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Helping Business Thrive On Technology Change

June 8, 2006

Creating The Strategic Plan ForTodays ITby Alex Cullen

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2006, Forrester Research, Inc. All rights reserved. Forrester, Forrester Wave, Forresters Ultimate Consumer Panel, WholeView 2, Technographics,and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies.Forrester clients may make one attributed copy or slide of each gure contained herein. Additional reproduction is strictly prohibited. For additional reproduction rights and usage information, go to www.forrester.com. Information is based on best available resources. Opinionsreect judgment at the time and are subject to change. To purchase reprints of this document, please email [email protected].

BEST PRACTICES

EXECUTIVE SUMMARYITs strategic plan is an essential tool to run IT like a business. e strategic plan for todays IT isdifferent from the strategic plans that IT may have developed ve years ago. It is purpose-driven and acomplement to IT governance structures and processes. e structure and content are tailored to thispurpose, avoiding the sprawling documents that tried to cover every possible input and aspect of ITstrategy. And todays plan must be a living plan, with regular review and updating, thereby providinglong-term direction while maintaining relevancy.

TABLE OF CONTENTSYesterdays IT Strategic Plan Isnt NeededAnymore

Make Todays Strategic Plan Context-BasedAnd Purpose-Driven

Structure ITs Strategic Plan In Five Sections

Avoiding Strategic Plan Shelfware

RECOMMENDATIONSThe Business Plan For The Business Of IT

WHAT IT MEANS

Your IT Archetype Focuses Your Strategy

Supplemental Material

NOTES & RESOURCESForrester interviewed 31 user companies andexamined the strategy documents of ve more,including: DirectTV, FDIC, Northwest Airlines,Russell Investment Group, Sonoco Products, andUnumProvident.

Related Research Documents

The Three Archetypes Of ITMarch 22, 2006, Trends

The Economics Of ITJune 6, 2005, Best Practices

The IT Balanced Scorecard Metrics That CountSeptember 30, 2004, Best Practices

June 8, 2006

Creating The Strategic Plan For Todays ITPlanning How To Run IT Like A Businessby Alex Cullenwith Bobby Cameron, Craig Symons, Laurie M. Orlov, and Lauren Sessions

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Best Practices | Creating The Strategic Plan For Todays IT

2006, Forrester Research, Inc. Reproduction ProhibitedJune 8, 2006

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TARGET AUDIENCE

Enterprise architecture executive, chief information officer

YESTERDAYS IT STRATEGIC PLAN ISNT NEEDED ANYMORE

Successful IT organizations use an IT strategy to achieve specic results: to communicatepriorities across business and IT; to provide direction and context to governance structures, suchas IT investment committees, and to their portfolio management processes; and to ensure thatexpectations set by a strategy are aligned with budgets and improvement plans. A strategic plan fortodays IT should be very different from the IT plans generated ve or 10 years ago (see Figure 1).Whats changed?

Project portfolio management as a governance discipline. Without a portfolio managementapproach, the ability of IT to work with business to si and prioritize demand for IT resourceswas hampered business would give IT a long list of changes, and IT attempted to workeverything on the list. Project portfolio management provides business and IT with the ability to set priorities based upon the relative value of different requests. 1

Our project review board was reviewing project lists but lacked context. Now our CIOis excited because we have business interest he hopes to get more strategic use of ITresources. Chief architect, biotechnology rm

e relationship manager as a dened role. Relationship managers provide a focal point forcommunication, planning, and coordination between IT and its business customers. 2 Without

this role, ITs ability to have a dialogue on business plans and needs was constrained by a lack of business understanding resulting in a reactive stance to business requests.

