Strategic IT Planning Comes of Age - New Forrester Analysis

Since the turn of the decade, forward-thinking executives and technologists have pondered how to use enterprise architecture and IT planning processes to drive enterprise strategy. This has not been an easy road.

In the run up to the dot-com bubble, IT organizations went on a spending binge. Most companies purchased technologies without proper due diligence or strategic planning. By 2000, CIOs had a larger share of the enterprise budget than ever before.

With the crash of the dot-com boom, IT organizations were dramatically overextended on spend and commitment to business process automation. With constricted budgets and head count, IT rapidly found itself on the defensive. CIOs and VPs of IT lost what gains they might have had related to influencing corporate strategy—they lost their seats at the table.

From 2002–2007, IT organizations restructured and refocused. Cost reduction and efficiency gains were the primary areas for IT to impact the enterprise. While IT spend dropped dramatically, in many companies, IT began to regain credibility by delivering measurable value in reasonable time frames.

By 2005, an intrepid few organizations began to understand the implications of merging cost cutting and efficiency strategies with strategic planning, standards management, and business alignment concepts. A handful of tools vendors launched offerings that combined the best of both these worlds.

Fast forward to 2009. In the heart of economic darkness, we are seeing a broadening renaissance of IT strategy. Companies such as Barclays Bank, Accenture, and Vodafone as well as government agencies such as the Department of Homeland Security and the Los Alamos National Laboratory have made investments in strategic IT planning capabilities, and returns on investment as great as 700 percent have been validated for these kinds of projects.

Recently, Forrester stepped into the fray with a report titled “Tools for IT Planning” (March 23, 2009, by Sharyn Leaver with Tim DeGennaro and Alex Cullen). In this report, Leaver and colleagues describe the “optimal tool base as one that keeps information regarding business strategy, IT capability, demand, capacity, and standards in a single place.” The report also outlined the elements provided in an IT planning tool as follows:
A repository of application data.

  • Capability maps.
  • Gap analysis tools.
  • Modeling and analytic capability.
  • Reporting tools.

The Forrester analysts conclude, “Planning tools are a dream come true to planning teams and CIOs. Having such a wealth of information in one place in a format that allows for the data to be easily manipulated and compared is a desire of all IT organizations across all decision-making processes.”

At A&G, we’ve tracked the maturity of strategic planning tools and processes for almost a decade. We are pleased to finally see a growing acknowledgment of the necessity and timeliness of those capabilities.

by Jonas Lamis, the founding editor of Architecture & Governance Magazine.

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Comments

Strategic Planning

Tue, 2009-06-23 15:29 — mgoetsch

There is much more to do in regards to IT strategic planning. One of the difficulities that is missed is work done on financial analysis. Cost drven dynamics as developed in ROI calculations is often misleading and in many cases wrong. The difficulty is that the cost-driven dynamics do not account for "real value to the firm" which is difficult even with the more traditional profit driven approaches. The approach that many have taken is Kaplan's activity-based accounting which uses a variant of the "time & materials" calculation used in consulting projects. This is a weak proxy and lacks the necessary option-adjusted function that accounts for other costs (such as opportunity costs) and the adjusted cost of switching.

In the case above the term 700% is used which can mean anything from 700% the cost of pencils and employee's time (which may in fact not be very successful but still generating a high percentage ROI. Think one resource allocated may make a personal contribution but it might not affect the overal enterprise). It could be used in some "scale-up" argument except that if an enterprise architecture project cost $1 million then one would expect $70 million revenue increase or cost savings. How can we attribute that entirely to strategic planning? The answer is that you cannot. Most business executives would look at someone cross-eyed when that number is thrown around too often. The argument then is "if I put in $10 million then I should get back $700 million.

If we are going to be treated as more than IT "geeks" we are going to have to start learning more than the mythical ROI calculation.