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Establishing the Portfolios and Costs for Alignment
Properly establishing the portfolios for use in the Alignment practice is a criti-
cal step. In Chapter 4, we discussed the basis for development of portfolios in
the lights-on budget, and gave some examples of line items within each. Here
we reemphasize the importance of selecting the right line items. For applica-
tions, the key issue is granularity. Ideally, an application portfolio will contain
30 to 50 line items. This means that, for larger companies, applications will be
clustered (e.g., the payroll application contains all of the various reporting ele-
ments). For infrastructure, the key is determining the basic infrastructure serv-
ices (e.g., platforms, networks, e-mail).
For all four portfolios, identifying cost for each line item is the single most
critical action. We do not propose a completely detailed cost accounting nor a
thorough activity-based costing. We look for costs in the 80 percent accuracy
range. This is more than sufficient to drive the data analysis and decision mak-
ing that needs to occur.
Exhibit 8.20 shows an example of the four portfolios for a company, with
annual costs included. This is the level of portfolio development that makes the


EXHIBIT 8.20 Four Lights-On Portfolios with Annual Costs

Service Annual Cost

Application Annual Cost
Help Desk 4,285,600
Consumer Database Marketing 1,087,800
On-site Desktop Support 1,029,600
Sales Force Automation 712,000
Electronic Report Distribution 550,000
Sales Budget 88,000
Report Distribution 12,932,000
Sales Promotion Inventory 1,020,800
Job Scheduling 5,526,400
Services Accounts Receivable 945,260
Notes Administration including e-mail 730,800
Banking System 70,400
Hardware/Software evaluation 695,200
Budget Application 1,270,400
Telephone Support 1,012,000
Capita l Projects 545,600
Internet Support 3,400,000 Cash Management 205,695
Training (PC and other) 1,806,490 Cost Sheet Reporting 827,200
Procurement process 413,600 EFT 1,295,713
Applications Records Management 460,560 Litigation Support 1,220,320

Retention Manager 125,600
User hardware maintenance 716,800
Total Recall Records Management 123,200
Total Services 33,559,050
Document Control 6,581,524
Green Leaf System 2,868 ,800
Infrastructure Element Annual Cost Leaf Forecasting 352,000
Platform ” Mainframe 5,051,000 Leaf Inventory 1,742,400
Management Maintenance Management 3,784,000
Platform ” AS400 5,900,000
Applications Total: 24,866,712
Platform ” NT 2,297,100
Software Licenses 4,802,221
Management Annual Cost
Data Management (SW) 1,219,200
Vendor Relationship Management 800,000
Security 5,900,000
Planning (including upgrades, renewals) 1,188,000
Disaster Recovery 4,129,250
Infrastructure Records Retention/Records Management 380,000
Network LAN 7,912,120
Methodology Development 264,000
Network WAN and e-mail and access 3,829,680 Staff and budget mgmt. (administration) 8,212,700
MIS Tools (DB2 Table File, Merant) 560,000 Project Administration 805,200

Internet/Intranet Security 281,600 Planning 1,050,000
Staff Development 3,639,008
Infrastructure Total: 46,344,511
Training Program 5,438,063

Management Total: 21,776,970
153
The Alignment Practice


alignment assessments described in the following section so valuable in analysis
and decision making.

Strategic Alignment
How well do the applications, infrastructure, and service portfolios support
strategic intentions and business operational requirements?
Exhibit 8.21 shows the two dimensions of portfolio alignment and the three
portfolios to be aligned. For example, the Applications portfolio is aligned with:
(1) the company™s strategic intentions, and (2) the company™s business processes.
Consequently, six different alignment tests are possible, and for each, an alignment
assessment template is used. The result is that each portfolio can be examined
for alignment gaps. (Alignment information is also a part of the Performance
Measurement practice; see Chapter 10.)


EXHIBIT 8.21 Strategic Alignment: Six Tests



Applications




Operational
Strategic Requirements
Intentions (Business
Processes)




Services Infrastructure




Internal IT Alignment
How well do the IT infrastructure and services portfolios support the highest
value components of the IT applications portfolio? That is, if we identify the
applications that are (or should be) highly aligned with the business, does the
infrastructure adequately support those applications? Are the IT organization™s
management processes effective in turning business strategy into IT actions?
154 MAKE THE RIGHT DECISIONS


Exhibit 8.22 pictures the analysis of portfolios against each other. Whereas
Portfolio Alignment analyzes the portfolios against the business factors (strate-
gic intentions and business processes), this alignment assesses the consistency
of support between the portfolios, such as between applications and infra-
structures.