Relationship Managers are charged with developing the business unit IT plan in partnershipwith the business, with representing the overall IT plan back to the business, and withworking to ensure synergy between these two levels of plans. CIO, commercial mortgagerm

Enterprise architecture as a planning discipline. e EA groups function in the past wasalmost exclusively focused on technology selection and technology standards policing. Whilethis beneted technology decision-making, it had little impact on IT planning. EAs focus is

broadening to include business applications and services, and it is increasingly taking an activerole in dening IT strategies. 3

SOX raising the prole of IT governance. IT may have been mission-critical to the business,but IT governance such as dened decision-making processes and documented plans wasan a erthought. But Sarbanes-Oxley section 404 compliance combined with COBIT has raisedthe visibility of IT governance and increased executive management and Board of Directorsinvolvement in setting IT directions and overseeing IT investments. 4

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2006, Forrester Research, Inc. Reproduction Prohibited June 8, 2006

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Figure 1 Todays IT Strategic Plan Is Different From Yesterdays

A Strategic Plan Documents ITs Intentions Focusing IT And Business Thinking

Being successful as a business requires a solid model for how to meet customers needs and how toprepare for future opportunities. Strategic plan development drives the thinking on this model

the documented plan communicates this thinking (see Figure 2). For IT, the effort to develop astrategic plan helps by:

Setting business expectations and improving understanding. IT will be challenged to meetthe business expectations for new systems or cost reductions if it cant set the expectations of what is possible by when. And business groups will always be frustrated if they dont understandITs constraints.

As a result of strategy development, were more in sync with the business and they betterunderstand IT capacity. Business views strategy as one of the streams they do IT viewsstrategy as encompassing everything we do. Chief architect, major commercial bank

Establishing credibility with executive management. With IT both a signicant operatingexpense as well as one of the largest categories of capital expense, CxOs and o en the boardof directors look for evidence of both investment alignment with corporate priorities andadequate governance and controls to ensure expenditures are spent prudently. ey need to seea big-picture view of IT not just spend on projects for the business, and not just budget foroperations, but visibility to an asset that can be applied to enterprise priorities.

Source: Forrester Research, Inc.39515

Strategic planning the old way

Purpose

Contents

Audience

Planningcycle

Impact

Strategic planning for todays IT

Identify and communicate all plans for ITinvestments and improvements overmultiyear timeframe

Tend toward infrastructure investments

Everything business trends and drivers,IT assessments, IT principles, multiyearproject lists with descriptions,improvement programs

All-encompassing plan forsenior IT management, business execmanagement, IT staff

Infrequently, as a major clean sheetactivity: when the last one is out of date

Rapidly declines after rst budget cycle Not measured

Provide input to business and ITgovernance and management processes

Tailored to business and IT context Not conned to infrastructure

investments

Specic drivers, assumptions, and plansrelevant to context and purpose

Specic plans targeted to specicaudiences, from the Board of Directorsto the IT organization itself

Regular revalidation and refreshmentplanned within an annual cycle

Provides continuous input to IT operatingplans, governance, and portfoliomanagement

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Figure 2 What Business And IT Need From A Strategic Plan

e Board has become very involved in IT plan development. e Boards focus: ensuringIT investments are made in the areas the Board sees as essential to the rms success. CIO,diversied insurance carrier

Bringing coherence across the IT organization. Managers across the IT organization aremaking daily decisions on projects, product purchases, or staff training and development. esedecisions can build on each other or they can be at cross-purposes, wasting resources anddegrading capability. And too o en, IT reacts to the last and loudest request in, making that therst request to go out.

IT absolutely has to have a strategy to provide a platform to support business agility. ITalso needs strategy to manage itself. VP business planning, apparel manufacturer

Were trying to implement a more logical process than the squeaky wheel. Director of IT

strategy, healthcare insurance provider

IT Cannot Run Like A Business Without A Plan

Businesses sometimes run without documented strategies or business plans as a factor of company culture when executive management believes that the strategy is obvious or that rapid businesschange precludes developing or following a documented plan. But in large rms with more complex


IT needs the plan to:

Clarify expectations what does it have to do to be successful Provide room to maneuver how to balance new and conicting demands on IT, without damaging

its ability to deliver Justify investments in itself applications and technology portfolio, and IT skills and processes

