Using the IT CMF Framework to Develop a Business Oriented IT Strategy

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Using the IVI (Innovation Value Institute) IT CMF (IT Capability Maturity Framework) to Develop a Business Oriented Information Technology Strategy:

Using the IVI (Innovation Value Institute) IT CMF (IT Capability Maturity Framework) to Develop a Business Oriented Information Technology Strategy Alan McSweeney

Objectives:

January 11, 2011 2 Objectives To provide an introduction to the IVI (Innovation Value Institute) IT CMF (IT Capability Maturity Framework) To describe how the IT CMF can be used as a basis for establishing a business-oriented information technology strategy

Agenda:

January 11, 2011 3 Agenda Introduction to the IT CMF (IT Capability Maturity Framework) Using the IT CMF to Define A Business-Oriented Information Technology Strategy

Innovation Value Institute (IVI) and IT-CMF (IT Capability Maturity Framework):

January 11, 2011 4 Innovation Value Institute (IVI) and IT-CMF (IT Capability Maturity Framework) IVI is developing an the IT-CMF as a systematic framework for improving IT capability and identifying and prioritising opportunities, reducing cost and optimising the business value of IT investments (see http://ivi.nuim.ie/ ) Based on an Intel framework and initially developed as part of Intel’s IT transformation (see Managing Information Technology for Business Value http://www.intel.com/intelpress/sum_bv.htm ) Reviewed and tested with 200+ CIOs Objectives of IT CMF To assess current practices To understand opportunity and value of increasing maturity To bridge structural gaps in other assessment frameworks

Disconnect Between IT Investments and Business:

January 11, 2011 5 Disconnect Between IT Investments and Business 62% of organisations say they find it difficult to calculate ROI for IT investments 45% of organisations say their business value metrics do not accurately capture the value of IT investments 52% of organisations say that business executives are sceptical of efforts to measure business value of IT Only 41% of organisations perform an ROI assessment for IT budget

IT CMF High Level Framework:

January 11, 2011 6 IT CMF High Level Framework Managing the IT Budget Managing the IT Capability Managing IT for Business Value Managing IT Like a Business Provides Alignment Between Business and IT Provides Metrics to Close the Loop on Value IT CMF structured into four high-level processes for value-oriented IT management

IT CMF:

January 11, 2011 7 IT CMF IT CMF is a meta-framework that identifies an IT organisation’s maturity in key critical practices Comprehensive overarching framework that encompasses all relevant IT practices and sits above implementation frameworks Does not mandate the use of specific implementation frameworks Identifies the key areas where the organisation wants or needs to improve to deliver business value Identifies critical gaps in maturity that are preventing IT delivering business value Identifies appropriate levels of maturity for the organisation for critical IT processes Contains benchmarks to allow an organisation measure itself against similar organisations Defines a structure to allow improvements to be measured Implementation of specific critical practices improvements devolved to implementation frameworks

IT CMF Meta-Framework:

January 11, 2011 8 IT CMF Meta-Framework IT Capability Maturity Framework High Level (Macro) Processes Detailed Critical IT Processes Specific Implementation Frameworks for Critical IT Processes High Level Macro Processes Contains Detailed Critical Processes Contains Provides Measurement Structure for Current and Future Status of Critical IT Processes Implementation Framework Implementation Framework Implementation Framework

IT CMF Meta-Framework and Implementation Frameworks :