EXHIBIT 8.22 Internal IT Alignment: Six Tests



Applications




IT
Management
Activities




Services Infrastructure




Strategic and Internal Alignment Process Overview
There are two separate alignment assessments performed in the practice. The first,
strategic alignment, looks at three elements of IT (applications, services, and
infrastructure portfolios) and determines how they support/inhibit two business
elements (strategic intentions, and business operational and process requirements).
The second assessment, internal alignment of IT, examines how infrastruc-
ture and services support/inhibit applications and each other, as well as how the
IT management activities support/inhibit all three.

How Is Alignment Assessed?
The general question for alignment is, “Does an element of the Alignment
Model being used support or inhibit the objectives of the other components?”
For example:

Strategic Alignment: For every application, does it support or inhibit achiev-
ing business goals?
155
The Alignment Practice


Internal IT Alignment: For each part of the infrastructure element, does it
support or inhibit the applications that depend on it?
Strategic Alignment: Does the infrastructure support or inhibit the business
goals of the company?

These questions are answered for each of the alignment connections. To
obtain the assessment, the service uses a series of matrices that document the
alignment relationship. For example, a matrix that assesses the status of align-
ment between business goals and IT applications lists, on one axis, the business
goals, and along the other, the set of IT applications. The matrix entries docu-
ment the degree to which the application supports or inhibits the achievement
of the business goals. In the example in Exhibit 8.23, we present an assessment
of the application portfolio against strategic intentions. Data for the matrix is


EXHIBIT 8.23 Sample Alignment Assessment Scale
Service is a critical enabler in achieving the
Critical
3 Strategic Intent. Without this Service, the
enabler
Strategic Intent cannot be accomplished.
Service is an enabler in achieving the
Strategic Intent. Without this Service, the
2 Enabler
Strategic Intent can be accomplished, at some
additional cost.
Indirect Service is an indirect enabler; it is indirectly
1
enabler related to achieving the Strategic Intent.
Service has no effect on achieving the
0 No effect
Strategic Intent.
NA Not applicable; Service is not used.
Blank
Service is an indirect inhibitor; it is indirectly
Minor
-1 related to inhibiting the achievement of the
inhibitor
Strategic Intent.
Service is an inhibitor to achieving the
Strategic Intent. With this Service, the
-2 Inhibitor
Strategic Intent can be accomplished, but at
additional cost.
Service is a critical inhibitor in achieving the
Critical
-3 Strategic Intent. With this Service, the
inhibitor
Strategic Intent cannot be accomplished.




gathered through interviews, individually completed matrix instruments, and
facilitated group processes. (For most of the Alignment connections, a similar
table will represent the assessments.)
For each Alignment assessment, a scale is used like the one shown in Exhibit
8.23. Note that this Scale is for an IT services portfolio against business strate-
gic intentions.
Companies may also choose to use a +5 to “ 5 scale, to be consistent with
the scales used in prioritization and in other parts of Alignment assessment.
156 MAKE THE RIGHT DECISIONS


Who Assesses Alignment?
Alignment is best assessed by the business managers who are responsible for
business performance and those who are major users of IT. In a consensus-build-
ing and facilitated process, business and IT managers together arrive at an assess-
ment of alignment in each of the alignment connections. This consensus building
is a critical element of the process. Fostering and facilitating communication
between business and IT managers not only results in assessment but is, in fact,
the first step of an ongoing process of organizational development and more
effective IT use in the company.

Alignment Assessment Result
Ultimately, Prioritization and Alignment are about allocating resources to high-
value activities. Alignment, however, allows a deeper analysis of those activities
and allows managers to make resource decisions based on a range of assessments
beyond strict bottom-line impact.
For example, in Exhibit 8.24, note several applications which have assess-
ments slightly above neutral or worse for all strategic intentions. Managers can
now ask: For that application, should we be spending any resources maintain-
ing this application? Does it need to be a net enabler for strategic intentions,
and thus warrant more resources for upgrade or even replacement?


EXHIBIT 8.24 Sample Alignment Data

Wgt. 20 10 10 10 20 10 5 10
Targeted Market Growth


Acquisition Capability


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