Your business customers need the plan to:

Demonstrate understanding of their business and their goals and constraints Set their expectations what they can (reasonably) expect from the IT function

Clarify the rules IT operates under governance, prioritization, allocation of resources

Build their condence build a track record of IT doing what it says it will do

Executive management needs the plan to:

Show alignment with corporate priorities

Communicate rationale behind IT budget and longer-term investment needs

Describe governance controls

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structures, such as multiple business lines, the costs of undocumented or vague plans becomemanifest in lack of coordination and fragmented execution. Similarly, as IT becomes more complexand the business dependence grows, the cost of not having a plan is also high because:

Lack of a documented plan puts IT at risk of failure. An IT organization may appear to besuccessful for a time operating without a plan, but it is always at risk that quick responses willcreate a damaging legacy of short-term workarounds. Worse, as IT reacts to one set of needs,other groups in the enterprise will have no visibility as to whats up next on ITs to-do list. ITcant succeed if it is solely focused on the impossible task of keeping up with a re hose of newprojects, enhancements, and service requests.

Our IT strategy had mirrored the lack of business strategy weve tried to run it as acollaboration model, not planning model. But as we doubled in size, we realized we need todo more long range planning to support continued growth. CIO, airline

If you dont know where youre going, stakeholders dont either. Without a plan, ITsstakeholders cant know where their needs t within IT capacity. More importantly, stakeholdersare more likely to see what IT delivers as disconnected actions with no coherence andno relationship to their priorities, such as investing in new phone systems when businessmanagement places greater importance on supply chain improvements.

IT must explicitly acknowledge its business surroundings. Technology is interwoven into allof a rms activities, from integrating M&As to regulatory compliance to paying a salesmanscommission and so the rms growth trajectory, cost and market pressures, and attitudes

toward risk and technology are inescapable backdrops to IT actions. Without acknowledgingthese surroundings, ITs activities can be disconnected from the rms plans. For example, wheninternational growth is a driver, yet IT has no plans to change from a US-orientation.

MAKE TODAYS STRATEGIC PLAN CONTEXT BASED AND PURPOSE DRIVEN

In the best rms, IT should be part of the business strategy but the systems, services, andtechnology IT is responsible for are too complex to be planned solely within the context of thebusiness plans. And each IT organization is unique in terms of its relationship with business,planning, and governance maturity and internal processes and practices. 5 To manage its uniqueopportunities and constraints, IT needs a documented strategic plan that is tailored to its own goals,maturity, and requirements acknowledging context and using context to drive the purpose of theplan.

Context Ensures The Plans Relevance

Starting with an awareness of both the business context and the IT context means that the strategicplan will be relevant to the rm as it is today. Without this understanding of context, an otherwise

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ne strategic plan is destined to an early fate as shelfware and ultimately does more damage toITs credibility than if there were no plan at all (see Figure 3). Factors to consider include:

e business climate and rms culture. How is the rm changing? How fast is it growing, andwhere is it growing? What is the relative importance of supporting growth versus controllingcost? How important does business management view technology to the rms plans? Does therm have a planning culture, or does it eschew long-term planning? is context will drive therms pull for IT services and its willingness to support an IT strategic plan.

ITs capability and maturity. What are the IT organizations strengths and weaknesses? Are ITprocesses for service management, project management, or IT governance working effectively?How condent is the business in ITs capability? ese factors may indicate strengths that the ITstrategy should leverage or impediments that must be overcome as part of, or a prerequisite to,strategy success.

e state of the technical environment. Are desktops up to current standards? Are key business applications held together with chewing gum and bailing wire? ese are factors thatwill either drive the purpose of the strategy or constrain what IT can accomplish.

