The IT Value Network E-Book

Tony J. Read

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 466

Veröffentlichungsjahr: 2009

Beschreibung

Learn to measure and manage the real value of IT investment and spending IT investments are becoming more than just business enablers or assets on the books; they provide capability that can drive the business. Thought leadership should migrate towards information investment, getting a bigger bang for the buck from the 'I' in IT and from the 'I' in CIO. The IT Value Network: From IT Investment to Stakeholder Economic Value incorporates new emerging decision support methods, such as real options, which are considered to complement traditional financial measures. Organizational and informational economic based techniques are also incorporated to manage and assess IT investments, including the balanced scorecard (BSC), and investment and portfolio management; in addition to coverage of IT key performance indicators and competitive benchmarking. Selected as a top 10 best IT-Business book for 2009 by CIO Insight - Praises for The IT Value Network: From IT Investment to Stakeholder Value "This is probably the best 'up-to-date' executive information management resource since Strassmann's works of fifteen years ago. Tony Read provides a comprehensive and insightful assessment of the state of IT investment and the value of various technologies and information management in the modern enterprise. For corporate executives trying to navigate this rapidly changing landscape, this book is highly recommended." --Paul A. Brinkley, Deputy Under Secretary of Defense (U.S.) for Business Transformation Agency "Managing technology investments with a value-based approach just works--it has provided significant stakeholder value at Indigo. This book is a must-read for both IT and business managers who want to improve the return on their IT investments." --Michael Serbinis, President, Shortcovers, CIO & EVP, Indigo Books & Music Inc. "Difficulty proving the business value of IT remains a key barrier to IT executives. IT Value Network provides a clear road map to chief information officers interested in moving beyond simply aligning business and technology strategies. It is a must-read for IT executives who wish to become true partners to the business." --Gary Beach, Publisher Emeritus, CIO magazine "This book is a complete study of how value is derived and measured from IT investments. All IT strategy professionals should read it and have access to it. I strongly recommend it." --Ali Hamza, Partner, PricewaterhouseCoopers (PwC) "IT spending continues to climb, but IT value is invariably left on the table. Tony's new book will enlighten both the practitioner and academic to new approaches and techniques for capturing and realizing stakeholder economic value--with a great perspective to sustaining competitive advantage or as the book promotes network advantage, across the firm's value system." --Edward Lieblein, PhD, Dean and Professor, Graduate School of Computer and Information Sciences, Nova Southeastern University "Tony Read's book provides excellent insight and strategies for maximizing shareholder return from IT investments. The book gives a timely response to the challenges every CIO and CFO face in the current economic environment. It is now more important than ever to demonstrate IT return on investment and this book is a valuable aid for Cx's looking to leverage every IT dollar to secure maximum business return" --Albert R. Hitchcock, CIO, Vodafone Group

Leseprobe

Table of Contents

Praise

Title Page

Copyright Page

Dedication

Foreword

Preface

Part I: Status Quo—Where’s the Value?

Part II: Triangulating the Value—Somewhere Here

Part III: Six Degrees of IT Value—There IT Is

Part IV: IT Value Network Clients—Did IT, Got IT

Part V: Emerging Reality—Do IT, Value IT

Acknowledgements

PART I - Status Quo—Where’s the Value?

