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From Business Strategy
to IT Action
Right Decisions for a
Better Bottom Line
Praise for
From Business Strategy to IT Action

The authors provide us a most insightful approach to industry™s
toughest problem: on what IT investments should we invest our scarce
resources? More importantly, their framework can be applied to
any and every discretionary corporate investment. Linking corporate
investments to strategic objectives is critical to remaining or
becoming a viable and vital business ” and this book gives us the
roadmap for the journey. Particularly helpful are the provocative
sets of questions and helpful tools to address this complex issue.
”Francisco A. Figueroa, CFO and Vice President,
Sandia National Laboratories


This is a dynamite book of practical advice for companies that
do not fully understand IT, and should become required reading for
both business and IT management. It is a “gem” of disciplines
and practices and of business-based ways to manage IT and to get
the biggest and most important value from IT investments.
”Cecil O. Smith, Senior Vice President and CIO, Duke Energy


I™ve worked with Bob for several years. This book, which outlines
his practical yet elegant approach for aligning IT action plans
with the overarching business strategy, is a must read for anyone
who wants to get more impact from their IT dollar!
”Brian Gill, Vice President and CIO, Sunlife Canada


I like this book very much. It offers an extraordinary set of insights
on how to take IT planning, innovation, and performance
measurement to the bottom line. For more than two decades
I struggled, as a CIO, to tie IT management decisions to business
outcomes. Finally, I found in this book a consistent framework
for guiding IT and business leaders alike, in maximizing the
business value of their IS capabilities and technology investments.
” Doron J. Cohen, Ph.D. CIO, The BrassTacks
To bridge the chasm between business and IT, concise and clearly
defined business and financial decision processes and metrics
need to be created and articulated. This book provides a precise
and simple to follow methodology that IT executives can use
to better align themselves with CFOs and their business partners.
”Mark Popolano, CIO, Vice President, AIG, Inc.


This book tells you all you need to know about strategy and execution
related to developing IT strategies, making the right investment
decisions, and implementing the strategies that will lead to creating greater
impact to business performance. A great insight shared by the authors
for those who are concerned with IT investment and return.
”Swee-Cheang Lim, Director, Institute of Systems Science, Singapore


In 1988, Information Economics proposed a way of thinking and
a method about the value of IT. In this new book, based on their broad
business-based experience, the authors further develop the
framework and process. It is the combination that lays the foundation
for increasing the bottom-line results of IT investments.
”Prof. dr. Pieter Ribbers, Faculty of Economics,
Tilburg University, The Netherlands


Within ING there is continuous pressure to ascertain that all
discretionary IT-related business investments generate a stable earnings
stream that is significantly higher than the weighted average
cost of capital. Following on the valuable insights of Information
Economics, this book may contribute to the firm™s ability to
enhance IT™s contribution to its value creation process by
ameliorating project risk.
”Dr. John FA Spangenberg, Head of IT Performance &
Investment Management, ING Group
From Business Strategy
to IT Action
Right Decisions for a
Better Bottom Line


ROBERT J. BENSON
THOMAS L. BUGNITZ
WILLIAM B. WALTON




John Wiley & Sons, Inc.
This book is printed on acid-free paper.

Copyright © 2004 by John Wiley & Sons. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey
Published simultaneously in Canada

No part of this publication may be reproduced, stored in a retrieval system, or transmitted
in any form or by any means, electronic, mechanical, photocopying, recording, scanning,
or otherwise, except as permitted under Section 107 or 108 of the 1976 United States
Copyright Act, without either the prior written permission of the Publisher, or authorization
through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc.,
222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-750-4470, or on the
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to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ
07030, 201-748-6011, fax 201-748-6008, e-mail: permcoordinator@wiley.com.
Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their
best efforts in preparing this book, they make no representations or warranties with respect
to the accuracy or completeness of the contents of this book and specifically disclaim any
implied warranties of merchantability or fitness for a particular purpose. No warranty may
be created or extended by sales representatives or written sales materials. The advice and
strategies contained herein may not be suitable for your situation. You should consult with
a professional where appropriate. Neither the publisher nor author shall be liable for any loss
of profit or any other commercial damages, including but not limited to special, incidental, c
onsequential, or other damages.
For general information on our other products and services, or technical support, please
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Library of Congress Cataloging-in-Publication Data
Benson, Robert J.
From business strategy to IT action : right decisions for a better
bottom line / by Robert J. Benson, Tom Bugnitz, William Walton
p. cm.
Includes index.
ISBN 0-471-49191-8
1. Business planning. 2. Business enterprises ” Computer networks.
3. Information technology” Management. 4. Information resources
management ” Economic aspects. I. Bugnitz, Thomas L. II. Walton,
William, 1951“ III. Title.
HD30.28.B4533 2004
658.4'03 ” dc22 2003020204

Printed in the United States of America.
10 9 8 7 6 5 4 3 2 1
Bob Benson thanks his wife, Noreen Carrocci,
for her continuous and constant support
and dedicates this effort to her and our families.


