IT Strategy and Management Teaching Aids Chapter 1-11 (Final)

1

IT STRATEGY AND MANAGEMENT

SANJIVA SHANKAR DUBEY

IT Strategy and Management (Author: Sanjiva Shankar Dubey) 2

IT Strategy and Management: Introduction Today, Information Technology (IT) has become the strategic value creator

and differentiator for most companies. Therefore, it needs to be managed strategically, effectively and efficiently to

optimize its benefits. We need to understand the proven principles and practices of IT strategy

and get a holistic perspective of its planning, execution and management. We need to examine IT as a strategic resource and adopt a strategic

approach for its management, and align it with overall business strategy. Once the various building blocks of IT strategy are developed, we need to

Prepare an effective plan for its implementation Evaluate the impact of IT on organizations and their workforce Measure returns on IT investment.

Also, IT management frameworks such as ITIL (Information Technology Infrastructure Library), IT service management (ITSM), MOF (Microsoft Operations Framework), CobiT and standards such as ISO 2000 and B527001 need to be adopted.

All the above is covered in 11 chapters of this book, which is intended for a full credit course spanning 20 sessions of 75–90 minutes each.


IT Strategy and Management[[Note to faculties: Please check the speaker notes on every page.] This outline is designed around 20 sessions.

Session Chapter Slide No.

1–2 Introduction

1. Business Strategy: Challenges and Opportunities for IT

2. Business and IT Alignment

1 – 6

7 – 15

16 – 24

3–4 3 Strategic IT Planning 25 – 46

5–6 4. Enterprise IT Architecture 47 – 56

7–8 5. IT Application Strategy 57 – 68

9–10 6. Technology Management Strategy for IT 69 – 76

Mid-term/ quiz, etc.

Author can be contacted for quiz papers and questions for both mid-term and end-term assessments.

11–12 7. Strategy for IT Program Management and PMO 77 – 101

13–14 8. IT Service Management Strategy 102 – 119

15–16 9. IT Sourcing Strategy 120 – 133

17–18 10. Planning and Measuring Returns on IT Investment 134 – 141

19–20 11. Strategies for Managing IT-Led ChangeAuthor contact details

142 – 149

150

End-term exams

IT

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IT Strategy and Management: Why Information Technology (IT) is a strong contributor to

globalization. IT helps modern corporations in continuous

transformation. IT is not only a supporter or enabler but is also a strategic

value creator and differentiator. The growth of IT has accelerated due to the Internet and

convergence. New challenges and opportunities have emerged in

managing IT as a strategic resource. IT is strategic in nature and needs a long-term

perspective. IT management can be a difficult area.


Learning Pause: What do you think? Name one example where IT has dramatically

changed the ways in which business is conducted.

Can these businesses survive without IT? Consider what will happen if IT stops functioning.

Therefore you need a proper and methodical approach for IT Strategy and Management.


IT Strategy and Management: What to do? Analyze and critically evaluate information as a key

resource. Analyze IT systems’ ability to meet strategic information

needs. Evaluate the use of Information Systems (IS) or IT to

gain competitive advantage. Prepare an effective plan for the implementation of

information strategy. Evaluate IT function service capabilities and enhance it

using ITSM processes.


1BUSINESS STRATEGY: CHALLENGES

AND OPPORTUNITIES FOR IT


1.3 WHAT IS BUSINESS STRATEGY? Set of objectives, plans and policies for the firm to

compete in the market Plan, Pattern, Position, Perspective and Ploy.

What is The Role of IT in Formulating Business Strategy?

What is The Impact of IT on Business Strategy?


1.3.1 What are the Challenges and Opportunities with IT?

Efficiency improvement through the use of digital nervous systems

Delivering different mixes of value Innovation for IT.

Why it is so? Global competition, global marketplace and global

connectivity.


1.4 WHAT IS IT STRATEGY?

It is both Competitive necessity: To do business in any industry Competitive advantage: Developing products, services,

processes, or capabilities, giving the company a superior position vis-à-vis competitors.

Comprises IT application strategy Technology management strategy for IT IT management strategy.


1.4.1 IT Application Strategy

IT application strategy involves answering these questions: Which applications are to be used? For which business areas, and for what benefits and at

what cost are they to be used? Application types belong to either:

Support, Factory, Turnaround, or Strategic categories.

This is discussed in detail in Chapter 5 (Session 3).


1.4.2 Technology Strategy for ITLong-term approach for planning and selection of underlying information technology components and tools (see Chapter 6, Session 3).

1.4.3 IT Management Strategy See Chapters 7, 8 and 9. More complex and involved in current times Managing underlying risk in the event of system failure Ensuring that IT projects and programs meet business

expectations within the desired time, cost and budget limits Decision on outsourcing versus doing in-house Establishing IT systems management processes Change management strategies for people.


1.5 DEVELOPING IT STRATEGY FOR COMPETITIVE ADVANTAGE

Understanding the strategic dimension Exploring the points of opportunity as well as areas of

concern Deciding whether corporate strategy should drive IT or

vice versa Setting long-term direction for IT.


1.6 STAGES OF IT STRATEGY DEVELOPMENT Aligning business and IT strategy (Chapter 2)

Developing strategic IT plan (Chapter 3) Developing enterprise architecture (Chapter 4) Developing IT application strategy (Chapter 5) Developing technology strategy for IT (Chapter 6).


[Note to faculties: Please refer to review questions and ask the students

to answer them.]

End of Chapter 1


2BUSINESS AND IT ALIGNMENT


2.1 WHAT IS BUSINESS – IT ALIGNMENT?

Alignment between IT and business means that IT delivers what businesses need to their satisfaction.