CHAPTER 1 - IT Investment

Sticker Shock

Six Decades of IT Investment

IT Investment Trends

IT Investment Classification: The Four “S” Category Model

Future IT Investment

CHAPTER 2 - Conventional IT Valuation

Bottom Line

Maximizing Shareholder Value

Conventional Asset Valuation

Challenging Conventional Norms

Lost Value

CHAPTER 3 - Banking Value

Financial Services Industry Global IT Investment

North American Banking Industry

North American Banking Market Challenges

Banking Industry IT Value Observations

NA Bank Case: IT Investment Observations

PART II - Triangulating the Value—Somewhere Here

CHAPTER 4 - IT Value Network Measurement

Identifying Investment

Justifying Investment

Prioritizing Investment

Selecting Investment

Performance of Investment

Realizing Value from Investment

CHAPTER 5 - IT Value Network Measures

Traditional Financial and Accounting Techniques

Emerging Financial Techniques

Emerging Decision-Support Techniques

Value-Creation Business Case

CHAPTER 6 - IT Value Network Measures

Conventional Planning Techniques

Emerging Organizational Management Techniques

Emerging Information Economics Techniques

CHAPTER 7 - Triangulating IT Investment Value

Value Index and Value Lenses

IT Value Portfolio

PART III - Six Degrees of IT Value—There IT Is

CHAPTER 8 - IT Value Network Management

Value Capture

Value Enabling

Value Optimization

Value Realization

CHAPTER 9 - First Degree of IT Value

Value System

Process and System Improvement

CHAPTER 10 - Second Degree of IT Value

Strategic Planning

Portfolio Governance

CHAPTER 11 - Third Degree of IT Value

IT Systems and Infrastructure Capability and Capacity

Organization and People Capability and Capacity

CHAPTER 12 - Fourth Degree of IT Value

Program and Project Management

System Management

CHAPTER 13 - Fifth Degree of IT Value

Service Management

Information Management

CHAPTER 14 - Sixth Degree of IT Value

Networked Value Management

PART IV - IT Value Network Clients—Did IT, Got IT

CHAPTER 15 - NA Bank

Challenge: Strategic IT Investment Alignment

Solution: The IT Value Network

Impact: IT Investment Redirection for Higher Value Capture

CHAPTER 16 - Nortel Networks

Challenge: Speed of Market Change

Solution: The IT Value Network

Impact: IT Reorganization and Improved Capability for Value Enabling

CHAPTER 17 - Indigo Books & Music

Challenge: Project Management

Solution: The IT Value Network

Impact: Project Management Office for Value Optimization

CHAPTER 18 - NA Credit Union

Challenge: Credit Union Merger

Solution: The IT Value Network

Impact: Successful Bank Integration for Value Realization

PART V - Emerging Reality—Do IT, Value IT

CHAPTER 19 - Forward Thinking

Value Networks

Value Systems

Value Options

Maximizing Stakeholder Economic Value

CHAPTER 20 - Connecting the Dots

IT Value Network Maturity Model

IT Value Network Checklist

Collaboration for Network Advantage

Value IT

Glossary

Notes

About the Author

Index

Additional praises forThe IT Value Network: From IT Investment to Stakeholder Value

“This book is required reading for any CIO who wants to demonstrate and drive the investment possibilities of technology. A seat at the table with business awaits the reader.”

—Steve Gestner CIO & EVP, Resolve Corporation

“The IT value network is a comprehensive and excellent consolidation of the current thinking on IT value-based management—especially relevant in today’s current economic climate. The concepts of triangulating value and the six degrees of IT value hit the mark, providing great management insights. IT and business managers wanting more from their IT investment dollar and the ability to effectively communicate the value proposition to the CXOs should read this book.”

—Drew McNaughton Chief Technology Officer, Axia NetMedia Corporation

“IT vendors and professional services companies wishing to improve their value proposition and partnership with their CXO clients will find the IT value network invaluable. The concept of expanding a firm’s IT value footprint beyond an internal perspective is enlightening. Driving stakeholder economic value across the firm’s value system and value network is visionary and, as Tony states, will create network advantage—great read by Read.”

—Dale Neilly VP Sales & Marketing, Radiant Communications

Copyright © 2009 by Tony J. Read Ph.D. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

Read, Tony, 1958-

The IT value network : from IT investment to stakeholder value / Tony Read. p. cm.

Includes bibliographical references and index.

eISBN : 978-0-470-54187-6

1. Information technology—Cost effectiveness—Evaluation. 2. Capital investments—Evaluation. I. Title.

HD30.2.R.068’1—dc22 2009015526

To the Read family:

Rhonda Lee Martine Charlie Pauline John Gary Nicky Lisa Naomi Jonathan

Family Stakeholder Value

Foreword

Executives around the world are trying to get a clear answer to one fundamental question when faced with significant IT investment proposals: Where’s the value? The IT Value Network provides a framework to answer that question. It systematically outlines effective techniques and tools for the measurement and management of IT investments to deliver a comprehensive and enlightening answer.

My career started in finance and I have held a number of CFO roles around the world, in different industries, within dynamic companies. The industries may have been different, but they all had the common challenge of ever-increasing IT investment demands, which required unquestionable justification.

