handled and processed, has not been formalized in a comprehensive manner. Some isolated data architecture standards do exist across the company, but no functional corporate-wide data architecture exists.
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The company has no comprehensive or formal applications architecture across any area of the business. This is an area that warrants attention and focus as the rest of the target architecture is defined. Sigtuna has no formal technology architecture in place at this time. The legacy/core business has pockets of data and information related to some of the technology architecture, but no comprehensive view of this layer of the target architecture exists. Standards Sigtuna has few standards in the areas of technology and applications. The company has some legacy data and security standards that were put into place following an audit of the company’s operations by an accounting firm. The relative lack of standards across these domains makes certain steps on the path from strategy to IT delivery more difficult than otherwise might be the case, were good standards in operational use. Given all of these data, I rate the Technology component of the Strategy Pillar as a 2 using the IPM Scorecard. A view of the evolving IPM Scorecard for Sigtuna may be seen in Figure 13.11.
Optimize Enterprise Architecture Although the company’s strategic direction remains consistent, Sigtuna should invest in building a formal target architecture in the interest of improving operational efficiency and moving from a midsize to a large company. Target Architecture Given that Sigtuna does not have a formal target architecture in place or documented, the company should focus on building just such a target architecture. Sigtuna’s business architecture, when formalized, should incorporate both the company’s consistent and clear strategic direction as well as the increasing focus on driving continued revenue growth. The company should empower an individual, or create a working group, to map out the steps needed to put a formal set of data architecture policies and procedures into place across Sigtuna. Any such effort should follow the other changes across the Strategy Pillar noted earlier in the chapter. As with the data architecture optimization suggestions, the company should undertake to map the steps required to build a formal and functional applications architecture for the company. The increasing focus on operational efficiencies across IT and the company at large should help build up a solid and useful target architecture for Sigtuna.
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FIGURE 13.11 Evolving View of Sigtuna IPM Scorecard
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FIGURE 13.12 Evolving View of Optimized Sigtuna IPM Scorecard
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Sigtuna should focus on building a formal technology architecture—but only after the work suggested earlier for the rest of the company’s enterprise architecture. Mapping out such a formal technology architecture has the potential to impact the downstream delivery of IT services on the path from strategy to IT delivery. Standards The company has not done a good job with defining and implementing standards. It has implemented some basic standards across the data and security domains to, if nothing else, limit liability. As with the suggestions related to the target architecture, the company should develop and execute a plan to define and implement useful standards. The changes suggested have the potential to drive an increase in the IPM Scorecard value for the Technology component of the Strategy Pillar from the current value of 2 to the new value of 3. A view of the evolving optimized IPM Scorecard for Sigtuna may be seen in Figure 13.12.
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The Project Management Pillar of a Growing Organization
hapter 14 is focused on the Project Management Pillar of the Information Technology (IT) Pillars Model (IPM) for the IT assessment and optimization work related to Case Study 2. As noted in Chapter 12, Chapters 12 to 16 of Part Three of the book walk through the full IT assessment and optimization steps outlined over Chapters 1 to 6 for a midsize and growing company with a mix of both older and more recent systems. As a reminder from earlier chapters, Figure 14.1 highlights the steps involved in optimizing and assessing IT. The case study in Part Three of the book covers all of the steps shown in Figure 14.1. The Project Management Pillar in the context of the IPM is shown in Figure 14.2. The Project Management Pillar’s place in the context of the path from strategy to delivery is shown in Figure 14.3. I assess and cover optimization thoughts for each of the components of the Project Management Pillar—People, Process, and Technology—over the course of this chapter.
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PEOPLE A view of the People component of the Project Management Pillar for Sigtuna Technologies is presented in Figure 14.4.
Assess Approximately 25 percent of the company’s Build team had been with the company for the five-plus years prior to the three recent acquisition integrations. The recent acquisitions were not too large in terms of number
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FIGURE 14.1 Steps for Optimizing and Assessing IT
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FIGURE 14.2 Project Management Pillar in Context of IPM of IT professionals involved and, as such, did not add significantly to the headcount of the IT organization. The balance of the Build team has been with the company for less than five years. Although the company is just a bit over 10 years old, this level of turnover may be a source of concern moving forward, and it should be monitored. Sigtuna makes very little use of third-party contractors for systems development/build work. While not a positive or negative aspect in isolation, this characteristic should be kept in mind for the overall IT assessment and optimization. Sigtuna’s project management teams have a broad base of experience but tend to operate in a disorganized, execution-oriented manner that is tightly focused on delivery. Overall, the team has a good track record for delivering in a “scrappy” manner, but it does not have a strong foundation in project management processes and procedures.
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FIGURE 14.3 Project Management Pillar in Context of Path from Strategy to Delivery
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FIGURE 14.4 People Component of Project Management Pillar Based on these data, I believe the People component of the Project Management Pillar deserves a 2 rating using the IPM Scorecard. The updated IPM Scorecard for Sigtuna may be seen in Figure 14.5.
Optimize The average tenure of a large portion of the IT team is less than five years at Sigtuna. The suggested optimization effort across the Build area is to stabilize the IT team both by training existing employees and a more rigorous performance review process at the company. The scale and scope of third-party contractor involvement in the Build process should also be considered here when focusing on operational efficiencies. With the broad push for increasing operational efficiency across the company, Sigtuna should focus on formalizing and increasing the rigor of the IT projects teams. As the projects undertaken by the teams grow in scale, scope, and complexity, a more rigorous and scalable project management function will be needed to support the growth of the business.
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FIGURE 14.5 Evolving View of Sigtuna IPM Scorecard
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The changes just suggested with a focus on optimization should lead to an increase in the IPM Scorecard value for the People component of the Strategy Pillar from the previous value of 2 to a new value of 3. A view of the updated optimized IPM Scorecard for Sigtuna may be seen in Figure 14.6.
