Tips for assessing & communicating value of IT

Kamala Puram

CIOs today are responsible for developing and defending the IT budget and proving the value of IT to business executives, but that isn't an easy task. These tips, drawn from more than 25 years of IT experience, will make your IT projects more successful as well as eliminating the burden of defending IT initiatives.

PLM Software Implementation

Current Approach

The IT leader completes the capital expenditure request for the software implementation, defends the IT investment needed, and explains how it will support the business goal of reducing product variances by 25 percent.

Strategic (New) Approach

The VP of engineering, who is responsible for new product development globally, has a business goal of "reducing product variances by 25 percent." The VP completes the capital expenditure request, integrating the IT component (for example, in this case, Product Lifecycle Management software), and defends the overall investment required to achieve the business goal, rather than each spend line item.

Key revelations of the recommended approach:

-- The burden of defending IT initiatives as standalone project is eliminated; instead the business leader adopts the IT project as a core enabler of the business strategy. This imparts instant credibility as the business sponsor justifies why the company needs to invest dollars in an IT project.

-- IT projects will likely experience higher success since the business and IT have completely aligned objectives and purpose. Aligned people, process and technology is a winning recipe.

How big is the task of transitioning to this high-impact approach?

1. Active membership at the executive table is a prerequisite.

You should jump into the driver seat to help businesses shape their strategies. Recommend ideas where technology can change the way the business is done. Take the time to educate fellow functional executives about new technologies and share information on industry best practices. Provide real examples of companies that have benefited from such new technologies. Avoid falling into the trap of using acronyms and IT jargon; instead focus on specific business issues that could be leveraged by technology or IT applications--reducing time to market, improving the bottom line through cost reduction, expanding market share, or enhancing competitiveness.

A good example of this is at Procter & Gamble, where the CIO, Filippo Passerini, convinced the business to leverage RFID technology to solve the problem of not having posters and product displays at the right place at the right time during new product introductions.

2. Assign high-performance IT professionals to the business strategy team.

It is critical that you assign IT people who have a good business orientation and think in terms of market share, top- or bottom-line impact, competitiveness, or those passionate about reducing cycle time, so that they can recommend the right IT investment needed to support the business strategy. The IT member should partner with the business project manager and help develop the capital expenditure request (ROI and cash flow impact) with benefits clearly monetized. The IT budget in many cases could be substantial, and it is important that the business project manager have a good understanding of the IT initiative and how IT can enable the overall business strategy.

Business Driven IT Initiative--Key Players

My most recent assignment was with a global manufacturing company. The company had R&D facilities in India and the USA, manufacturing in China and Mexico, and suppliers from the world over. As we started transitioning our workload to India and China, it became impossible to ensure that all parties were viewing the same design documents and were fully aware of real-time design changes. This required us to completely overhaul the current employee mind-set and the available tools. So, the VP of Engineering pulled together a cross-functional team, including a business-savvy IT person to develop new processes to help address current issues and challenges. As part of this analysis, Product Lifecycle Management software was identified as a critical tool needed to help streamline the business process and provide a real-time view of the product design. In this example, the IT budget was almost the entire cost of the project, at more than 80 percent of the total. The VP of Engineering leaned heavily on the IT mentor to recommend the solution that was most cost-effective for the business.

3. The business sponsor presents the ROI to executive management.

The business project manager working closely with the sponsor should integrate the overall budget estimate requirements at the business strategy level and develop the necessary ROI justification. The IT budget should be just one of the line items, and the benefit resulting from it should be incorporated as part of overall ROI analysis. The business sponsor and the IT leader could consider jointly presenting the budget flow-through and ROI analysis. This will enable the business executives to clearly see the connection between the business strategy and the IT initiative. This approach will also eliminate orphan projects that take on a life of their own without any business ownership and ultimately end up abandoned due to budget cuts.

In this example, the vice president of engineering articulated the cost and the benefits information and presented the capital expenditure request to the president and CEO of the business. I was there to provide him support. Intense discussion on business benefits versus cost ensued, ultimately leading to the consensus that the IT project and business initiative were aligned well and all the possible contingencies had been considered.

4. The business strategy governance is indeed the surrogate framework of the IT project.

Within IT a lot of best practices and monitoring tools exist to manage large projects. IT must provide the necessary guidance to the business sponsor to track project progress and manage the business strategy. The onus of ensuring that the project is on track should fall on the business project manager, and he should be responsible for providing ongoing status updates to the executive team. However, the IT leader should track and monitor the IT portion of the project to ensure that all tasks are completed on time and on budget; provide regular status reports to the business sponsor; and work closely with the business managers to make sure that the issues are resolved in a timely fashion.

Successful initiatives have clearly defined roles and responsibilities, processes for timely resolution of issues, visibility into project status at any time, and a governance model that helps make decisions when things vary from the optimal path.

5. Finally, celebrate successes with the business sponsor and recognize the entire team.

Winning is never in isolation; it is invariably a result of cross-functional excellence. Public group celebration provides recognition to key players and fosters future ownership by each member on subsequent projects. IT projects rarely fail because of technology issues; they fail mostly because people and process issues are not addressed or are underestimated.

When you present IT initiatives as an integral part of the business strategy, the need to defend the value of IT becomes moot. Senior executives are readily able to intuitively connect dots between business strategy and IT initiatives.

Kamala Puram is the president of Chrysalis International, a management consulting company, which specializes in creating technology vision and strategy, IT organizational alignment, large global ERP system implementations and IT integration (mergers and acquisitions). She has more than 25 years of IT management experience in various industries.