The 21st Century

Since its emergence in the early 1970s, IT has been built from the bottom up. Applications to support the business were deployed as the need arose to increase efficiency and support growth. Because systems were not architected from the top down, the result has been a legacy of inconsistency, redundancy and the type of complexity that makes change difficult without destabilizing the whole system. As organizations compete in the global economy, they need systems that are agile, easy to change and responsive to new business needs.

In mature organizations, IT is currently undergoing a twofold transformation. One, the IT culture is changing from a provider of technology to a provider of valuable services, and two, IT assets, products and services are being aligned with business strategies. Project management and business analysis are critical to making the transformation succeed.

A New Discipline for IT

Young or immature IT groups focus narrowly on technical implementations. Here, IT is merely a provider of technology, responsible for maintenance and support. Project management centers around budget, schedule, scope and system specifications, and much time is spent recovering from failures, modifying or replacing components to eliminate problems, carrying out additions, modifications or removals to introduce improved functionality. Because the number of incidents, problems and changes exceeds staff capacity, IT needs a way to determine how it can best use its resources so that the issues it does tackle will yield the most business benefit. The only way that prioritization can be accomplished is with guidance from customers and users, but that discussion cannot be carried out effectively in technical language.

This is where ITSM (IT Service Management) comes in. It provides an effective framework of tools and templates for helping IT groups become more adaptive, flexible, cost-effective and service-oriented. ITSM drives fundamental change within the IT organization, from how it manages its processes, technology assets and vendors and deploys personnel, to how staff view their organizational roles. An ITSM-based IT organization seeks to understand the customer’s service requirements, agrees with the customer on the delivery of the service, and operates and evolves the service to contribute measurable results to the business.

A proven set of best practices to implement ITSM is ITIL (IT Infrastructure Library). ITIL was developed by the U.K. government and has been used in Europe for many years, but is just now beginning to make inroads into the U.S. Designed to define and streamline IT services, ITIL’s practices were drawn from public and private sectors internationally. Both ITSM and ITIL are about efficiently and effectively leveraging IT to achieve desired business outcomes, but ITSM answers the question, “What do we want to do as an IT organization?” while ITIL is one way of addressing, “How are we going to do it?” ITIL and ITSM help IT organizations deliver IT services that are:

• Cost-justifiable
• High in quality and are measured, reported and reviewed regularly
• Managed efficiently (best use of resources) and effectively (achieving the intended results)
• Prioritized by activity relative to the business impact
• Monitored for change so that change is controlled to minimize negative impact on services
• Aligned to and drive business strategy

According to industry analysts, 80 percent of business processes are run on IT. Just as corporations are reinventing themselves to comply with new regulations such as Sarbanes-Oxley, so too has IT had to reinvent itself to become a disciplined organization whose activities are aligned with the business and result in direct, measurable business benefits. The first step in achieving this alignment is to understand how the business works. This is done by building process maps and defining business rules as necessary to document how the business flows value through the organization to its customers. Gaps and misalignments between business and IT are brought to light so that hardware and software can be realigned. The transformation process amounts to the building of a strategy-execution framework, both on the business side and the IT side.

The Role of Project Management

Traditionally, projects were spawned within IT. Today, a mature IT department does not implement upgrades and infrastructure projects unless there is a business advantage to doing so. Effective business management depends on successful IT projects, and the practices of project management and business analysis intensify the impact of ITIL. ITIL has a strong focus on managing changes to maximize benefit (business outcomes) while minimizing risk. Because changes are typically implemented as projects, project management is the foundation for successful integration of IT changes into the operational environment in a way that meets IT service quality and availability targets. Most organizations that are implementing ITSM/ITIL are tackling the challenge by addressing IT services piece by piece in order of importance. They are forming project teams and managing changes as projects so they can track the investment in new tools and processes.