PROCESS Assess A view of the Process component of the Project Management Pillar for Sigtuna is offered in Figure 14.7. The transitional processes of interest in the context of this book, investment review and portfolio management, both function poorly and inconsistently. Few policies and procedures related to investment review and portfolio management exist across the company, and those that do exist are not followed regularly. Based on these facts, the Process component of the Project Management Pillar earns a 1, or “poor,” rating from me using the IPM Scorecard. Despite the size, momentum, and growth of Sigtuna as a company, no formal transitional processes of interest are in place at the company. This is a significant weakness for Sigtuna. A view of the evolving IPM Scorecard for Sigtuna may be seen in Figure 14.8.
Optimize Formalizing and mandating the use of investment review and portfolio management processes are important steps on the path from strategy to IT delivery for Sigtuna. The changes outlined should enable an increase in the IPM Scorecard value for the Process component of the Project Management Pillar from the current value of 1 to a new value of 2. A view of the evolving optimized IPM Scorecard for Sigtuna may be seen in Figure 14.9.
TECHNOLOGY Assess The Technology component of the Project Management Pillar for Sigtuna may be seen in Figure 14.10.
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FIGURE 14.6 Evolving View of Optimized Sigtuna IPM Scorecard
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FIGURE 14.7 Process Component of Project Management Pillar Sigtuna’s IT development environment is somewhat unstable and involves technologies that can, at times, change. The three recent acquisition integrations increased the scale of the issues across the IT development environment, as, due to the acquisitions, three additional environments are now utilized. A wide range of build tools are utilized across the company. The core IT organization (the function that existed prior to the three recent acquisitions) works mainly with Microsoft Visual Studio for its IT development toolset. Each of the recently acquired companies is working with different opensource toolsets.
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FIGURE 14.8 Evolving View of Sigtuna IPM Scorecard
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FIGURE 14.9 Evolving View of Optimized Sigtuna IPM Scorecard
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FIGURE 14.10 Technology Component of Project Management Pillar The platform for the IT development environment extends beyond the company’s development tools. In Sigtuna’s case, this platform consists primarily of a number of externally hosted build environments run by a thirdparty application development partner. Improving the processes and manner in which Sigtuna’s IT function builds systems is an area flush with potential. As it turns out, each of the IT teams at the three recently acquired companies, as well as the core IT function, follows a standard waterfall approach to systems development. Sigtuna has taken a fairly hands-off approach to integrating the IT functions of the three recently acquired companies. Although some enterprise systems, such as e-mail, were integrated following the acquisitions, other core areas, such as systems development, were not integrated and operate in a relatively independent manner from one another. All of these data related to Sigtuna lead me to rate the Technology component of the Project Management Pillar as a 1 using the IPM Scorecard. Given its size, maturity, and growth prospects, the company should have a more standardized set of processes and technologies than exists today. A view of the evolving IPM Scorecard for Sigtuna may be seen in Figure 14.11.
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FIGURE 14.11 Evolving View of Sigtuna IPM Scorecard
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FIGURE 14.12 Evolving View of Optimized Sigtuna IPM Scorecard
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Optimize Formalizing and standardizing the company’s development environment are important steps forward for Sigtuna. Approaching the core business and the three recent acquisitions in parallel may be a good approach to beginning the move to a formal and standard development environment. The company’s increased focus on operational efficiency argues for a longer-term tools strategy, but any changes to the company’s development toolsets should follow, and be informed by, upstream changes on the path from strategy to delivery. As with the optimization thoughts related to the tools area of the IT development environment, any changes to the company’s development platform should follow upstream changes on the path from strategy to delivery. The company should focus its efforts first in the area of process improvement at the intersection of the Technology component and the Project Management Pillar. Assuming that the company plans to continue acquiring other companies, Sigtuna should begin to build a set of best practices and/or a team focused on integrating acquisitions. The hands-off approach may continue to work in the company’s favor, but Sigtuna’s evolution from a medium-size to a large company may warrant a more involved approach to acquisition integration in the future. These proposed changes warrant an increase in the IPM Scorecard value for the Technology component of the Project Management Pillar from the current value of 1 to a new value of 2. A view of the evolving optimized IPM Scorecard for Sigtuna may be seen in Figure 14.12.
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15
The Operational Excellence Pillar of a Growing Organization
hapter 15 is focused on the Operational Excellence Pillar of the Information Technology (IT) Pillars Model (IPM) for the IT assessment and optimization work related to Case Study 2. As noted in earlier chapters, Chapters 12 to 16 walk through the full IT assessment and optimization steps outlined over Chapters 1 to 6 for a midsize and growing company with a mix of both older and more recent systems. Figure 15.1, presents, for the sake of context, highlights of the steps involved in optimizing and assessing IT. The case study in this part of the book covers all of the steps shown in Figure 15.1. The Operational Excellence Pillar is shown in Figure 15.2 in the context of the IPM. The Operational Excellence Pillar’s place on the path from strategy to delivery is shown in Figure 15.3. I cover both assessing and optimizing each of the components of the Operational Excellence Pillar—People, Process, and Technology—over the course of this chapter.
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PEOPLE A view of the People component of the Operational Excellence Pillar for Sigtuna Technologies is presented in Figure 15.4.
Assess Sigtuna’s Operational Excellence team is loosely organized and focuses on fixing problems as they arise—in other words, team members function as “firefighters.” Some critical systems are supported by more formal “triage”based support, but many systems are not monitored or formally supported.
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FIGURE 15.1 Steps for Optimizing and Assessing IT
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FIGURE 15.2 Operational Excellence Pillar in Context of IPM The vast majority of the Run team is made up of internally sourced resources (people). The internal systems have been supported by this team in one form or another since the company’s inception. There is a lot of internal knowledge about the company’s systems in this team. There is a balance between internally and externally sourced resources (or people) on the Run team. This balance is struck in such a way as to optimize the output of the team while controlling for the location of each team member (onshore versus offshore) and the cost level of each team member (high cost versus low cost). Based on these data, I rate the People component of the Operational Excellence Pillar as a 2 using the IPM Scorecard. The company delivers results in this area, but performance across this area is beginning to decline. There is significant room for improvement. A view of the updated IPM Scorecard for Sigtuna may be seen in Figure 15.5.
