IT Value Chain

Summary

 Issue: Technically-oriented people often find it difficult to ‘sell’ their initiatives to decision-makers, resulting in missed opportunities, frustration and a poor image for the IT department.

Guidance: The IT Value Chain is a way of articulating the outcomes of an IT initiative in terms that make sense to business people, e.g. more business, better business, cheaper business.

IT Value Chain

The IT Value Chain is a way of articulating an IT initiative in terms of benefits for both the business (IT’s customer: the user organization) and the IT organization. Being aware of how an IT solution impacts the ‘bottom line’ is beneficial to both the design of the solution and to how to ‘sell’ it to the business. 

Business goals

In the example above, based on a generic commercial enterprise, the bottom line performance is expressed in terms of profit, which is of course the difference between revenue and costs. Costs (the red lines) are either related to IT or the business. Revenue (the blue lines) comes from selling more products and/or services, and/or selling better products at a higher margin. Business goals are expressed simplistically as more, better and/or cheaper business. These goals apply to many commercial enterprises but can be adjusted to accommodate other relevant aspects, for instance capital investment. Public organizations are usually driven by different goals; for instance the criminal justice system in England and Wales aims to "reduce crime by bringing more offences to justice, and to raise public confidence that the system is fair and will deliver for the law-abiding citizen”. So the right hand side of the IT Value Chain should be constructed accordingly. Identifying the enterprise’s goals is an important part of the IT Value Chain process because it focuses the attention on the right aspects.

Business benefitsThe left hand side of the example shows how the outcomes of an IT initiative can be split up into two parts: business benefits and IT benefits. Business benefits have been broken down into better functionality, quicker time to market, and fewer and shorter outages. Better functionality can have service multiple business goals. Better functionality can simply mean that business processes can be executed more efficiently, by automating manual work and reducing labour costs. But better functionality can also contribute to better customer service by providing employees and/or customers with information that enhances the customer experience, for instance by giving insight into current waiting times at a hospital department. And better functionality can also contribute to achieving more business by giving access to new markets through different channels.A quicker time to market means that the IT solution is delivered promptly, enabling the other benefits to be achieved earlier, and for instance beating a competitor to a new market.Fewer an shorter outages contribute to business efficiency but also to a better customer experience, and in turn to better business. Just as the business goals can differ from enterprise to enterprise, these benefits can also differ.

IT benefits

In addition to the business benefits, there are benefits for the IT organization, that translate into lower costs and/or an improve capability to deliver the business benefits. The IT benefits in the example are a more flexible, more productive, and cheaper IT organization. Investment in Agile could make an IT organization more flexible. Investment in tooling lead to better productivity. And application rationalization could reduce IT costs. But just as the business goals and benefits can differ from enterprise to enterprise, these benefits can also differ.

Desired attitude and behavior

Attitude

• Being aware of the importance of translating the output of IT initiatives into outcomes that are formulated in such a way that business people understand them

• Realizing that users often exhibit irrational (‘normal’) behavior and that just communicating in terms of logic may not be effective

   

Behavior

• Engaging with business people to identify the relevant business goals and in so doing, to demonstrate commitment to supporting these goals 

• Talking about the IT solution ‘above the line’, i.e. in terms of the benefits and how they affect the business goals

• Monitoring the actual results in terms of the benefits and the business goals

Additional guidance

COBIT®5 guides enterprises in rigorous governance and management of processes and other enablers related to demand, supply and use of information and technology. It provides excellent guidance for assurance of benefits realization, risk optimization and resource optimization.

Managing BenefitsTM has been carefully designed to complement existing Best Practice in portfolio, programme and project management such as PRINCE2®, MSP®, P3O® & MoP®. It consolidates existing guidance on benefits management into one place, while expanding on the specific practices and techniques aimed at optimizing benefits realization.

The underlying structure of the IT Value Chain has been inspired by the DuPont Analysis and Capgemini’s Benefits LogicTM.

References

• COBIT®5 - www.isaca.org 

• Managing BenefitsTM - www.apmg-international.com

• DuPont Analysis -  www.wikipedia.org 

• Benefits LogicTM - www.capgemini.com 

3 career options if you work in a traditional IT department

IT departments are under pressure from two sides. On the supply side from multiple external service providers that are encroaching into the IT departments’ space and eroding jobs. And on the demand side from the business that is claiming a more dominant role and is engaging external service providers directly, but that at the same time is struggling with their new responsibilities. No, you weren’t expecting this and no, you probably don’t welcome it. But it’s happened and it’s called progress. If you work in an IT department, you have three main options.

