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Business units will often request projects that were not on their agendas when the budget was completed. As outlined in Chapter 15, projects should be evaluated on a business case basis and, if approved, executed. Large projects will likely hit the capital budget if approved and not affect the operating budget. Business-unit project requests should be documented, along with a business case, and sent to the IT steering committee for review and approval.
Every new request must be considered in relation to the current operating budget and the capital budget. Possible outcomes include:
• Project is covered by the current capital budget and approved.
• Project is not covered by the current capital budget but is higher priority than another project. Downgrade the priority of the second project on the list of backlog projects and replace with the newly approved project.
• Project is not covered by the current capital budget. It is a high priority.
There are no other projects to displace. New funding for the IT group is needed. The business case is sound, so additional funds are approved to complete the project, and the ongoing negative capital budget variance is approved (i.e., the capital budget is increased or some other nontechnology investment is displaced).
• Project is not a priority and has a substandard business case; therefore, it is not funded and further consideration is not necessary.
IT budgeting and cost containment practices are critical skills for the IT
manager to master. Developing a sound budget, which provides a road map for managing the department and can withstand business changes and economic changes, is a challenge. Additionally, anticipating, understanding, and forecasting the known variables about the business distinguish an average IT
director from a star performer. The average performer is reactive to the environment while the top performer has assessed the reliability of key assumptions and the associated risks and planned contingencies accordingly.
Concepts presented in the chapter, such as prioritizing discretionary spending areas and keeping this prioritized list handy, encourage the IT
manager to act quickly and decisively to negative budget variances. Finally, ensuring that IT assets are deployed against revenue generating and customer-facing activities help ensure that budget dollars are f lowing to the highest value activities. Companies whose IT managers routinely ensure this, as well as the business value of IT investments, see much higher productivity and profitability from IT investments.
IT Steering Committee Concept
The IT steering committee is composed of senior IT management and senior business leaders who meet on a regular schedule to review, discuss, prioritize,
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and resolve IT projects, issues, and strategy. Used properly, the IT steering committee is one of the most effective tools for creating the high-performance IT department. The steering committee conveys business priorities to IT so that IT management can direct resources to the highest priority business functions in real time. The committee provides approval, oversight, and high-level steering of projects, as well as finalizes project priorities based on IT demand management analyses. It also reviews proposed operating and capital budgets, IT operations service levels, and IT performance metrics. The committee has the membership and authority to facilitate the resolution of any organizational roadblocks to IT effectiveness. Perhaps the most important responsibility of the committee is to improve communication and business relationships between key line personnel and IT managers, facilitating better informal communication between groups outside of the committee. This chapter outlines the typical charter, responsibilities, membership, and ongoing operations of a properly functioning IT
steering committee.
Exhibit 17.10 illustrates the communication f low and outcomes of the committee. Exhibit 17.11 displays the demand management process. The IT
Steering Committee meeting is on Tuesday’s.
Business Units
IT
• Business priorities
• Project updates
• New programs
• Project requests
• Results of business
• Capex requests
• Technology needs
• Competing priorities
IT Steering
Committee
Outcomes
• Business and IT alignment
• 4–8 week game plan
• Project approvals
• Solved issues
• Reprioritization of work
Exhibit 17.10
IT Steering Committee Communication Flows
Project
completion
and review
te
pacityca
In process
prioritized
projects
Assess IT
and corpora
w
vie
erv
t O
projects
Commission
tion
Project
prioritiza
IT Demand Managemen
y
pproved
project
A
inventor
Exhibit 17.11
Project
pprovala
y of
projects
Project
proposal
Inventor
all potential
definition and
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Summary
IT is difficult to manage for most companies and even more difficult in professional service firms because of high expectations of management, staff, and clients. Here is a checklist of specific steps across five broad areas that can be taken in dysfunctional IT departments to improve performance: 1. Improve IT management:
• Implement an IT steering committee as a “virtual CIO” to provide
advice and leadership to the IT director and help speedily resolve issues between business and IT.
• The committee should be composed of the top five to ten senior
managers in the business; they should be required to attend every
meeting.
• Upgrade management talent in the IT department by hiring the
right director.
• The IT steering committee should source the candidates and hire the new director as a senior manager instead of a senior programmer.
• Clean up the IT organization chart. This means no “f loating boxes”
and clean, clear lines of responsibility between applications man-
agement and operations without gaps or overlaps in coverage.
• Every staff member should have a shorter-than-one-page roles and
responsibilities document posted at his or her desk.
2. Add basic project management disciplines:
• Establish a single, well-documented master inventory of projects.
• Determine the ROI or business benefits for each project.
• Projects that do not improve revenues, reduce costs, or improve
control over the business should be ignored.
• Prioritize projects by their benefits, difficulty, and adequacy of the current systems, generating a force-ranked list.
• Determine the intrinsic project capacity of the IT department.
• Limit the number of open projects to that capacity.
• Expect this number to be shockingly small and disconcerting,
but be comforted by the notion that the projects will actually be
accomplished.
• Assign a specific person from the IT department to be responsible
for the management and execution of the project, and have them re-
port progress in a five-minute update to the IT steering committee
on a weekly basis.
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• Each team lead must develop a clear work plan for accomplishing
the assigned project, with work tasks, time lines, deliverables, de-
pendencies, and required resources clearly defined.
3. Manage vendors:
• Determine which vendors are good, productive partners and which
are sapping the IT budget with overbloated fees and unproductive
products, services, or billable hours.
• Migrate business to the former and dismiss the latter.
• Insist on favorable contracts and pricing in return for vendor
exclusivity.
• Migrate the technology platform in the department to homogeneity
to facilitate ease of management and project execution.
• Negotiate hard with vendors for best pricing, and aggressively manage them after the sale.
• Ask vendors how they measure their own client-satisfaction perfor-
mance internally, and require them to produce a report card on
themselves at reasonable intervals.
• If they don’t know how to measure themselves internally, get them
out.
• If they do, hold them to the periodic reporting and help them im-
prove their services with clear feedback.
4. Fiscal management /budgeting:
• Recognize that most companies must generate $10 in revenues to
cover every $1 spent in IT.
• Build a reputation for saving the company money by “making do”
and reserve capital expenditure requests for must-have items. Al-
though more difficult, IT directors must become a business resource
for the senior management team by suggesting ways to lower the
company’s overall operational costs through use of IT.
• If budget variances appear, proactively explain them to senior management and provide fair warning for surprise capital or operating
expenditures.
• Build trust with the CFO by avoiding typical agency issues that accompany the budgeting process that give IT teams a bad reputation
for being focused on the constant acquisition of new toys.
5. Improve relationship with the business:
• Reduce finger pointing between IT and business users by initiating a
“seat rotation” that has key IT staff members sitting with the busi-
nesses they support one to two days per week.
• IT director should have a quota of two lunches per week with busi-
ness-unit managers, functional managers, or members of the IT
steering committee.
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• Add effective business user relationship management to the appraisal process for all IT team members.
With the right leadership in place, and enthusiastic engagement from the senior management team, the IT department can lead the company in management excellence.
NOTES
1. Peter Ustinov, Quotable Ustinov (Amherst, NY: Prometheus Books, 1995).
2. R. Mack, Creating an IT Strategy: An Alternative Approach (New York: Gartner, 2002).
3. Gary Hamel and C. K. Prahalad, “The Core Competence of the Corporation,”