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Agenda

Portfolio Approach to IT Projects IT Governance and Leadership Case 3-2: Volkswagen of America : Managing IT Priorities 1

A Portfolio Approach to Managing IT Projects

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A Portfolio Approach to Managing IT Projects  • • • Three IT Deficiencies Failure to assess the implementation risk of a project at the time it is funded Failure to consider the aggregate implementation risk of a portfolio of projects Failure to recognize that different projects require different managerial approaches 3

Projects Typically Fail     Over budget  Average cost overrun: 189% Delivered late  Average schedule overrun: 222% Failed to meet expectations  Average coverage: 61% Larger companies are even worse [Standish Group, 2004] 4

Source of Implementation Risk    Project size Experience with the technology Requirements volatility 5

Effect of Adding Rick Factors 6

Risk Metric 7

Managing the “Dip” during Project Implementation 8

IT Governance, Leadership, and IT Investment

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IT Governance

IT Requires Executive Oversight    An apparel manufacturing company’s difficulties in installing supply chain software cost it an estimated US $200 million A publicly traded company admitted that a virtual collapse of its financial reporting system reduced its market value by one-third in a single day An operational meltdown after the merger of two transportation companies was traced to the inability to coordinate their IT systems

Oversight Can Lead to Value Creation

 A major airline’s supply chain transformation improved the forecast of demand, reduced procurement costs and increased service levels while costs fell  A technology products and services company saved US $12 billion over two years by linking up disparate pieces of its supply chain, thereby reducing inventory levels

IT Governance Is the Key Issue

 Enterprises are sacrificing money, productivity and competitive advantage by not implementing effective IT governance  Executives need a better way to:  Direct IT for optimal advantage  Measure the value provided by IT  Manage IT-related risks  Information Systems Audit and Control Association Inc.

 IT Governance Institute Inc.

A Road Map to Good IT Governance

    Accepted globally as a set of tools that ensures IT is working effectively Functions as an overarching framework Provides common language to communicate goals, objectives and expected results to all stakeholders COBIT ® - based on, and integrates, industry standards and best practices in: – – Strategic alignment of IT with business goals Value delivery of services and new projects – – – Risk management Resource management Performance measurement

Harmonizing the Elements of IT Governance

IT Governance Resource Management IT Governance Institute Inc.

COBIT

®

Used by Organizations Worldwide

also used by Allstate, Harley-Davidson, the Bahrain Civil Service Bureau and many others

IT Leadership

 Two sets of tensions  Innovation and Control  IT staff and Business Users 16

IT Leadership  Drivers toward User Dominance  Pent-up Users Demand  Need for Staff Flexibility  Growth in the IT Services industry  Users’ Desire to Control Their Own Destiny  Fit with the Organization (i.e., division, function) 17

IT Leadership  Drivers toward User Centralized IT Structure  Staff Professionalism  Standard Setting and Ensuring Systems Maintainability  Envisioning Possibilities and Determining Feasibility  Corporate Data Management  Cost Estimation and Analysis 18

IT Leadership  Manage the Tension  Clear policy to specify the user domain, the IT domain, and senior management’s role.

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IT Leadership – Who’s Responsibility?

 Six IT Decisions your IT People Should Not Make (Ross and Weill, 2002, HBR)  How Much we should spend on IT?

 Which business processes should receive our IT dollars?

 Which IT capabilities need to companywide?

 How good do out IT services need to be?

 What privacy and security risks will we accept?

 Whom do we blame if an IT initiative fail? 20

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