Purpose Provides Focus To Planning Efforts And Clarity to Plan Audiences

While the context informs the strategic decisions IT must make, an IT planning effort that tries torespond to every factor of the context runs the risk of requiring substantially more time and effortto create and of developing a large, unwieldy plan that is harder to understand, let alone implement.Planning efforts need focus and bounds which means the CIO and senior IT management needto dene the catalyst that drives the plan its purpose. Using the context to identify the planspurpose, ask yourself: What are the highest-priority challenges or changes needed both businessand IT? For example, is it to improve the business value of IT? Or to dene how IT will supportstrategic business change? Or to plan how IT will improve its own efficiency and reduce costs? Oncethe decision is made on the purpose of the plan, then the contents and the actions to develop thecontent become much clearer (see Figure 4).

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Figure 3 Whats Your Context?

Figure 4 Context Drives The Purpose Of Your Plan

STRUCTURE ITS STRATEGIC PLAN IN FIVE SECTIONS

ere are ve major sections to ITs plan, which are common whatever its purpose, but the inputs toeach of these sections and the subsections will be different depending on context and purpose (seeFigure 5).


Context Example Possible implications

Business growth

M&A

Increasing competitivepressures

IT quality

IT efficiency

Technology foundation

Firm is growing 20% per year,driven by sales of low-endproducts

Strategy is to acquire small rmswhere products can be soldthrough existing channels

Firm is facing new marketentrants who are causing pricesto decline

Business sponsors feel thatapplication releases are tooinfrequent and too buggy

Business partners perceive thatIT is high cost relative to valuedelivered

Core business applications areon legacy technologies andgetting harder to support

Invest for scale

Rapidly absorb frequentacquisitions

Focus investment on marketdifferentiators

Improve project management,software development, and QAprocesses

Drive down cost of IT servicesand create cost transparency

Incorporate applicationremediation in project portfolioand plans

IT

Business


Context Potential plan purposes

Business growth

Competitive pressures

IT efficiency

Develop and communicate investmentsneeded to support growth strategy

Implement planning and governanceto align IT with highest-value businessactivities

Institute process improvement andservice management programs

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Figure 5 Strategic Plan Outline

Executive Summary

While the executive summary may be approached as an a erthought, it sets the tone for theaudience and should not be treated haphazardly. Key content items:

Purpose of the plan. A strategic plan can suit a variety of purposes and the purpose of theplan should be stated clearly upfront. For example, if IT is seeking to better align its prioritieswith business plans, this intent should be clearly indicated in the executive summary.

Plan highlights. is is the summary of the major business and IT issues the plan is addressingand the major strategy elements.

Audience. Describe who your expected audience is and what sections they will be mostinterested in. Business management may be most interested in ensuring its needs are identiedaccurately, whereas IT staff will be more interested in the details of the road maps.


E x ec S umma r y

B us i nes s G oa l s

I T A s s es s ment

S t r a t egy

I mpl ement a t i on

FIRMIT Strategic Plan

2007-2010

Table of Contents

Executive SummaryPurposePlan highlightsAudience

Business Goals and Requirements

IT Assessment

IT Strategy

Plan Implementation

1

3

8

10

19

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Business Goals And Requirements

e foundation of the strategic plan is the description of the business goals and requirements thatthe plan is addressing. Business goals and needs can be captured a variety of ways and analyzed avariety of ways but this should be driven by the purpose of the plan (see Figure 6). If your planspurpose is:

Supporting business strategy. If the plans purpose is to support business strategy, then thegoals and requirements would include the business strategy and plans, business drivers, andexpected changes to business processes.

Improving business value from IT. If the plans purpose is to improve the business value of IT,then the goals and requirements documented in the strategic plan include the business valuechain, operating or go-to-market model, and potentially any SWOT analysis the business hasperformed

Figure 6 Business Goals And Requirements


E x ec S umma r y


I T A s s es s ment

S t r a t egy


BUSINESS GOALS AND REQUIREMENTS

Corporate and business goals

Business strategy

Value Chain, operating or go-to-market model

Business drivers (SWOT, critical success factors,or other analysis)

Business expectations of IT or satisfaction with IT

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Supporting business strategy. e IT assessment for a plan to support business strategy shoulddescribe the IT capabilities to support this strategy and the comparison to current capabilities.

