IPMA Executive Conference Value of IT September 22, 2005

IPMA Executive Seminar 2005 Value of IT 2 Today’s Discussion The purpose of today’s discussion is to provide an opportunity to share ideas and lessons learned on how to determine the “Value of IT”  Presentation Define the problem Discuss an approach Discuss how to get started  Panel Discussion Share experiences Open discussions

IPMA Executive Seminar 2005 Value of IT 3 Introduction The Problem Information Technology makes up a significant portion of an organization’s budget Information Technology competes for precious resources; and therefore, must demonstrate value to the organization  How does IT demonstrate the value that it provides to the business?  How can IT best evaluate the effectiveness and efficiencies of its operations? In today’s business world, it has become virtually impossible to separate business from technology So, the problem is………..

IPMA Executive Seminar 2005 Value of IT 4 Introduction The Problem Many have tried to define: What Defines Value? Who Defines Value? How is Value Measured? How does an organization quantify the value of information technology Balanced Scorecard SLA’s GMAP ROI Analysis Customer Satisfaction Surveys Performance Measures Outcome Measures So, why is it so hard?

IPMA Executive Seminar 2005 Value of IT 5 Introduction The Problem - “Value” is in the eye of the beholder! Webster’s Dictionary defines “Value” as:  Worth of a thing in money or goods; estimated worth; that quality of a thing that makes it more or less desirable; a thing or quality having intrinsic worth What is the value of a hammer? To a roofer? To me? What is the value of technology? To a business customer? To a technologist?

IPMA Executive Seminar 2005 Value of IT 6 Introduction The Problem - “Value” is in the eye of the beholder! We will never be successful at determining the value of IT if we do not have a common definition of value, and a common answer to these questions: What Defines Value? Who Defines Value? How is Value Measured?

IPMA Executive Seminar 2005 Value of IT 7 Who Defines Value? Value is defined by needs at “multiple levels” in an organization:  Executives  Program Managers  End Users

IPMA Executive Seminar 2005 Value of IT 8 What Defines Value? Value is best defined in terms of “Outcomes”  Outcomes – are the conclusion of core functions; the results of activities, which accomplish the end product of service to the customer

IPMA Executive Seminar 2005 Value of IT 9 How is Value Measured? Value is best measured by establishing:  Objectives –clarify how the organization will realize their outcome; they are actionable and measurable  Measures – describe how the outcome will be measured  Target Measures – quantify the outcome by establishing a common understanding of what we are striving to accomplish IT Value is the difference between whether an objective’s target measures are met with or without IT  Immunization outreach programs may expect 60% without direct mailing, but 75% if parents are contacted

IPMA Executive Seminar 2005 Value of IT 10 Technology Activities Services Processes/ Solutions Infrastructure Data/ Information Knowledge Skills S Best Practices Performance Measured (How well you do your business) So, What Is So Hard? Measures and Target Measures Outcomes Strategies Initiatives Mission & Vision Performance Measured (How well you do your business) Objectives Business Activities Services Processes/ Solutions Infrastructure Data/ Information Knowledge Skills S Best Practices Governance

IPMA Executive Seminar 2005 Value of IT 11 So, What Is So Hard? We try to define value for our customers We measure things we currently collect data on vs. measuring things important to the organization We don’t align outcomes/objectives/strategies/initiatives/ measures We don’t fund activities based on defined outcomes; or even more importantly, we fund non-contributing activities We select too many measures  Use measurements for good – they change behavior We don’t always measure things in our control We don’t evaluate results on an on-going basis  Annual review is not sufficient

IPMA Executive Seminar 2005 Value of IT 12 So, What Is So Hard? Senior Executives understand the importance of IT in running their businesses, but do not always see it as a significant advantage They often see IT as a major hindrance to change due to cultural and technical barriers IT Value depends on successful management of IT resources and a clear understanding of IT’s value add Bottom-line  We don’t focus on answering the 3 questions: 1. Who defines value? 2. What defines value? 3. How is value measured?  When we do answer the three questions, we don’t formalize (contract) our agreements with each other to establish clear roles and responsibilities and deliverables  Therefore, we can not assert we did what we said we would do