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FIGURE 15.3 Operational Excellence Pillar in Context of Path from Strategy to Delivery
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FIGURE 15.4 People Component of Operational Excellence Pillar
Optimize Sigtuna’s IT function does an acceptable job of fighting fires in terms of IT support issues. This informal and disorganized approach needs to change, however, to support the company’s continued growth. The company should focus on training and growing its internal resources (people) while leveraging external resources to help optimize the Run team’s effectiveness. The suggested optimization steps should help improve the company’s People component of the Operational Excellence Pillar. More specifically, the IPM Scorecard value for the People component of the Operational Excellence Pillar will increase from its current value of 2 to a value of 3. A view of the updated optimized IPM Scorecard for Sigtuna may be seen in Figure 15.6.
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FIGURE 15.5 Evolving View of Sigtuna IPM Scorecard
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FIGURE 15.6 Evolving View of Optimized Sigtuna IPM Scorecard
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PROCESS A view of the Process component of the Operational Excellence Pillar for Sigtuna is presented in Figure 15.7. The Run processes for Sigtuna address the steps involved in providing IT services.
Assess The processes and people involved in triaging and addressing problems as they arise have worked reasonably well at Sigtuna. Performance, however, has been trending downward with the company’s continued growth and recent acquisitions. Sigtuna’s performance in the areas of root cause analyses (RCAs) and fix processes is not strong, and it is declining. As the company continues to grow and become more complex, a focus on identifying the true underlying, or root, causes of problems and addressing those causes and fixing the problems is warranted. The Process component of the Operational Excellence Pillar gets a 2 rating from me using the IPM Scorecard. The manner in which Sigtuna is functioning across this pillar is below how I expect a company of its size and maturity to perform in this area. A view of the evolving IPM Scorecard for Sigtuna may be seen in Figure 15.8.
Optimize Sigtuna’s approach in this area has worked in the past, but many indicators suggest this approach will not work well going forward. The company should bolster this area through training of the teams and standardization of policies and procedures. The company needs to improve in this area. Formalizing the manner in which RCAs are to be run—and standardizing the subsequent actions to address the root cause—is a good first step for Sigtuna at this point in its growth and evolution as a company. The changes outlined here are significant in both scale and scope. Likely it will take the company a significant amount of time to implement the suggested changes. Once implemented, however, these changes should increase the IPM Scorecard rating from the currently assessed value of 2 to a value of 3. A view of the evolving optimized IPM Scorecard for Sigtuna may be seen in Figure 15.9.
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FIGURE 15.7 Process Component of Operational Excellence Pillar
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FIGURE 15.8 Evolving View of Sigtuna IPM Scorecard
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FIGURE 15.9 Evolving View of Optimized Sigtuna IPM Scorecard
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TECHNOLOGY Assess The Technology component of the Operational Excellence Pillar for Sigtuna may be seen in Figure 15.10. Sigtuna’s IT production environment is more a case of where the environment ended up as compared to where the company planned to go. The environment may well undergo some changes, however, due to the company’s growth and increased focus on operational efficiency. The company does not have a fully documented and formal view of its current architecture. Although tight control exists over certain key systems, holistic and centralized control over the entire architecture does not exist today at the company. The target business architecture has not changed over the past 18-plus months.
FIGURE 15.10 Technology Component of Project Management Pillar
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Sigtuna’s data architecture has not been formalized to any real degree. There is an extensive but informal base of knowledge in terms of the company’s approach to applications architecture. Data on how Sigtuna’s applications function, how they interact with one another, and how they work with the company’s business processes have not been documented or fully determined. Sigtuna has no official technology architecture blueprint. Data exist in a number of places across the organization, but they are disparate and not integrated in a useful manner. Given these facts about the company, the Technology component of the Operational Excellence Pillar earns a 3 rating using the IPM Scorecard. Although it is deficient across a number of areas, the IT function has delivered impressive results in terms of Technology in the Operational Excellence Pillar for the company. A view of the evolving IPM Scorecard for Sigtuna may be seen in Figure 15.11.
Optimize The ongoing growth of Sigtuna’s business combined with an increased focus on operational efficiencies merits a close examination of how the company’s current architecture might be modified. To be optimized, first the current architecture must be more fully understood and documented. Following such documentation and formalization, it will be easier to understand the scale and scope of optimization alternatives. As the core company strategy remains, for all intents and purposes, unchanged, any optimization ideas here are likely to be incremental in nature. Thus no major optimization suggestions exist for this area at this time. Sigtuna should move proactively in an effort to standardize the company’s data architecture and data management policies and procedures. Doing so stands to benefit the company as it scales up in size. Formalizing and documenting the company’s informal knowledge related to how applications function and interact across the IT production environment are logical steps on the path from strategy to the delivery of IT services for Sigtuna. Building a formal technology architecture is an important area of longerterm focus for the company. Optimization efforts across other areas on the IPM matrix should move forward in conjunction with, or ahead of, optimization efforts on the company’s technology architecture.
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FIGURE 15.11 Evolving View of Sigtuna IPM Scorecard
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FIGURE 15.12 Evolving View of Optimized Sigtuna IPM Scorecard
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The changes suggested here have the potential to improve the company’s performance across the Technology component of the Operational Excellence Pillar. Specifically, implementing the suggested changes should increase the rating on the IPM Scorecard from the currently assessed value of 3 to a value of 4. A view of the evolving optimized IPM Scorecard for Sigtuna may be seen in Figure 15.12.
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16
The IPM Scorecard of a Growing Organization
igtuna’s Information Technology (IT) Pillars Model (IPM) Scorecard for Case Study 2 is reviewed in this chapter. As I covered the individual ratings for each cell across the scorecard over the past three chapters, I address the pillar and overall ratings for both the assessed and optimized IPM Scorecards in this chapter.
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ASSESSED Figure 16.1 offers a view of the completed assessed IPM Scorecard for Sigtuna Technologies. The company’s assessed value was lower for the Project Management Pillar as compared to the Strategy and Operational Excellence pillars.