January 11, 2011 9 IT CMF Meta-Framework and Implementation Frameworks Specific Implementation Frameworks for IT CMF Critical Processes ITIL (Information Technology Infrastructure Library) ISO 20000 (ITSM Standard) IT Service CMM (Capability Maturity Model) ISPL (Information Services Procurement Library) eSCM (eSourcing Capability Maturity Model) ASL (Application Services Library) USMBOK (Universal Service Management Body of Knowledge) PRINCE2 (Projects in Controlled Environments) PMBOK (Project Management Body of Knowledge) MSP (Managing Successful Programmes) IT Balanced Scorecard CMMI (Capability Maturity Model Integration) ISO/IEC 12207 Systems And Software Engineering DSDM (Dynamic Systems Development Method) RUP (Rational Unified Process) ITIM (Information Technology Investment Management) Val IT Gartner Total Cost of Ownership ISO 9000 TickIT/ TickITplus TQM (Total Quality Management) Six Sigma COBIT (Control Objectives for Information and Related Technology) ISO 38500 ( Corporate Governance of Information Technology) ISO 27000 / (Information Security Management System) OCEG (Open Compliance and Ethics Group) IT Baseline Protection Catalogs TOGAF (The Open Group Architecture Framework) Department of Defense Architecture Framework (DoDAF) Ministry of Defence Architectural Framework (MODAF) Zachman Federal Enterprise Architecture (FEA) NASCIO EAMM (NASCIO Enterprise Architecture Maturity Model)

IT CMF High Level Framework:

January 11, 2011 10 IT CMF High Level Framework Managing IT Like a Business Managing the IT Budget Managing the IT Capability Managing IT for Business Value Managing IT like a business involved using solid professional business practices and applying them to the IT function and involves shifting the focus from production and technology to a focus on customers and services. Underlying focus areas include leadership, governance, alignment and management processes. Managing the IT budget involves effective financial management to reduce costs to free funds for investment in innovative IT solutions that deliver better value and performance. Underlying focus areas include budget management and performance sustaining and making new investments and portfolio planning. Managing the IT capability is concerned with what information technology and the IT organisation can do collectively for the organisation. Underlying focus areas include traditional IT factory functions like solutions delivery and services provisioning Managing IT for business value involves aligning IT investments to overall business benefits Underlying focus areas include value and benefits delivery and portfolio management.

IT CMF Framework:

January 11, 2011 11 IT CMF Framework Contains Assessment approach to determine an IT organisation's maturity Best practices associated with outcomes and metrics for their measurement Benefits A comprehensive and detailed framework to collect and provide management information on critical processes within the IT function of an organisation Processes designed, selected and defined as those that ensure that IT delivers business value Provides a view of the level of maturity of the IT function Identifies areas where effort should be focussed in order to add value Enable IT to be responsive to business needs

IT CMF Framework:

January 11, 2011 12 IT CMF Framework IT CMF framework closes the loop on Information Technology delivering value to the business Managing the IT Budget Managing IT Like a Business Managing and Delivering IT Capability Managing IT for Realising and Assessing Value Closing the Loop Between Cost and Value

IT Capability Maturity Framework - Characteristics:

January 11, 2011 13 IT Capability Maturity Framework - Characteristics Maturity Level IT Capability Maturity Framework Managing the IT Budget Managing and Delivering IT Capability Managing IT for Realising and Assessing Value Managing IT Like a Business Level 5 Optimising Sustainable economic model Organisational core competency Optimised value IT is a value centre Level 4 Advanced Expanded funding options Strategic business partner Options and portfolio management IT is an investment centre Level 3 Intermediate Systematic cost reduction Technology expert Return on investment and business cases generated IT is a service centre Level 2 Basic Predictable performance Technology supplier Total cost of ownership known IT is a cost centre Level 1 Ad Hoc Beginning

IT Value Contribution Increases with Maturity:

January 11, 2011 14 IT Value Contribution Increases with Maturity Maturity Level 3 Intermediate High Low 4 Advanced 2 Basic 5 Optimising 1 Initial IT enables and drives business value creation and business opportunities IT is fully aligned with business strategy and anticipates business needs IT focuses on business value creation Value oriented IT management using various industry best practices IT directly contributes to business value creation in some areas IT turns toward focusing on business value creation, but is mostly understood as service provider IT mainly provides services allowing business to create value IT focuses on delivering solutions for business needs, but not a value creator on its own IT disconnected from business value creation IT is not an integral part of value creation IT Value Contribution Increasing contribution to business value as the IT organisation increases its maturity Organisation must be able to translate IT maturity into business value contribution

IT Capability Maturity Framework – Sample Current High Level Maturity:

January 11, 2011 15 IT Capability Maturity Framework – Sample Current High Level Maturity Maturity Level IT Capability Maturity Framework Managing the IT Budget Managing and Delivering IT Capability Managing IT for Realising and Assessing Value Managing IT Like a Business Level 5 Optimising Sustainable economic model Organisational core competency Optimised value IT is a value centre Level 4 Advanced Expanded funding options Strategic business partner Options and portfolio management IT is an investment centre Level 3 Intermediate Systematic cost reduction Technology expert Return on investment and business cases generated IT is a service centre Level 2 Basic Predictable performance Technology supplier Total cost of ownership known IT is a cost centre Level 1 Ad Hoc Beginning

IT Capability Maturity Framework – Sample Desired Future High Level Maturity:

January 11, 2011 16 IT Capability Maturity Framework – Sample Desired Future High Level Maturity Maturity Level IT Capability Maturity Framework Managing the IT Budget Managing and Delivering IT Capability Managing IT for Realising and Assessing Value Managing IT Like a Business Level 5 Optimising Sustainable economic model Organisational core competency Optimised value IT is a value centre Level 4 Advanced Expanded funding options Strategic business partner Options and portfolio management IT is an investment centre Level 3 Intermediate Systematic cost reduction Technology expert Return on investment and business cases generated IT is a service centre Level 2 Basic Predictable performance Technology supplier Total cost of ownership known IT is a cost centre Level 1 Ad Hoc Beginning

IT Capability Maturity Framework:

January 11, 2011 17 IT Capability Maturity Framework Current High Level Maturity Desired Future High Level Maturity IT CMF defines a processes for measuring and benchmarking current and future IT organisation maturity Identifies the key areas where the organisation wants or needs to improve to deliver business value Identifies critical gaps in maturity that are preventing IT delivering business value Identifies appropriate levels of maturity for the organisation for critical IT processes

IT CMF Framework – Detailed View:

January 11, 2011 18 IT CMF Framework – Detailed View Four high-level processes consist of 36 lower level detailed processes Comprehensive overarching framework that encompasses all relevant IT practices

IT CMF Framework – Detailed View:

January 11, 2011 19 IT CMF Framework – Detailed View

Managing IT Like a Business High Level Process – Constituent Critical Processes (1):

January 11, 2011 20 Managing IT Like a Business High Level Process – Constituent Critical Processes (1) Managing IT Like a Business IT Leadership and Governance Provides the decision rights and accountability framework to encourage behaviours that lead to the achievement of the organisation’s IT business value goals. Top performing companies show 20% better performance when governance is aligned with enterprise goals. Business Process Management Document and manage the IT organisation’s work flows and business processes. An accurate inventory of processes and work flows can substantially improve IT efficiency. Business Planning Define and anticipate the company’s demands for IT capabilities and services. Business planning identifies key objectives and areas for IT investments. Strategic Planning Sets the vision, mission and objectives for the IT organisation which directs IT capability to directly address the organisation’s overall strategies. Business and IT strategy is aligned on a clear set of concrete actions that ensure an effective translation of plans into IT capability requirements and business value. Demand and Supply Management Achieve a balance between supply and demand for IT services which is both efficient and sufficient. Cost-effective and business-proficient IT systems are delivered at an optimal cost. Capacity Forecasting and Planning Anticipate the shifting needs for IT capabilities and plan to deliver them in a timely fashion. Capacity planning provides the company with the right amount of IT resources, sometimes more and sometimes less, to meet shifting needs. Risk Management Analyse threats and their potential impacts and develop strategies to mitigate those threats. Business continuity is ensured by systematically mitigating IT operational risk.