Improving business value from IT. If the plans purpose is increasing the business value of IT,then the IT assessment should describe the service offerings and processes to provide increasedvalue, the current offerings and processes, and the gap.

Improving IT efficiency. If the plans purpose is to increase the efficiency of IT, then theassessment should describe what efficient IT would look like and compare this with currentpractices to document the gap.

IT Strategy

e strategy describes the how of how IT will close the gap between where it needs to be

and where it is today the actions that will be taken or the road maps IT is planning to follow.Depending upon the purpose of ITs strategic plan, the strategy may be made up of operatingprinciples and guidelines to ensure decision-making consistency, of road maps for applications andservices or technology investments, or it may consist of IT programs to improve its performanceand business satisfaction (see Figure 8).

Principles bring strategic guidance to IT decisions. Decisions are being made across IT andwith business and no strategy can specify the answer to every decision. Principles ll thegap, both by inuencing the tactical decisions below the level of strategy and by providingguidance that is relevant across a greater timeframe. Many rms make principles the center of their strategy dispensing with road maps and replacing them with decision consistency (seeFigure 9).

Road maps show the time dimension of the strategy. If the strategic plan is specic aboutchanges to the application portfolio and infrastructure, then road maps will be the best way to communicate the changes, the results of the changes, and the investments necessary. ereis more than one type of road map that may be needed: an application portfolio road mapshowing new applications being brought online and older ones being retired or an investmentroad map showing the spend on major changes, linked to what the major changes are providing(see Figure 10).

Program plans clarify ITs own planned improvements. ITs own transformation may bethe core of the strategic plan. is might include skills development, process improvement,governance changes, or the creation of an innovation team. ITs program plan describes theseinitiatives, the results to be achieved, the cost, and their interdependencies. e audiencefor this program plan is not just IT business customers will nd these changes and therelationship to their needs very useful.

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Figure 8 Strategy

IT governance changes support road maps. When the strategic plan lays out road mapsfor application evolution or technology investments, IT governance must take on the taskof synchronizing business and IT proposed projects against these road maps. If existinggovernance processes do not perform this check, such as if they focused on projects businesscases, then the governance model must be changed. Describe it in the strategy, so as to link thechange to the road map strategy.

New IT programs address new goals. Many IT organizations are nding their goals arechanging for example, in prior years, the goal was cost containment, but now there is greaterpull from the business for help with innovation. Describe the innovation program and link it tothe business goals and requirements that are driving it.


E x ec S umma r y


I T A s s es s ment

S t r a t egy


STRATEGY

IT principles

Road maps Application and service Technology Investment and return

IT performance improvement plans

IT governance changes New IT programs (e.g. innovation, other)

Organization changes

Other (sourcing, etc.)

Alternatives discussion

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Alternatives not taken add credibility. A strategy entails decisions and an effectivestrategy benets from IT and business staff understanding why the strategy is the best solutionto business needs. e strategic plan should document the why and also gain credibility fromthe discussion of why not. For example, a strategic direction for selective outsourcing acrossmultiple vendors should also explain why a wholesale single vendor outsourcing approach is notbeing adopted. But dont clutter the strategy document with this discussion, and keep it in itsown section.

Figure 9 Principles Guide IT Decisions


Principle Implications

We will improve integration and reducesupport costs by favoring application solutionsfrom a small number of preferred vendors.

Business-sponsored projects will be prioritizedbased upon alignment with corporate anddivisional strategies, investment return, andproject risk.

IT will continuously reduce the cost of servicesthat provide no differentiating value to thebusiness.

Vendor management will develop strategicrelationships with preferred vendors, andfacilitate regular strategy updates from them.

