Planning IT from demand to budget

see >analyze >control >align < WhitePaper > Planning IT from demand to budget Planning IT from demand to budget 2 IT Planning Challenges Today’s IT planners face tremendous challenges. Requests for services frequently exceed the ability to deliver, compounding substantial applications backlogs. Opportunities to outsource and offshore tasks, and to deploy powerful yet disruptive technologies like web services, are prompting comprehensive re-appraisals of the technical landscape. New regulations are also compelling large IT Organizations (ITOs) to clearly document complex relationships between financial reporting processes and IT infrastructure. Any breach can have dire consequences. These issues are exacerbating a fundamental IT planning challenge – to balance the proportions of the IT budget that support operations and innovation. In the 1990’s ITOs had enough money to invest at least 30% of the budget in innovation while supporting the installed infrastructure. By 2001, recession had necessitated widespread cost reductions, which ITOs achieved by canceling investments in innovation, as operating costs are not easy to reduce. Operations costs swallowed up over 80% of many IT budgets, thereby preventing investments to transform the infrastructure and reduce costs in the longer term. But as IT budgets rebound the problem continues, because investments one year incur operational expenses the next, on the order of 20% per annum. Best practices suggest that a 40:60 ratio of innovation costs and operating costs1 can be achieved by prioritizing the IT investment portfolio to meet strategic goals while eliminating project redundancies, and ensuring that, wherever possible, new projects support the reduction of long term costs. For example, systems consolidation and standardization of the architecture can reduce operations costs by 20%2. The IT planning challenge THEN NOW NEXT ReduceOpEx to Reduce enable innovation Baseline TCO investment (investment) again IT Budget 30% 18% 40% INNOVATION 70% 82% 60% OPERATION Years 1 Accenture, Unternehmenserfolg durch IT, 2003 2 Metagroup: Enterprise Architecture Desk Reference, 2002 Edition Planning IT from demand to budget 3 Transparency first How is the IT planning challenge resolved today? ITOs that lack a current, consistent and complete With difficulty! IT planning takes place in a rapidly changing business environment inventory of the IT landscape typically invest 15% – and involves an overwhelming volume of data – hundreds of applications and many 30% of the average project budget to see the as-is thousands of artifacts in multiple locations. Complex interdependencies between landscape. distributed specialists, critical business processes, IT support services and the underlying technical infrastructure can be significantly disrupted by isolated Logical IT Inventory actions and incidents. Business Layer Organi- Business Business Application Layer Business Physical Layer Data Many organizations struggle to meet the IT planning challenge with MS Office Platform Component Hardware tools. Subject Matter Experts own fragments of technical information while zation Process Function Application Centre Deployed on Responsible for Is compatible Located in organizational and functional data is maintained in ad hoc databases, which lack Consists of the GUI and visualization tools needed to show relationships between data classes with Provided by Runs on Consists Items of (business, technical and financial information). In this context, a transparent and Supported by Sends data to accurate window to the as-is landscape is the essential starting point for every IT project and planning exercise. To find out how transparency can be achieved far more efficiently, see Planning IT: The Logical IT Conventional portfolio management tools Inventory at www.alfabet.de. IT executives are turning to portfolio management practices and tools to demand returns on IT investments in terms of income, savings, strategic value and customer satisfaction.