IT also plays a strategic role in shaping new business strategy.

Refer to Fig. 2.1 to show the alignment framework. Alignment must happen between four elements as

shown, spanning Functional integration Strategic fit.

Refer to Section 2.1.1 for the broader definition of alignment and relevant examples.

Refer to Sections 2.5, 2.6 and 2.7 for research by Cathleen and MacFarlane David Nickels.


2.2 CHALLENGES OF BUSINESS AND IT ALIGNMENT

Absence of a well-articulated strategy Completeness, comprehensiveness and speed to

gather the end-users’ requirements Uniform and seamless communication of the strategy,

objectives and critical success factors to the entire organization.

Alignment Inhibitors Leadership level congruence IT’s ability to identify and partner with business IT’s ability to deliver.

Three levels of alignment: Refer to Fig. 2.2.


2.3 3D FRAMEWORK FOR ALIGNMENT

Discipline

Design

Drive for results.


2.4 HOW TO ACHIEVE BUSINESS AND IT ALIGNMENT

This section discusses the three-perspective framework.

2.4.1 Communication School See page 18. What happened to the task force manager? Discuss

the case. Discuss Rockert, Earl and Ross’ bidirectional

approach and Rich and Benbast’s extension.


2.4.2 Architecture School (see Box 2.1)

Integrated architecture framework Quality Function Deployment (QFD) Design and Engineering Methodology for Organizations

(DEMO) by Jan Dietz Information Engineering (IE) by James Martin.


2.4.3 Technology School ITIL (Information Technology Infrastructure Library)

frameworks

2.4.4 People School Approaches of Indira and Michelle on the role of IT

professionals, skills required, and aspiration Approach of Charles about alignment as a

collaborative process Business and IT alignment framework summary (Table

2.1) Role of IT professional (Fig. 2.3).


2.5 BUSINESS AND IT ALIGNMENT TOOLS, TIPS AND TRAPS

Relationship between all schools (see Fig. 2.4) Role of IT strategy played out at different stages of

business maturity (see Fig. 2.5).


CASE STUDY: BANK OF HINDUSTAN[Note to Faculties: Read the case study on page 28 and answer the review

questions. Read the definitions of acronyms on page 26.]

End of Chapter 2


3STRATEGIC IT PLANNING

Strategic planning is the systematic examination of opportunities and threats in the business environment so that you are in the position to identify those opportunities that should be exploited and the threats that should be avoided.

—George Steiner Strategic planning is to create opportunity that can be leveraged to

create differential advantage in the marketplace.

—N. Les Clark


In this chapter we Develop a conceptual framework about the process

of SITP (Strategic IT Planning) Identify which planning methodologies really work

and why Examine the content of SITP, its measurement and

appraisal Dwell on the roles and responsibilities of

Executives in integrating and aligning IT with the business strategy

IT professionals in ideal conditions.

Refer to Fig. 3.1.


3.1 BUSINESS IMPLICATIONS OF IT STRATEGY AND PLANNING

Where are we now?

Where do we want to go?

How will we get there?


3.2 WHAT IS STRATEGIC IT PLAN? Nothing seems more logical, more reasonable or more

appropriate than planning. Doing things today to make us better tomorrow. Because the future belongs to those who make the hard decisions today.

—Anonymous (Page 33) A strategic plan maps out where the firm is headed,

short and long-range performance targets and actions of the management to achieve outcomes.


3.3 STRATEGIC IT PLAN MOTIVATIONS Refer to page 33. It is to reduce cost and increase competitiveness

and integration.


3.4 SITP PROCESS: PLANNING APPROACHES Top-down analytical approach Bottom-up evaluative approach (Fig. 3.2) Creative Approach (Fig. 3.3).

3.5 DIFFICULTIES IN DEVELOPING AND EXECUTING

SITP: 3 difficulties according to McNurlin.


3.6 BEST PRACTICES FOR ACHIEVING SITP

Segars, Grover and Teng (1998) define the following best practices:

Comprehensiveness Formal Focused Smooth flow Wider participation Consistency.


3.7 SITP APPROACHES AND PREVALENT RESEARCH

IBM business systems planning Rockart’s critical success factors (CSF) Stages of growth: Nolan’s stages theory Porter’s competitive forces model Porter’s value chain analysis E-business value matrix Linkage analysis planning Scenario planning.


SITP overall planning processes See Fig. 3.4. Refer to Figures 3.5, 3.6 and 3.7 for SITP approaches.


3.8 CRITICAL COMMENTS ON VARIOUS APPROACHES

Refer to Table 3.1, p. 45.

3.9 INTEGRATED PLANNING APPROACH

Refer to Fig. 3.8.


3.10 CONTENT OF SITP

Refer to Fig. 3.9. Earl, Mocker and Teubner defined the components

of SITP as IS–M component S–MI component M–IS component.

3.10.1 Typical Content Of SITP

Refer to pp. 47-48.


3.10.2 Six Planning Stages of SITP

1. Assemble a planning team

2. Assess information needs

3. Develop a vision and a mission Examples of mission/vision statements of Saturn division

of GM as well as Eastman Kodak

4. Communicate the vision and seek buy-in

5. Arrive at the project’s portfolio and define the scope of projects and their prioritization

6. Evaluate IT projects for inclusion in application portfolio.

Refer to pp. 49–52. These are:


3.11 CONSIDERATIONS FOR SYSTEMS OPERATIONS

Systems operations considerations include running the firm’s applications according to the defined processes.

3.11.1 Considerations for Committed Service Levels Refer to Table 3.2 (Typical list of IT projects) Refer to Table 3.3 (Typical TPS applications).


