Get in line
BY SANDRA A. SWANSON :::::: PHOTO BY MARK KEGANS
are spurring a game-changing mentality in IT portfolio management. No longer can CIOs and tech teams set their own terms for major IT investments. These days, IT projects must align with organizational strategy and contribute to business growth—or risk being killed.
“Already, there is no such thing as a pure IT project,” declared IT research firm Gartner in its 2011 CIO Agenda. “Whether investments are more IT-intensive or less so, they are all business projects.”
Gartner's survey found that 66 percent of 2,000 global IT executives ranked business results and knowledge as their primary sources of success and influence. “CIOs recognize that they need to reposition themselves and IT to support enterprise innovation and growth,” the report said.
It seems like that should have been obvious all along.
“When you really look at it, the surprising thing is that aligning to business strategy was ever not the focus of the IT project portfolio,” says Audrey Apfel, managing vice president at Gartner Research, Stamford, Connecticut, USA.
Yet all too often, teams have delivered IT projects with revolutionary technology—and no full adoption in the business world. (Google Wave, the tech giant's failed attempt at a real-time messaging platform, is just one example.) Now, though, the IT project portfolio is under greater scrutiny as recession-wary executives look to make sure all that money they're pumping into IT actually delivers benefits to the business.
Forty-one percent of organizations expect increased use of technology or IT processes to specifically boost their revenue, according to a survey of nearly 400 North American managers by Baseline.
“In the past, the CIOs' duties were to keep the trains running on time,” says David Kistler, vice president and CIO of Dynamics Research Corporation, a government technology provider in Andover, Massachusetts, USA. “Today, I consider the CIO role to be one of a ‘chief innovation officer’ by improving key processes and making those processes extremely efficient through enabling technologies.”
Global telemarketing and outsourcing firm Sitel has a fairly straightforward method to ensure alignment: If an IT project's business case isn't in sync with the company's financial and strategic goals, it doesn't launch.
As part of its planning process, the company's enterprise project management office (EPMO) requires a detailed due diligence review of every IT solution proposed, explains Bruce M. Stone, PMP, senior project manager in the EPMO at Sitel in Des Moines, Iowa, USA.
Project managers must build a business case, looking at strategic alignment and working closely with the finance group to ensure the ROI and cash-flow models support the project capital needs. From there, Sitel has a formal senior management committee that analyzes whether the project is in sync with financial and strategic business goals, security and compliance guidelines, and contractual requirements. If a business case doesn't meet these standards, it doesn't move past the initial phase.
The EPMO also has implemented quality-control gates that require the project manager to work with stakeholders across the enterprise—from operations, finance, IT and human resources—to maintain strategic alignment through the project life cycle, Mr. Stone says.
The IT and human resources teams collaborated on a web-based recruiting tool viewed as key to Sitel's ability to find the talent needed to meet organizational goals. That alignment not only helped expedite project approval, it also helped the team deliver a project with true business value when it reached full implementation in December 2011.
“The cumulative effect is a multimillion-dollar annual cost savings for recruitment and retention and a significant increase in Sitel's ability to service the corporations' talent recruitment and retention needs,” Mr. Stone says.
CREATING THE RIGHT MINDSET
Bringing IT projects into alignment with the organization's business goals isn't simply a matter of adding another process to the planning stages. Rather, it requires a fundamental shift in the way IT project teams approach everything they do.
That shift will not always be readily embraced. It's up to organizations to rally their IT project professionals around a focus on business outcomes instead of technical performance issues.
Organizational leaders should groom their tech teams to think and speak in terms of business value, says Carlos Roberto Katayama, CIO at Usiminas, a steel producer in Sao Paulo, Brazil. “It's our role to help IT focus on the business vision of the projects,” he says.
4 STEPS TO BUILDING A BETTER BUSINESS CASE FOR TECH PROJECTS
Determine how the project contributes to the organization's competitive positioning, says Bruce M. Stone, PMP, Sitel, Des Moines, Iowa, USA. “What is the competitive advantage—and how durable is the advantage?”
Highlight qualitative as well as quantitative advantages, says Olen Pepple, Novus Origo, San Diego, California, USA. “Not all benefits can or should be measured, but they are just as important,” he says. “A company website is essential for a public-facing organization, and the cost to quantify that fact would be a waste of resources.”
Identify the value. “What are drivers make this project an imperative from each stakeholder's point of reference?” Mr. Stone says.
Create a “30-second value proposition,” Mr. Stone adds. Be able to make your case for the project in a single sentence.
Mr. Katayama brings his IT team into long-term project portfolio planning to collaborate on how IT projects can help meet the company's goal of doubling its output by 2015. “We have identified 35 different projects to help us achieve this goal, and IT is part of almost all of them,” he says.
