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(resource allocation)
11 Lights-On Budget Use of alignment assessment
to decide on lights-on budgets
Notes: 1. Value Chain components without prioritization or alignment are excluded from the table.
2. Items in parenthesis are activities outside of the prioritization decision-making context
but that use the results.

The Prioritization and Alignment NIE practices are crucial tools in final
decisions, providing the specific bottom-line and IT spend control inputs into
those decisions. The final decisions are typically made as part of the “annual
project plan,” the “projects budget” and “line-item” budgets in the Strategy-to-
Bottom-Line Value Chain. See Exhibit 8.28.
The second perspective on resource allocation is to examine decisions as
they affect an individual project in its lifecycle, including when it becomes part
of the lights-on budget following implementation. Exhibit 8.29 shows how we
can define the lifecycle phases from a decision perspective.
From this individual project perspective, the decision to assign resources
and the decision to continue its operation, are both driven from the business per-
spective ” strategic intentions and performance. However, the Prioritization and
Alignment NIE practices do not produce better projects or improved perform-
ance for lights-on portfolio line items. Both come from planning processes ”
for example, the Strategic Agenda for the Use of IT, and the Strategic IT Plan
(discussed in Chapter 9). These practices do provide a framework for those
planning processes ” that is, the strategic intentions and the understanding by
planners that projects and light-on budgets will be subjected to the prioritiza-
tion and alignment processes.

EXHIBIT 8.28 Strategy-to-Bottom-Line Value Chain ” Deliverables

Strategic IT Planning Annual IT Planning
The Business Enterprise: Lines of Business, Departments
7 Business Plan
3 (Annual)
(Strategic Business Strategic IT Projects Budget
5 8
Strategic IT Project Plan
Requirements (Annual)
Assessed Lights-On
Strategic IT Plan
Portfolios Budget
9 IT Plan
(Alignment, (Annual)
Technology) The IT Enterprise: Four “Lights-On” Asset Pools

Performance Measurement Metrics 12

Effective Planning
in the
Appropriate Resource Decisions
Business IT
Strategies Actions
Workable Budgets, Projects, and
Operational Plans
Value Chain
Performance Measurement Metrics

EXHIBIT 8.29 Project Lifecycle Decisions from Prioritization and Alignment
Lifecycle Phase Prioritization Decisions Alignment Decisions
Project Formulation/Definition Make the business case
based on bottom-line impact
(connection to business
strategic intentions).
Project Selection Prioritize within overall project
portfolio; select the projects
with greatest bottom-line
Project Development Monitor the project according
to risks and bottom-line
Application Operation Continuously assess the
(Lights-On Phase) status of the project against
current strategic intentions,
service, quality, functionality,
and so forth.

Where is Prioritization applied?
The practice is embedded in company processes that produce the IT strate-
gic requirements and the annual project plan. See Exhibit 8.30.
Chapter Summary

EXHIBIT 8.30 New Information Economics Practices
1: Demand/Supply Planning
3: Prioritization
4: Alignment
5: Performance
5: Measurement
2: Innovation

Plans: Establish Business Requirements
and IT Solutions based on business strategy IT
Business Resource Decisions: Justify and prioritize Programs ”
Strategies and Projects based on business strategy Business
Operationalizing: Establish Budgets, Plans
and Metrics based on business strategy
Portfolio Management
IT Impact Management: Strategic and Operational Effectiveness
Culture Management

Supporting Practices

What outcomes does Prioritization produce?
Practice Description
–« Assess the business impact of IT initiatives and prioritize them accord-
ing to strategic intentions.
Desired Management Process Outcomes
–« Business-driven prioritization processes establish the development port-
–« The results of prioritization affect business decision making on IT invest-
Desired Business Outcomes
–« IT investment resources are spent on initiatives that improve impact on
achieving the company™s strategic intentions.
–« IT investment resources that are being spent on lower-impact invest-
ments are reallocated to higher-performing initiatives.

Where is Alignment applied?
The practice is embedded in company processes that portfolio assessment
and annual/capital budgets. The practice is also included in the Performance
Measurement practice activities.

What outcomes does Alignment produce?
Practice Description
–« Assess the business impact of the existing IT infrastructure, applications,
and services.

–« Assesses the quality and service levels for existing IT resources, as input
to demand/supply planning.
Desired Management Process Outcomes
–« Existing IT infrastructures, applications, and services are validated and
aligned against current and future business requirements.
–« Existing IT infrastructures, applications, and services are examined by
business management for quality and service levels.
–« All IT investments are reviewed in a routine, consistent basis, assessing
connection to strategic intentions.
Desired Business Outcomes
–« Resources are considered interchangeable between new IT investments
and existing investments.
–« Only high-impact investments are assigned resources.


If No, What Is
Yes or Our Plan for
Management Question No? Correcting This?

Do the business cases we use for project reflect project™s
suppor t of business strategic intentions?

Does our current prioritization process prioritize based on
connection to business strategic intentions?

Does our management team understand the complete
application development por tfolio?

Do we examine our lights-on budget each budget cycle,
and squeeze out the poorly performing elements?

Do we have an investment strategy in place for the
lights-on budget?

Do we understand where costs are in the lights-on

Who par ticipates in prioritization?

Who participates in activities assessing the lights-on

Is risk formally assessed in project prioritization?

Does enterprise architecture provide input into prioritization?
Make the Right Decisions: Management Agenda

The book™s website contains additional information:
Website Note 3: IT, Bottom-Line Impact, and Government
Website Note 14: Scoring for Portfolio Assessment

The appendices at the back of the book also contain related information for
Chapter 8:
Appendix B: Management Team Roles in Right Decisions/Right Results
Appendix C: The Development of Strategic Intentions, with Examples
Appendix D: Applying Strategic Intentions in Prioritization

1. Appendix C, “The Development of Strategic Intentions, with Examples,” pro-
vides background on how to develop them.
2. Chapter 9 provides for a definition of this and the process that produces it.
3. This prioritization practice description assumes that Prioritization is the only
practice being employed by the company. If the company is following other parts
of the Strategy-to-Bottom-Line Value Chain ” for example, the Demand/Supply
planning activities ” then strategic intentions would be defined there, and the
project plan in Step 5 is included in subsequent Value Chain activities rather than
here. Also, this practice description does not include portfolio balancing, an
essential element in making a comprehensive project plan and/or a line-item
4. See Appendix D, “Applying Strategic Intentions in Prioritization,” for a descrip-
tion of the cause-and-effect scale.
5. See Chapters 3 and 6 for further discussion of strategic intentions, including
examples with goal statements and metrics.
6. See Parker and Benson, with Trainor, Information Economics (Prentice-Hall 1988),
Chapters 13 and 14, pp. 144 “176.
7. See Information Economics, Chapters 13 and 14, for the definition of these risk
factors and the scoring templates associated with them.

Plan for the Right Results

I n Chapter 8, we introduced Prioritization and Alignment practices that enable
the management team to decide on the most valuable projects and line items
in the lights-on budget. This is how
managers can achieve what we™ve Control Spending and Maximize
termed the “right results”: controlled Impact on the Bottom Line
IT spending and improved IT bottom- 1 Define the Goals
line impact. By selecting the best
2 Ask the Right Questions
projects that have the most potential
3 Connect to the Bottom Line
bottom-line impact and by examining


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