Competency in project management is thus a vital contribution to realizing:

• Lowered risk
• Cost efficiencies
• Ability to hit the planned/estimated scope, budget and schedule targets that underpinned the business case

In the past the project manager’s goal was to bring projects home on budget, on time and with the full scope. Now there is a fourth success criteria and expectation, which is that the business benefits were actually achieved with positive ROI. That means the business should have realized more in benefits than it spent to develop and operate the new solution. A challenge in this regard, particularly in decentralized companies, is that IT managers are often doing hands-on engineering work, as was customary with the 1970s reactive approach. Rather, they should be managing the work and allocating resources to the most valuable projects and activities.

The Role of Project Portfolio Management

The practice of project portfolio management is a form of IT governance. It ensures that IT is investing in the most valuable projects and allocating resources to projects in order of priority. Project teams that are performing strategic initiatives are resourced while trivial projects that consume resources without returning significant business benefits are back-logged.

Expect a learning curve with portfolio management/IT governance because the business is used to sending any kind of request to IT and having it fulfilled. Portfolio management encourages organizations to work collaboratively to establish a new structure for decision-making and prioritization of IT work that takes into account the benefits of projects all across the enterprise. This is a new leadership practice in the way changes are approved at the senior level. The transformation task at hand is daunting because of IT’s legacy of complexity. Practicing portfolio management to focus on the most strategic products and services first saves scarce resources, and keeps personnel from getting overwhelmed.

The Role of Business Analysis

According to a 2004 survey (The Standish Group, Third Quarter Research Report), 53 percent of IT projects in the U.S. were over time or over budget, 18 percent failed and only 29 percent succeeded. According to the Standish Group’s 2006 Chaos Report, little had changed: 46 percent of IT projects were over time or over budget; 19 percent failed and just 35 percent succeeded. Nearly two thirds of all projects failed or ran into trouble. The reason for the dubious success record of IT projects is that business analysis is not applied and maintained throughout application development and implementation.

Poor business analysis not only impacts business stakeholders, who don’t get what they paid for, but it also adversely affects project management. Poorly stated requirements prevent accurate estimation and effective resourcing. This in turns leads to poor application development and forces project managers to repeatedly re-initiate or even directly carry out requirements management activities to address deficiencies.

The primary responsibility for requirements’ management belongs to the business analyst (BA), as defined by the International Institute of Business Analysis (IIBA). While subject matter experts understand the language of requirements in their particular domains, the BA speaks both business and technical languages, but focuses exclusively on the business. He or she understands and owns the process through which requirements are translated from business strategy to successful solutions. The BA’s enterprise view of requirements management drives alignment through all levels of the organization.

Unfortunately many IT groups still insist that they do not need a BA because most of their projects are “technology projects” or “exclusively engineering.” Every project should derive from business needs. Therefore, every project’s decision-making process should be driven by a BA. Without a BA who focuses on the business case and makes sure there is a business benefit, the IT organization is not fulfilling its responsibility.

Culture Change for the New Millennium

IT can no longer function as a set of discrete tools supporting discrete business processes. Today, critical business processes are highly dependent on and integrated with IT; the two are essentially inseparable. IT assets need to be tightly focused on meeting the needs of internal customers, if organizations are to respond flexibly and quickly to markets, customer demands and regulatory obligations. In the early 21st century, a perfect storm is gathering to change the culture of IT, to govern investments in IT and to use IT as a competitive advantage to impact the bottom line. The challenge of the transformation is immensely complex and should not be undertaken without competent project management and business analysis.

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Kathleen B. Hass, PMP is Senior Practice Consultant at Management Concepts, and Director at Large and Chapter Governance Committee chair for the International Institute of Business Analysis (www.theiiba.org). She is the author of Managing Complex Projects: A New Model (Management Concepts, October 2008). Since 1973, Management Concepts, headquartered in Vienna, VA, has been a global provider of training, consulting and publications in leadership and management development. Management Concepts is a Gold International Sponsor and an Endorsed Education Provider of IIBA. For further information, visit www.managementconcepts.com or call 703 790-9595.