If I take my 10 years at FedEx as an example, customers often talked about the great service, the knowledgeable couriers, or the vast fleet of aircraft covering the globe overnight—but it’s the IT investment that enables the “experience” behind the product or service. Consider the FedEx capability for you to track the movement of your precious package around the world from the comfort of your own home. Justifying IT investment requires a strong business case, which should include quantifiable drivers like customer experience. The IT value network aptly refers to the necessity of triangulating the value through a value index, determining stakeholder economic value.

Justifying IT investments goes beyond cost savings; it’s fundamental to your differentiation as a company—your strategic advantage. Consider the FedEx IT capability to provide your business with the opportunity to reconfigure your supply chain to minimize inventory, or the offering of a customized product from a single location, with service across the world. The decisions you make on your IT investments, sitting at the heart of your business, are one of the most important decisions you will ever have to make as an executive—so they better be informed! The IT value network framework enables you to make informed decisions: capturing, enabling, optimizing, and realizing business value.

My past eight years have been with Vodafone, in the telecommunications industry. As the CEO of Asia, Pacific, and Middle East region, I get the opportunity to see markets/countries in various stages of development—from mature to emerging. I see the profound impact that mobile telephony can have on a country’s rate of development, as a key part of the country’s infrastructure. There is obviously a lot of interest about the mobile technology evolution path, from 2G to 3G to LTE; taking us from pure voice services to high-speed exchange of data on the move. Consider the growth of the smartphone like the iPhone, or mobile broadband connectivity to your corporate IT applications via your laptop. However, these technology investments are just enablers.

The way telecommunication operators, and indeed most companies, will differentiate themselves is through their IT choices and how those choices will provide unique and compelling products and services. In the case of the operator, choices that allow customers to make the most of their time, whether in the office, at home, or on the move. IT agility and value options are a necessity within today’s business, driving current and future returns and intellectual capital, which drives shareholder wealth. Bad choices make for bad economics. Thus, the need to appropriately migrate away from traditional “industrial age” measures to more effective “informational age” techniques to manage and govern IT investments, as effectively covered within the IT value network.

At Vodafone, we want to ensure that our customers stay connected to the people and the information that are central to their lives—via voice, text, instant messaging, e-mail, music, communities, news, and applications both social and work related—whenever, wherever. The IT value network helps you explore your company’s value system and value network, building network advantage, a concept for sustained competitive advantage.

Being on various company boards, many of which have other shareholders represented, I reiterate the book’s mantra: that maximizing shareholder economic value should be a primary consideration. The IT Value Network not only provides guidance on how to assess the trade-offs, it also outlines methods of triangulation, when a single perspective is too narrow a line of sight. The book also provides an IT investment governance model that goes beyond the pure “industrial age” regulatory compliance, internal controls or audit requirements, to more effective “informational age” considerations, required to run a company in today’s fast paced global economy.

The IT Value Network is a thought-provoking book that is rich in content and one that will continue to be referenced beyond the first read. I passionately believe in IT as a key differentiator, where mistakes set you back years and can be fatal to your business and your competitiveness. Tony has brought his extensive IT management and consulting experience to focus on addressing a real need—making an informed decision on how to value IT and ultimately make the right call for the future of your business. I am fortunate that I get his advice for free. You just need to pay the price of this book—an investment with a great ROI. Enjoy the read.

Nick ReadRegional CEO Asia, Pacific, and Middle East, Vodafone Plc Board member of China Mobile and several Vodafone subsidiaries

Preface

The modern computing era started more than 60 years ago with the advent of early digital technology, but debate remains about whether organizations have seen the expected value from their information technology (IT) investments. In the current economic climate, the tendency is to focus IT investments on short-term profitability. Yet successful firms cannot ignore future business opportunities for long-term growth and competitive advantage and for building strategic options for agility under uncertainty. Establishing confidence in future IT value provides the impetus to invest now, despite a recession. The emerging reality is that attitudes toward IT value are changing to accommodate new paradigms such as value networks and value systems, which are driving intellectual capital and company valuations. The goal of this book is to provide insights into IT value-based management and to maximize stakeholder economic value—beyond shareholder value. The IT value network framework presented here provides current and new, multidimensional measurement and management approaches to gain sustained competitive advantage or network advantage from IT investment and spending.