By involving the IT team in strategic planning, it has an opportunity to offer ideas in sync with business goals, says Mr. Katayama. When the company looked to reduce safety risks on work sites, for example, his team suggested an IT-driven answer: provide site workers with mobile devices so they could communicate potential issues—as well as possible solutions—with project leaders in real time.
He also puts his IT team members through rigorous training to teach them how to talk about their projects in business terms and connect IT investments with corporate goals. In addition, he meets monthly with tech project leaders to discuss their progress in terms of strategic value, including how the projects contribute to profit and loss, customer satisfaction and process-improvement goals.
“Of course, we still worry about meeting cost and time commitments, but the primary purpose of these meetings is to discuss business results,” Mr. Katayama says. “We no longer talk about projects in terms of technology. We talk about business results and value added.”
Shifting the focus has helped build respect for the IT project team among senior leadership—and helped Usiminas achieve its goals. “We are more profitable, we have been able to reduce inventory, and we have achieved better synchronization of the supply chain thanks to our IT strategy,” Mr. Katayama says. “That is how we have changed the perception of IT from a cost center to a strategic business unit.”
If IT teams are left to operate in a vacuum, the decisions they make—about what technologies to use, for example—lack context. Showing IT teams how their projects relate (or don't relate) to business goals can help them make more informed judgments.
“Our IT projects typically don't just happen out of thin air,” says Kelly Bedrich, PMP, director of IT at Houston, Texas, USA-based APQC, a benchmarking and business research not-for-profit.
IT projects are tied to APQC's annual strategic initiatives and have a business owner serving as sponsor. If an IT project doesn't align to a specific strategic initiative, it's immediately moved down the priority list, he says. And those that do demonstrate alignment tend to get the extra attention they need. “The stakeholders know what to expect out of a project and tend to stay more involved in the full project life cycle since they're tied to strategic initiatives,” says Mr. Bedrich.
UNDER THE MICROSCOPE
IT projects are already under pressure. A global survey by the Standish Group found that only 37 percent of the 10,000 IT projects studied came in on time and on budget in 2010 (the last year for which figures are available). More than 40 percent came in over budget, late or with less-than-required features; 21 percent failed completely.
By aligning IT projects with strategy, the expectation is that teams will deliver on-time, on-budget IT projects that meet business—not just technology—needs.
That means added pressure on IT projects, which isn't always a bad thing. “When there's value to the business, [sponsors] quickly become highly engaged partners, which most often translates into improved implementation and execution,” says Mr. Kistler.
Of course, a higher profile also usually translates to higher demand for metrics—solid numbers that clearly show that what's talked about in the planning stages actually gets delivered.
“Unfortunately, with many organizations, business strategy is more about slogans and hand-waving than anything that is well-articulated in terms of business outcomes,” says Vaughan Merlyn, principal at IT management consulting firm The Merlyn Group, Roswell, Georgia, USA. “We ought to be able to show, even if only anecdotally, ‘What is it about this investment that is important to our business strategy? How does this investment further our business strategy? And if I can't make a clear and compelling case for that, why are we investing in this?’”
Nothing makes the case better than data.
“Although some feel the term ROI is passé, it's more important than ever,” says Olen Pepple, COO of Novus Origo, a program and project management consulting and training services firm headquartered in San Diego, California, USA.
THE GOAL should be to clearly show how the project delivers tangible, quantifiable benefits to the organization.
“The days of the subjective green/yellow/red dashboard are over,” he says. “The business requires full accountability for the resources being invested in the portfolio and will not hesitate to pull the plug on a project if it is not bearing fruit.”
At Dynamics Research, Mr. Kistler imposes a nine-month limit for his project managers to deliver ROI. Too often, major tech projects that go on for years fail—and then fail to deliver on the original promise, he says. So the company divides its IT projects into smaller, business-oriented segments that are more likely to stay in line and deliver organizational value.
The goal should be to clearly show how the project delivers tangible, quantifiable benefits to the organization.
“Measure the outcome and the results you are looking for, not the technology,” says Ms. Apfel. “It's like asking, ‘What's the business benefit of the light bulb?’ The answer is not about watts and lumens. It's about how many books I can read at night.”
As with any process, though, organizations mustn't view strategic alignment as a panacea for all IT project woes. “It doesn't address the fact that we still have to execute well,” says Ms. Apfel. “So it is not the holy grail for fixing all challenged projects.” PM
IT'S LIKE ASKING, ‘WHAT'S THE BUSINESS BENEFIT OF THE LIGHT BULB?’ THE ANSWER IS NOT ABOUT WATTS AND LUMENS. IT'S ABOUT HOW MANY BOOKS I CAN READ AT NIGHT.”
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