Pillar Ratings Sigtuna is performing at a low level across the Strategy Pillar and has room to improve. Each of the three components of the pillar—People, Process, and Technology—rates at average or below. Given the growth potential of this business, this is an area that should be given attention. Weakness across the Strategy Pillar can imply a lack of flexibility or agility in terms of a company’s ability to change direction. The assessed Strategy Pillar from the IPM Scorecard is shown in Figure 16.2. Sigtuna is exceedingly weak across the Project Management Pillar. This is an area where each of the three components of People, Process, and Technology (and especially Process and Technology) warrant significant attention.
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FIGURE 16.1 View of Assessed IPM Scorecard for Sigtuna
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FIGURE 16.2 View of Assessed Strategy Pillar in IPM Scorecard
Figure 16.3 offers an illustration of the assessed Project Management Pillar. The company is relatively weak across the People and Process components, and average across the Technology component, of the Operational Excellence Pillar. Given the increased focus on operational efficiencies, this should be an area of focus.
FIGURE 16.3 View of Assessed Project Management Pillar in IPM Scorecard
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FIGURE 16.4 View of Assessed Operational Excellence Pillar in IPM Scorecard The assessed Operational Excellence Pillar from the IPM Scorecard is shown in Figure 16.4.
Overall Rating The company’s overall rating for the assessed IPM Scorecard is well below average. There are many areas for improvement—most notably across the Project Management Pillar. Figure 16.5 presents a view of the full assessed IPM Scorecard for Sigtuna. As the assessed values for the IPM Scorecard have now been reviewed, the next step is to examine the optimized values.
OPTIMIZED The company’s optimized values are projected to increase, compared to the assessed values, across each of the Strategy, Project Management, and Operational Excellence pillars.
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FIGURE 16.5 View of Full Assessed IPM Scorecard for Sigtuna
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FIGURE 16.6 View of Optimized Strategy Pillar in IPM Scorecard
Pillar Ratings The ideas presented for optimizing across the Strategy Pillar offer a moderate level of improvement for Sigtuna. The overall pillar rating is projected to improve from an assessed value of 12 to an optimized value of 36. The optimized Strategy Pillar from the IPM Scorecard is shown in Figure 16.6. The proposed steps to optimize across the Project Management Pillar do not accomplish a great deal in terms of increasing the pillar rating. The IPM Scorecard rating is slated to improve to 12 from an assessed value of 2; both of these ratings are exceptionally low. Figure 16.7 offers an illustration of the optimized Project Management Pillar. The optimization suggestions for the Operational Excellence Pillar stand to yield an improvement of a magnitude similar to the level of improvement seen across the Strategy Pillar in this chapter. The optimized Operational Excellence Pillar from the IPM Scorecard is shown in Figure 16.8.
Overall Rating The suggested optimization efforts are projected to yield a moderate improvement across Sigtuna’s overall IPM Scorecard. Neither the assessed value of 26 nor the optimized value of 84 is in the acceptable range. Figure 16.9 offers a view of the full optimized IPM Scorecard for Sigtuna.
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FIGURE 16.7 View of Optimized Project Management Pillar in IPM Scorecard
FIGURE 16.8 View of Optimized Operational Excellence Pillar in IPM Scorecard
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FIGURE 16.9 View of Full Optimized IPM Scorecard for Sigtuna
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SUMMARY Sigtuna provides the basis for a good case study for assessing and optimizing IT across a midsize and growing organization. Given the varying role IT plays in the operations of different companies, the assessment and optimization of IT processes focused on different areas with Sigtuna as compared to Uppland, the focus of Case Study 1, which was covered in Chapters 7 to 11.
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Four Tools and Reporting
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17
IT Measures, Metrics, and Indicators
his chapter covers the topics of information technology (IT) measures, metrics, and indicators. Given the complexity that can (and often does) arise across IT functions, there is widespread interest in keeping track of IT’s performance. Referring back to the Preface, this complexity may well contribute to the fact that IT projects typically are not executed to plan and often represent a large set of costs. A number of terms, including “metrics,” are used widely and inconsistently across the IT industry. This can introduce an unnecessary additional layer of complexity to an already complex situation. My interest is in offering up simple and logical definitions for these terms so that they can be employed in a simple and useful manner. More specifically, I focus on two sets of terms that can be used in a variety of contexts across the IT industry. These sets of terms are “data, information, knowledge, and wisdom” and “measures, metrics, and indictors.” Measures, metrics, and indicators are based on data, information, knowledge, and wisdom. Given this relationship, I am going to focus on the meaning of these terms and their interrelationships. Following my coverage of these two sets of terms, I am going to discuss the topics of benchmarking and return on investment (ROI). Both benchmarking and ROI work can, and often do, build directly on the areas of data, information, knowledge, and wisdom and measures, metrics, and indictors. For some additional context on this chapter’s subject matter, one term—“dashboard,” or “information dashboard”—is widely used across the IT industry. Despite its widespread usage, it can be difficult to determine—or even agree on with other stakeholders—how a dashboard relates to the data, information, knowledge, and wisdom and to measures, metrics, and indictors terms and hierarchies. One goal of this chapter is to build a simple and rational vocabulary for exploring and working in the contexts of data and metrics.
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DATA, INFORMATION, KNOWLEDGE, AND WISDOM According to a recent paper on the topic of data, information, knowledge, and wisdom, each of these individual component concepts may be defined in this way:
Data are series of disconnected facts and observations. Information is data that has been converted by analysis, cross-referring, selecting, sorting, summarizing, or in some way organizing. Knowledge represents patterns of information that have been worked together into a coherent body; in other words, knowledge consists of an organized body of information. Wisdom represents patterns of information forming the basis of insights and judgments.1 An analogy might help make these conceptualizations more concrete: Consider spinning fleece into yarn, and then weaving yarn into cloth. The fleece can be considered analogous to data, the yarn to information and the cloth to knowledge. Cutting and sewing the cloth into a useful garment is analogous to creating insight and judgment (wisdom). This analogy emphasizes two important points: (1) going from fleece to garment involves, at each step, an input of work, and (2) at each step, this input of work leads to an increase in organization, thereby producing a hierarchy of organization.2
Data, information, knowledge, and wisdom serve as the foundation for the main topic of this chapter: measures, metrics, and indicators.
