The business value of IT : managing risks, optimizing performance, and measuring results

In ordernbsp;to maximizenbsp;IT resources andnbsp;justify IT expenditures, CIO's and other IT managers must be able to identify meaningful metrics and explain them in a way that management can understand. The Business Value of IT: Managing Risks, Optimizing Performance, and Measuring Results solves this problem by providing practical answers to these questions:

What does IT contribute to the business? Why should we care about IT governance? How can we best measure IT performance? How do we mitigate the risks associated with change?

Leading consultants Michael D. Harris, David E. Herron, and Stasia Iwanicki share their real-world experiences to explain how you can demonstrate IT's value, and potentially find extra value you didn't know your IT organization creates. They also show how to apply risk management to process improvement and avoid unintended consequences of process improvement programs. The text provides the understanding required tonbsp;discover the processes necessary to: prioritize yournbsp;organization's IT activities. identify alternative measurement frameworks, andnbsp;evaluate the best approaches to outsourcing.

Many IT organizations have successfully implemented the techniques described in this book to increase their business value. This work identifies the organizational and cultural obstacles you need to remove to get started along the same path.nbsp;

• Foreword p. xiii
• Preface p. xv
• Acknowledgments p. xvii
• Introduction p. xix
• About the Authors p. xxiii
• List of Commonly Used Acronyms p. xxv
• Part I What Does IT Contribute to the Business?
• 1 What Should the Business Expect from IT? p. 3
• Information for Decisions p. 5
• Value for Money p. 6
• Risk Management p. 7
• Innovation p. 8
• Process p. 9
• Responsiveness p. 11
• Summary p. 12
• References p. 12
• 2 How Do I Measure the Value of IT? p. 13
• What Is Value? p. 13
• Why Is It Important to Measure IT Value? p. 15
• Financial Value Measures p. 16
• Total Cost of Ownership (TCO) p. 16
• Return on Investment (ROI) p. 16
• Economic Value Added (EVA) p. 17
• Real Options Valuation (ROV) p. 17
• Return on Assets (ROA) p. 18
• Return on Infrastructure Employed (ROIE) p. 18
• Non-Financial Value Measures p. 19
• Multi-Dimensional Value p. 19
• Strategic Value p. 21
• Using IT Value Measurements for Decisions p. 25
• Dashboards p. 26
• The Business Case p. 27
• Value Visualization p. 29
• Summary p. 31
• References p. 31
• 3 How Much IT Is Enough? p. 33
• ROI or Return on Investment for IT Spending p. 34
• IT Spending as a Percentage of Gross Company Revenue p. 36
• IT Distribution Analysis p. 36
• Organizational Evaluation p. 39
• Containing Cost Versus Innovation p. 40
• Summary p. 42
• References p. 42
• 4 Am I Paying Too Much for IT? p. 43
• What Is a Budget? p. 44
• Defining a Budget for IT p. 44
• IT as a Percent of Revenue p. 46
• IT as a Percent of Total Operating Expenses (Opex) p. 46
• IT as a Strategic Business Partner p. 47
• IT Poised to Enable the Business Strategy p. 51
• Capitalizing IT Expenses p. 52
• Monthly Budget Review p. 54
• Monthly Project Review p. 55
• Summary p. 56
• References p. 56
• Part II Why Should We Care About it Governance?
• 5 Who Governs IT? p. 59
• What Is IT Governance? p. 59
• Key Elements of IT Governance p. 60
• IT Principles Decisions p. 60
• IT Architecture Decisions p. 61
• IT Infrastructure Decisions p. 62
• Business Needs Decisions p. 63
• IT Investment and Prioritization Decisions p. 63
• Decision Input and Decision Making Models p. 64
• Summary p. 69
• Reference p. 70
• 6 What Models Should IT Use? p. 71
• Capability Maturity Model Integration (CMMI) p. 72
• Control Objectives for Information and Related Technology (COBIT) p. 77
• IT Infrastructure Library (ITIL) p. 79
• Service Strategy Processes p. 84
• Service Design Processes p. 86
• Service Transition Processes p. 87
• Service Operation Processes p. 89
• Continual Service Improvement Processes p. 89
• International Organization for Standardization (ISO) p. 90
• Project Management p. 92
• Six Sigma p. 93
• Summary p. 98
• References p. 98
• 7 Are We Outsourcing Effectively? p. 99
• Why Should We Outsource or Why Are We Outsourcing? p. 100
• What Are Our Competitors Outsourcing Today? p. 101
• What Should We Be Outsourcing? p. 105
• Is Our Governance of Outsourcing Appropriate? p. 107
• Are We Engaging With Our Outsourcing Vendors Appropriately? p. 111
• Are Our Service Level Agreements (SLAs) Driving the Behavior We Need? p. 115
• The SLA Framework p. 117
• Identifying Service Level Measures p. 117
• Measuring Levels of Service p. 118
• Monitoring Performance p. 119
• Summary p. 120
• References p. 120
• 8 What Tools Should IT Use? p. 121
• What Are the Business Benefits of Using IT Tools? p. 122
