We all know that IT budgets are being slashed in this still-slow economic period. As a result, it is more important than ever to select and prioritize the best investments, to ensure that investment goals are realized and the business obtains sufficient value. No doubt, there is awareness of these objectives, but are activities to meet them being carried out effectively?
A 2011 IT Governance Institute survey, titled Global Status Report on the Governance of Enterprise IT (GEIT)—2011, found that 89 percent of the respondents believe that IT investments are creating sufficient value for the business. However, a survey of IT-related issues revealed that around 20 percent of the respondents believe that return on IT investment is not as expected. Moreover, one-fifth of all respondents noted that their enterprise had ended an IT-related project prematurely. The survey also found that only 5 percent of respondents use the Val IT framework, which is used in such organizations as the European Parliament and ICW Group, and has been proven to improve the governance of IT investments.
This likely means that organizations are using ad hoc frameworks for determining return on investment, as opposed to a framework such as Val IT. The downside of using an ad hoc framework is that organizations will not be aware of their relative maturity and will believe they are doing well, as opposed to the Val IT users who use standard processes and can assess their maturity using well-developed maturity models.
This leads one to believe that most organizations are stuck in the traditional project management world. Once the business case for an IT investment is presented and approved, it is shelved and never revisited to verify whether the original goals of the investment are met. Even if the macroeconomic environment changes and the investment will no longer deliver the intended benefits, the investment (or project) is never killed. Benefits are never tracked to measure the value delivered to the business.
Indeed, realizing expected benefits from IT investments requires effective management, processes and governance. The Val IT framework has been developed to meet this need. According to the framework, Val IT usage will help ensure that organizations realize optimal value from IT-enabled business investments, at an affordable cost, with a known and acceptable level of risk.
Val IT has three domains: Value Governance, Portfolio Management and Investment Management. Value Governance practices establish the overall governance, monitoring and control framework. Portfolio Management practices ensures that the portfolio of IT-enabled investments is aligned with the business’s strategic objectives. Investment Management practices ensure that an organization’s individual IT-enabled investment programs deliver optimal value at an affordable cost with a known and acceptable level of risk through the use of the business case, program management and benefit realization techniques.
Val IT takes the business case a step further. Not only is it used to support the selection of the right investments, as in the traditional project management world, but it also needs to be maintained throughout the economic life cycle of the program to actively manage the benefits realization process. As mentioned in John Thorp’s book The Information Paradox, benefits realization can be done using results chain modeling and the “four ares” technique.
All these tools and techniques including program management, portfolio management, business case, and benefits realization are put into operation using a term “Full Cycle Governance” which is also mentioned in The Information Paradox. So, the usage of Val IT framework and full cycle governance can help transition an organization from the traditional project management to the value management world.
Of course, the transition is not easy. It will require executive management buy-in, as well as significant organization structural and cultural changes. The process can take years and needs to be carried out in phases. More information on this can be found in The Information Paradox.
Rajesh Bhatia, CISA, CGEIT
Senior IT manager, Computer Sciences Corp., USA
We welcome your comments! Please log in using the Sign In button at the top right of this page and then leave your comment in the box at the end of the post.
To view all blog posts, please click on the ISACA Now button in the blue box on the left.