October is probably the most grueling month of the IT planning cycle, given the exorbitant amount of time expended in meetings. Each department—Sales, Marketing, R&D and Manufacturing—will meet with its IT counterpart to plan next year’s projects. These meetings should be dialogue-driven events that result in a shared understanding of anticipated business drivers over the next 12-18 months, current market conditions, emerging trends, and specific strategies to capitalize on opportunities. In preparation for these meetings, it would also be helpful for IT to conduct a SWOT analysis (strengths/weaknesses/opportunities/threats) comparing your company to 3 or 4 competitors. Not only will this assessment point out technical strengths and weaknesses, but it is always wise to know what the competition is up to.

Unfortunately, October is also a time of enormous pressure, as both IT and the Business push hard to achieve MBO deliverables before the end of the year. Too often, the competing time constraints of completing existing projects while planning new ones causes Business to default on the planning side, leaving IT to design new projects on its own. This lack of input from Business leads to “silo” thinking: “We know what they [the Business] really want or need.”

Now, in a perfect world, Business would remain engaged with the IT Account Manager—the one who not only has the best vantage point from which to understand and articulate Business’s needs, but is also well-equipped to offer ideas and solutions to address those needs holistically (end-to-end) rather than piecemeal. But, if Business opts out and IT can’t get it back to the table, or IT believes it actually can do the planning on its own, the next step needs to be the creation of a business case, or multiple business cases, depending on the number of initiatives IT believes are necessary for the coming year. In this situation, the account management teams should lead the business case process.

What Your Business Case(s) Should Focus On:

  • Quantitative business benefits: ROI that can be tracked, and the forecasted payback over the next 12 or 18 months
  • Risk assessment: what is probability of success when the following variables are considered: processes needed, organizational and infrastructure requirements, bandwith capacity, timing, information and skills necessary, competing business initiatives or conflicts, etc.
  • Funding: Project costs (both operating expenses and capital expenditures) for all phases of the project; these costs should also include transition and post go-live support.
  • Business alignment: clear alignment with business drivers, strategies, and objectives, taking into consideration the impact of the timing of each implementation event.
  • Total cost of ownership (TCO): over lifecycle of project (ideally, this includes ALL costs associated on both the IT and the Business sides).
  • Sponsorship: The name of the person or organization with “skin in the game,” who will help obtain project funding or resources, advocate for the project, etc. In short, someone who has a vested interest in the successful outcome of the project.

Once you have thoroughly assessed the viability of the project, your business case is ready to be presented to the Business. If both IT and the Business are in agreement, the commitment then is to investing in the funding, people, and amount of time necessary to undertake the project.

During the business case assessment process, be sure someone on the account side works with the service delivery partners to develop an overall review of the current operations. This will help you understand what capacity is available (people, technology, funding), or conversely, what capacity is already committed and unavailable.

This capacity review really shines a light on the 60-80% of the “operational support” work that comprises the bottom segment of your typical IT Portfolio Pyramid—work some refer to as “keeping the lights on.” At most companies, operational support is a made up of three things:

  1. Service Level Agreements: Services and capabilities are aligned to fulfillment of SLAs, i.e., mutually defined agreements between IT and Business. Costs associated with each transaction and response/resolution times are tracked and monitored. These agreements are critical for the IT Account Director or IT Relationship Manager to represent the total cost of service to their Business partner. In a chargeback world, fees for these services are crucial to those IT departments operating solely as cost centers, providing, as they do, the funding for new projects. This is the only operational support activity in which you should invest.
  2. Phase 2 & 3 Hiding Place: This is project work or “stuff” that didn’t really get done after the implementation of phase 1, can’t operate as a stand-alone, and thus is very hard to justify on its own merits. Ergo, it is categorized as operational support.
  3. Unnecessary demand stuff: This is the “stuff” that should have been decommissioned years ago, but no one has the resources (funding/man-hours) to invest in getting rid of it and tossing it out of the environment. (Picture that box of moldy college textbooks you’ve been lugging around for years.)This “waste” is what I refer to as the “slow death of IT,” and it is my number one place to begin to restore capacity. In ridding IT of this old baggage, you will create the capacity that IT desperately needs for delivering on current Business needs. I have studied this dilemma for years, and many companies have tried to address it by taxing new projects or building it into the (TCO), but, like “training,” getting rid of it never seems to be the necessity it is, and it always seems to get cut.

Every dollar spent needs to be viewed as an investment. “Keeping the lights on” consumes a majority of IT’s budget, and yet, undergoes the least amount of scrutiny during planning. Why? Because:

  1. It’s hard. If you haven’t done a good job of writing cogent SLAs with your Business partners or been diligent about tracking costs, unraveling the mess will take time and effort.
  2. No one gets a bonus or a promotion for cleaning up someone else’s mess.
  3. IT leadership has not done a good job of educating their Business partners on TCO.
  4. IT Account Managers would much rather be working on the new blockbuster than talking about maintenance on last year’s project.

Many smarter than I thought that with Shared Services the CFOs would get more involved, and unnecessary demand costs would be reeled-in. Surprisingly, I have seen only a few CFOs willing to invest in “consolidation and rationalization,” even during these tough economic times.

Back to planning:
By mid or end of October, you will need an aggregate view of your total next year’s plan that should include:

  • Innovation projects (short, 4-6 week sprints to learn and de-risk future larger projects
  • New projects (i.e., Business and IT)
  • Phase 2+ functionality improvement projects
  • Service investments (otherwise referred to as “Keep the lights on” investments)

To ensure success, new projects need to have an estimated funding of +/- 20%; Phase 2 should come in at +/-10%; and service costs need to be aligned to the service agreements and appropriate funding model. All projects should have clear business cases.

November is all about prioritization based on guidance from Executive and Finance. The better you plan in October, the more successful you will be when the new guidance comes—and, yes, it will come.

Putting your investments into a portfolio tool is something we can help you with, and will allow you to manage your investments and make the right tradeoff decisions.

Most maturity level 1 and 2 companies still optimize by divisional silo, but there are new processes, tools and governances that can help you and your company to make cross functional tradeoffs and ensure you are returning the most value for your IT investment…surely something your CEO and CFO would want to know.

Enjoy October. The hard decisions are coming, and those of you who are prepared will enjoy Thanksgiving much better.