As managing partner of Read & Associates, I have traveled the world working with various companies to capture, enable, optimize, and realize IT value. As I journeyed through sunny days and cloudy days, periods of boom and doom, there was always an opportunity to realign IT investment and connect the dots for a higher IT value proposition. It’s amazing what new constellations you can configure from stargazing—but this book is not “pie in the sky”; it’s grounded on proven techniques, as depicted in various client cases. The IT value network approach has been deployed in many companies within the high-tech, telecommunications, computing, banking, financial, retail, and professional services industries. The book covers a multitude of various financial- and organization-based tools, methods, and techniques for practical application in the real world, including an IT value network maturity model for current practice assessment.

The IT value network presents a business focus on IT value, bridging the value gap between the CIO and CXO. Thus, the book’s intended audience is for business and IT leaders and managers wanting to get more out of the IT dollar—and why not, given a $3 trillion annual global IT investment and a 2009 economic recession with a credit crunch. The IT value network builds a comprehensive IT value proposition, extending beyond company boundaries and leaving nothing on the table. Academics and students engaged in the fields of IT management and the economics of IT will also find this book valuable. It discusses multidisciplinary fields, including finance and accounting, decision support, organizational management, information economics, portfolio and project management, business strategy and planning, and value-based IT management. The book challenges conventional approaches to IT value measurement and management, identifying lost value. The IT value network provides a comprehensive toolkit for IT value-based management, organized as follows.

Part I: Status Quo—Where’s the Value?

Part I considers the following topics: reflecting on six decades of IT investment and discussing future IT investment direction. Classifying IT investment spending—the four “S” category model. Conventional asset valuation is contested, challenging traditional norms of IT investment evaluation. Lost value is identified—no bang for the buck—providing IT value observations within the banking industry.

Part II: Triangulating the Value—Somewhere Here

Part II considers the following topics: how traditional and emerging financial-based and organization-based IT value measures are defined, creating a strong value-creation business case. Financial and accounting measures alone are just not good enough; value needs to be triangulated through strategic, operational, stakeholder, and agility value lenses, culminating in an IT value index scorecard. The IT value portfolio is discussed, citing stars and black holes.

Part III: Six Degrees of IT Value—There IT Is

Part III considers the following topics: IT value management, which covers capturing, enabling, optimizing, and realizing stakeholder economic value. Six degrees of separation from IT investment to stakeholder economic value exist; proactively managing the six degrees of IT value will unlock and realize stakeholder economic value. Each degree of IT value improves IT value management, providing an iterative cycle for enhanced network advantage or sustained competitive advantage.

Part IV: IT Value Network Clients—Did IT, Got IT

Part IV considers the following topics: Four client cases are discussed, within the banking, financial, retail, and high-tech/telecommunications industries. Each case describes the company challenges, the IT value network solution, and the subsequent stakeholder economic value impact. Realized IT value is discussed.

Part V: Emerging Reality—Do IT, Value IT

Part V considers the following topics: applying thought leadership, with respect to new paradigms and emerging concepts, including social networking, value networks, network portfolios, value network analysis, exchange value, value systems, value options, risk management, collaboration, and value loyalty. An IT value network maturity model and implementation checklist enables stakeholder economic value maximization for your company.

IT investments are becoming more than just business enablers or assets on the books; they provide capability that can drive the business. Thought leadership should migrate toward information investment with the aim of getting a bigger bang for the buck from the “I” in IT and from the “I” in CIO, accounting for intellectual capital and 80 percent of market capitalizations. The IT value network will make a difference in the way your company manages and measures IT investments for network advantage or sustained competitive advantage. I hope you enjoy the book and resonate with the IT value insights that are highlighted.

Acknowledgments

Throughout my international career as a corporate executive, consultant, and university professor, I have been fortunate to meet many wonderful people. This book relects a journey of discovery, which could not have happened without the contributions of many knowledgeable and insightful colleagues. I am blessed with my own value network.

In writing this book, I particularly want to acknowledge three groups of terrific individuals who have provided support and encouragement, specifically:

• My clients, for collaboration in the best practice cases: Heather Reisman (CEO), Michael Serbinis (CIO), Dan Leibu (VP Strategy & Planning), and the PMO team, from Indigo Books & Music. Gwyneth Edwards (CIO office) and Steven J. Bandrowczak (CIO), from Nortel Networks. NA Bank and NA Credit Union wish to remain anonymous; therefore, contributors cannot be mentioned, but thanks to many (you know who you are) for your insights and support.

