IT Funding and Value Realization Strategies
How to Ensure IT Investments and Initiatives Meet Their Goals
One of the often-overlooked factors for demonstrating the business value of IT is a clearly understood and robust IT Value Realization Model. If poorly designed, funding procedures can virtually guarantee that organizations shortchange themselves and miss out on IT value, often the value associated with infrastructure and shared resources. There are eight closely integrated and necessary components of our Value Realization Model:
- ITsavvy. This is defined by the depth of enterprise-wide IT and technology-related business skills, and management commitment to the use of information technology for business advantage.
- Opportunity management. This centers on the IT organization's engagement with the business community to create business advantage and exceptional outcomes through the astute application of information and information technology to business processes.
- Business-IT principles. These define strategic intentions, the business' value system and expectations for leveraging information and IT to achieve business goals.
- Decision rights and accountabilities. A major aspect of IT governance, this component clarifies the roles and accountabilities of entities and individuals in making investment, prioritization and directional decisions about IT projects and services.
- IT portfolio management. This applies investment portfolio techniques to IT assets, analyzing them along dimensions such as goals, risks, costs, and expected returns.
- Measures and measurement plans. Defined early in the conceptualization of an IT investment, measures and measurement plans are refined as more information becomes available about the investment and its benefits.
- Pricing. This is how IT products and services are priced internally, not only to recover costs, but also to influence business demand for those products and services. Pricing structures make IT cost visible and provide the basis for IT cost control.
- Recovery. Costs may be recovered by a corporate allocation (typically, above the line), chargeback based upon usage or some proxy thereof (such as charge per employee), or by corporate investment (typically, below the line).
When attempting to show business value, IT has had a tendency to address only one, or a few, of these components rather than looking at all of them in an integrated way.
This Re.sults report explores the limitations of traditional IT funding methods, identifies and explains how to develop the most effective funding methods for high-performance and service-centric IT, and provides actionable techniques IT can adopt to bring more value to the business.