MEASURES, METRICS, AND INDICATORS The terms “measures, metrics, and indicators” can be used in a number of contexts in the IT industry. Their varying uses can add unneeded and counterproductive complexity to the practice of assessing and optimizing IT. Each of these terms may be defined in this way:
A measure is a standard or unit of measurement; the extent, dimensions, capacity, and so on, of anything, especially as determined by a standard; an act or process of measuring; a result of measurement. To measure is to ascertain or appraise by comparing to a standard.
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A metric is a quantitative measure of the degree to which a system, component, or process possesses a given attribute. A calculated or composite indicator based on two or more measures. A quantified measure of the degree to which a system, component, or process possesses a given attribute. An indicator is a device or variable that can be set to a prescribed state based on the results of a process or the occurrence of a specified condition. For example, a flag or semaphore. Generally compares a metric with a baseline or an expected result.3 An example may help contextualize these terms: A sick patient is brought into an emergency room and his temperature is taken. The relevant measure is his temperature of 99.1 degrees Fahrenheit. The comparison, or trend, of many hours of individual temperature readings is the relevant metric. A comparison of this metric with a baseline or expected result—in this case, a healthy/normal temperature of approximately 98.6 degrees Fahrenheit—represents the relevant indicator.4
The indicator highlighted in this example, and good indicators in general, enable quick comparisons of observed to expected behaviors. In other words, an indicator allows a quick health check of an item for which a metric, or metrics, exist.
BENCHMARKING The process of benchmarking involves comparing a given level of performance against an expected level of performance. The value and utility of a benchmarking exercise is dependent on, among other things, the quality of the data being compared. I highlight this topic of benchmarking with a special focus on the terms and terminology noted earlier in this chapter. Given the variety of interpretations of such terms, it is important to align their definitions and meanings prior to undertaking benchmarking work.
ROI An ROI, or return on investment, analysis assesses the return offered by a given investment. ROI analyses can be run on historical data as well as used for projecting scenarios into the future. I cover ROI as a topic here because
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many ROI analyses are directly related to work on measures, metrics, and indicators, and these analyses involve data. The foundational question addressed by a good ROI analysis is this: What is the value of the return related to this investment? This question relates more specifically to the “present value” of both the return and the investment. This book does not cover the concept of present value in any depth; suffice it to say that present value refers to the value of something in today’s terms (accounting for items such as inflation and the cost of capital—more topics outside the scope of this book). ROI analyses are often subject to estimates and judgment. For this reason, an important first step in any type of ROI work is ensuring a common and consistent understanding of both the data flowing into the analysis and the types of measures, metrics, and/or indicators employed in the ROI work.
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18
Reporting
he reporting area, or domain, is a large field unto itself. In this book, I cover the topic of reporting at a high level. Although there are a large number of potential items and issues to monitor and report on across the field of information technology (IT), I am going to focus on five distinct reports in this chapter:
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Simple IT assessment People, Process, and Technology (PPT) assessment Cost assessment Acquisition integration assessment Red flag report
Each of these five reports addresses assessments, not optimizations. Each relates to judging as opposed to suggesting paths forward. This focus certainly does not preclude you from utilizing reports for specific optimization efforts on your own behalf; I state it merely so that you understand the manner in which this chapter is written. The report templates covered over this chapter have been populated with some generic fictitious data and information. These templates are not based on either of the case studies in Parts Two and Three of the book. These reports are, in my opinion, more derivatives of the work underlying the overall assessment and optimization of an IT function. In other words, these reports depend upon, and are based on, the overall assessment and optimization work. That work, as covered in the case studies, led to the generation of the IT Pillars Model (IPM) Scorecards. These templates are available for download on the book’s companion web site (www.wiley.com/go/proctorit).
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FIGURE 18.1 Example of Simple IT Assessment Report
SIMPLE IT ASSESSMENT An example of a simple IT assessment report may be found in Figure 18.1. This report covers two areas at a high level—IT operations and IT costs. The simple IT assessment report offers summary-level findings that are directional in nature. This report is used for summary high-level communications. Specifics are usually available in different areas and across different reports. Executives are typical consumers for this report.
PPT ASSESSMENT Figure 18.2 presents an example of the PPT assessment report. The areas noted for the assessments in Figure 18.2, such as “organizational structures” in the People section of the report, are suggestions. Feel free to add, delete, or modify these areas to fit your specific situation. The PPT assessment report offers more detail than does the simple IT assessment report. This report typically is used to cover areas at a medium level of detail across the PPT domains. Executives often have an interest in this report as will line managers working on the project to which the report relates.
COST ASSESSMENT A cost assessment report example is shown in Figure 18.3. I have included columns for both one-time and recurring costs in the table shown in Figure 18.3. Each of the PPT components shown here has areas
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FIGURE 18.2 Example of PPT Report
FIGURE 18.3 Example of Cost Assessment Report
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where you can add “problem” details that contribute to the IT function’s costs. The cost assessment report provides both quantitative and qualitative data across the PPT domains. This report often is used for budgeting, financial analysis, and mergers and acquisitions purposes. Typical consumers of the cost assessment report include executives in the corporate, financial, and IT functions.
ACQUISITION INTEGRATION ASSESSMENT Figure 18.4 offers a view of an acquisition integration assessment report example.
FIGURE 18.4 Example of Acquisition Integration Assessment Report
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This template includes sections both to assess the effectiveness of acquisition integration efforts and to track any remaining open action items along with their associated one-time and recurring costs. The acquisition integration report is focused on IT operations. Given its focused nature—typically it is utilized only when a company is being acquired and integrated into another company—this report is not used as widely as are the other reports discussed across this chapter. Executives across the corporate, financial, and IT functions are the usual consumers of the acquisition integration report.