3.12 IT PLANNING HORIZON

Operational—3 months Tactical—3 months–2 years Strategic—3-5 years.

3.12.1 Rapid Response Planning for Internet Applications


3.13 RESOURCE PLANNING People planning Financial planning Administrative actions Technology planning.

3.14 MANAGING PROJECT SCOPE TIGHTLY


3.15 IMPLEMENTATION CONSIDERATIONS OF SITP

Refer to Fig. 3.12. The following are important for the success of SITP process as planning

as shown by Gottschalk’s studies:1. Adequacy of resources the implementation 2. Level of user involvement during the implementation 3. Adequacy of analysis of the organization’s information needs 4. Anticipation of changes in the external environment 5. Solutions to potential resistance during the implementation 6. Information technology to be implemented 7. IT projects’ relevance to the business plan 8. Who owns the responsibility for the SITP implementation 9. Level of management support for the implementation10. Communication issues 11. IT issues 12. General business-related issues.


Completing SITP SITP implementation best practices (p. 60) Pitfalls to be avoided as per Luftman’s studies Refer to Fig. 3.13.


3.16 CHANGE MANAGEMENT ISSUES OF SITP DEVELOPMENT AND IMPLEMENTATION

3.17 MONITORING AND MEASURING SITP SUCCESS

3.17.1 IT Strategy Committee: 9 important functions


Review Questions1. What is a strategic IT plan? What are the business implications and

motivations for IT strategy and planning?

2. What are the prevalent planning approaches for the SITP process? What are its advantages and disadvantages? Which one will you choose for a large public sector oil distribution company?

3. Enumerate and explain some of the prominent best practices for achieving good SITP.

4. What are, according to McNurlin, the difficulties in developing (conceptualizing and realizing) and executing SITP?


5. Write a short note on the following SITP approaches espoused by the leading researchers:

(a) IBM business systems planning

(b) Rockart’s critical success factors (CSF)

(c) Stages of growth: Nolan’s stages theory

(d) Porter’s competitive forces model

(e) Porter’s value chain analysis

(f) E-business value matrix

(g) Linkage analysis planning

(h) Scenario planning.

6. List the various stages and deliverables of the integrated IT planning framework as discussed in the chapter.

7. What are the three major constituents of SITP as elaborated and explained by researchers such as Mocker and Teubner? How can they be summarized asIS–M, S–MI and M–IS to underline all factors?


8. What are the typical contents of an SITP?

9. What are the different stages through which the IT planning process is undertaken?

10. What factors are considered while classifying and ranking projects?

11. What are the important and constituents of the resource planning exercise in strategic IT plan?

12. How can we successfully implement an SITP? Enumerate some of the implementation best practices.

13. What are the change management issues of SITP development and implementation?

14. How can we monitor and measure the success of a firm’s SITP? What is the role of the steering committee in this effort?


[Note to Faculties: Ask students to work on a industry/company that they

are familiar with (or get insight through research or interview with CIO) and examine If such best practices are being followed What is going wrong? What has gone right?]

End of Chapter 3


4 ENTERPRISE IT ARCHITECTURE


4.1 INTRODUCTION Enterprise IT architecture covers the architectural

principles and practices under whose guidance IT applications are built, purchased, customized and deployed within the organization.

4.1.1 Challenges Addressed by Enterprise IT Architecture

See Fig. 4.1. Enterprise IT architecture is the link between business

strategy and results through IT.


4.2 WHY DEFINE ENTERPRISE IT ARCHITECTURE?

To deal with a diverse set of requirements in a fast manner

To make IT systems that are able to meet these local requirements for global corporations.

4.2.1 Enterprise IT Architecture Aids Global Firms to Become Agile

According to Weill, business agility can only be achieved through EITA.

It is a framework that helps align information technology (IT) with business processes in a well-orchestrated fashion.


4.3 WHAT IS ENTERPRISE IT ARCHITECTURE?

Enterprise IT architecture (EITA) is the articulation of the structure of IT systems, its elements or components that comprise these systems, their externally visible properties, and their interrelationships.

EITA defines business capabilities which comprise People (who), Process (what and how), and Technology (through what)

working together to produce business results.


EITA is made up of five sub-components: Business process architecture (BPA) Information systems or solutions architecture (ISA) Information technology architecture (ITA) Security architecture (SA) Organizational architecture (OA).


4.4 NEED FOR ENTERPRISE IT ARCHITECTURE

Significant research done by Scott, Spewak and Zachman needs to be reviewed.

Enterprise IT Architecture is an increasingly mature area of professional practice that provides a link from strategy to execution of information systems.

The term Enterprise Architecture (EA) was first coined by John Zachman in 1987.

Dr. Steven Spewak conceptualized the need of EA planning. Currently, several large corporations use EITA approach to

integrate strategic, business, and technology planning processes.

EITA primarily helps to communicate, control and direct the decisions related to IT investments.


4.4.1 Advantages Of Defining Enterprise IT Architecture

Promotes better planning and decision making Improves communication between business and IT Provides architectural views to communicate the complexity

of large systems and facilitate management of extensive, complex environments

Focuses on the strategic adoption of emerging technologies Enhances consistency, accuracy, timeliness, integrity, quality,

availability, access, and sharing of IT-managed information across the enterprise.


Provides a tool for the assessment of benefits, impacts, and capital investment measurements and supporting analyses of alternatives, risks, and trade-offs

Develops greater quality and flexibility in applications without increasing cost

Can lead to economies of scale through sharing across the firm

Facilitates integration of legacy as well as new systems Leads to increased adherence to legal and regulatory

compliance.

