IDSC 4204W Midterm

Reasons IT projects Fall short

-Missing focus

-Content Issues

-Skill Issues

-execution Issues

Main Reason IT Projects Fall short

Lack of business alignment

IT Governance

The leadership, organizational structures and processes that ensure that the enterprises information technology supports the organizations strategies and objectives

Leadership in IT Governance

-monitor oversight

-service

· Key Decisions in IT governance

-IT principles

-IT Architecture

-IT infrastructure

-Business Applications

-IT investment

IT Principles

Enterprise level objectives for IT- role of IT

IT Architecture

The logic for process, application, data and infrastructure

IT Infrastructure

Servers, desktops, networks, databases, common apps

Business Applications

Software applications that service business needs

IT Investment

How much to invest, and what projects to fund

Decision Makers in IT Governance

-Business Monarchy

-IT monarchy

-Feudal

-Federal

-IT duopoly

-Anarchy

Business Monarchy

Business executives

IT Monarchy

Individual or group of IT executives

Feudal

Business unit leaders, line managers

Federal

C-level executives and business units together

IT Duopoly

IT and Business

Anarchy

Each Individual user

What decision makers are in a centralized governance?

-business monarchy

-IT monarchy

What decision makers are in a hybrid governance?

-federal

-IT duopoly

What decision makers are in a decentralized governance?

Feudal

Who should the CIO report to with focus on differentiation?

CEO

Who should the CIO report to with focus on cost leadership?

CFO

Decision Making Structures in IT Governance

-Executive Committee, IT steering committee, IT policy Board

- IT architecture committee, IT architecture Review Board

-Process councils, process owners, business/ IT relationship managers

Executive Committee, IT steering committee, IT policy Board

Small number of high level executives often including the CIO make decisions to ensure IT business alignment

IT architecture committee, IT architecture Review Board

Senior IT executives define key IT standards and sometimes grant exemptions

Process councils, process owners, business/ IT relationship managers

Understand business as well as IT. Define process standards, and approve process experiments and change

Decision Making Process in IT Governance

-IT investment Approval Process

-IT architecture exception process·

-Service Level Agreements and Chargeback-

-Project and Business Value tracking

IT investment Approval Process

standardized IT investment approval templates to describe alignment with business strategy, financial analysis, risk assessment

IT architecture exception process

standards are important for efficiency, but occasional exceptions are necessary

Service Level Agreements and Chargeback

specify the level of service IT will provide and the cost/price of that service

Project and Business Value tracking

track the development of new systems, and value derived from new systems

What is the tradeoff in IT governance?

synergy and autonomy

Main points in Johnson and Johnson Case

-started in decentralized feudal system with no CIO or leadership

-Moved to federal and developed organization and standardization

Operating Model Definition

The degree to which a company standardizes its core processes and integrates its data

Autonomous

High data integration and low process standardization

Replication

High business process standardization and low need for data integration

Coordination

o HIGH need for data integration, LOW business process standardization

o Shared customers, products suppliers

o Business unit control over business process design

Unification

o HIGH need for business process standardization, HIGH need for data integration

o Shared customers, suppliers, products

o High level process owners design standard processes

Diversification

o LOW need for data integration, LOW need for business process standardization

o Few shared customers, products, suppliers

o Business unit control over business process design

Replication

o HIGH business process standardization, LOW need for data integration

o Few shared customers, suppliers, products

o Locally owned data

o Shared business processes

Cirque Du Soleil Overview

· Very decentralized/unorganized

· Low standardization- want more standardized processes

· Goal- more shows- growth through info/talent sharing

· Want higher process standardization and data integration

· New IT governance- standardization/digitalized data

Enterprise IT Architecture Definition

· Organizing logic for business processes, applications, data and infrastructure technologies to enable the firm's business strategy

· Policies and standards for the design of business processes, databases, applications and infrastructure technologies

· Operating model drives enterprise architecture

IT Architecture Stages

-Application Silo

-Standardized Technology

-Rationalized Data/Optimized Core

-Modular Architecture

Application Silo

- The architecture of individual applications to address the specific business needs of a function, business unit or geography

- Diversification operating model

-Data closely tied to applications

-Business users focus on value of the applications

-Few shared infrastructure services

Application Silo Benefits and Risks

· Local optimization and innovation, as there is no contstraint on development

· Projects can be funded on simple cost benefit analysis

· Unconnected applications, no integration

· High cost of maintenance

Standardized Technology

§ Enterprise wide standards for infrastructure

§ Diversification operating model

§ Reduced number of platforms/technologies supported

§ Application silo problem still exists-each application defines its own data

§ Think of enterprise architecture in terms of shared infrastructure

Standardized Technology Benefits and Risks

· IT efficiency-reduced costs

· Technology standardization also increase maintainability, reliability, security

· Funding infrastructure is harder than funding individual applications where business value is more easily measured

Application Silo Key governance

Business Case and Standardized project methodology

Standardized Technology Key Governance

IT standards committee, Infrastructure Funding and renewal process, A formal architectural compliance and exception process

Rationalized Data/Optimized Core

§ Enterprise wide standards include standardization of data and processes

§ Coordination, replication, unification

§ Data from apps extracted and managed centrally and made available to other apps

§ Core business processes defined and implemented using standardized applications