Managing IT Like a Business High Level Process – Constituent Critical Processes (2):

January 11, 2011 21 Managing IT Like a Business High Level Process – Constituent Critical Processes (2) Managing IT Like a Business Accounting and Allocation The policies, processes and tools used for calculating and distributing the costs of IT. Range of methods such as chargeback, transfer pricing, and allocation may be used to manage the cost of IT services and to influence the demand for IT services within an organisation. Organisation Design and Planning Review and reorganise as necessary the alignment between the IT organisation and company needs. Stable organisations are increasingly rare in the dynamic world of today’s business. Sourcing Identifying and forming supply agreements with vendors and internal providers. Sourcing results in placing some enterprise activities outside the company, that is, outsourcing. Resource Management Optimise the use of IT resources deployed in response to business or organisational priorities. Dynamic resource allocation provides agility to IT organisations and the companies they serve. Innovation Management Creating, identifying, funding and measuring information technology based innovations to generate business value. Companies systematically monitor their environment, adapt with new solutions, and prosper. Performance and Quality Management Close the loop through the use of balanced scorecard or other techniques to maximise aligned output. Continuous multi-dimensional management leads to higher levels of performance and value. Service Analytics and Intelligence IT performance monitoring, modelling, and analysis to establish a clear understanding of the relationship between business processes and the underlying IT infrastructure and processes to sustain and optimise the delivery of IT services for business value. Provide required data for planning activities. The IT organisation leverages this knowledge as an integral component for efficient operations and effective planning.

Managing the IT Budget High Level Process – Constituent Critical Processes:

January 11, 2011 22 Managing the IT Budget High Level Process – Constituent Critical Processes Managing the IT Budget Funding and Financing Understand how, why and from where IT is funded. Determine the scale, scope and sources of funding for IT the IT Budget and assign financial resources to IT activities. Budget Management Active, ongoing review and adjustment of the IT spending plan to systematically ensure that allocated budgets are being spent effectively and are within budget parameters and governance model. Careful budgeting leads to continuous unit cost reduction for IT services. Portfolio Planning and Prioritisation Allocate the IT budget to projects and activities based on factors such as risk management. Historical returns data informs portfolio planning to improve the investment mix. Budget Oversight and Performance Analysis Periodic offline review of IT spending vs. IT plan, which provides stimulus for re-profiling or reprioritisation of budgets. Oversight certifies that the budget targets are being met and variance analysis improves forecasts in the future.

Managing the IT Capability High Level Process – Constituent Critical Processes (1):

January 11, 2011 23 Managing the IT Capability High Level Process – Constituent Critical Processes (1) Managing the IT Capability Enterprise Architecture Management Provide the necessary models and practices for defining, planning and managing the business and IT capabilities by developing the IT Capability business, data, application, and technical architecture of IT systems. Achieve effectiveness and agility with technical standardisation and system integration. Technical Infrastructure Management Optimise IT infrastructure (including client, network, storage, and server) to support the business. Provide an on-demand capability which is efficient and reliable as a platform for delivering IT services. People Asset Management Manage and train personnel to be successful contributors to the IT organisation. Create a culture where IT is customer focused to provide the company with business value. Intellectual Capital Management Cultivate the suite of applications, the information in the company databases, and the accumulated knowledge of how to deploy IT. Support all aspects of the company’s value chain and gain information or execution superiority. Relationship Asset Management Enhance the relationship between the IT organisation and the company’s business units. IT will share in the risks and rewards associated with the overall business of the company. Research, Development and Engineering Formally investigate new information technologies and the opportunities they provide. IT R&D can deliver prototypes of innovative IT systems, white papers, or patent filings. Solutions Delivery Deploy systems and solutions which efficiently address the company’s IT requirements and opportunities. IT solutions are delivered with the cost, schedule, functionality, and quality the company needs.

Managing the IT Capability High Level Process – Constituent Critical Processes (2):

January 11, 2011 24 Managing the IT Capability High Level Process – Constituent Critical Processes (2) Managing the IT Budget Service Provisioning Provide reliable IT services to support the company’s objectives and strategies. Data centres, help desks, and service solutions are in position to support IT’s customers. User Management and Training Maximise user proficiency and ensure users acquire the right skills at the right time. Usefulness and ease of use are the hallmarks of a successful IT solution. User Experience Design Create solutions based on user experience to deliver what users want and need. Business value is maximised when excellent IT solutions are put to maximum usage. Programme and Project Management Cultivate the ability to manage programs and projects to be on time, on budget, and on target. The costs of schedule overruns are avoided and the quality of IT solutions is matched to customer needs. Supplier Management Encourage cooperative relationships with contractors to create shared value. Achieve more value from the company’s primary supply base. Value Chain Management Optimise integration and performance of overall IT value chain processes in support of overall value delivery. Successful alignment leads to maximum leverage of the IT organisation’s efforts. Capability Assessment and Management Regularly inventory the IT organisation’s capabilities and realign its organisational structure as needed. Demonstrate gains in IT maturity and efficiency with capability and performance measurements.