4.5 CONTENTS OF A TYPICAL ENTERPRISE IT ARCHITECTURE


4.6 STANDARDS FOR EITA ANSI/IEEE Standard 1471–2000 TOGAF (The Open Group Architecture Framework)

TOGAF origins can be traced to Technical Architectural Framework for Information Management (TAFIM) developed by the US Department of Defense

TOGAF’s latest form version 7 Covers ANSI/IEEE Standard 1471–2000.

Other frameworks used by the United States government are as follows: Federal enterprise architecture framework (FEAF) Treasury enterprise architecture framework (TEAF) Spewak’s enterprise architecture planning (EAP) Zachman’s framework.


Students should Go through the articles given as reference:

• Peter Weill, The Agility Paradox, 2• Ralph Whittle, Enterprise Business Architecture: The

Formal Link between Strategy and Results• J.A. Zachman, A Framework for Information Systems

Architecture • S.H. Spewak and S.C. Hill, Enterprise Architecture

Planning: Developing a Blueprint for Data, Applications and Technology.

Attempt to answer all the review questions.]

End of Chapter 4

[Note to Faculties:


5 IT APPLICATION STRATEGY


See Fig. 5.1.

5.1 INTRODUCTION IT application strategy is the choice between building (i.e., developing)

or buying a commercially off-the-shelf available package (COTS). It is the next step after SITP. The task is more complex due to enterprise size, spread and coverage

of application package. The approach, though generic, will be applicable to the entire life cycle of planning, acquisition and execution of the major enterprise package (COTS) systems such as ERP CRM Billing Supply chain automation/optimization Accounting, treasury management


How to select the right alternatives from among developing an IT application, selecting a commercially off the shelf available (COTS) package; and assembling an IT application from COST components (see Section 5.2)

How to address the requirements engineering, a common challenge for these approaches (see Section 5.3)

Cash management E-business and e-commerce E-procurement E-selling and e-marketing E-employee care Business intelligence, data warehousing and data mining Knowledge management

and many more.

IT Application Strategy steps are:


COTS package selection life cycle (see Section 5.4• Identification of candidate packages (see Section 5.4.1)• Defining evaluation criteria and selection process (see

Section 5.4.2)• Package customization strategy (see Section 5.4.3).

Implementation management: Strategy (see Section 5.5). Post-implementation support and management (see Section 5.6).


5.2 WHY DEVELOP APPLICATION PACKAGE Low cost Changing requirements Simple application Good talent pool Low recurring cost.


5.2.1 Why COTS ? Affordability Scalability/modularity Flexibility Easy to use Good quality Accelerating rates of COTS enhancement and

expanding system requirements.


5.3 REQUIREMENT ENGINEERING Both COTS and applications developed in-house need

proper requirement engineering to ensure that Architectural requirements Domain requirements Organizational requirements are captured properly.

Rosemann defines stages for gathering complete requirement sets as shown in p. 85.


5.4 COTS PACKAGE SELECTION LIFE CYCLE

5.4.1 Identification of Candidate Packages

5.4.2 Defining Evaluation Criteria and Selection Process

See Fig. 5.2. Ncube and Maiden defined their approach to iterative

evaluation as a framework called procurement-oriented requirements engineering (PORE) consisting of the following steps:

Step 1: Plan and control selection activity Step 2: Requirements acquisition process Step 3: Supplier selection process Step 4: Software package selection to locate

candidate packages


Step 5: Contract with package suppliers covering commercial and licensing aspects

Step 6: Package acceptance according to original requirements.

Concept of RFI and RFP (see p. 88, Fig. 5.3 and Table 5.1).

5.4.3 Package Customization Strategy See Fig. 5.5.


5.5 COTS IMPLEMENTATION STRATEGY Any COTS implementation is a major change in the

organization process as well as the underlying technology that supports it. If the COTS package is like ERP that touches many functions at the same time, its implementation becomes a real challenge due to people, process as well as technology issues.

Read Somers and Nelson as well as Akkermans and Heldan CSFs on p. 92.

5.5.1 Best Practices for Successful Implementation See p. 92, Fig. 5.6.

5.5.2 Multi-Unit Implementation Alternatives See Fig. 5.7.


5.6 POST-IMPLEMENTATION SUPPORT AND MANAGEMENT

The success of any COTS package implementation is largely dependent upon how well the package has been implemented, as well as how well it is being continuously evolved, enhanced and maintained as the business needs grow.

Post-implementation services include those services that are related with the version upgrade, code optimization and adding new functionalities. Major issues are:

1. Managing version upgrade

2. Optimizing performance

3. Adding new interfaces

4. Customized report development

5. Managing commercial and support issue with vendor

6. Measuring benefits and attainment of objectives. See Table 5.5 for post-implementation assessment of objectives.


Review the articles given in the References. This is the most useful chapter and students must be subjected to at

least a 45-minute quiz using the review questions.]

End of Chapter 5

[Note to Faculties:


6 TECHNOLOGY MANAGEMENT

STRATEGY FOR IT


6.1 NEED FOR TECHNOLOGY MANAGEMENT STRATEGY

Need for a technology management strategy for IT arises because:

IT investments impact heavily on the bottomline Most business functions, nowadays, depend heavily on

their respective IT applications It would cost dearly to correct a wrong decision later.


6.2 TECHNOLOGY MANAGEMENT STRATEGY FRAMEWORK

A technology management strategy framework (see Fig. 6.1) helps in deciding

Technology choice, standards and interface requirements

Technology sourcing and interconnectivity issues Data standards Security and network.