If a business need cannot be met by current orplanned offerings, then the PMO will determinewhether to utilize unique solutions frombest-of-breed vendors or conduct small, targeteddevelopment efforts.

Project proposals will include sufficientdocumentation to evaluate alignment.

Enterprise architecture will develop road mapsthat are aligned with dened strategies.

Selective outsourcing will be used forinfrastructure services and noncore businessapplications.

IT will track costs and cost drivers on a per-servicebasis.

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Figure 10 Road Maps Add The Time Dimension

Plan Implementation

Once a plan is complete and signed off, it has to be put into action. is section should describe howthis will happen who will be responsible for different initiatives, how oversight will be provided,

and how results will be monitored. For example, rms that use a Balanced Scorecard might updatetheir scorecard measures to specically reect elements of their strategic plan (see Figure 11). 6

We want to avoid shelfware. We have initiative owners with specic plans, monthly statusmeetings with the CIO, and quarterly review and planning meetings. VP IT strategy andarchitecture, health insurance carrier

AVOIDING STRATEGIC PLAN SHELFWARE

Even a well-focused strategic plan runs the risk of becoming shelfware unused and with noimpact on IT-business collaboration and IT performance. Practices to avoid this fate:

Make participation as broad as you can afford. While there is always a risk of having too many people involved with the strategic planning process discussion gets extended and decisionstake longer the more people who are involved means the more people who have a stake inthe resulting plan. Take particular pains to get participation by key audiences and stakeholders,such as business management or line IT leadership. Keeping the participation level may notbe easy so make the planning process as efficient as possible and the follow-through asconvincing as possible. 7


Road map

Business capability

Application portfolio

Application

Technology

Investment

What it communicates

Shows improvements to businesscapabilities, such as unied customeraccess, with relevant IT initiatives

Shows changes in the portfolio overtime new strategic apps beingimplemented, and unneeded appsremoved

Shows the changes to an applicationor closely integrated set of applications,such as platform upgrades or businessfunctionality changes

Shows the evolution of the technology

portfolio for an architecture domain,such as the planned road map fordatabase platforms

Shows investments over time as theyrelate to different technologyinitiatives

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Figure 11 Implementation

One thing that made past strategic planning effective was business involvement butthe hard thing is keeping businesses involved. eir view: strategic planning is used tojustify budget but the IT view is that it is not a one-time process. VP IT strategy andarchitecture, health insurance carrier

Clearly connect the strategic plan to IT governance processes. e strategic plan mustprovide direction to IT governance processes, such as project selection and portfolio

management, or business unit level project planning. For example, portfolio managementprocesses should use an application road map to evaluate the t of business project proposals and potentially offer suggestions on rescoping them to align better with the road map.

Market the strategy. Broad participation will help develop momentum behind the strategicplan but it is not enough. IT and business staff need to know about the strategy and see how


E x ec S umma r y


I T A s s es s ment

S t r a t egy


IMPLEMENTATION

Overall plan governance

Accountability by road map and/or initiative

Plan metrics and scorecards

Plan review and updating

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it is being placed into action. Develop a communications program for the strategy rollout andmake sure to answer the question: What does this mean to me? 8

Its good to have all of the plan in one place business people & IT people can read thesame material. is promotes common understanding. Chief architect, global logisticsrm

Keep the strategic plan a living plan. Make review and refresh of the plan a regular activity.Take advantage of the fact that review and update of a plan takes less effort than the initialdevelopment and it keeps the plan relevant to business and IT even as they change.