Managing IT for Business Value High Level Process – Constituent Critical Processes:

January 11, 2011 25 Managing IT for Business Value High Level Process – Constituent Critical Processes Managing IT for Business Value Total Cost of Ownership Track and control direct and indirect costs associated with IT infrastructure and systems. Total cost of ownership better informs the budgeting and portfolio management processes. Benefits Assessment and Realisation Establishing a common business value vocabulary, measurement and valuation methodology to express the potential and document the actual business value returns. Constructing high quality business cases and managing the realisation of actual benefits versus original forecasts ensures organisations achieve business value delivery. Portfolio Management Regularly examine the mix of IT projects and the allocation of resources among them. New investments can be compared to ongoing projects in the portfolio. Investment Analysis and Performance Investigate the success of different IT portfolios to inform decisions and make predictions. These techniques lead to a more precise understanding of investment choices,

Business Strategy:

January 11, 2011 26 Business Strategy The business develops a business strategy that contains defined high level aims and lower level objectives Each objective will be subject to challenges that have to be overcome. Achievement of the strategic objectives needs to be subject to measurements

Business Strategy Links to IT Strategy:

January 11, 2011 27 Business Strategy Links to IT Strategy IT strategy follows from business strategy Ensure the organisation is making the best use of IT to deliver on its strategy Ensure the organisation is using IT effectively and efficiently

IT CMF Provides Framework to Link Business Strategy to IT Strategy:

January 11, 2011 28 IT CMF Provides Framework to Link Business Strategy to IT Strategy Managing the IT Budget Managing the IT Capability Managing IT for Business Value Managing IT Like a Business Business Context IT Context

Current and Future Critical IT Process Maturity:

January 11, 2011 29 Current and Future Critical IT Process Maturity

Critical IT Process Maturity and IT Strategy:

January 11, 2011 30 Critical IT Process Maturity and IT Strategy Use the IT CMF to identify gaps in critical IT processes and practices that deliver business value Implementation of IT strategy is the process for filling these identified gaps Creates a business-oriented IT strategy that is comprehensive and realistic

Using IT CMF to Define a Business Oriented Information Technology Strategy:

January 11, 2011 31 Using IT CMF to Define a Business Oriented Information Technology Strategy Perform High Level Current State Maturity Assessment Identify Gaps Where the Organisation Wants or Needs to Improve to Deliver Business Value Perform Optional Detailed “Deep Dives” Into Specific Critical Processes, if Required, to Identify Detailed Gaps and Issues Define Overall Plan to Achieve Planned Process Maturity Levels

IT CMF Provides Framework to Link Business Strategy to IT Strategy:

January 11, 2011 32 IT CMF Provides Framework to Link Business Strategy to IT Strategy Managing the IT Budget Managing the IT Capability Managing IT for Business Value Managing IT Like a Business IT Context Creating the Business-Oriented IT Strategy Delivering on the Business-Oriented IT Strategy

Benefits of Using the IT CMF Framework to Create the Business-Oriented IT Strategy:

January 11, 2011 33 Benefits of Using the IT CMF Framework to Create the Business-Oriented IT Strategy IT CMF is a comprehensive overarching framework that encompasses all relevant IT practices Agnostic of specific implementation frameworks IT CMF is business-value oriented Contains benchmarks to allow an organisation measure itself against similar organisations Defines a structure to allow improvements to be measured Identifies the key areas where the organisation wants or needs to improve to deliver business value Identifies critical gaps in maturity that are preventing IT delivering business value Identifies appropriate levels of maturity for the organisation for critical IT processes Ensures the IT strategy is soundly anchored on delivering business value

More Information:

January 11, 2011 34 More Information Alan McSweeney [email protected]