Rationalized Data/Optimized Core Key Governance

Enterprise wide process owners and data standardization

Rationalized Data/Optimized Core Benefits and Risks

· Business process efficiency

· Standardization enables innovation

· Business process standardization is harder to sell to managers than technology standardization

Modular Architecture

§ Builds on enterprise wide standards with loosely coupled standards for applications, data and infrastructure

§ Strategic agility from customized, reusable modules

§ Coordination, replication, unification

§ Customization and experimentation to meet local needs

§ Successful experiments, standardized and made available to others

Modular Architecture Key Governance

Define boundaries for business experiments, component funding and approval process

Modular Architecture Benefits and Risks

· Opportunity for strategic agility, innovation and responsiveness

· May lead to application silo

What is the tradeoff as firms move across IT architecture stages?

local and global flexibility

Cemex Case overview

· Role of IT- assimilation/integration of acquisition

o Standardize and best practices

o Operational efficiency- build scale-acquisitions

· Commodity product- hard to differentiate- need low costs

Digital Transformation Definition

A radical rethinking using technology, people and processes to fundamentally change business performance

· Christensens disruptive innovation idea

New products and services that remake industries generally at the expense of incumbent firms

Two Dimensions of Platform Business

-Degree of Openness

-Business Model Style

Degree of Openness

-public

-private

-internal

Public Degree of Openness

open to everyone

Private Degree of Openness

Participants have known prior relationships

Internal Degree of openness

restricts platform activities to entities within the enterprise

Business Model Styles

-collaboration

-orchestration

-creation

-matching

Collaboration Model

amplifies existing relationships

Orchestration Model

allows different components to be brought together to deliver a service

Creation Model

provides building blocks and infrastructure to provide new value

Matching Model

matches demand and supply of a service

Netflix Case Overview

· Netflix disrupts blockbuster

· Currently utilizing collaborative model

· Need to figure out how to become competitive and disruptive again

Budget Estimate- Total Cost of Ownership

o Acquisition and procurement

o Operations and maintenance

o End of life management

Top Down Estimates Types of Benefits

-strategic

-tactical

-operational

Types of Risk

-development

-organizational

-market risk

Development Risk

Can the unit develop the proposed system

Organizational Risk

Can the organization assimilate the organizational changes

Market Risk

How the changes in the environment will affect organizational returns from the new system

How do companies respond to risk?

o Downplay the level of risk

o Penalize IT projects with a high hurdle rate

o Treat setbacks on IT projects as inadequacies of the project team

· Limitations of NPV method

o Makes debatable assumptions

-- Investment is reversible

--Now or never decision

o Most investments are irreversible, but can be delayed

o Investment opportunities are options

· Options Approach to IT investment

-defer

-stage

-growth

-abandon

Defer Option

put off without reducing benefits

Stage Option

divided into distinct phases- cost and benefits after each stage

Growth Option

initial baseline investment opens the door to pursue a variety of potential follow on projects

Framework for Evaluating IT investments

-Renewal

-Process Improvement

-Transformation

-Experiments

Bottom Up Estimates Overview

· Starts with Work package estimates

· Deliverable oriented

Bottom Up Estimating Steps

1. Build work breakdown structure

§ Begins with deliverables

2. Identify task relationships

3. Estimate work packages

4. Assign costed resources

5. Obtain project cost

Estimating Software Costs

1. Develop UCD and Use Cases

2. Calculate UAW

3. Calculate UUCW

4. Estimate Technical Complexity Factor

5. Estimate Environmental complexity factor

IT Investment Portfolio Management Definition

· Selecting the right set of IT projects that are aligned with the organization's strategy and improve returns on IT investments

· Ensures the right projects are done

Firm wide Infrastructure

o The foundation of network, computing, and database services on which IT applications run

o Goal-integration, flexibility, reduced IT costs through standardization

Transactional Systems

o Process basic business transactions cost effectively

o Goal-reduce costs through increased throughput

Informational Systems

o Provide aggregated information to monitor and control the performance of the organization

o Goal-better information, increased control, improved quality

Strategic Systems

o Applications that provide a competitive advantaged

o Goal-increase sales, competitive advantage, market positioning

Portfolio Management Process

-inventory of all IT projects

-ranking and selection of projects

-managing the project portfolio

IT Chargeback Types

-cost center

-service center

-profit Center

Cost Center Chargeback

o IT as corporate overhead

o IT cost charged to divisions on some ad hoc basic

Cost Center Chargeback Pros and cons

o Advantages

- Simple and easily understood

o Disadvantages

- Little incentive for IT unit to be efficient

- No incentive for users to consumer prudently

- Politicization of prioritization

Service Center Chargeback

o IT unit offers IT services for price

o Business units pay for consumption

o Price set to recover IT units costs

Service Center Chargeback Pros and Cons

o Advantages

- Price mechanism for users to consume prudently

o Disadvantage

- Little incentive for IT to be efficient

Profit Center Chargeback

o IT unit offers IT services for price

o Business units pay for consumption

o Price set based on market price

Profit Center Chargeback Pros and Cons

o Advantages

-Incentive for IT unit to be efficient

- Incentive to consume prudently

o Disadvantages

- Complex implementation

Chargeback Process

o Price

o Publish

o Bill

o Track and analysis