Getting to Yes in Setting IT Priorities: An Approach to Business and IT Alignment

---

Getting to "Yes" in Setting IT Priorities: An Approach to Business and IT Alignment

Even in top-down, hierarchical organizations, decisions require buy-in to be successfully implemented. Therefore, any major IT investment impacting the entire enterprise needs the endorsement, if not the championing, of the greater organization to succeed. Indeed, without the backing and direct participation of the business side of the house, few IT projects will ever realize their goals. For that matter, most significant IT projects entail business and technical requirements analysis, process reengineering, system and service deployment, and end-user training and support. These activities call for the direct involvement of line-of-business personnel. If the business leadership is placed in the situation of choosing and approving what the IT unit undertakes, it is more likely to invest the time of its own people in such efforts.

Not all project suggestions will win the same level of support from business managers. Some will advocate for those that appear to benefit their own lines of business and may actively oppose those of neutral advantage to them. They will most certainly resist items that imply a need for their unit's support without a clear payback. Such responses could be viewed as self-serving, narrow, and petty, but they are also part of human nature. Not everyone shares the same agenda. In addition, your business colleagues may not fully appreciate the enterprise's overall operational needs or its real fiscal and technological constraints. It is therefore essential to find a way to build consensus around a prioritized list of IT investments for the coming year. This requires an approach whereby business leaders agree on the metrics for a balanced evaluation and ranking of proposal options.

Unfortunately, due to the complexities inherent in most IT projects, few in management may be able to discern either the true opportunities or the actual risks associated with a particular item on the wish list. The IT team must ensure that decision makers possess the necessary facts to make an informed choice. There are several dimensions to such deliberations. On the one hand, decision makers must understand each opportunity's value to the enterprise. On the other hand, they must appreciate what it will take for the business to realize that opportunity. In other words, they must know the effort's true scope in terms of cost, difficulty, and the potential for failure. To objectify this assessment of options, some practitioners develop simple scoring mechanisms based on a set of values and metrics agreed to by the decision makers themselves. Typically, such tools plot the ability of the organization to deliver the envisioned IT solution against the value of that solution to the enterprise and its customers. The end product of this process is a portfolio of projects that represent efforts of the highest value and with the greatest likelihood for successful delivery.

My colleague Tom Murphy has employed such a tool to great effect in both for-profit and not-for-profit corporate settings. ^[8] He observes that there are many benefits to his portfolio approach, including the following:

• Evaluation of all potential IT investments on the same set of criteria

• Customization of scoring factors to meet the unique characteristics of a particular company or institution

• Balanced conversation concerning both infrastructure and business IT investments

• Creation of a commonly understood value proposition for IT undertakings that everyone across the business supports

• Identification of ways to improve the success of those IT initiatives chosen through the process

As Murphy also points out, the real teeth in his tool, or any tool like it, are in its ability to produce a standardized score for each proposal, based on business management-defined value and risk metrics. Decision makers may then compare these IT investment option scores and select those that possess the greatest promise of enterprise value while offering the least amount of risk in implementation.

The measures for a particular enterprise will no doubt reflect the values, concerns, strengths, and weaknesses of its business. For example, time-to-market or capturing a larger market share might be particularly important business objectives, whereas strong database and project management skills within the IT team might mitigate certain project risks. Through exploration and negotiation, IT leadership must construct the specific measures that apply to your situation. A generalized application of Murphy's process serves to illustrate. ^[9] See Exhibit 2.

Exhibit 2: An Example of Tom Murphy's Portfolio Scoring Tool for IT Projects

Success Criteria Weights	Major Success Criteria	Specific Questions	Value Criteria Weights	Major Value Criteria	Specific Questions
X1 26 pts	Program scope and complexity	Duration Breadth of users Geographies IT integration Functions	Y1 30 pts	Customer advantage factors	Top 10 focus Category strength Industry response Ease of business Collaboration
X2 22 pts	Sponsorship and commitment	Support level Signoff Resources Funding	Y2 22 pts	Consumer marketing gains	Promotional gain Market insights Marketing mix POS data capture
X3 18 pts	End-user adoption	Involvement Resistance Ease of use Readiness	Y3 18 pts	Financial benefits	Inventory management IT cost savings Manufacturing efficiency IT revenue gain
X4 16 pts	IT resource skills and availability	Dedicated team Consultant use IT skills Past experience	Y4 12 pts	Internal efficiency and production	Workflow Collaboration Functional Systems
X5 10 pts	Project management ability	Project plan Milestones Cost controls Project team Autonomy	Y5 10 pts	Strategic goal enhancement	Decision making Competitive edge of technology Global integration
X6 8 pts	IT risk reduction	Regulatory compliance Risk analysis	Y6 8 pts	Technology fit	IT integration Systems Network Applications
Maximum Points	100		Maximum Points	100

In this example, the X axis of the table addresses project risk while the Y axis addresses customer value. Each measure has an upper point value with the total number of points assigned to both the X and Y variables equal to 100 points. The proposal risk factors include program scope and complexity, the strength of sponsorship and line-of-business commitment, the ease of end-user adoption, the quality and availability of appropriate skills and experience within the IT team, the IT team's project management capabilities, and the overall approach to project risk reduction.

