Business IT Alignment IT Governance and Decision Making

1. Business IT AlignmentIT GovernanceandDecision Making October 31st, 2012 Siamak Amjadi

2. Effective Governance Addresses three Issues How do we make and monitor these decisions? Who should make the decsions? What decisions must be made?

3. What decisions to be made? • IT principles Decisions • IT Investment and Prioritization Decisions • Business Application Needs Decisions • IT Architecture Decisions • IT Infrastructure Decisions IT principles Decisions • High level statements about how IT is used in the business IT principles Decisions • High level statements about how IT is used in the business IT Architecture Decisions • Organizing structures for logic, data, applications and infrastructure, which are blueprinted in set of policies, technical choices and standards … for technical standardization and integration. IT Architecture Decisions • Organizing structures for logic, data, applications and infrastructure, which are blueprinted in set of policies, technical choices and standards … for technical standardization and integration. IT Investment and Prioritization Decisions Decisions about how much and where to invest in IT including project approvals and justification techniques IT Investment and Prioritization Decisions Decisions about how much and where to invest in IT including project approvals and justification techniques IT Infrastructure Decisions • Centrally coordinated, shared IT Services that, provide the foundation for Enterprise’s IT Capability. IT Infrastructure Decisions • Centrally coordinated, shared IT Services that, provide the foundation for Enterprise’s IT Capability. Business Application Needs • Business applications to be purchased or internally developed. Business Application Needs • Business applications to be purchased or internally developed.

4. IT Principles • The most successful enterprises, who have been able to achieve superior business value from their IT investments have a small set of clearly articulated IT principles. • Principles are often short and clear statements, with a transparent rationale behind them. • They can be defined by: • Principles name: a name everybody knows • Statement a leading phrase with clear values • Rationale the motivation \ incentive • Implications how to get there . . .

5. Examples of Principles • Principle: Compliance with Law • Statement: • Enterprise information management processes comply with all relevant laws, policies, and regulations. • Rationale: • Enterprise policy is to abide by laws, policies, and regulations. This will not preclude business process improvements that lead to changes in policies and regulations. • Implications: • The enterprise must be mindful to comply with laws, regulations, and external policies regarding the collection, retention, and management of data. • Education and access to the rules. Efficiency, need, and common sense are not the only drivers. Changes in the law and changes in regulations may drive changes in our processes or applications.

6. Examples of Principles • Principle: Business Continuity • Statement: • Enterprise operations are maintained in spite of system interruptions. • Rationale: • As system operations become more pervasive, we become more dependent on them; therefore, we must consider the reliability of such systems throughout their design and use. Business premises throughout the enterprise must be provided with the capability to continue their business functions regardless of external events. Hardware failure, natural disasters, and data corruption should not be allowed to disrupt or stop enterprise activities. The enterprise business functions must be capable of operating on alternative information delivery mechanisms. • Implications: • Dependency on shared system applications mandates that the risks of business interruption must be established in advance and managed. Management includes but is not limited to periodic reviews, testing for vulnerability and exposure, or designing mission-critical services to assure business function continuity through redundant or alternative capabilities. • Recoverability, redundancy, and maintainability should be addressed at the time of design. • Applications must be assessed for criticality and impact on the enterprise mission, in order to determine what level of continuity is required and what corresponding recovery plan is necessary.

7. Principles of MeadWestvaco link IT Principles must reflect the Business Principles Business Principles IT Principles • Leverage Economy of scale • Standardize processes and technologies • Common tools and business diversity (one ERP system) • Cost control and operational efficiency • Alignment and responsiveness to negotiated business requirements • Benchmarked lowest total cost of ownership • Architectural integrity • Consistent, flexible infrastructure • Rapid development of new applications • Measured, improving and communicated value and responsiveness

8. MetLife seven IT Principles • Enable the business • Ensure information integrity • Create a common customer view • Promote consistent architecture • Utilize industry standards • Reuse before buy; buy before build • Manage IT as an investment IT Principles should define desirable behaviour for both IT professional and users

9. What should enterprise leaders ask themselves? Questions for reflections and inspiration • Has the strategic importance of our IT changed? • Understand the role of IT in helping business in positioning itself uniquely in the market. • What is our competition doing with the IT? • How are the rapids changes in the business affecting the IT • Is our infrastructure allowing us to exploit our intellectual assets? • Data, processes, platforms, ability to scale, customer view … and many others

10. IT Principles should clarify at least three perspectives How will IT support the desired Operating Model? What is the enterprise’s desired Operating Model? Thus, IT Principles state (implicitly or explicitly) the requirements for process standardization and process integration in the enterprise. How will IT be funded?