RED FLAG REPORT An example of a red flag report is shown in Figure 18.5.
FIGURE 18.5 Example of Red Flag Report
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The red flag report is designed to highlight areas of concern. The report addresses these areas across the IT function:
What does the company do well? What does the company do poorly? What looks unusual? What raises concerns?
The red flag report is used to identify and track areas of risk across the IT function. Often used in conjunction with other summary reports, this report is central to the overall IT function. Senior executives and other stakeholders from functions such as compliance are regular consumers of this report.
SUMMARY This chapter covered a number of reports that are used across the IT function. Although you should not feel constrained and limit yourself to these specific reports when assessing an IT function, the areas addressed by these reports should be covered in the reports that you choose to utilize. Put another way, although you do not need to use these exact reports, you should be sure to cover all the areas addressed by these reports in one form or another.
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19
Conclusion
s noted in the Preface, this book is a guide to aid you in optimizing and assessing information technology (IT). With global IT spending reaching U.S. $3.9 trillion in 2009, the IT market is large and global in nature.1 Despite its size, however, few IT projects succeed or turn out well.2 After working through Chapters 1 to 18, you should be able to (1) generate an accurate and reliable assessment of a company’s IT operations and (2) identify areas on which to focus to optimize IT. The overview of the IT Pillars Model (IPM), the IPM Scorecard, and the two case studies provided a solid foundation and good practical examples focused on improving business project execution through effective IT optimization and assessment. Part One of the book introduced the concept of the IPM for optimizing and assessing IT. In addition to the IPM, Part One provided background material in terms of where and how the IPM fits into the overall operations of a business. Topics such as strategic direction and enterprise architecture were discussed and covered. An overview of the steps involved in the process of optimizing and assessing IT is shown in Figure 19.1. The IPM consists of three pillars—Strategy, Project Management, and Operational Excellence—as well as three components—People, Process, and Technology. A summary view of the IPM is offered in Figure 19.2. As was covered in Chapter 2, this book utilizes a progression and flow from strategy to enterprise architecture: A strategy drives a business model, which in turn informs an operating model, which is then resolved in an enterprise architecture. This progression, relevant to the manner in which a company’s IT function is optimized and assessed, is represented in Figure 19.3.
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FIGURE 19.1 Steps for Optimizing and Assessing IT
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FIGURE 19.2 Summary View of the IPM In terms of the IPM model itself, a template may be seen in Figure 19.4. Once populated with data, the template presented in the figure will represent the IPM Scorecard. Parts Two and Three of the book reviewed each aspect of the IPM in the context of two practical case studies. Chapters 7 to 11 provided a case study of Uppland Industries, a fictitious large and mature company, while Chapters 12 to 16 reviewed a case study of Sigtuna Technologies, a fictitious midsize and growing organization. An overview of the framework that I used to discuss the path from strategy to delivery for both case studies is shown in Figure 19.5. The final part of the book, Part Four, covered the topics of tools and reporting. A number of analytical tools, such as return on investment, benchmarking, and metrics, were discussed in this part. In addition, Part Four discussed a series of useful reports for IT optimization and assessment.
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FIGURE 19.3 General Business Figure
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FIGURE 19.4 IPM Template
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FIGURE 19.5 Framework to Discuss the Path from Strategy to Delivery
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Now that you have learned about the IPM and the IPM Scorecard, a natural next step is to apply this model and scorecard to your own business. As stated in the Preface, this book is focused on improving business project execution through effective IT optimization and assessment. Moreover, it is designed to be both easy to use and immediately useful. I encourage you to apply the principles covered and illustrated over the course of this book in a practical manner. The book’s companion web site (www.wiley.com/go/proctorit) offers a variety of materials for downloading and use in the practice of optimizing and assessing IT. I hope that you find this book, and its associated templates and materials, useful and practical. I encourage you to share your comments and feedback with me via e-mail on
[email protected].
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his book includes a companion web site, which can be found at www .wiley.com/go/proctorit. This web site includes:
The IPM Scorecard Template The IT Pillars Model Overview Blank templates of the reports from the book, including: Simple IT Assessment People, Process, and Technology Assessment Cost Assessment Acquisition Integration Assessment Red Flag Report
The IT Pillars Model overview should serve as a helpful reference as you get to know the tools and models outlined over the course of this book. The Scorecard and report templates found on the web site should help you get up to speed quickly on your IT assessment and optimization work.
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Notes
Preface 1. “Information Technology,” Encyclopedia of Business and Finance, edited by Allison McClintic Marion (New York: Gale Cengage, 2001). eNotes.com, 2006, www.enotes.com/business-finance-encyclopedia/information-technology. 2. Gartner Press Release, “Gartner Says Worldwide IT Spending on Pace to Surpass $3.4 Trillion in 2008,” August 18, 2008. 3. Robert N. Charette, “Why Software Fails,” IEEE Spectrum (September 2005). 4. Gregory Clark, “Fatal Error: Buggy Software May Have Crashed Mars Polar Lander,” Space.com, March 31, 2000. 5. “Enterasys Increases Customer Satisfaction to 95% with the Service Cloud.” www.salesforce.com/showcase/stories/enterasys.jsp. 6. Daryl Plummer, “Gartner Webinar: Gartner Top Predictions for 2011: IT’s Growing Transparency and Consumerization,” 2010, www.gartner.com/it/ content/1462300/1462334/december_15_top_predictions_for_2011_dplummer .pdf.