Technology Management Strategy Process It is an iterative process covering the following 4 steps:

1.Track technology evolution trajectory

2. Sponsor to adopt new technology

3. Deploy technology internally and reap results

4. Ascertain technology adoption in peer group of industry.

See Fig. 6.2 and Fig. 6.3.


6.3 TECHNOLOGY MANAGEMENT STRATEGY MOTIVATION Strikes a good balance between the architecture discipline and

the project needs. It helps in maintaining support service levels It ensures directions for business continuity, availability and

disaster recovery facilities. It facilitates data management and consistency. It ensures intuitive, easy-to-use applications. It gives security and provides intellectual asset protection. It creates strategy for services sourcing—build versus buy. It helps in infrastructure standardization and management of

costs. See Fig. 6.4.


6.6 TECHNOLOGY MANAGEMENT STRATEGY CONSTITUENTS The constituents of technology management strategy

are as follows: Data strategy (see Fig. 6.6) Strategy for solution and application integration

strategy—3 sub-strategies (pp. 108–109); various application integration strategies (Table 6.2).

Technology component strategies covering the network strategies

Security strategy for data and network.


6.7 PREVALENT TECHNOLOGY MANAGEMENT FRAMEWORKS AND ARCHITECTURES

6.7.1 The Open Group Architectural Framework (TOGAF)

TOGAF version 8 (see p. 113) TRM—Technical Reference Model (see p. 113) SIB—Standard Information Base (see p. 114) BBIB—Building Blocks Information Base. Resource Base

ADM—Architectural Development Method (see p. 115).


References and websites of TOGAF should be visited.

All review questions should be answered.]

End of Chapter 6

[Note to Faculties:


7STRATEGY FOR IT PROGRAM

MANAGEMENT AND PMO


7.1 INTRODUCTION Strategies for managing IT projects, program and

portfolio, addressing inter-project management issues, managerial as well as financial concepts.


7.2 WHY HAVE A STRATEGIC VIEW FOR PROJECT, PROGRAM AND PORTFOLIO MANAGEMENT?

When IT strategy initiative is undertaken, multiple projects and various functional areas will start operating, and create impact on each other.

All these would need close management of resources through a program management office.


7.3 PROGRAM MANAGEMENT OFFICE (PMO) Program Management Office (PMO), according to Archibald,

is “a long-term undertaking which is usually made up of more than one project”.

Other definitions: A service for managing projects in an enterprise, A centralized service of project coordination and

communication, A vehicle to establish a project management culture.

PMO promotes overall success and strategic alignment of information technology initiatives by Serving as a bridge between program and project

managers and leadership to facilitate coordination.


67% of IT organizations have set up PMOs. So, what constitutes a Project? The Project Management

Book of Knowledge (PMBOK) defines a project as “a temporary endeavor undertaken to create a unique product or service”.

PMO oversees ongoing and repetitive operations even though the projects it oversees have distinct beginnings and ends.

This mindset shift is a key realization for the success of PMO. PMO remains a permanent entity within the IT function. Figure 7.1 defines these terms in a context.


7.4 WHAT IS PROGRAM MANAGEMENT ? PMO is strategically driven to synergize all projects Olson and Branch say: “Programs are integrally related

projects, which together move towards the realization of a particular organizational goal”.

Program management is the process of managing multiple ongoing projects to achieve business objectives.

It combines the ability and resources to define, plan, implement, and integrate every aspect of a comprehensive IT strategy program.


7.5 WHY SET UP A PMO? To avoid delay and overbudgeting of IT projects due to lack of

coordination; to standardize project management methodology; and to adhere to project management practices

PMO helps to Manage all projects by consistently utilizing best practices

and achieving higher project completion rates Manage strategic change with programs Achieve well-defined strategic goals Rank and select important tactical improvement projects Prevent overcommitment of resources.


7.6 BENEFITS OF PMO Studies show 80% ROI, 20% reduction in project time,

and 30–35% successful project delivery, whereas companies without a PMO experienced 74% project failure rate.


7.7 QUALITIES OF A PMO

Have thorough understanding of the firm’s business and functional process

Embody continuous learning and implementation of best practices

Team-building and spreading motivation across projects Deep project management experience A positive attitude and a friendly and supportive personality Ability to deal with business ambiguity.

PMO is a senior management role responsible for overall business outcome and is accountable to either the business sponsor, IT Director or CIO.

PMO can act as a knowledge powerhouse to provide high-level architectural advice.

A Project Management Officer must


7.8 MATURITY OF PMO Baby Stage: Vision is still under development and the

PMO operations are carried out following a trial-and-error approach.

Teen Stage: Its vision would be somewhat aligned with business strategy.

Matured Stage: PMO starts to take portfolio focus and approaches all activities in a strategic manner.

See Fig. 7.2. Focus of PMO changes at all these stages as shown in

Fig. 7.3.

7.9 WHAT DETERMINES THE PMO TYPE


7.10 WHAT PMO DOES

Eyes: Gathering information about projects progress and soliciting feedback

Ears: Gathering issues and risk factors, and ensuring communications between central groups and project teams

Tongue: Monitoring project progress in terms of time, resources spent and cost incurred. Also ensuring communication, giving advice on processes and tools, and acting as a channel of communication to senior management

Skin: Capturing and taking action on softer issues of projects. Leads Change Management and also gets processes and systems installed for software configuration management, operations processes, standards for forms and reports, earned value management, integrated change control, resource management and integrated work/service request

PMO has five major sub-functions like


Nose: Sensing if anything is going wrong, which is achieved by maintaining the overall coordination and control role, leading decision-making, including commitment of time, money and resources, issue resolution, project monitoring and integration, and maintaining master project schedule.