11. IT Architecture Decisions Architecture Decisions

12. Architecture Decisions • An integrated set of technical choices to guide the organization in satisfying business needs. • The architecture is a set of policies and rules that govern the use of IT … and plot a migration path (roadmap) to the way business will be done • Enterprises need a organizing logic for data, applications and infrastructure, because integration and standardization shape IT capabilities. • Process integration allows multiple business units, in the enterprise, to provide a single face to a customer … moving seamlessly from one function (e.g. Sales) to another (e.g. Service). • This requires • Data standardization • Technology standardization • Applications standardization, and • Structuring business logic

13. Architecture blueprint Architecture policies and designs are often clearly articulated and illustrated in a so-calles architecture blueprint.

14. IT Architecture Questions • What are the core business processes of the enterprise? How are they related? • What information drives these core processes? How must the data be integrated? • What technical capabilities should be standardized enterprise-wide to support IT efficiencies and facilitate process standardization and integration? • What activities must be standardized enterprise-wide to support data integration? • What technology choices will guide the enterprise’s approach to IT initiatives?

15. IT Infrastructure Decisions Infrastructure Decisions

16. IT Infrastructure Decisions • IT Infrastructure is the foundation of planned IT capability (both technical and human) available throughout the business as shared and reliable services and used by multiple applications • Foresight and insight in establishing the right infrastructure at the right time enables rapid implementation of future electronically enabled business initiatives as well as consolidation and cost reduction current business processes • Infrastructure services often include telecommunication, network services, provision and management of large scale computing, management of shared customer databases, and enterprise wide Intranet.

17. Centrally controlled set of IT services Local Applications Fast changing local business apps: Insurance claim processing, Web bank loan apps, customer complaints support system, phone order support systems, etc. IT Infrastructure Shared and Standard Business Solutions (IT Applications) Shared standard apps that change less regularly: accounting, budgeting, HR management etc. Human information technology infrastructure • Shared Information Technology Services Services that are stable over time: management of customer db, LAN, Human infrastructure of knowledge, policies, stds information Technology Components Computers, printers, OS, routers, database sw,

18. IT Infrastructure Questions • What infrastructure services are most critical to achieving the enterprise’s strategic objectives? • For each capability cluster, what infrastructure services should be implemented enterprise-wide and what are the service-level requirements of those services? • How should infrastructure services be priced? • What is the plan for keeping underlying technologies up to date? • What infrastructure services should be outsourced?

19. Business Application Needs Decisions Business Application Decisions

20. Business applications needs decisions • Defining and delivering valour through business application has always been a significant organizational challenge. • Identification of business needs for IT applications has often two conflicting objectives: Creativity … and … discipline. • Creativity to in identifying new and more effective ways to deliver customer value through IT • Discipline is about architectural integrity, ensuring that applications leverage and biuld out of Enterprise Architecture, rather than undermine architectural principles. • Business application need are crusial to re-inforcing the core processes of the enterprises, as well as, responding to market changes.

21. Business Applications Needs Questions • What are the market and business process opportunities for new business applications? • How are experiments designed to assess whether they are successful? • How can business needs be addressed within architectural standards? • When does a business need to justify an exception to the standard? • Who will own the outcomes of each project and institute organizational changes to ensure the value?

22. Business Application Needs Decisions IT Investment Decisions

23. IT Investment prioritization

24. IT Investment Portfolio … is an Investment Portfolio • Different strategic contexts causes enterprises having • Different levelse of IT invenstments, • Diffetent IT portfolios, and • Different indicators of success. Valuation Investment System • Manage the IT investment as any other investment portfolio. • IT and business must agree on the indicators of success. • Align portfolios with enterprise strategies and balance Risk and Return. • Classify the each Euros in any project in categories reflecting business objectives. • Keep track of how the investments in each category have performed – historically. Nordea Change Portfolio

25. IT Asset Classes • One approach to categorization of how the IT investments support different business and management objectives is the four IT Asset Classes. • Strategic: To gain competetive advantage • Informational: To provide information • Transactional: To process transactions and cutting cost • Infrastructure: To provide shared services and integration Strategic Informational Infrastructure Transactional IT Asset Classes

26. What to invest in … during crisis • Investing in high-risk, high-return strategic class? • Or do you want to focus on low-risk, solid-return transactional investments?

27. IT Investment and Prioritization Questions • What process changes or enhancements are strategically most important to the enterprise? • What are the distributions in the current and proposed IT portfolios? • Are the portfolios consistent with the enterprise’s strategic objectives? • What is the relative importance of enterprise-wide versus business unit investments? • Do actual investment practices reflect their relative importance?