New Ways to Manage it or how Business Goals are Linked to IT Processes
Author: Andriy Pogorelyy, CGIET, Visionary leader, CIOneer, independent expert in the field of IT
COBIT / ITIL model is characterized by the following basic concepts and principles:
IT as a business partner. Modern informational technologies make it possible to find solutions that improve business operations. They are expressed in quantitative terms: the quantity of services, the cost of the IT service and its level of reliability, rate of introduction of new services on the market or implementing new conditions for already existing and etc.
The main product of the IT function is an IT service. Creating a new business process or business area, based on the IT capabilities, requires a clear understanding of responsibilities over information systems. ITIL defines an IT service as a core element that exists within a business process, and/or IT project.
Management of IT services might be divided into 3 tasks:
– Alignment of IT services with the current and future business needs;
– Improvement of the quality of IT services;
– Optimization of long-term costs on delivering IT services.
Process approach. ITIL / ITSM model does not describe the organizational units and their functions, but the process that is defined as “an interconnected sequence of actions, changes, etc. which are aimed at realization of a certain goal or objective. ” Practice shows that in the modern information service process management brings greater returns than any reorganization.
IT process definition. IT process is a set of actions aimed at achieving a particular result. Every process usually consists of several sub-processes, as well as inputs and outputs. Efficiency of the process can be measured by the level of maturity.
The maturity of IT processes indicates the maturity of IT function. The maturity level is an evolutionary step on the path toward achieving the maturity of IT function. Thus, characteristic of maturity is stable, while the maturity level is discrete and can only take the values from 0 to 5.
Introduction of the best IT management practices and the actual transformation of the internal IT function to a service organization ispossible only if the issue is well understood by senior management and, of course, by the head of the IT function.
Worldwide the competition is at the stage when revenues and EBITDA are less dependent on sales, and money spent on marketing is increasingly dependent on innovative approaches and business transformations. One of such functions is IT. Most companies, which have a high level of business processes maturity, understand the importance of IT, but not so many people understand how business goals are linked to specific IT processes and vice versa.
According to the research by the University of Antwerp Management COBIT 5 there is a clear dependence of the business goals – IT goals and IT processes. Nowadays,at any enterprise that uses information tools and technology, business goals cannot be achieved without reaching IT goals and IT goals in their turncannot be achieved without a mature IT processes. It means that IT is directly involved in the building the company’s EBITDA either in a positive or negative way.
There are 17 business goals that are associated with 17 IT goals and 37 technology processes.
According to Balanced scorecard, these 17 business goals are grouped into 4 domains, particularly:
– stakeholder value of business investments;
– portfolio of competitive products and services;
– managed business risk;
– compliance with external laws and regulations;
– financial transparency.
– customer-oriented service culture;
– business service continuity and availability;
– agile responses to a changing business environment;
– information-based strategic decision making;
– optimization of service delivery costs.
– optimization of business process functionality;
– optimization of business process costs;
– managed business change programs;
– operational and staff productivity.
Learning and growth:
– compliance with internal policies;
– skilled and motivated people;
– product and business innovation culture.
How to identify the core business goals of the enterprise?
There are several ways:
1) If the company has a clear business strategy, it is obvious that the main business goals derive from strategy
2) If the company does not articulate its business strategy, business goals of the enterprise will be set through direct questioning, followed by interviewing the company’s management (CxO) and its shareholders.
According to our practice there is a number of interesting regularities and patterns:
– In 40% of companies, shareholders and managers pursue different goals, expectations, respectively, from a completely different IT. In such companies, IT is in a difficult situation.
– In 40% of the companies, managers and shareholders think in completely different directions. Thus the expectations of the IT are fair, and the basic principle here is “hope, it wouldn’t be just worse”.
– In 20% of the shareholders and managers pursue the same business goals, and have adequate expectations from IT. In the given situation IT is the most effective.
Business goals correspond to 17 IT goals which in their turn correspond to 37 IT processes. They are divided into 5 domains:
1. Direct: EDM
2. Plan: APO
3. Build: BAI
4. Run: DSS
5. Monitor: MEA
It’s worth mentioning that EDM domain is IT governance function that should be represented at CIO+ level.