IPMA Executive Seminar 2005 Value of IT 13 Defining The Value of IT Define the Value of IT Create your Value Program Develop a Value Program Contract Monitor Results & Adjust Align Business And IT Strategies Review Resource Allocations

IPMA Executive Seminar 2005 Value of IT 14 Defining The Value of IT Define the Value of IT  Gain an understanding of “need” by analyzing organizational plans & GMAP results  Conduct program/customer interviews (at any level of the organization) to determine: What changes are you making to improve program outcomes? Where can IT help? What would you consider success? What will be your objectives, measures and target measures? What initiatives are you planning this year?  Will technology be needed to implement your initiative?  Look for value opportunities Define the Value of IT Create your Value Program Develop a Value Program Contract Monitor Results & Adjust Align Business and IT Strategies Review Resource Allocations

IPMA Executive Seminar 2005 Value of IT 15 Defining The Value of IT Create Your Value Program  Evaluate your interview results Look for similarities that can be leveraged  Can you identify common strategies?  Can you identify common outcomes? Identify program strategies and objectives Define IT roles in supporting program outcomes/strategies Define measures and targets  Conduct workshops that will assist your customers with identifying and envisioning opportunities  Cluster ideas, look for an enterprise view Define the Value of IT Create your Value Program Develop a Value Program Contract Monitor Results & Adjust Align Business and IT Strategies Review Resource Allocations

IPMA Executive Seminar 2005 Value of IT 16 Defining The Value of IT Develop Value Program Contract(s)  Contracts are used to establish “value” and to agree how IT will be measured  Best when there is an organizational understanding of Governance  Contract should include: Scope of work Contract participants (may be multiple entities) Outcomes, Objectives, Strategies and Initiatives Measures and Targets that focus on  Program outcomes  Performance outcomes Define the Value of IT Create your Value Program Develop a Value Program Contract Monitor Results & Adjust Align Business and IT Strategies Review Resource Allocations

IPMA Executive Seminar 2005 Value of IT 17 Defining The Value of IT Align Business and IT Strategies  Once your contracts are in place, validate IT alignment  Understand individual program’s outcomes and how they combine to meet organizational objectives  Combine the IT efforts in the same manner  Tell your story in terms of outcomes  Use this test to determine if you are doing the right thing, at the right time Prioritize your efforts Take things off the plate!!!!! Define the Value of IT Create your Value Program Develop a Value Program Contract Monitor Results & Adjust Align Business and IT Strategies Review Resource Allocations

IPMA Executive Seminar 2005 Value of IT 18 Defining The Value of IT Review Resource Allocations  Look at Technology Activities Budget – Are we funding only those activities that can be tracked to the outcomes, indicators, and strategies? People – How are they allocated? Do they have the right skills? Processes – Are they usable? Are they best practices? Technology – Is it being driven by need that supports and improves program outcomes?  Recognize that all resources and activities should track to your Value Program; however, not all will be measured and reported Expand your Value Program as you grow in experience and maturity Define the Value of IT Create your Value Program Develop a Value Program Contract Monitor Results & Adjust Align Business and IT Strategies Review Resource Allocations

IPMA Executive Seminar 2005 Value of IT 19 Defining The Value of IT Monitor Results and Adjust  Review indicators quarterly, at a minimum Understand how you are included or support GMAP activities  Ensure you have the data collection activities in place that support your Value Program  Be responsive to feedback A critical few indicators are key to success Define the Value of IT Create your Value Program Develop a Value Program Contract Monitor Results & Adjust Align Business and IT Strategies Review Resource Allocations

IPMA Executive Seminar 2005 Value of IT 20 Remember! Too perfect and too precise forces us into a thought process that is ultimately not doable Create a top down and specific program approach to value; however, be aware of how specific program’s continue to satisfy the enterprise Be aware of the full range of organizational objectives, but select based on organizational maturity Once you have defined “how” value will be measured then you can establish accountability – who will do what by when!

IPMA Executive Seminar 2005 Value of IT 21 Conclusion Value is in the eye of the beholder! The value of IT is measured over time based on your ability to demonstrate if IT is:  Doing the right thing!  At the right time!  For the right price!  In the right way!  Again and again and again and again!

Panel Discussion