We annually update strategy, twice a year we update business architecture, and yearly weupdate business blueprints. e steering committee approves and they are then used asinput to proposal review to validate scope and solution. VP IT strategy and planning,health insurance carrier

Multiyear plans that are updated are easier than one-year plans that have to be restartedfrom scratch. Chief architect, diversied commercial and consumer bank

R E C O M M E N D AT I O N S

THE BUSINESS PLAN FOR THE BUSINESS OF IT

A common goal of CIOs is to run IT like a business as a means to improve ITs contribution to

their rms. The unique demands and constraints that IT faces, coupled with its own legacies of applications, technology, skills, and practices, make this goal challenging. Developing a strategicplan aligns expectations and investments with ITs capacity to execute this becomes ITs planto run like a business. But a strategic plan that produces results has to be targeted to these results.The strategic planning effort is not one size ts all it must be tailored to the opportunitiesavailable for IT. You must:

Dene your goal for your strategic plan. Without a clear set of goals for a strategic plan,the result easily becomes a sprawling document from which audiences will struggle to getthe most salient points. The result can be the perception of irrelevance. Instead, focus yourplanning effort on a few goals, such as increasing business alignment, improving demand

management, or transforming the IT operating model. Focus your plan approach around this goal. A clear set of goals drives both the inputs to

the plan and the structure and contents of the plan making the process more efficientand less time-consuming. Include business SWOT analysis if your goal requires a clearunderstanding of business challenges, but leave it out if your goal is to improve ITs servicedelivery performance. Similarly, include IT skills assessment if your goal is to improve the

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alignment of IT capacity with business demand, but leave it out if it is not signicant to thegoal you are trying to achieve. When you document IT principles, focus on the ones thatdirectly link to the results you are seeking.

Track the results. The best-laid plan is of little value unless it produces results and theonly way to ensure it is producing results, or address reasons why it is not, is to track theresults. If the strategic plan provides input to your project portfolio management process,dene the metrics that show whether your project goals are being achieved. Take a processimprovement perspective: Dene the desired results, track them, and if the actuals divergefrom the expected, analyze why and institute corrective actions.

Institutionalize planning discipline . If the practice is to develop a strategic plan only everythree years or only when needed, then you will face the dual challenges of starting fromscratch each time and developing a plan that stays relevant and action-producing even as

the business and IT landscape changes. A better practice is to institutionalize it as an annualprocess with quarterly checkpoints, and use this increased frequency to tune your planningmethodologies as well as make midcourse corrections.

W H A T I T M E A N S

YOUR IT ARCHETYPE FOCUSES YOUR STRATEGY

IT organizations typically represent one of three major types: Solid Utilities that emphasizeoperational excellence, Trusted Suppliers that focus on project execution effectiveness, andPartner Players who emphasize strategic relationships with business counterparts. 9 The archetype

an IT organization ts within is driven more by business expectation than IT desire. But even if anIT organization is tending toward a certain type, it needs the discipline to excel in this type andthe strategic plan is a necessary element of institutionalizing this discipline.

Solid Utilities: Your plan should describe how you deliver cost-effective services. Solidutilities must provide the level of service the business needs, at a cost aligned with thebusiness willingness to pay. A strategic plan for this IT type will describe how this service-level alignment with business needs will occur, addressing items such as cost transparency,satisfaction level measurement, and operational efficiency.

Trusted Suppliers: Document steps to improve business trust. Use your strategic planto set business expectations on priorities and capacity. Make sure there is a link between

your plan and your structures for IT governance and portfolio planning, and connect theinvestments in IT technology and skills to improvements in IT delivery performance.

Partner Player: Focus on the principles used to guide joint decision-making. As a partnerplayer, you are aligning with the dynamics of business change. Road maps for applicationsand infrastructure improvements are important to this relationship only to the extent that

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they address how you will increase prociency at changing at the speed of business. Moreimportant than road maps to this relationship is developing the IT principles that helpbusiness partners and IT collaborate on business planning.

Plan your archetype evolution. Many IT organizations desire to transition from one type,such as a utility, to another type, such as being the business partner. This isnt possible unlessthe business is ready for a new relationship but your plan can guide how you will prepareit for a new relationship: building supplier credibility or increasing collaboration withinsolution denition and delivery.

