alfabet a.g./whitepaper planning it

Planning IT from

demand to budget

WHITEPAPER

IT Planning Challenges

Today’s IT planners face tremendous challenges.

Requests for services frequently exceed the ability to deliver, com-

pounding substantial applications backlogs. Opportunities to out-

source and offshore tasks, and to deploy powerful yet disruptive

technologies like web services, are prompting comprehensive reap-

praisals of the technical landscape. New regulations are also com-

pelling large IT Organizations (ITOs) to clearly document complex

relationships between financial reporting processes and IT infra-

structure.

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 cancelling 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 trans-

form 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 costs can be achieved by prioritizing the IT in-

vestment 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 con-

solidation and standardization of the architecture can reduce opera-

tions costs by 10%.

How is the IT planning challenge resolved today?

With difficulty! IT planning takes place in a rapidly changing busi-

ness environment and involves an overwhelming volume of data –

hundreds of applications and many thousands of artefacts in multi-

ple locations.

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Planning IT from demand to budget2

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Complex interdependencies between distributed specialists, critical

business processes, IT support services and the underlying techni-

cal infrastructure can be significantly disrupted by isolated actions

and incidents.

Many organizations struggle to meet the IT planning challenge with

MS Office tools. Subject Matter Experts own fragments of technical

information while organizational and functional data is maintained

in ad hoc databases which lack the GUI and visualization tools nee-

ded to show relationships between data classes (business, technical

and financial information). In this context, a transparent and accu-

rate window to the as-is landscape is the essential starting point for

every IT project and planning exercise.

Conventional portfolio management tools

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. Portfolio ma-

nagement tools and processes are sufficiently “project-property”

independent to be deployed across any project portfolio, including

IT. Implementation typically delivers savings by identifying skill and

resource dependencies across multiple projects, balancing project

value and risk, making it easier to kill a project, and improving busi-

Transparency firstITOs that lack a current, consistent and complete inventory of the ITlandscape typically invest 15% – 30% of the average project budget to see the as-is landscape.

ness/IT communications. A reduction in new investments of 15% –

20% can be achieved when portfolio management techniques are

introduced in the IT organization, as 20%-30% of all projects deliver

little or no business value.

Despite these reductions in the new investment budget, conven-

tional portfolio management tools neglect technical aspects of IT

projects, which greatly affect their implementation and successful

deployment. IT projects are interdependent, they are easily disrup-

ted by new technologies and their costs can be very difficult to allo-

cate. Seemingly prudent short term decisions to approve IT projects

can result in unforeseen, long term impacts on the enterprise ar-

chitecture, and tremendous costs. For example, while the business

case and skills/resource dependencies associated with outsourcing

decisions may be clear, neglect of architectural dependencies may

have highly detrimental consequences.

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>> Conventional enterprise architecture tools

ITOs are also purchasing stand-alone tools that help technical spe-

cialists manage IT dependencies in an increasingly complex techni-

cal landscape.

Enterprise architecture tools are used to facilitate specialist vie-

wpoints for a specific architecture, adapt the strategic target ar-

chitecture to suit local geographic and reporting requirements, and

trace dependencies between artefacts. Most point solutions provide

modeling capabilities and a repository where models can be stored

and linked.

Enterprise architecture tools are primarily used to document and

publish a comprehensive view of the as-is and target landscape. The

dependencies, costs, and disruptions they analyze and reveal are

rarely considered outside the technical arena and are typically by-

passed in the portfolio management process.

As a consequence, vital information is withheld from the investment

process.

An integrated planning process from demand to budget

The planning challenge is to integrate technical know-how from

the architecture management arena into portfolio management to

reduce operating expenses and facilitate innovation. This can be

achieved with an integrated planning process that delivers full visi-

bility of the dependencies in skills, resources and the architecture.

An effective, integrated process encompasses value management,

enterprise architecture management, demand management, appli-

cation architecture management, and program portfolio manage-

ment, enterprise strategy and master planning, and release ma-

nagement.

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Portfolio manage-ment toolsdon’t solve the IT cost dilemma

An integrated process resolves the IT cost dilemma

Investments one year incur maintenance costs the next. In a flat budget scenario, an increasing proportion of budget will be allocated for operations, even if portfolio management tools are used to reduce investments.