• If you want to continue doing IT service management as you always have done, go work for an external services provider.
• If you have feel for logistics and retail, stay in the IT department and develop the competences that will help the IT department fulfill an ‘IT Retail’ function. With increasing technological standardization, ‘IT Manufacturing’ has moved from the IT department to the external service providers.
• If you understand the business and get along well with business people (or ‘normal people’ as my wife likes to call them), jump the fence and move across to the business, where business and IT are morphing into a new function.

Things will change, they might just change without you. So go reinvent yourself.

Multi-supplier value streams (questions, not answers)

About a year ago, I compiled 90 questions that 27 world leaders in IT believe that people in IT Service Management should be asking themselves. The compilation is available here.

From that list I've selected eight that pertain to Multi-supplier value streams, the topic that the Pink Think Tank explored at the Pink14 conference in Las Vegas in February 2014 (Twitter #pinktt). I trust that they are worth thinking about.  

Rob England, IT Skeptic, Owner & Managing Director at Two Hills Ltd, NZ

• How to better manage multi-party value chains? Especially cloud environments and XaaS providers

Troy DuMoulin, Vice President Professional Services at Pink Elephant, USA

• Consider the premise that today’s Enterprise IT functions are made up of a mixed group of diverse suppliers (internal and external) and becoming even more diversified and complex as we integrate cloud and online services. How in the world will an organization keep all these moving parts synchronized in order to play their designated part in the larger value service system or even get them moving in the same direction?
• How can all players in the IT value system achieve shared values, priorities and practices in order to deliver service in a harmonious fashion?
• How can you create a shared IT Operating Model that outlines the key elements of the value stream comprising Demand, Plan, Build and Run?
• Which Enterprise IT Governance Roles are needed to ‘conduct’ all the various parties participating in the Service Orchestra?

Steven de Smet, President itSMF Belgium & Manager at Capgemini Belgium

• Trends and recent rumours predict that IT as a department will disappear, the business will control IT themselves with a maximum of XaaS, cloud and mobility solutions. The purchasing department will manage these contracts. What will be the future for ITSM?

AN Rao, Senior Vice President at Cognizant Technology Solutions, India

• As deals get unbundled and go into multi-vendor sourcing and as the traditional on-premises moves into a hybrid environment, how are CIOs planning to construct their service integration and multi-vendor service management arrangements and contracts ? How would they measure the success of such an arrangement in supporting the business?

James Finister, EMEA Competency Lead for IT Governance, Service Integration & Service Management Excellence at Tata Consultancy Services, UK

• Both IT departments and the business have a track record of failing to leverage benefit from large suppliers. How then will they manage the shift to multiple supplier ecosystems - and should they?

Notes on Mark Burgess' talk about Uncertainty in IT

Very much enjoyed listening to Mark Burgess (@markburgess_OSL) at the Cloudstack Collaboration Conference Europe in Amsterdam. Some of my takeaways:

• Need for interoperability of infrastructures
• Infrastructures -> pervasive & decentralized
• The cloud is more than the cloud - think about the various other bits and pieces that you depend upon
• What are the promises that we can keep?
• The system's environment  pokes and prods at systems from the outside - things fail
• Systems are grown in captivity and then thrown out into the wild
• Systems thinking: Dynamics (what do systems do?) & Semantics (what is intended, the purpose, the human part)
• We miss the causes of failure if we ignore the environment
• DevOps: Dev = semantics (intent) & Ops = Dynamics (behaviour)
• We have to understand both in a balanced way
• Continuous delivery requires continuous automation (analogy: storm drain that prevents flooding)
• No such thing as an immutable system (no intended change is not the same as no change at all)
• An operating system is a city
• Failures are semantic; processes are dynamic
• Talk to business executives about IF THEN MAYBE in terms of risks and gambling 
• Uncertainties in IT (see photo)

Millennials see convergence of demand-supply paradigm

In my ‘Trends in no-man’s-land between business and IT, and other exotic places’ workshop for The Hague University for Applied Sciences on 21 February 2013, the students had the opportunity to share their opinions about the relationship between business and IT, and how the business fulfills their responsibilities with respect to ‘business information management’. The millennial perspective: less division of the business and the IT department in formal demand-supply relationships but shared responsibilities, and not only the need for IT people to have a better understanding of the business perspective but also for business people to be able to assess benefits and risks associated with IT. A detailed paper will be published in a couple of weeks time.