CHAPTER 1
IT Fundamentals
1. “Information Technology,” Encyclopedia of Business and Finance, edited by Allison McClintic Marion (New York: Gale Cengage, 2001). eNotes.com, 2006, www.enotes.com/business-finance-encyclopedia/information-technology. 2. Gene Bellinger, Durval Castro, and Anthony Mills, “Data, Information, Knowledge, and Wisdom,” 2004, www.systems-thinking.org/dikw/dikw.htm. 3. Gartner Press Release, “Gartner Says Worldwide IT Spending on Pace to Surpass $3.4 Trillion in 2008,” August 18, 2008. 4. Robert N. Charette, “Why Software Fails,” IEEE Spectrum (September 2005). 5. Massachusetts Institute of Technology Center for Information Systems Research video streaming presentation by Jeanne Ross, http://amps-web.amps.ms.mit.edu/ public/CISR/2010/JeanneWRoss_operating_model.mov, accessed November 27, 2010.
CHAPTER 2
The Role of IT in Business Operations
1. Rajiv Nag, D. C. Hambrick, and Ming-Jer Chen, “What Is Strategic Management, Really? Inductive Derivation of a Consensus Definition of the Field,” Strategic Management Journal 28, No. 9 (September 2007): 935–955.
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2. Alexander Osterwalder and Yves Pigneur, Business Model Generation, selfpublished, 2010, www.businessmodelgeneration.com/downloads/businessmodel generation_preview.pdf. 3. R. E. Giachetti, Design of Enterprise Systems, Theory, Architecture, and Methods (Boca Raton, FL: CRC Press, 2010). Enterprise Architecture Research Forum, http://earf.meraka.org.za/earfhome, and MIT Center for Information Systems Research, Peter Weill, Director, “Innovating with Information Systems: What Do the Most Agile Firms in the World Do?”as presented at the Sixth e-Business Conference, Barcelona, Spain, March 27, 2007, www.iese.edu/en/files/6_29338.pdf. 4. TOGAF Version 9 Enterprise Edition, Part I, Core Concepts, “What Is Architecture in the Context of TOGAF?” Copyright © 1999–2009 The Open Group, www.opengroup.org/architecture/togaf9-doc/arch/. 5. Massachusetts Institute of Technology Center for Information Systems Research, “Enterprise Architecture,” accessed December 31, 2010, http://cisr.mit.edu/ research/research-overview/classic-topics/enterprise-architecture/.
CHAPTER 3
The Strategy Pillar
1. Arnold Schwarzenegger and Teri Takai, “2010 California Information Technology Strategic Plan,” Foreword, www.itsp.ca.gov/pdf/2010/2010_IT_Strategic_ Plan-Volume1.pdf. 2. The Open Group Architecture Framework (TOGAF), TOGAF Version 9, www.opengroup.org/togaf/. 3. Each of the definitions of the architecture layers comes directly from ibid. 4. Content from this section comes directly from the California Information Technology Council Enterprise Architecture and Standards Committee, “California Enterprise Architecture Framework,” www.cioarchives.ca.gov/stateIT/pdf/ California_EA_Framework_Final.pdf.
CHAPTER 4
The Project Management Pillar
1. Content from this section comes directly from the California Information Technology Council Enterprise Architecture and Standards Committee, “California Enterprise Architecture Framework,” www.cioarchives.ca.gov/stateIT/pdf/ California_EA_Framework_Final.pdf.
CHAPTER 5
The Operational Excellence Pillar
1. Each of the definitions of the architecture layers comes directly from The Open Group Architecture Framework (TOGAF), TOGAF Version 9, www.opengroup .org/togaf/.
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CHAPTER 17
IT Measures, Metrics, and Indicators
1. Chaim Zins, “Conceptual Approaches for Defining Data, Information, and Knowledge,” Journal of the American Society for Information Science and Technology 58, no. 4 (2007): 479–493. This reference is found on p. 482, and the paper itself references these sources: T. Stonier, The Wealth of Information (London: Thames/Methuen, 1993); T. Stonier, Information and Meaning—An Evolutionary Perspective (Berlin: Springer, 1997). Professor Gordana DodigCrnkovic, Malardalen University, Vaster as/Eskilstuna, Sweden, is noted in the ¨ ¨ ˚ references as well. 2. Stonier, Wealth of Information, in Zins, “Conceptual Approaches for Defining Data, Information, and Knowledge,” p. 482. Dodig-Crnkovic is noted in the references as well. 3. Bryce Ragland, Software Technology Support Center, Ogden ALC/TISE, “Measure, Metric, or Indicator: What’s the Difference?” http://blog.csdn.net/ dellxu/archive/2007/07/29/1715743.aspx 4. Ibid.
CHAPTER 19
Conclusion
1. Gartner Press Release, “Gartner Says Worldwide IT Spending on Pace to Surpass $3.4 Trillion in 2008,” August 18, 2008. 2. Robert N. Charette, “Why Software Fails,” IEEE Spectrum (September 2005).
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About the Author
cott Proctor is the chief technology officer and head of quality for the Global Marketing Services Division of GSI Commerce. Proctor’s experience includes working as an executive director at AstraZeneca Pharmaceuticals in the United States and as the chief information officer at GE Healthcare Life Sciences in Sweden. He earned his BA, MBA, and MS from the University of Virginia, and he is a CFA charterholder. Proctor also is a Certified Six Sigma Black Belt by the American Society for Quality, and he has an ITIL (v3) Foundation Certificate in IT Service Management. Proctor is the author of a number of books on financial modeling published by John Wiley & Sons as well as a number of scientific publications in the field of ophthalmology.
