|By Sanjeev Khurana||
|March 24, 2017 12:00 PM EDT||
A strategy is a planning document that sets a direction for future work to ensure that you end up where you want to be. A strategy allows you to see the wood, despite the trees. A strategy is often used as a management tool for securing the resources needed to get there
IT is now part of the business and forward looking organisations will have senior IT people responsible for helping devise the Corporate Business Strategy
This will include discuss for the next few years how it intends to grow and maintain the business. It may mean doing things like:
- Starting new business lines
- Expanding new business areas, new locations, products enhancements
- Adding new distribution channels
- Making better use of existing customer to cross sell
- Reducing costs
- Stopping businesses
- Regulatory changes
Technology needs to ensure business are agile that can meet business needs in a timely manner, while having a low cost/income ratio. The ability to change systems should be easy and cost efficient. An optimal IT strategy must comprehend the business context, applications, technology, organisational capability and governance.
An IT atrategy should aim to deliver continual business benefits in the form on projects, like monthly and its overall time horizon should be no more than 3 years.
We need to define the functional areas of a business and assess the application(s) which support them. There should be no uncontrolled duplication of functionality or data within the application landscape of an organization.
With a detailed understanding of the business strategy, each applications needs to be assessed:
- How well does the applications meet today's and tomorrow's business needs
- How well does the application support: Core coverage (products, clients, market).
- How well is the application designed and developed to ensure stability (IT reliability, change capacity), scalability, performance and extendable
- Cost of application - need understanding of both Change the business (CTB) and Run the Business (RTB) costs. A high and increasing yearly RTB costs suggest the application needs investment in architectural improvement to reduce this figure.
- Technology infrastructure: the simplicity, uniformity and efficient the infrastructure to meet
- Governance & funding: The decision making process and the ability of IT to meet its objectives. understand the technology cost base eg CTB/RTB ratio
- Organization capability: readiness and capability of human assets to perform consistently with the needs of the organizations
Why are IT projects done and how to measure value
Projects are done to increase revenue, decrease costs & improve efficiency. These can be improve the income statement and balance sheet. An improved income statement and balance sheet can help drive stock price higher. Not all benefits are financial like 1) some are related to strategic, like for competitive positioning, high availability and scalability 2) operational efficiency - allow the organization to be more lean and efficient by doing things like simplify, standardize, integrate, centralize 3) Security, Business continuity, Regulation
In summary, projects need to be able to demonstrate they can:
- Does it potentially increase revenue? If so, how?
- Does it decrease expense? If so, how?
- Does it optimize assets? If so, how?
- Does it improve productivity? If so how?
- Does it mitigate risks (or address regulatory demands)? if so, how?
The "return on investment" (ROI) metric measures, per period, rates of return on money invested in a project in order to decide whether or not to undertake an investment. It is also used as indicator to compare different project investments within a portfolio. The project with best ROI is prioritized.
return on investment = (gain from investment - cost of investment) / cost of investment
This is a powerful thing to add in your Strategy. Strength and Weakness refers to the current environment and Opportunities and Threats refer to the future environment. In producing the Weaknesses, you need to determine the value in overcoming them. You need to understand the weakness, need to know how success will be measured, how important is it to fix it. Likewise, for Opportunities, how would you measure success if the opportunity is fully realized?
Producing a Heatmap
It helps to produce a heatmap where you define whether your application to support a given functionality is a "Buy", which means to invest more on this platform, a "Sell", meaning don't invest and plan to move off, or a "Hold", which is a keep for the time being. For each "Sell", you need to have a plan on what needs to be done, what the cost will be (one-time costs) and ongoing costs, what are the benefits, like productivity gain, cashable benefit, etc.
An IT strategy should answer the following questions:
- Are we doing the right things with technology to address the organization's most important business priorities and continuously deliver value to the clients?
- Are we making the right technology investments?
- Do we measure what is the real value to the organization derived from that technology?
- Is our current Information Technology agile enough; flexible to continuously support a successful organization?
- Is our Information Technology environment properly managed, maintained, secured, able to support the clients, and is it cost effective?
- Can our strategy support current and future business needs?
IT strategy should not be static but needs to continually evolve as the organization continues to do so; close alignment with the business is key to deliver value in a cost effective manner.