2. Inventory the Entire Portfolio
Once the business has a clear vision and a strategy, it needs to determine whether existing IT investments, and the resulting IT assets, are consistent with the vision and strategy. Gardner says organisations without a clear business-driven IT strategy will inevitably find some existing investments are out of balance. The first step to resolving this problem is to gain something most companies have failed to achieve so far: a clear understanding of the project and IT asset portfolio, and the value of that portfolio.
"There is a need to go and do a foundation diagnostic, to go in and inventory all current IT projects but also to inventory IT assets and capabilities," he says. "And as part of this exercise, and quite important to the transparency and the understanding process, you have to recognise that there are different types of IT assets. And it's important, like with any portfolio, that you segment the portfolio into the different types of investments, and assets."
The ideal approach is to divide IT projects and assets into three core categories. First, the core infrastructure required to run the business: the data centres, the core communications infrastructure and the core infrastructure for supporting applications. Second, those IT assets and projects required to grow the business, to support growth and new value propositions. Third, and typically, the set of IT assets that is there to transform the business.
"It's important to understand those three different types of IT assets because you probably need to approach them differently in terms of how you value them, and also in terms of how you assess their performance and to what extent IT is delivering value," Gardner says.
You should also aspire to understand this portfolio by categorising and valuing the different components according to asset type, risk/return, purpose (run the business, grow the business, transform the business), discretionary/non-discretionary, cost, returns, timelines and so on.
3. Assess the Portfolio Against Business and IT Strategy
Once this work is done you can use this portfolio approach to make decisions regarding selection, acquisition, management and retirement of IT assets and projects.
"Once you understand where you are, you then assess the current portfolio against your business and your IT strategy, and where you want to be, and often you find again that you're out of balance and so there's a need to rationalise the portfolio. That will in many cases involve eliminating numbers of projects.
"Your IT portfolio strategy should align well with your business portfolio strategy, and again, it often doesn't. You need to highlight that; you need to rationalise the portfolio and then take some steps to realign it in terms of how you look at your investment and spend."
4. Develop a Strategy to Plug the Gaps
Once you have assessed the portfolio against the new business-driven technology strategy, you need to determine what measures need to be implemented on an ongoing basis to secure the future.
Gardner says there are a couple of areas that need to be addressed. One is the need to upgrade the strategic planning processes, to ensure that there is an integrated IT component. "And that goes all the way from: 'I'm going to set my IT strategy and my business strategy so that they're aligned' to 'I'm going to then address how I want to transition my portfolio and what I want to invest in.'"
You can then go to the board and show them your capital overhang, and make them aware of how much you are spending on IT.
"Most boards won't know that there are [say] 185 projects ongoing right now at a total capitalised value of $2.5 billion. So you point that out, and you make them aware that they don't have transparency into how much shareholder value that they're delivering out of that spend. And then you point out some of the riskiness of some of those projects when they go bad," says Gardner.
"There are a number of examples of IT projects that we know well in the financial industry that have gone bad and also result in bad publicity.
There are examples of ERP projects like the case of the SAP work with the National [Australia Bank]; there was a recent transaction processing debacle at the ANZ; and, there was the merchant acquiring system crash at the CBA during the Melbourne Cup. Those were things that get publicised in papers, and that's symptomatic of an institution probably not having the right kind of IT and business management structure in place."
Gardner points out that the more strategic IT becomes, the more prominent examples there will be of projects going wrong in the most public of all possible ways. Boards, particularly those in very risk adverse industries, are increasingly coming to understand they can no longer afford such disasters.
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