7.11 MANAGEMENT OF PMO PMO governance covers aspects such as

How will it be organized? Who reports to whom (line of business versus IT

organization)? What skills are required? Who will it report to (board, steering committee, CIO,

CEO, others)? How will it interact with operational and development

functions? What is the reporting process for communicating status

and progress?


7.12 PMO IS ABOUT BRINGING CULTURAL CHANGE

PMO needs management support to be successful.

7.13 IMPLEMENTING PMO STRATEGY Revolutionary approach

versus Evolutionary/incremental approach.


7.14 STAFFING OF PMO

The typical roles skills needed are PMO director/manager Project manager Project portfolio manager PM process/methodology trainer Solution architects Relationship/account manager Tools support/administration Project office administrative support Librarian/document control.


7.15 MEASURING PMO PERFORMANCE

This combines metrics depending upon maturity and roles.

Typical business value metrics: What benefits PMO and gives savings/ROI

Typical functional performance metrics: These are• Project management budget/resources• Process improvement metrics• Number/per cent projects completed on or ahead of

schedule• Number/per cent projects completed on or below budget• Number of projects managed—increase over year, target

versus actual• Number of training classes delivered (target versus actual)


Service level metrics: SLA/SLO (service level agreements/ objectives) expressed in a variety of ways. Examples of service level metrics are

• Turnaround time on business cases• Turnaround time on responding to stakeholders’ request for

support• Customer satisfaction based on survey results• Turnaround time on resolution of issues.


7.16 SUCCESS FACTORS FOR PMO Clear charter, right expectations and defined boundaries Top-down support and bottoms-up buy-in Strong sponsor and equally strong LOB representation Strong communication/PR initiative Mix of performance metrics that demonstrate business and

customer value. Inculcation of high degree of prestige associated with its

function Doing the right projects effectively as well as efficiently Customer service focus Ensuring that the core of the PMO is compact enough.


7.17 MATURITY ASSESSMENT OF PROJECT MANAGEMENT PRACTICES

This is achieved through various models such as CobiT, OPM3, ISO 15504 and CMM/CMMI.


7.18/7.19 CobiT® CobiT®—Control Objectives for Information and related

Technology—is developed and promoted by IT Governance Institute.

CobiT® maturity levels are:

1. LEVEL 0: Non-existent

2. LEVEL 1: Initial—Ad hoc and disorganized

3. LEVEL 2: Repeatable—Follows regular pattern

4. LEVEL 3: Defined—Documented/communicated

5. LEVEL 4: Managed—Monitored and measured

6. LEVEL 5: Optimized—Best practices followed/automated.


7.20 STRATEGY OF APPLICATION PORTFOLIO MANAGEMENT Application portfolios, as shown in Table 7.1, consist of a variety of systems

that satisfy different requirements. The applications, which deliver a function, can be divided into the following

three levels of business performance impact: Low Medium High.

They can also be grouped as Infrastructure Utility (mission-critical but about not improving performance, such as

payroll) Business enhancement (such as supply chain management) Customer-facing (such as customer relationship management).


7.21 PROJECT SCOPE MANAGEMENT Initiation Scope planning Scope definition Scope verification Scope change control Also involves

Project categorization: Size, type and priority Project cost and expected returns: Using net present value

(NPV) analysis, return on investment (ROI) and payback analysis (see the formula worked out on p. 137)

Project charter: Defining project scope and returns (see Fig. 7.4, p. 138)

Individual project planning: See pp. 139–40 Scope verification and scope change control: After project is

delivered.


7.22 MANAGING OVERALL RISK

The four types of risks are:

1. Business risks

2. Organizational risks

3. Technical risks

4. Execution risks.


7.23 PMO DASHBOARD

Helps senior leadership with crucial information covering the following:

Integrated project calendar, status at a glance, or detailed drill set down by line of business

Issues and risk register Assets register; summary numbers Project dependency matrix Resources deployment status and outlook Financial outlook Cost matrices Turnaround time of various resources.


References to be reviewed All review questions should be answered.]

End of Chapter 7

[Note to Faculties:


8 IT SERVICE MANAGEMENT

STRATEGY


8.1 INTRODUCTION IT Service Management Strategy is needed to

Evaluate IT cost, complexity, reliability, and conformance to the business needs

Ensure proper management of IT infrastructure that has become too complex and expensive

Ensure reliable/interoperable applications Manage risk, service impact, cost of failure as well as visibility

(see Fig. 8.1). Unless the IT industry is able to address these fundamental

challenges, it will decline. ITSM strategy has gained significant importance due to

increased reliance on IT for running the business. ITSM denotes the philosophies, methodologies and best

practices required to bring discipline for managing the IT infrastructure with an integrated approach.


8.2 WHY HAVE STRATEGIES FOR IT SERVICE MANAGEMENT?

Strategies are needed to Meet business objectives Ensure that business processes and functions coexist,

run on common IT infrastructure and facilitate exchange information and data between each other.

All these IT components have to be managed as together as a service (IT service management), ensuring proper support to business processes to achieve the organizational objectives.


The three key objectives of ITSM are: Align IT services with the current and future needs of

the business and its customers Improve quality of IT services Reduce long-term costs of IT service provision.

The goal is to bring quality consciousness into the management of IT services.


8.3 WHAT IS ITSM? ITSM is a set of guiding principles covering

Process Tool People and partners.

It is delivered through competent people with right cultural framework and measured appropriately.

It helps in managing the outsourcing of the IT service functions.

It includes not just how to manage technology efficiently or effectively, but the associated processes and people as well.

It manages the complete life cycle of IT services.


8.4 INFORMATION TECHNOLOGY INFRASTRUCTURE LIBRARY (ITIL)

ITIL was developed in the 1980s by the Office of Government Commerce (OGC) in the United Kingdom.