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Key components in the integrated planning process:

Value Management encompasses the definition and assignment

of policies, strategies, and goals, and the formulation and

measurement of the Balanced Scorecard and Key Performance

Indicators (KPIs). Formulated goals are inputs for the

management of demands and the enterprise architecture, while

the evaluation and prioritization framework is the input for

Program Portfolio Management.

Enterprise Architecture Management encompasses the

formulation of strategic demands (as inputs to demand

management), analysis of the application portfolio, the definition

of standards and consolidation of architecture and migration

plans across projects (as inputs to Application Architecture

Management).

Business Demand Management involves documentation of

demands from the business lines and the enterprise

architecture, and their consolidation as defined projects with

associated business benefits. In an integrated process, projects

with architectural impact are transferred to the Application

Architecture function for detailed estimates, while those with no

architectural impact are directly transferred for budget

prioritization and assignment.

Application Architecture Management commences with a

thorough analysis of the as-is architecture, which is ideally

achieved by referencing a current, consistent and complete IT

inventory. Target architectures and alternative scenarios for

each defined project can then be devised in gap analysis to

inform architecture decisions and transformation planning.

Detailed plans (with cost estimates, risks and dependencies) are

then transferred to Program Portfolio Management.

In integrated systems, Program Portfolio Management involves

the consolidation of all project dependencies (skills, resources

and architecture), project evaluation and program assignment,

bottom up prioritization of projects inside each program, and top

down prioritization of programs to release budgets.

Enterprise Strategy and Master Planning defines the evolution of

business/IT alignment by relating the core artefacts of the

business architecture with those of the application architecture.


It enables IT strategy planners to explore tactical options and

ensure that flexibility in the IT architecture is accommodated.

Master plan information is used to ensure that solution

architectures are compliant with planned changes to the

landscape and that new introductions into the landscape remain

within the IT strategic corridor.

In Release Management the technical architecture for

applications, components and standard platforms, otherwise

managed on a strategic and tactical level in Enterprise

Architecture Management, is specified at a level of granularity

that allows technicians to install and maintain. It includes

planning and governance of the hand-over from IT strategy to

the development/build environment and supports the

deployment process of applications, components and standard

platforms.

Collaborative system

IT planning takes place in a rapidly changing business environ-

ment and involves an overwhelming volume of data – hundreds of

applications and many thousands of artefacts in multiple locations.

Complex interdependencies between distributed specialists, critical

business processes, IT support services and the underlying technical

infrastructure can be significantly disrupted by isolated actions and

incidents. Though most business managers inherently know that

wellorchestrated teams can have a dramatic impact on the success

of a business, organizations often struggle to create and execute the

strategic IT plan because this work involves tight co-ordination of

decision makers with diverse interests, budgets and reporting lines,

especially between the IT organization and business divisions. Given

the complexity, collaboration is a necessity to ensure transparency

and accelerated productivity in project planning cycles.

For integrated IT planning processes to be effective a solution must

offer a platform for collaboration and integrated workflow capabili-

ties with significant benefits for a wide community of stakeholders.

Each stakeholder must be supported with a role-based system that

configures access rights, information views and planning tools to

meet the diverse needs of those involved in the process, horizontally

from demand to budget and vertically from strategy to operations.

This includes CIO’s, strategic planners and enterprise architects,

system architects, controllers, IT managers, business analysts, pro-

ject managers and end users of IT applications.

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Integration benefits

Tight integration of demand, architecture and portfolio manage-

ment techniques and resources through the planning process can

deliver the visibility needed to achieve immediate savings in the

investment portfolio and the long term business benefits that re-

sult from standardization and flexibility. By adopting an integrated

approach to planning IT from demand to budget, management can

realize significant returns, in addition to the discrete benefits that

are achieved with conventional portfolio management and architec-

ture management tools, (such as the elimination of obvious project

redundancies and the disciplined assessment of the strategic value

of IT projects).

An integrated planning system from demand to budget can help:

Cut smaller development projects with higher success rates

Enforce the architecture standardization plan across the

program portfolio for long-term operating cost reductions

Accurately calculate costs and risks by building plans from a

detailed list of architecture transformation gaps

Eliminate low value/high cost components in plans for priority

projects (such as expensive but infrequently used system

interfaces)

Bundle costs for closely related tasks from multiple project

plans to the project budget that can best support them

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Integrated IT planning is only possible with a platform that supports collaboration amongst stakeholders

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Plan for technical project interdependencies (such as the

development of an interface in one project for a deliverable from

another)

Enable detailed chargeback per supported business process.