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Index
A Acquisition integration assessment, 210–211 example, 210 Applications architecture, 29 Applications standards, 30 Assess, definition of, 4 B Benchmarking, 205 Business architecture, 29 Business model, 17 Business operations role of IT in, 13–20 business model, 17 enterprise architecture, 17–20 models and definitions, 13–15 operating model, 17 strategy, 16–17 Business strategy, 17 C California Information Strategic Plan (2010), 25 Case study 1: a mature organization introduction to, 67–71 company background, 67 corporate and IT goals, 70–71 financials, 69 IT organization, 69–70 operations, 69 IPM Scorecard of, 123–131
assessed, 123–126 optimized, 126–130 Operational Excellence Pillar of, 107–121 People, 107–111 Process, 111–115 Technology, 115–121 Project Management Pillar of, 91–105 People, 91–97 Process, 98–99 Technology, 99–105 Strategy Pillar of, 73–89 background, 73 People, 73–79 Process, 79–83 Technology, 83–86 Case study 2: applying the model to a growing organization introduction, 135–139 company background, 135–137 corporate and IT goals, 139 financials, 137 IT organization, 137–138 IPM Scorecard of, 191–199 assessed. 101–194 optimized, 194–198 Operational Excellence Pillar of, 175–190 People, 175–181 Process, 182–185 Technology, 186–190
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230 Case study 2: applying the model to a growing organization (Continued ) Project Management Pillar of, 159–173 People, 159–165 Process, 165 Technology, 165–173 Strategy Pillar of, 141–157 People, 143–147 Process, 147–151 Technology, 151–157 Corporate strategy, 17 Cost assessment, 208–210 example, 209 D Data, definition of, 204 Data architecture, 29 Data standards, 30 E Enterprise architecture (EA), 17–20, 28–29 applications architecture, 29 business architecture, 29 data architecture, 29 technology architecture, 29 F Functional strategies, 17 G Gartner report, xii, xiii Growing organization, applying the model to (case study 2) introduction, 135–139 company background, 135–137 corporate and IT goals, 139 financials, 137 IT organization, 137–138
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IPM Scorecard of, 191–199 assessed, 101–194 optimized, 194–198 Operational Excellence Pillar of, 175–190 People, 175–181 Process, 182–185 Technology, 186–190 Project Management Pillar of, 159–173 People, 159–165 Process, 165 Technology, 165–173 Strategy Pillar of, 141–157 People, 143–147 Process, 147–151 Technology, 151–157 I Indicator, definition of, 205 Information, definition of, 3, 204 Information Technology Infrastructure Library (ITIL), 48, 70, 138, IPM Scorecard, 55–64, 123–131, 191–199 example, 57–63 in a growing organization, 191–199 assessed, 101–194 optimized, 194–198 in a mature organization, 123–131 assessed, 123–126 optimized, 126–130 process, overview of, 55, 57 template details, 64 IT fundamentals, 3–12 IT Pillars Model (IPM), introducing, 5–12 Operational Excellence, 10–12
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Project Management, 9 Strategy, 8–9 optimizing and assessing IT, 4–5 steps for, 5, 6, 14, 22, 34, 44, 56, 68 IT measures, metrics, and indicators, 203–206 benchmarking, 205 data, information, knowledge, and wisdom, 204 measures, metrics, and indicators, 204–205 return on investment (ROI), 205–206 IT Pillars Model (IPM), 4, 5–12, 21–31, 33–53, 213–219 Operational Excellence, 10–12, 43–53 People, 11, 47–48 Process, 12, 48–49 Technology, 12, 49–50 overarching goal of, 4 Project Management, 9, 33–42 People, 9, 37, 39 Process, 9, 39 Technology, 9, 39–41 Scorecard, 55–64 example, 57–63 process, overview of, 55, 57 template details, 64 Strategy, 8–9, 21–31 People, 9, 23 Process, 9, 23, 25–28 Technology, 9, 28–30 summary of, 213–219 template, 217 ITIL. See Information Technology Infrastructure Library K Knowledge, definition of, 204
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231 M Mature organization (case study 1) introduction to, 67–71 company background, 67 corporate and IT goals, 70–71 financials, 69 IT organization, 69–70 operations, 69 IPM Scorecard of, 123–131 assessed, 123–126 optimized, 126–130 Operational Excellence Pillar of, 107–121 People, 107–111 Process, 111–115 Technology, 115–121 Project Management Pillar of, 91–105 People, 91–97 Process, 98–99 Technology, 99–105 Strategy Pillar of, 73–89 background, 73 People, 73–79 Process, 79–83 Technology, 83–86 Measure, definition of, 204 Metric, definition of, 205 O Operating model, 17 Operational Excellence Pillar, 43–53, 107–121, 175–190 customers, ending with, 51, 51 in a growing organization, 175–190 People, 175–181 Process, 182–185 Technology, 186–190 in a mature organization, 107–121 People, 107–111
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232 Operational Excellence Pillar (Continued ) Process, 111–115 Technology, 115–121 People, 47–48 Process, 48–49 from strategy to delivery, 43, 47 Technology, 49–50 Optimize, definition of, 4 P People, Process, and Technology (PPT) assessment, 208, 209 example, 209 Present value, 206 Project Management Pillar, 33–42, 91–105, 159–173 in a growing organization, 159–173 People, 159–165 Process, 165 Technology, 165–173 in a mature organization, 91–105 People, 91–97 Process, 98–99 Technology, 99–105 next steps, 42 People, 37, 39 Process, 39 from strategy to delivery, 33, 36–37 Technology, 39–41 R Red flag report, 211–212 example, 211 Reporting, 207–212 acquisition integration assessment, 210–211 example, 210 cost assessment, 208–210 example, 209
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People, Process, and Technology (PPT) assessment, 208, 209 example, 209 red flag report, 211–212 example, 211 simple IT assessment, 208 example, 208 Return on investment (ROI), 205–206 Root cause analysis (RCA), 48–49 S Sigtuna Industries, case study, 135–200, 215 Simple IT assessment, 208 example, 208 Standards, 30 Strategy, 8–9, 16–17 Strategy Pillar, 21–31, 73–89, 141–157 in a growing organization, 141–157 People, 143–147 Process, 147–151 Technology, 151–157 in a mature organization, 73–89 background, 73 People, 73–79 Process, 79–83 Technology, 83–86 next steps, 31 People, 23 Process, 23, 25–28 strategic direction, 25–26 tactical direction, 26–28 from strategy to delivery, 21, 23 Technology, 28–30 enterprise architecture, 28–29 standards, 30 target architecture, 29
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T Technology, definition of, 3 Technology architecture, 29 Technology standards, 30 TOGAF (The Open Group Architecture Framework), 19–20
U Uppland Industries case study, 67–132, 215 comparison to Sigtuna Industries, 145, 199 W Wisdom, definition of, 204