13 questions to assess Business Information Management Quality

Quality of information systems

·         Is the right information available to support the business processes?

·         Is there insight into the managerial improvement requirements for information systems?

·         Is the business using the potential of IT, e.g. social media, big data, BYOD?

·         Is the business using IT to achieve strategic goals?

Acquisition and management of  IT services

·         Is there insight into the costs of the information systems and whether they are normal?

·         Is there insight into the budget that is available for use and operation of information systems and for improvements (changes, projects, programmes)?

·         Is the right amount of time and money being spent on information (technology) – as opposed to other business assets?

·         Does the business manage their side of change to information systems effectively?

·         Has the business got the (delegation of) quality, cost and timeliness of IT services and projects under control?

·         Are adequate specifications for IT created?

Business use of information and IT

·         Are business employees getting the most out of the currently available information and information systems and using them efficiently?

·         Is operational interaction with IT effective and efficient?

·         Is there insight into (1) what the users think about the information systems and (2) their ‘bottom-up’ improvement requirements? 

Management of information and IT – business responsibility or business entitlement?

One of the great things about traveling around the world is that you get to learn about differing ideologies. And when you’re an IT Paradigmologist you focus on differing IT paradigms. Something that has fascinated me for several years in an apparent difference in perspectives between Europe – particularly in the Netherlands – and the US as far as business responsibility for IT is concerned. 

Whereas demand-side activities such as specifying requirements, acceptance testing, monitoring data quality, ensuring effective usage, and negotiating and managing service levels from an IT customer perspective have often been recognized and organized as business responsibilities in Europe, enterprises in the US seem to leave this up to the IT department. Somebody recently used the term ‘entitlement mentality’: the business just expects IT to deal with it and wants to be involved as little as possible. The interesting question is why. 

Politics? Sure, it’s convenient to blame the IT department (always a willing victim) when things go wrong but it’s not exactly in the enterprise’s interest. 

Capabilities? Yes, managing information and IT from a business perspective requires a combination of analytical and communication competences and more. And if you’re not confident, that’s a very human reason to steer clear of taking on this responsibility. Guidance is available for those who recognize the value.

Significance? Information is a business asset but if other business assets such as people, land and capital are more important, of course they will be your higher priority. But even in that case, business managers are running considerable risks of productivity loss, missed revenue and damage to reputation if enterprise information is incorrect or gets into wrongs hands. Can business management afford to take the risk? The following questions will help you make up your mind.

Two overarching questions for starters: is your enterprise spending the right amount of time and money on information (as opposed to other business assets) and is it well-spent? 

Are your enterprise achieving the following high-level business-related goals?

1. Ensuring that the organisation is provided with the information that it needs
2. Acquiring and managing IT services effectively and efficiently, from a demand (business) perspective
3. Ensuring that the organisation uses information and IT effectively and efficiently

Achieving these goals is a corporate responsibility that needs to be addressed and followed from the most senior levels of management to the front line worker. Organizations must be held and must hold their employees accountable to manage information appropriately and responsibly.

Key questions that give an indication of how well business organisations have got their business information management under control, are:

1. Is the right information available to support the business processes?
2. Are business employees getting the most out of the currently available information and information systems?
3. Does the business have insight into what the employees think about the information systems and their ‘bottom-up’ improvement requirements?
4. Does the business have insight into the managerial improvement requirements for information systems?
5. Is the business using the potential of IT, e.g. social media, big data, BYOD?
6. Is the business using IT to achieve strategic goals?
7. Does the business have insight into the costs of the information systems and whether they are normal?
8. Does the business have insight into the budget that is available for use and operation of information systems and for improvements (changes, projects, programmes)?
9. Is the business spending the right amount of time and money on information (technology) – as opposed to other business assets such as people, buildings, capital etc.?
10. Does the business manage change to information systems effectively?
11. Has the business got the (delegation of) quality, cost and timeliness of IT services and projects under control?
12. Does the business create specifications for IT work that are fit-for-use?

Business managers should be able to answer these questions positively, otherwise they’re allowing the business to run a risk and are in any case risking the embarrassment of a negative audit report. IT managers who are aware of this situation can demonstrate their value to the business by proposing corrective measures. Whether these apply to the business or IT, demanding on how business information management is organized, is of secondary importance. The most important thing is that these responsibilities are recognized and addressed.