• What Are the Business Risks of Using IT Tools? p. 124
• How Will IT React to Business Questions About Tools? p. 125
• An IT Software Tools Taxonomy p. 127
• Service Management Tools p. 127
• Service Support Tools p. 128
• Service Delivery Tools p. 132
• What Criteria Should We Use for Evaluating Software Tools? p. 133
• What Are the Best Options for Delivering IT Tools to End Users? p. 134
• Summary p. 135
• References p. 135
• Part III Why Should We Measure It Performance?
• 9 How Do I Measure IT Performance? p. 139
• IT Value Contribution p. 140
• Four Key Performance Measures (+ One) p. 142
• Cost p. 143
• Quality p. 143
• Duration p. 143
• Customer Satisfaction p. 144
• The Missing Measure: Size p. 144
• Function Point Analysis p. 146
• Combing the Key Performance Measures p. 147
• Cost and Size p. 147
• Duration and Size p. 148
• Quality and Size p. 148
• Effort and Size Productivity p. 149
• A Successful Measurement Program p. 150
• Determining the Source of the Data p. 150
• Ensuring the Integrity of the Data p. 151
• Reporting the Data p. 151
• Summary p. 152
• References p. 153
• 10 Is IT Operating Effectively? p. 155
• Introducing the Measurement Model p. 155
• Quantitative Data p. 156
• Qualitative Data p. 158
• Collecting the Data p. 160
• Quantitative Data Collection p. 161
• Qualitative Data Collection p. 161
• Analyzing the Data and Reporting the Results p. 163
• Measuring Effectiveness p. 172
• Improved Estimating Practices p. 173
• Summary p. 175
• References p. 175
• 11 Where Are We in Relation to Industry Peers? p. 177
• Comparing to Industry Data p. 178
• Where Does the Data Come From? p. 178
• Comparative Data Points p. 180
• Developing a Baseline p. 180
• Initialization p. 181
• Establishing Baseline Objectives p. 181
• Defining Baseline Deliverables p. 181
• Identifying Key Data Elements p. 182
• Data Collection p. 182
• Defining the Data Collection Process p. 182
• Collecting Quantitative Data p. 182
• Collecting Qualitative Data p. 182
• Analysis p. 183
• Establishing Performance Profiles p. 183
• Establishing Internal Benchmarks p. 183
• Comparing Findings to Industry Data p. 183
• Project Performance Baseline p. 183
• The Baseline Process p. 184
• The Collection Process p. 184
• Quantitative Data p. 184
• Qualitative Data p. 185
• Baseline Deliverables p. 185
• Analysis of Process Strengths and Weaknesses p. 187
• Not-for-Profit Industry Data Sources p. 189
• ISBSG p. 189
• Software Engineering Institute Data p. 190
• The Importance of Auditing p. 191
• Objectives of an Audit p. 192
• Scope of the Audit p. 192
• The Auditing Process p. 193
• Problem Resolution p. 194
• Summary p. 194
• References p. 195
• 12 How Can We Do IT Better? p. 197
• The IT Industry Context p. 197
• Case Studies p. 199
• Case Study 1 Large Financial Institution p. 200
• Case Study 2 Mid-Size Insurance Company p. 202
• Case Study 3 Large Service Organization p. 203
• Performance Modeling p. 204
• Summary p. 205
• Part IV How Should We Change?
• 13 How Can We Manage IT Changes? p. 209
• The Need for Change Management p. 209
• Types of Change p. 210
• Seven Principles of Managing Change p. 211
• Principle 1 Two Levels of Management Support p. 211
• Principle 2 Proper Funding p. 212
• Principle 3 The Business Case p. 213
• Principle 4 Setting and Managing Expectations p. 213
• Principle 5 It's About the People p. 214
• Principle 6 Communicate, Communicate, Communicate p. 214
• Principle 7 Measurement Is Key p. 214
• Managing Resistance p. 215
• Using a Change Agent or a Coach p. 217
• Summary p. 218
• Further Readings p. 218
• 14 How Should IT Manage Risk? p. 219
• Why Perform Risk Planning? p. 220
• How to Begin Risk Planning p. 221
• How Does Security Relate to Risk Planning? p. 225
• What Legislation Has Affected Risk Planning, and Why? p. 226
• Sarbanes-Oxley Act of 2002 p. 226
• Health Insurance Portability and Accountability Act of 1996 (HIPAA) p. 227
• Gramm-Leach-Bliley Act of 1999 (GLB Act) p. 228
• Summary p. 229
• Reference p. 229
• 15 How Should IT Manage Its People? p. 231
• What Should You Expect From Your CIO? p. 232
• Leadership p. 232
• Management Skills p. 233
• Communication Skills p. 234
• Technical Expertise p. 235
• Business Expertise p. 235
• Vision - Ability to Create and Manage Change p. 236
• Ability to Hire, Develop, and Retain High-Quality IT Professionals Who Can Work Together p. 237
• International or Global Experience p. 239
• Industry-Specific Experience p. 240
• Relationship Skills p. 240
• IT Staff as Assets p. 240
• IT Staff and Change p. 243
• IT Staff as Stakeholders p. 245
• Summary p. 248
• References p. 248
• 16 What Should IT Expect From the Business? p. 249
• It's the Relationship That Matters p. 249
• Develop an Operating Model p. 250
• Statement of Commitment p. 253
• Summary p. 254
• References p. 254
• Index p. 255