This is the first of six articles to be published in this column on the practicalities of introducing and establishing Val IT™. These articles draw from the authors' many years of experience working with enterprises to introduce value management.

The remainder of the series will cover:

• The Five Starting Steps to Introduce Val IT
• Practical Guidance on Establishing Value Governance
• The Challenges of Implementing Portfolio Management
• Benefits Realisation and Programme Management— Beyond the Business Case
• Critical Success Factors for Introducing Val IT

Executives, even if they are aware of the need for more effective governance and management of information technology (IT), may not recognise that many of the day-to-day business challenges they face involve issues of value management. Val IT provides proven value management principles, processes and practices to enable enterprises to maximise the delivery of business value from investments involving IT.

This article identifies some of the most common tipping points—the pain points or "trigger" events that are likely to, or at least should, spur executives to improve their enterprise's value management practices.

Experience shows that the tipping points can come from two sources:

• Internal events—Experiences that bring into question the contribution of IT to the enterprise. Examples include major IT project failures, serious budget overruns, the enterprise's inability to absorb the changes delivered by new technologies, business executives not understanding the business value of IT, and IT executives (or indeed major IT suppliers) needing to prove the value to the business of the services delivered.
• External events—Influences from beyond the enterprise that necessitate the changing of IT priorities. Examples include mergers and acquisitions, a major shift in the marketplace with respect to competitors' actions or economic conditions and the need to share services or outsource a business process.

Internal Tipping Points

The most common internal tipping points include:

• A major IT project failure—Every enterprise has had at least one of these. Enterprise resource planning (ERP) and customer relationship management (CRM) investments are classic examples. A major IT project has become a disaster when/if it is exhibiting all or a combination of the following symptoms:
  • Being delivered too late
  • Cost overruns
  • Not delivering the benefits
    

Such a project probably struggles on until it is either declared closed with nothing much delivered, or a new chief executive officer (CEO) kills it. Sometimes it gets relaunched with a new name only to suffer the same fate. Such failures, apart from being costly, can be highly visible, resulting in bad press, reduced market valuation and/or damage to the enterprise's credibility. Executives ask:

• Where is the value expected from this IT project?
• How could this go so terribly wrong? Why didn't anyone warn us?
• We have trained our people in project management, how could this project fail?
• Was this our fault or the supplier's fault?
  

This is a fairly common tipping point. No one likes costly failures, especially highly visible ones, and executives who have experienced major investment failures do not want to get burnt again.

• Recognition by executives that they do not know everything they should about their IT-related expenditures—This is especially likely with the appointment of a new CEO, chief financial officer (CFO), chief information officer (CIO) or IT director. Questions may be asked by the executive that probe the completeness and effectiveness of their governance processes. These questions may include:
  • Do we have an inventory of assets and projects/investments?
  • Are we investing in projects that align to what the business currently wants to do?
  • How do we prioritise the allocation of scarce resources to deliver maximum business value and how do we define ‘business value' anyway?
  • Do we have ownership and accountability for the business change and outcomes we expect from our IT projects?
  • Why are we continuously juggling investments and changing priorities within our limited capabilities and constraints?

The tipping point comes when unsatisfactory answers create anxiety at the executive level as to whether business value from the IT spend is being maximised—or realised at all.

• Business executives not seeing proof of the business value delivered by IT—IT is a key enabler for the business to operate and grow successfully and to create value. However, the contribution of IT to the success of the enterprise is frequently implicitly assumed by proponents of technology rather than explicitly stated and, therefore, is difficult to justify and even harder to measure. In this environment, how can executives feel comfortable with business benefits that are promised from new investments involving IT, and how can they determine if they were realised? The tipping point comes when executives are asked to approve investment decisions in cases where they can see no readily identified business justification to do so.

External Tipping Points

The external tipping points include:

• Major shift in the enterprise's situation in relationship to the market, economy, competitors, etc.—Market and economic factors may necessitate the enterprise to quickly respond or suffer the consequences. Executives will be asking:
  • How fast can we introduce new products (with associated enabling of IT)?
  • How could we handle a merger/acquisition in terms of integration of IT?

The tipping point comes when the executives see that the speed of decision making and responsiveness of the enterprise to rearrange priorities in response to market and economic changes is ineffective and keeping the enterprise lagging behind its competitors.

• Regulatory changes or budget cuts—Enterprises, particularly heavily regulated ones or those in the public sector, face the need to respond in a timely fashion to legislative, policy and funding changes. Executives will be asking:
  • Can we comply with new regulatory requirements without impacting our transformational change programmes?
  • How do we best manage the impact to our current projects of a budget-funding cut?

  The tipping point comes when the executives realise they cannot readily provide the answers to the ‘what ifs' and analyse the impact of externally mandated changes.

The Tipping Point Challenge

How many of these tipping points can you recognise within your own enterprise? It is not enough to recognise them as problems—the challenge for business and IT executives is to take action. The Val IT framework provides useful guidance on proven processes and practices that enable effective governance of investments involving IT. This guidance is found in the three domains of Val IT:

• Value Governance (VG)—Ensuring that value management practices are embedded in the enterprise
• Portfolio Management (PM)—Ensuring that the enterprise secures optimal value across its portfolio of investments involving IT
• Investment Management (IM)—Ensuring that the enterprise's individual investments each contribute the value expected of them

Sarah Harries
was with Fujitsu Services (UK) until 2008, specialising in value management (VM). She also chaired Fujitsu's global VM community of interest. She is now benefits realisation manager at Openreach, a BT Group business.

Peter Harrison, FCPA
is a principal and member of the value governance leadership team within Fujitsu Consulting Australia and New Zealand, and is a member of the Val IT Steering Committee.

Editor's Note:

The three initial publications of the Val IT project can be downloaded free from the ITGI web site, www.itgi.org, and include: Enterprise Value: Governance of IT Investments, The Val IT Framework 2.0; Enterprise Value: Governance of IT Investments, The Business Case; and Enterprise Value: Governance of IT Investments, The ING Case Study. Readers are encouraged to review Val IT and share it with key governance stakeholders within their enterprises. Please visit www.isaca.org/valit or contact Brian Selby at bselby@isaca.org for futher information regarding Val IT.

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