It is a non-proprietary approach. It has documented IT service areas, processes and

standards in 8 books. It has been further improved by a number of industry

leaders such as IBM, HP and Microsoft as well as IT Service Management Forum (ITSMF) and British Standards Institute (BSI).


It began as a Set of best practices (Version 1) Extended into a process-led approach (Version 2), and Was redesigned into a service life cycle approach

(Version 3). See Fig. 8.3.


8.4.1 ITIL Overview See Table 8.1. Various processes have been grouped under

Version 2.0 Version 3.0.


8.5 SERVICE SUPPORT See Fig. 8.4. Incident management — Service operation Problem management — Service operation Change management — Service transition Release management — Service transition Configuration management — Service transition.

8.6 SERVICE DELIVERY Service level management (continual) — Service improvement Financial management — Service strategy Capacity management — Service design IT service continuity management — Service design Availability management — Service design.


Typical SLA contract See p. 155, Fig. 8.5.

8.6.3 Capacity Management Table 8.2—Dependence of capacity management

process on other processes.

8.6.4 IT Service Continuity management (ITSCM) RPO and RTO concepts Addressing risk through ITSCM.


ITSCM Strategies See p. 159. Recovery options are:

Cold standby Warm standby Hot standby Other methods such as manual recovery and reciprocal

arrangement.


8.6.5 Availability Management Availability Management ensures that all IT services are available to

meet the business objectives in a cost-effective manner by reducing the frequency and duration of incidents that impact IT availability.

Availability would be dictated by the SLA. Data collected about IT service component failure(s) is used in

defining targets. New availability and recovery capabilities are designed, which may

include additional IT hardware, software or processes Also, it monitors and reports IT components’ deviations in

availability, reliability and maintainability. All IT service management disciplines have an influence on IT

availability; availability management, by implication, interfaces with all disciplines.

The availability management process leads to reduction in the frequency and duration of IT service failures.


8.7 SERVICES LIFE CYCLE AS DESCRIBED

IN ITIL V3

This includes: Service strategy formulation Service design Service transition Service operation Continuous service improvement.


8.7.1 SEI-Defined Maturity Level of Processes The levels are:

LEVEL 0: Undefined LEVEL 1: Initial LEVEL 2: Repeatable LEVEL 3: Defined LEVEL 4: Managed LEVEL 5: Optimized.


8.8 IT SERVICE MANAGEMENTIMPLEMENTATION STAGES

The stages are: STAGE 1: Create awareness STAGE 2: Create change agents STAGE 3: Planning and implementation STAGE 4: Continuous improvement.

Refer to pp.164–165.

8.9 SUCCESS TIPS FOR ITSM / ITIL IMPLEMENTATION

8.10 LEADING VENDORS AND THEIR ITSM PRODUCTS


8.11 COMPLEMENTARY FRAMEWORKSIN ITSM SPACE

See Table 8.3.

8.11.1 Comparison between ITIL, BS 15000 and ISO 20000

See Fig. 8.6.

8.11.2 Relationship between MOF and ITIL


8.12 MEASURING AND REALIZING IT SERVICE MANAGEMENT ADVANTAGES

For concepts of KPI, see Fig. 8.7.

For ITSM measurement framework, see Fig. 8.8.

For example of IT balanced scorecard, see Table 8.4.


The students should go through all the references given.

The relevant websites should be visited.

All review questions should be answered.]

End of Chapter 8

[Note to Faculties:


9IT SOURCING STRATEGY


9.1 BACKGROUND

IT sourcing strategy is needed to find strategic alternatives for deploying IT applications. It is necessary because IT systems have become

complex and mission-critical. All IT activities cannot be done in-house. A prudent choice between what to do in-house and what

to outsource to partners and vendors is needed. This chapter covers what strategies an organization

can adopt while outsourcing IT and recommends methods for successful sourcing strategy.


9.2 IMPERATIVES FOR OUTSOURCING? Several reasons for outsourcing exist. These areas:

IT is not a core competency. Keeping a highly skilled and motivated in-house team in

the long-term is difficult. There are cost advantages due to wage differential in

developing countries. There is easy availability of connectivity through telecom

infrastructure.

IT specialized services need specialized skills. Dr. Joseph O. Okpaku concludes that outsourcing

epitomizes the quintessence of true globalization.


9.3 WHAT IS OUTSOURCING? Outsourcing means engaging an external service

provider company to run internal business functions such as IT.

9.4 WHAT TO OUTSOURCE? The following activities can be outsourced:

Application development Support of application Database or end-user equipment development Business processes, e.g., CRM /SCM and back office

functions such as payroll.


9.5 MOTIVATION AND NEED TO OUTSOURCE See pp. 177–178. Outsourcing is needed due to:

Advantages of the specialized services and skills of the outsourcing partner

Inability to attract, hire and retain IT skills Cost predictability Better management hardware and control of software Better IT management of service levels and response

time Use of low-cost labour as well as higher skills as needed Need to clear the backlog of maintenance requests.


9.6 OUTSOURCING AND ASSOCIATED RISKS See pp. 178–179. The risks relate to:

Information security Confidentiality Apparent loss of control Hidden costs Outsourced company’s lack of ability and experience.


9.7 HOW TO MINIMIZE RISKS See p. 179. The following are needed:

Right partner Proper requirement gathering Proper cost-benefit analysis Partnership approach.

9.8 IT MANAGEMENT LAYERS AND CONSIDERATIONS FOR OUTSOURCING

See Fig. 9.1.


