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Smart Enterprise: Greater Expectations

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service. Justifying that budget involves one crucial element: projecting value through return on investment (ROI), says Perkins. In today's environment, most enterprises will fund only projects that provide substantial ROI. This is why CIOs need to create a case study or other detailed report to justify every discretionary request. To receive funding from the business, say experts, it's important to speak in the language of the business. Since such projects often percolate up through the enterprise from line-of-business executives requesting new IT functionality, use those requestors to help make the business case for the invest- ment. It will take more than just a solid case study to gain approval. In many instances, getting such requests approved requires the CIO to have a solid relationship with the enterprise's executive decision makers, which often translates into a seat at the business table. Without this personal con- nection, discretionary IT spending is likely to come under closer scrutiny than other aspects of the enterprise budget. "The toughest thing in the private sector is often that the CIO and the IT organization are not viewed as business partners," says Steve Cooper, CIO of the Federal Aviation Administration's Air Traffi c Organization (ATO). "If you're not part of the committee that makes budgetary decisions, it's diffi cult because you're not part of the discussion. You've got to rely on someone else, who may or not be speaking on your behalf." In Position To enhance IT's position at the table, Cooper advises CIOs to focus on proper governance and management of the IT investment. Instead of setting priorities and making deci- sions alone, CIOs should set up a governance committee with other senior executives to facilitate discussions about the company's top business priorities, and where IT should invest to support those priorities. "CIOs who facilitate that type of conversation can enhance their stature and credibility as a valued business partner," says Cooper, "as opposed to someone who just keeps the lights on." That's the process at Thermo Fisher Scientific, where CIO Kamenz chairs an executive-level committee that reviews a bottom-up build of discretionary IT projects requested by the company's business units. "If a request doesn't relate to a strategic business initiative, it's off the list," says Kamenz. "Based on projected ROI of the business value, it stays on the list and gets prioritized. Then it goes through a slice and dice [often more than once], until the key initiatives are determined." This ideal relationship between IT and business is often referred to as "alignment," but CIO coach Hinssen takes it further, calling for "fusion," where IT becomes a full partner with the business. He advises CIOs to abandon the old concept of IT budgeting and look at the budget more as a venture capitalist (VC) would, managing a portfo- lio of investments based on cost, risk and value delivered to the business. "A VC would say, 'We're going to have a certain number of investments,'" says Hinssen. "Some of them will fail, but we have to seed, select and amplify, develop what works for the business and kill the rest. " CIOs can approach this budget practice, Hinssen suggests, by segmenting the IT portfolio into three categories: Run the Race, Win the Race and Change the Race. The Run category — which comprises approximately 70 percent of the IT budget — is akin to keeping the lights on. While low in risk, it also provides the least business value. Win projects relate to those IT expenditures that help the enterprise compete better, winning the race in the market. Change projects, the riskiest of all, provide the most business value by changing the rules of the game. To show the distinction, Hinssen offers an example: A Run project for a consumer products company might be as simple as designing and maintaining a basic website. Creating an interactive portal, however, could fall under the Win umbrella. It's riskier, to be sure, but such a project could provide custom- ers with more value. A Change project might be an interactive, downloadable Java-based game to help engage customers. "Projects that change the rules could have great value, but it's unclear," Hinssen says. "If you don't take the risk, however, you could lose a lot." Making the case for such elements in the portfolio requires a business-savvy CIO with a strong boardroom presence — and fewer than 10 percent of CIOs fall in that category, Hinssen says. "The most successful CIOs have the ability to transform IT and drive the business value discussion," he says. "If you just say 'This is our capacity, and we'll let the business decide the priority,' you could be shying away from your responsibility." The CIO should be in the driver's seat, turning the discussion into a value dialogue. "That," concludes Hinssen, "is the only way to survive." TOM FARRE, formerly Editor of VARBusiness, is a freelance journalist. He's been covering the computer industry for more than 20 years. ITIL ® is a Registered Trade Mark, and a Reg- istered Community Trade Mark of the Offi ce of Government Commerce, and is registered in the U.S. Patent and Trademark Offi ce. Run, Win, Change CIO coach Peter Hinssen advises CIOs to think of the IT budget as an investment portfolio, analyzing cost, risk and business value of each element and initiating a value dialogue with the business. IT PORTFOLIO ELEMENTS PORTFOLIO CHARACTERISTICS BUDGETARY GOAL "RUN" THE RACE Low-risk "keeping the lights on" Minimize via effi ciency portfolio elements deliver the least measures to free funds for business value "Win" and "Change" projects "WIN" THE RACE Elements with midlevel risk that help Analyze cost and risk an organization compete better, or Win against business value the Race, in the market to justify investment "CHANGE" THE RACE High-risk projects with the potential to Identify "Change" projects change the rules of the game in the and drive a discussion of marketplace their business value with executive management DATA: Across Technology, 2010 )'('SMART ENTERPRISE 21

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