Tom Bugnitz dedicates his work on this book to
Diane Dimeff, who has supported, helped,
encouraged, and most of all put up with him
and his many idiosyncrasies for the last ten years.


Bill Walton dedicates his work to his wife Eliza
and children, Mac, Jas, and Grace.
Together, you are both my why and my how.




Miraculously, we have all three ended up with women
who are much better than we deserve.
about the authors


Bob Benson is a Principal with The Beta Group. He has served as CIO, finan-
cial executive, dean, professor, author, and consultant for over 40 years. His
consulting and research deals with the business value of IT, business and IT
strategic planning, methodology and process development, IT governance, and
facilitation. He has conducted executive seminars and performed and managed
consulting engagements on these subjects throughout the world (in 20 countries
and 40 states) and has taught graduate courses in schools of business and engi-
neering in Europe and the United States. For over 10 years, he has consulted full
time in his areas of interest.
He has keynoted numerous international conferences, created and managed
academic programs and organizations, developed large-scale computer systems,
and consulted with a wide range of companies and government agencies. Mr.
Benson is coauthor of several books and numerous book chapters, articles, and
monographs, including Information Economics: Linking Information Technol-
ogy and Business Performance (Prentice-Hall, 1988) and Information Strategy
and Economics: Linking Information Systems Strategy to Business Performance
(Prentice-Hall, 1989).
Mr. Benson is an affiliate professor of computer science at Washington Uni-
versity in St. Louis, where he also served as senior executive for computing and
communications, institutional financial planning, and professor, dean, and cen-
ter director. He is currently a professor of information management (part-time),
Faculty of Economics, Tilburg University, The Netherlands. He served as found-
ing managing director of the E-Business Forum.

Tom Bugnitz has been the President of The Beta Group, a consulting firm he
cofounded with Bob Benson, for the past 15 years. Mr. Bugnitz has consulted
and lectured widely in the United States on the subject of the business-IT con-
nection, and has codeveloped a number of consulting methodologies for
improving IT management. In addition, he is closely associated with Washing-
ton University in St. Louis as an adjunct professor of computer science and par-
ticipates actively in the development and execution of research in the field of
information management. He is coauthor of several books on systems and com-
puter programming. Mr. Bugnitz brings practical experience to bear on his con-
sulting and teaching assignments, having worked at all levels of information
systems organizations, including 10 years managing large data centers and tele-
communications operations.
ix
x ABOUT THE AUTHORS


Bill Walton is a Principal with The Beta Group. His areas of special interest and
expertise include Performance Measurement, Alignment, Integrated Strategic
Planning, IT/Business Value, Organizational Change Management, and Tech-
nology-Driven Change.
Before joining The Beta Group Mr. Walton was with Gartner and Real Deci-
sions for 17 years. He spent his final 5 years at Gartner as the Vice-President of
R&D for Gartner Measurement where he was directly responsible for the devel-
opment of numerous innovative benchmarking and IT performance measure-
ment services and their associated analytical methods. These included the use
of organizational and technical complexity as IT cost drivers, the application of
the Balanced Scorecard to IT, and the development of IT management process
models. Most recently, with The Beta Group Mr. Walton has been responsible
for the development of a set of management frameworks and tools that support
IT strategic alignment and planning processes.
Mr. Walton has been active in the information and technology management
field since 1977. He has worked with a large number of clients in the USA,
Canada and Europe on critical IT measurement and management issues. Mr.
Walton applies a combination of active research and practical experience to each
of his consulting engagements.
about the beta group



T he Beta Group consults to Fortune 500 companies and government agencies
in North America and Europe, focusing on improving IT™s bottom-line
impact and controlling IT spending. Beta Group consulting practices cover the
IT planning-to-execution cycle, starting with strategic planning and budgeting
through investment prioritization, alignment, performance measurement, and
portfolio management. For more information on the company or its methods,
visit www.the-beta-group.com or www.beta-books.com.




xi
about the website


s a purchaser of From Business Strategy to IT Action: Right Decisions for a
A Better Bottom Line, you have access to the companion website. The Notes
that are provided on the Website provide additional information and back-
ground on IT value strategies including the Strategy-to-Bottom-Line Value Chain,
New Information Economics, the five practices, and Portfolio Management and
Assessment. To access the website, go to www.wiley.com/go/ITAction.


NOTES
1 IT and Economic Cycles
2 IT™s Value ”A Definition
3 IT, Bottom-Line Impact, and Government
4 Tests for Connected Business and IT
5 Modern Portfolio Management
6 One Company™s View of Portfolio Management
7 Constructing Portfolios
8 Gap Analysis: Closing Disconnects between Business and IT
9 Building an IT Profit Model
10 Stage Theory and Management Culture
11 Right and Wrong in Management Culture
12 Value and Values
13 Our Use of Shareholder Value
14 Scoring for Portfolio Assessment
15 The CFO™s Role
16 What about IT™s Performance
17 Other Portfolio Classifications
18 ROI and the IT Value Life Cycle




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