9.9 STRATEGIC VERSUS GENERIC

OUTSOURCING Generic outsourcing refers to generic IT activities,

e.g., system operations, security and firewall management, networks management and end-user support.

Strategic outsourcing refers to areas that require customized solutions for the specific organization’s needs and are competitive differentiators.


9.10 VARIANTS OF OUTSOURCING

See Fig. 9.2. The variants are: Offshoring Near-shoring Inshoring Smart-shoring, smart-sourcing or multi-sourcing Full outsourcing.


9.11 BUSINESS PROCESS OUTSOURCING

9.12 BEST-OF-BREED CONSORTIUM

9.13 INSOURCING

9.14 OUTSOURCING JOINT VENTURE


9.15 HOW TO SUCCEED WITH OUTSOURCING 9.15.1 Shortlisting Candidate Service Providers

9.15.2 Defining Comprehensive Contract Content

9.15.3 Investing Time And Energy In Thorough Contract Preparation

9.15.4 Having Clear Scope Of Service See p. 188 for details of a typical scope of contract.

9.15.5 Rewarding and Penalizing

9.15.6 Safeguarding Dispute Area

9.15.7 Ensuring Objective Selection Process


9.16 CONTRACT MANAGEMENT AND GOVERNANCE

This involves: Relationship management Performance monitoring.


9.17 MANAGING OUTSOURCING TRANSITION

This involves transitions of assets, processes, applications, and at times, people.

This is a key activity that can make or mar the success of outsourcing.

Both technical as well as ‘soft’ factors are to be taken into account (see pp. 192–193).

Key actions include:

Staff recruitment and retention Focus on building expertise Ensuring regular progress meetings and

reporting.


Review all questions, ask the class to find the answers and present their applicability on some of the recent outsourcing deals in India, such as Aircel, Idea and Forbes.

Ask students to search on the Web and find success and failure studies.]

End of Chapter 9

[Note to Faculties:


10 PLANNING AND MEASURING

RETURNS ON IT INVESTMENT


10.1 BACKGROUND Planning and measuring of returns on IT investment is

needed because IT is not just the cost of doing business IT investment is now substantial in nature IT is a competitive toolkit IT needs ROI-like expectations of benefit The IT function will differ from firm to firm.


10.2 IT BUSINESS VALUE FRAMEWORK Business value includes all forms of value beyond

economic value. Framework by Kwon, Watts–Sussman, and Collopy

(refer to Section 10.2) is useful. See Fig. 10.1. Business value is dependent on scope, efficiency and

effectiveness. The steps are as follows (see pp. 196 – 197):

Link business value to business performance Identify value drivers Determine current and future areas of improvement Create a top-down approach See p. 197 for typical value elements.


10.3 CRITICAL FACTORS FOR IT BUSINESS BENEFIT REALIZATION See p. 198. The critical factors are:

Whether IT is considered a strategic asset Whether business value is ascertained for every investment Well-defined ownership Maturity of IT.


10.4 HOW MUCH IT INVESTMENT IS OPTIMUM Optimality of IT investment depends upon several

factors: Scope and geographical spread Organizational structure Stability and maturity of business IT in products and services Investment by peers.

See Table 10.1.


10.5 HOW TO MEASURE BENEFITS FROM IT See Fig. 10.2.

10.6 DEFINING AND MEASURING RETURN ON INVESTMENT

Various cost components are involved here: direct, indirect, etc.

Various methods can be used: NPV, IRR, break-even, etc.


10.7 COMMUNICATING AND MARKETINGBUSINESS BENEFITS

The following factors are important: Scale of IT service Regular publication Benefits measurement (post-implementation).


Refer to the article in Section 10.2. Ask the class groups to contact business

organizations of their choice and study any business benefit measurement tasks carried out by these organizations. They can interview the CIOs and other business users to arrive at the IT reruns and business benefits.]

End of Chapter 10

[Note to Faculties:


11 STRATEGIES FOR MANAGING

IT-LED CHANGE


11.1 INTRODUCTION

IT strategy implementation is an exercise involving the driving and managing of change.

IT implements the guiding rails between which the organization wants to function to ensure that all required process changes are adopted by the people.

One needs to be aware of the various issues and challenges.


11.2 IT STRATEGY IMPLEMENTATION The target layers of people (see Fig. 11.1) consist of:

Business leader Business user IT professional IT service provider IT outsourcing partner.

All these would be affected and therefore would need proper management, a difficult task in which setbacks frequently lead to IT implementation failure.


11.2.1–11.2.3 Issues

These exist at the following levels: Business alignment End-users IT professionals (in-house as well as partners).


11.3 BARRIERS TO CHANGE The various barriers to change involve:

Not enough ‘buy-in’ Lack of expectations management Inadequate training Not managing the middle Not managing and monitoring the change process

(see pp. 206–207) Inadequate attention to the various Change

Management stages (see Fig. 11.2).


11.4 MANAGING CHANGE See p. 208. The following steps are involved:

Identify the target and impact Deduce motivation and issues of resistance Address these issues Communicate as often as possible Take feedback and modify the implementation of

points 2 and 3 as needed Celebrate the successes and reward the teams Record and implement the lessons learnt.


11.5 STEERING COMMITTEE See p. 210. This is a leadership-level committee that

helps in driving change.

11.6 NEW SKILL-SETS NEEDED, SOFT SKILLS, PEOPLE ISSUE RESOLUTION


Read the Rutima case and discuss it in the class. Go through the references and pick one or two articles

for class discussion.]

End of Chapter 11

[Note to Faculties:


In case of any query, please contact Sanjiva Shankar Dubey at:

[email protected]

Documents

IT Strategy and Management Teaching Aids Chapter 1-11 (Final)