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SUPPLEMENTAL MATERIAL

Companies Interviewed For This Document

AetnaAmerican Heart Association

Applera Corporation

AutoNation

Blue Cross Blue Shield Association

CIBC

e Clarks Companies N.A.

Comerica BankDirectTV

E.ON UK

FDIC

Highmark

JetBlue

Kimball International

Laurentian Bank of Canada

MarriottMedia General

MoneyGram

Northern Trust

Northwest Airlines

Norton Healthcare

PSE&G

Russell Investment GroupSchenker AG

ServiceMaster

Shaw Cablesystems

Sonoco Products

UnumProvident

Plus additional rms that declined to beidentied

ENDNOTES1 IT portfolio management is a key part of the overall IT governance process and consists of the

consolidation of ITs plans to support the business in meeting its strategic goals. e portfolio consists of current investments, current initiatives, and externally mandated initiatives, allowing trade-offs to be madeacross these plans. See the September 29, 2004, Best Practices Dening IT Portfolio Management and seethe September 30, 2005, Best Practices Optimizing the IT Portfolio for Maximum Business Value .

2 Forrester has identied relationship management as a strategic IT function and essential for thecommunication between IT and the business on plans, needs, and issues. See the August 13, 2004, Best

Practices Relationship Managers Extend e CIOs Power And Awareness .3 A September 2005 survey shows a maturing of the enterprise architecture function in those rms that have

established an EA group. ese EA groups are reporting to the strategic levels of the IT organization: theCTO, VP or director of planning and strategy, or the CIO. EA groups have been given broad responsibility and are engaged with other IT processes and IT projects. e structure of the EA group reects a greaterinvolvement with the rest of IT. See the October 27, 2005, Quick Take e Maturing Of e EA Function .
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4 Boards of directors, executive management, and IT management all have a vested interest in IT governance their common goal is to maximize the business value derived from IT investments while managing risk.

e starting point for an IT governance framework should be COBIT, because it is the most comprehensive

IT governance framework available today. COBIT is designed for three constituencies: management, users,and auditors. See the January 6, 2006, Trends COBIT Versus Other Frameworks: A Road Map ToComprehensive IT Governance .

5 Forrester has identied business factors that are the most signicant drivers of IT spending. ese includetechnologys role in products and services, business volatility, competitive pressure, and geographic scope.Forrester has also identied IT factors that have a substantial impact on IT execution, such as ITs maturity as a business operation, how IT relates to its business stakeholders, and technologys link to the rmsbusiness strategy. See the June 6, 2005, Best Practices e Economics Of IT .

6 David Norton and Robert Kaplans Balanced Scorecard methodology has been adapted for IT organizationsas an IT strategic measurement and management system. See the October 15, 2004, Best Practices eBalanced Scorecard: An IT Perspective and see the September 30, 2005, Best Practices e IT BalancedScorecard Metrics at Count .

7 Forrester surveyed 922 North American IT and business decision-makers regarding their approach to ITgovernance. We asked about the participation of business and IT in establishing the rms IT strategy. Fi y-two percent of respondents indicated that business and IT collaborate equally in setting direction, while27% stated that corporate IT is the primary contributor to strategy, and 17% said that business units set theIT strategy. See the September 30, 2005, Trends Firms Have Less Centralized IT In 2005 .

8 IT must move to a campaign-based approach to communicating ITs value, creating and communicatingITs mission and brand, and guiding the adoption and use of new technologies. See the August 23, 2005,

Best Practices e Marketing Of IT .9 CIOs must understand that there is no one type of IT organization right for all enterprises and all industries.

Instead, there are three clear archetypes for successful IT organizations: Solid Utilities, Trusted Suppliers,and Partner Players. Understanding which is which helps articulate IT strategy, dictate trade-offs, and helpIT achieve its goal of running more like a business. Top management expectations dictate which type isright but overall IT maturity constrains or enables performance within each archetype. See the March 22,2006, Trends e ree Archetypes Of IT .
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