Each factor is further defined by a series of accompanying definitional factors that are shown juxtaposed with each success or risk criterion. Thus, program scope and complexity may be understood in terms of the duration of the project, the breadth of users impacted by its implementation, the geographies or distances involved in the project's rollout, the level of IT integration required, and the complexity of the system functionality accompanying delivery. In this manner, the tool exposes all of the different aspects of each proposal on the enterprise wish list. It provides a uniform way to assess the organization's ability to deliver on that particular commitment. If not enough is known about the proposal to measure its inherent risks, this should speak volumes to those sitting in judgment on corporate IT priorities.

This Murphy tool illustration also systematizes the estimation of project customer value in terms of tangible customer benefits, such as the attainment of known customer requirements; the growing of the business' market share; financial gain to the enterprise; internal improvements in business efficiency and work productivity; progress toward the realization of corporate strategic goals; and the technology fit of the solution. Here, too, the tool provides more descriptive details to assist the management team in scoring each factor. By applying the scoring tool as a group exercise facilitated by PMO project managers, the business can readily establish an objective measure of the risk and value for each proposal on the enterprise's IT project wish list. The results of this analysis may then be represented graphically for the purposes of comparison. See Exhibit 3.

Exhibit 3: Murphy Tool Output — Potential IT Projects' Size versus Value versus Risk

For this process to work, both business and IT must get involved. Most of the information required to facilitate the score process may not be readily known. Joint business and IT teams must spend time in research and analysis, and further time will be consumed in meetings with management to reach consensus on what the data means in scoring particular proposals. Some subjectivity will undoubtedly creep into these discussions. By and large, however, the process should yield a reasonable level of informed, standardized assessments. As part of these deliberations, IT management must take every opportunity to clarify the real (as opposed to the hoped-for) costs of project delivery. Make it crystal clear up front that the true TCO for an initiative will require related IT costs; do not wait for these to surface during implementation. If the TCO for a particular proposal is unacceptable to management, resize the project to bring its costs back in line with the corporation's means or drop it from further consideration. These TCO calculations will not come easily and must be defensible. Here again, it is a good idea to let the PMO team do the research and provide an objective, independent opinion of analytical outcomes.

With this data in hand, leaders will be positioned to come to closure on a short list of approved IT projects. They may opt for those of highest customer value that also carry the greatest possibilities for successful implementation (upper mid-left hand quadrant of Exhibit 3.8), or they may choose fewer but riskier investments that offer great returns (upper right hand quadrant of Exhibit 3.8). Whatever their strategy, ensure that the ultimate decisions are left to the business leadership. For its part, the IT team must clarify the implications of one choice over another, especially when tradeoffs are required in the existing base of IT products and services. To this end, Murphy's approach, or something like it, will assist in leveling the field and forcing rational discourse. If the process is applied effectively, management will first agree to the process and the measures for prioritization and then will work with IT leadership to employ this model in making choices. Thus, this process ensures that the IT organization's resource commitments are aligned with the business objectives of the greater enterprise, taking the onus of saying "no" off the shoulders of IT personnel, allowing the IT team to focus instead on project execution and delivery.

As a result of this alignment process, the IT organization receives its directions for the coming fiscal year. IT management must now incorporate the surviving initiatives from the alignment process into its portfolio of ongoing activities. Ancillary maintenance and support efforts must also be incorporated into the plan, as must any tradeoffs in current offerings. The concluding section of this chapter explores how to capture these decisions as part of an annual IT planning and reporting process. Like the Murphy tool, the author's IT action plan affords a model that the reader can adapt to meet his or her particular needs. In all my years as an IT consultant and manager, I have found that the challenges — such as alignment with the business, balancing the demands for resources, and reaching consensus on the scope of work — are quite similar from one IT organization to the next. My processes and tool recommendations help the IT team to focus on what is most important in communicating more effectively its plans and results to customers and partner providers.

^[8]Tom Murphy, "A Portfolio Planning Approach for IT Investment," Enterprise Operations Management Journal, 42-10-50 (August/September 2003): 1. For more information about the Murphy tool and related services, contact Tom Murphy at <[e-mail].>

^[9]Tom Murphy, "A Portfolio Planning Approach for IT Investment," Enterprise Operations Management Journal, 42-10-50 (August/September 2003): 1. For more information about the Murphy tool and related services, contact Tom Murphy at <[e-mail]>. 3.

---