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Featured articles - Informed Investment Planning Cuts Inefficiency and Wasteful Spending
September 23, 2008
Research shows that between 10% and 30% of IT’s growing annual spending is wasted and that CFOs are mostly left guessing about timeframes, costs and returns from major IT projects. CIOs themselves are often no better informed about the predictability of projects materializing in time, scope or budget. The only way the deficit in transparency, collaboration and control between both camps can be addressed is with an integrated planning process from demand to budget.
Today enterprises are in a position to take control of IT activities across the board from initial decision making to design and implementation to operations management. Yet the missing piece has been the bridge linking the thinking and vocabulary of the business with that of IT.
Too often, when embarking on major IT projects IT managers are left wondering about unknowns, like existing data or the new application being designed or the transition from branch banking to commercial lending or the plan to offer clients new service levels for existing servers.
As with any complex activity, without a master plan from which all groups can work, there is a tremendous amount of inefficiency. Because there is none, IT organizations are mired in a swamp of annual spending in which the vast majority (80-90%) is soaked up to support existing projects and maintain the growing installed base of existing systems.
Consider the difference when a business can dig its way out of huge recurring expenses and reallocate more spending to high return projects. In those cases, individuals come into work each day knowing they are working on the optimal set of activities to generate returns and expand the benefits of IT.
CIOs must be in control of costs and be able to justify investment expenditures. Nevertheless, many IT organizations have not managed to develop reliable measurements and methods that enable proper judgment and control over the contribution that IT makes to the enterprise. In the search for more efficiency and cost control, IT managers are realizing that the exact costs for IT aren’t really known. Most CIOs know how much they spend on hardware, software and personnel, but not what their costs are for application development and hosting, business process support or IT lifecycle costs, for example. So what can be done?
Enter EAM
Enterprise Architecture Management (EAM) is a proactive planning and analytic process that supports sustained business strategy alignment, information transparency, governance and control; plus, it facilitates intra-organizational collaboration. It is a core part of the strategic IT planning and management process and when adopted in a systematic and process-oriented approach can bring about sustained improvements in the effectiveness of IT performance and investments. The remit of EAM encompasses resource planning on strategic, tactical and deployment levels for the following:
- Business layer: organizational structure, business processes, business functions and business data
- Technical layer: applications, standard software products, release information and operational information
- Information layer: costs and planned investments
Business alignment is essential to the EAM process. Otherwise IT projects are planned for the sake of IT. The closer IT is aligned with the business, the higher the probability it will enable the business to achieve its goals and strategies. Especially in times of cost cutting, shrinking innovation budgets and shortening product lifecycles, IT faces greater pressure to deliver solutions that enable business competitiveness. In light of increasingly complex business processes shared with external partners and involving numerous stakeholders, the need for alignment becomes more acute. Otherwise the threat of chaos and disruption increases.
EAM delivers short-term wins on the operational level — e.g. discovery of redundant applications can result in immediate cost savings. Gaining understanding of the current project portfolio and the dependencies between projects originating from architectural overlaps allows corporations to optimize and better synchronize transformational activities and the associated investments. Substantial time can also be saved in capturing an accurate representation of the as-is landscape in the pre-project planning phase or in mergers and acquisitions.
In the mid term, gains can be achieved on many levels that typically depend on the maturity of the enterprises. Some of these may include rationalization of the application landscape; generating architecture evidence for regulatory compliance; reducing scope changes to projects due to better upfront planning and dramatically reducing failure rates of projects.
In the long term, EAM brings about a healthier IT organization, one more agile and responsive to market change. It delivers a closer partnership between IT and business where strategies are aligned and more informed decisions can be made. Aligning all IT planning activities with the business strategy ensures scarce financial resources are directed to where they are creating highest impact for the advancement of the business.