Example of transformation of Business goals into IT processes:
Alignment of business goals and IT goals
Depending on the company strategy, or results of interviews, we can understand the core business goals of the company. If the business goals are not articulated, or reflected in the company’s strategy, their identification might be performed by the means of questionnaires and interviews (as mentioned before). After company’s business goals are defined, they should be divided into three categories: primary, secondary, insignificant. In accordance with the procedure, we can render business goals into IT goals with a cascading methodology that will help us to determine core IT goals of the company.
Alignment of IT goals and IT processes
IT processes are the tools of achieving IT goals. After we have identified 5-7 IT goals, we can determine the core IT processes of the enterprise. At the same time, we can define IT processes that do not participate in the achieving business goals, at least because the investment in these processes do not provide expected business value and returns. As a result, we can define both: core IT processes and processes that do not participate in the achievement of business goals. The next step is to determine the level of maturity of the main IT processes and bring them to the required level of maturity.
There are 6 levels of process maturity:
Description and process characteristics:
(0) Missing: Process does not exist.
(1) Initial: The activities carried out occasionally without a unified approach. Process Management is not organized.
(2) Repeatable: The same problems are solved by different people, but with similar approach. There are no procedures and responsibilities; high dependence on some individuals.
(3) Defined: The procedures are standardized and documented, however, deviations from the procedures are not always tracked. Procedures describe existing practice.
(4) Managed: Management monitors and measures the process and take actions, if the process is inefficient. Process automation tools can be applied.
(5) Optimized: The development of the level of good practice as a result of constant improvements and benchmarking with other companies.
It should be noted that this tool will not be applied broadly to all the companies all over the world, and the management does not have to use this tool as a mechanical transformation, because each enterprise has its own specific, in terms of ownership (public, private), restrictions (for example, depending on activities), the industry and other components. It requires a more detailed consideration of the situation of every particular enterprise.
An example of the IT process in accordance with international standards:
Every company is capable of identifying the core IT processes, in which resources (time, money) need to be invested. Do not bring all the IT processes to the maximum level of maturity, since such investments do not pay off.
At the same time, the company can identify the IT processes that do not participate in achieving the business goals and cease investing, thus reducing losses from inefficient investments
Every core IT process should not be less than of “definite” maturity level
Increasing core IT processes’ level of maturity will drive to increasing the levels of process maturity, directly linked with them, which in turn will lead to greater business efficiency
The gap between the levels of maturity of the process should not be significant since it will lead to degradation of more mature processes
What other approaches can be used to build mature IT function nowadays:
1. Split IT management and IT governance.
These two concepts include various activities, and are used for different purposes. IT governance provides a link between enterprise goals and respective IT priorities. The main activity here is assessment of existing conditions and prioritization in decision-making as well as constant monitoring of compliance with the objectives of the enterprise. In most cases, the responsibility for IT governance belongs to a body headed by CEO.
IT management is to implement IT governance priorities. The main activities are focused on the planning, implementation and monitoring of tasks and escalation of problems. In the context of building an effective IT, this responsibility belongs to IT director.
2. Hire a mature IT director.
This person should have experience in both: local and international companies, preferably MBA and measurable activities in business terms (revenue, costs, %). In case if hiring a mature IT director is not possible due to cost reasons, an alternative can be rent CIO (CIO-as-a-service).
3. External penetration test, that includes social engineering
This action is better to perform in case if an enterprise has an IT security policy, proper organization of information management, protection procedures, and personnel awareness processes, as people are the most vulnerable area for intruders.
4. Secure the key business processes
This action will help you to understand the core company’s business processes in order to increase their level of maturity to the “optimal”. It will reduce processes costs, as well as a maximum impact on the level of maturity of other processes, and the operating efficiency of the company.
5. Stick to the principle of building project based on Capex budgets.
This is the only way to make the most optimal IT budget based on real business needs, and priorities. If your IT budget consists of servers, printers and routers, it is the IT budget of your IT director, but not enterprise.
6. Provide an independent assessment of the IT
a. Every 2 years the independent IT audit should be carried out, as independent assessment is always helpful and should be run regularly. This is even more valuable if it is understood and supported by your IT director.
b. Take into the Board an independent CIO, who сan give advice on the strategic development of IT. If necessary, he can act as a mentor for your IT Director and in this way increase IT Director’s level of maturity.
At the end, I’d like to note that every business can choose its own way to develop and manage IT, but there is a number of key elements that will help to make an enterprise successful:
– holistic approach;
– the use of a single integrated methodology;
– bringing measured value to the business;
– understanding the future business needs.