Migration to an integrated process

The conventional IT planning process involves selecting and appro-

ving budgets for new business demands before appraising the ar-

chitecture.

As the maturity of the architecture function grows, a hybrid pro-

cess may be adopted, in which the initial demand request is passed

through a preliminary architectural assessment in support of the

project approval, and then referred back to the application architec-

ture management function for detailed consideration once the pro-

ject commences.

Ultimately, an integrated planning approach can be considered in

which thorough appraisal of the technical issues is a constant facet

of the process, see figure below.

Planning IT from demand to budget

alfabet’s solution planningIT supports an integrated process to meet

the IT planning challenge from demand to budget. This modular,

scalable solution comprises a Logical IT Inventory for transparency

and focused modules that align IT investments with business objec-

tives.

The Logical IT Inventory captures the as-is landscape with

sufficient detail to support any IT project or planning task.

The Business Demand Management module documents

demands and their technical and strategic alignment to define

project proposals and track demands through the system.

The Application Architecture Management module supports

detailed analysis of as-is and to-be architectures to compare

scenarios and business cases for defined projects, perform gap

analysis, and prepare migration plans.

The Enterprise Architecture Management module is used to

define standards and guidelines, analyze and assess the

application portfolio (redundancies, costs and usage levels), and

Planning IT from demand to budget10

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Return on Investment1ITO budget assumptions:- labor: 50% of IT budget- operations: 60% of IT budget- deployment: 30% of IT budget- planning: 10% of IT budget

An integrated planning system can help to reduce or eliminate costs for:- information retrieval about the as-is architecture (15% - 30% of the average IT project)- redundant and non-strategic IT investments (20% - 30% of the portfolio)- inefficient planning processes (40% savings with a transactional system)- integration of non-standard architecture (30% of operations costs)(Sources: alfabet customers, IBM, McKinsey, Meta Group, MIT)

Migration to an integrated planning process from demand to budget

consolidate target architectures.

The Program Portfolio module is used to assign defined projects

to programs and conduct bottom up and top-down analyses of

budgets and programs.

Business Demand Management

Application ArchitectureManagement

Program Portfolio Management

Enterprise Architecture Management

ReleaseManagement

Enterprise Strategy & Master Planning

Value Management

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The Enterprise Strategy and Master Planning module is used to

analyze and assess the application portfolio (redundancies,

costs and usage levels), consolidate locally developed target

architectures, and create an IT master plan.

The Value Management module is used to document and align

business and IT strategies and to define and assign KPIs, roles

and project evaluation criteria.

The Release Management module derives operational

instructions for deployment and communication with CMDBs

from approved solution plans.

The Compliance Management module is used define a

centralized framework and the relevant data to make

compliance checks more efficient, perform and manage

compliance evaluations, and audit for adherence to the control

structure and correctness of the evaluated objects

Streamlined data collection and navigation processes encourage

widespread user communities to update content. Any member of

the organization can access the system by clicking a web link, while

simple screens and prompts facilitate error-proof data collection.

The system also assigns update responsibilities to named individu-

als. An easy to use GUI supports power users and occasional visi-

tors.


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About alfabet

alfabet enables companies to see, analyze, control and align IT ini-

tiatives with business priorities continuously. Its planningIT® soft-

ware is unique in tightly coupling business priorities and IT returns

with current and future initiatives. Competitive point solutions offer

modeling or repository functions with a static view of priorities, ar-

chitecture and infrastructure. alfabet provides a holistic, integrated

and collaborative approach that offers continuous transparency into

how IT and business information, processes and roles are changing

and need to be managed over time.

The company serves a global user community of 25,000 IT professi-

onals in more than 40 countries in a variety of industries, including

automotive, financial services, telecommunications, logistics, high-

tech and others. Its customers include international corporations

such as Credit Suisse, Munich Reinsurance, BMW, AXA Winterthur,

Deutsche Bahn, OCBC and T-Systems. Founded in 1997, alfabet is

based in Berlin with U.S. headquarters in Cambridge, Mass. Leading

analyst firms recognize alfabet as the technology and market leader

for enterprise architecture and strategic IT planning solutions.