• My Ph.D. dissertation steering committee, assisting with the research foundation: Dr. Sumitra Mukherjee, Dr. Steven Zink, and Dr. Easwar Nyshadham, from the Graduate School of Computer and Information Sciences, Nova Southeastern University, Florida. Thanks for direction, guidance, and the many hours of editing.

• My book enablers, making the idea a reality: Joel Silver (Chief Merchant) and Bahram Olfati (Director Trade), from Indigo Books & Music. Stacey Rivera, Timothy Burgard, Chris Gage, and Helen Cho, from John Wiley & Sons, Inc. publishers. It’s just great to have the opportunity of being coached and supported by leaders in the book business.

Finally, it would be remiss of me not to mention the continual support from my wife, Rhonda Lee. Thanks for being at my side and accepting the countless working weekends; now it’s time to play.

PART I

Status Quo—Where’s theValue?

IT costs typically constitute 2 percent of a company’s revenue, but it can easily exceed 12 percent, culminating in 2008 to a $2.6-$3.0 trillion global IT investment. But the value derived from IT is questionable at best. Part I of this book attempts to provide a better understanding of the nature of IT investments and conventional valuation. Despite continued IT investment growth, realizable shareholder value is often absent or suboptimal. Yet firms maintain the status quo by applying traditional approaches to measuring and managing IT investments or spending.

In the current economic climate, the tendency is to focus IT investments on short-term profitability, starving growth because of deflationary concerns. However, successful firms do not ignore valuable future business opportunities or long-term growth. Projecting confidence in future IT value increases the likelihood of investing now. Chapter 1 examines IT investment growth and trends during the past six decades, from early computing to cloud networks. IT investments are also classified according to a four “S” category model, defining characteristics for effective evaluation. Future IT investment considerations are subsequently explored, providing a backdrop or context for more effective valuation approaches, as discussed further on in the book.

Greater management focus is being placed on evaluating and realizing shareholder value from IT investments, especially with worsening market conditions. Chapter 2 discusses why IT investments have not fully realized their value. Conventional IT asset valuation methods are flawed, unable to effectively identify and capture value. The cost of poor IT investment decisions is high, whether in failed projects, lost revenues, security or privacy exposure, or operating inefficiencies and ineffectiveness. Conventional organizational-based and traditional financial-based approaches to IT investment valuation are reviewed, identifying concerns and subsequently challenging norms. The chapter concludes by examining lost IT investment value.

The global financial services industry is under siege and has not been in such dire straits since World War II. Yet, IT investments continue to grow within the banking industry. Chapter 3 provides specific insight to the IT value dilemma within the banking industry. An overview of the North American banking industry will explain the competitive landscape and bank challenges. Subsequently, IT investment patterns will be explored, questioning whether these investments have added value to the bottom line. Various IT value observations are identified throughout the chapter; these arguably apply to the global banking industry, not just to North America. A North American bank case is also covered, exploring IT investment observations.

CHAPTER 1

IT Investment

Sticker Shock

Walking through the virtual IT “car lot,” it is not hard to see why a CXO would challenge the Chief Information Officer (CIO) with respect to IT costs. Too often an IT Ferrari would be proposed when an IT Volvo could meet the required needs. The daunting task of justifying technology direction and spending variances, let alone the need for investment in the first place, is a challenge unto itself.

IT investments are becoming more than just business enablers or assets on the books; they are indeed a capability that can drive the business. IT thought leadership should transition from a traditional technology investment model to an information investment approach, getting a bigger bang for the buck from the “I” in IT and from the “I” in CIO. In today’s world, the business impact of effective IT investments is potentially exponential and needs to be governed accordingly, not just as cost savings enablers.

IT costs typically constitute 2 percent of a company’s revenue, but they can be as large as 12 percent, perhaps the single most manageable cost after labor. According to Gartner, this culminates in a global 2008 IT investment of some $2.6 to $3.0 trillion, with half spent on telecommunications and the rest on IT hardware, software, and services.1 Such annual spending is comparable to the gross national product (GNP) of the United Kingdom or France, or nearly thrice that of India. In other words, globally we spend on IT nearly three times what India’s 1,135 million people (20 percent of the world’s population) spend on consumption, gross investment, government expenditure, and exports less imports. But the value of information is invariably unknown.