©2012 David Consulting Group © 2013 David Consulting Group Michael Harris President & CEO David Consulting Group Tier 2 Accredited IT-CMF Associate IVI Winter Summit 2013 IT-CMF Financial Critical Capabilities How to get the most bang for your buck

©2011 David Consulting Group © 2013 David Consulting Group Agenda Getting the most bang for your buck from IT-CMF: Why the Financial CC’s? What are the Financial CC’s? Feedback – Q&A How can you get started on the Financial CC’s?

©2011 David Consulting Group © 2013 David Consulting Group Why the Financial CC’s? Bob WoodwardBob Woodward: The story is dry. All we've got are pieces. We can't seem to figure out what the puzzle is supposed to look like. John Mitchell resigns as the head of CREEP, and says that he wants to spend more time with his family. I mean, it sounds like bullshit, we don't exactly believe that... Deep Throat: No, heh, but it's touching. Forget the myths the media's created about the White House. The truth is, these are not very bright guys, and things got out of hand. Bob Woodward: Hunt's come in from the cold. Supposedly he's got a lawyer with $25,000 in a brown paper bag. Deep Throat: Follow the money. Bob Woodward: What do you mean? Where? Deep Throat: Oh, I can't tell you that. Bob Woodward: But you could tell me that. Deep Throat: No, I have to do this my way. You tell me what you know, and I'll confirm. I'll keep you in the right direction if I can, but that's all. Just... follow the money. Deep Throat Bob Woodward Deep Throat Bob Woodward Deep Throat Bob Woodward Deep Throat Memorable quotes for All the President's Men (1976) All the President's Men1976

©2011 David Consulting Group © 2013 David Consulting Group Focus on The Business Value of IT … … measured in $£€¥ etc. DCG’s “The Business Of Value of IT”, published in March 2008, provided answers to the challenges of measuring and managing the value of IT particularly for software development. Mike Harris, David Herron and Stasia Iwanicki of DCG shared their experiences and lessons learned in this foundational analysis. “The challenge is to characterize how an IT investment, for new capabilities or for “keeping the lights on,” helps the business that bears the cost to achieve its financial performance targets and business objectives.” “… the IT budgets of some organizations are a complete mystery to the businesses that pay for them and may not be delivering commensurate value.” Harris, Herron & Iwanicki, “The Business Value of IT,” page 15.

©2011 David Consulting Group © 2013 David Consulting Group Why another framework? In short, the other frameworks have strengths (DCG is an SEI Partner for CMMI) but identifying and enhancing business value is not one of them Source:

©2011 David Consulting Group © 2013 David Consulting Group How does IT-CMF relate to the other frameworks? Source:

©2011 David Consulting Group © 2013 David Consulting Group Assessment Focus – where to start? Examples of “Clusters” of CC’s Source:

©2011 David Consulting Group © 2013 David Consulting Group Cost Management - All 5 financial CC’s + PPP ( Portfolio Planning & Prioritization ) + BAR ( Benefits Assessment & Realization ) Source:

©2011 David Consulting Group © 2013 David Consulting Group Agenda Getting the most bang for your buck from IT-CMF: Why the Financial CC’s? What are the Financial CC’s? Feedback – Q&A How can you get started on the Financial CC’s?

©2011 David Consulting Group © 2013 David Consulting Group Financial Critical Capabilities Source: AA = Accounting & Allocation FF = Funding & Financing BGM = Budget Management BOP = Budget Oversight & Performance Analysis TCO = Total Cost of Ownership

©2011 David Consulting Group © 2013 David Consulting Group Overview of Funding & Budgeting Process Flow Strategic Planning Business Planning Funding level Funding & Financing Portfolio Planning & Prioritisation Target spending by portfolio Budget Management TCO Accounting & Allocation Budget Oversight & Performance Analysis Capacity Forecasting And Planning Capex/Opex budget Performance vs. budget Planned spend by Portfolio Cost accounting model Charge back model Variance analysis IT intensity vs. Benchmark Funding and Budgeting CC Other CC Variance analysis IT Leadership & Governance Financing guidelines Cost Data and budget refinements Updates Cost information Note: Simplified picture, additional dependencies exists After budget cycleDuring budget cycleBefore budget cycle Source:

©2011 David Consulting Group © 2013 David Consulting Group Overview of Accounting and Allocation Definition The policies, processes and tools used for calculating and distributing the costs of IT. A range of methods such as chargeback, transfer pricing, and allocation are used to manage the cost of IT services and to influence the demand for IT services within an organisation. Accounting platform capabilities Policy for the allocation and chargeback of IT costs Agreements on which IT services are covered by the Policy for allocating and chargeback of IT costs Business Planning of IT funding level and target spending by IT portfolio (refer to BP). Oversight of IT finance and overall budget performance (refer to BOP) Variance analysis of IT intensity compared to a benchmark (refer to BGM) The source and allocation of funds (refer to FF) What’s in scopeWhat’s out of scope Usage of Accounting Model Accounting & Allocation Governance Cost Coverage Quality of Accounting Model Transparency of Accounting Model Deploy ment Model Policies, Processes, Tools

©2011 David Consulting Group © 2013 David Consulting Group Overview of Funding & Financing Definition Company-wide understanding of how, why and from where IT is funded. Determines the scale, scope and sources of funding for IT and assign financial resources to IT activities. Establishes a balance between Capex and Opex to optimise IT effectiveness Seven dimensions Funding source -Clear understanding of funding options and where funds are derived from and why Funding level -Clear strategic case for the amount of funds which should be sought in order to meet organisational objectives -Clear strategic case for above the line (Capex) spend, versus below the line (Opex) Allocation -Ensure that funds are allocated to the right IT activities in order to meet organisational objectives Governance, Decision Making Process, Communication -Processes and standards which ensure that funding and financing is open, controlled and managed appropriately Performance Management -Tracking and recording of the entire funding and financing domain to ensure that lessons learned and under-performance issues are incorporated into the domain What’s in scope What’s out of scope Day-to day budget management IT Financial performance management TCO Funding processes, sources and alignment with alignment with strategic goals Leadership understanding of IT funding and financing issues and options Allocation of funds Portfolio planning interface Funding and financing performance Funding Sources Funding Levels Allocation Governance Communication Decision-making process Performance Management

©2011 David Consulting Group © 2013 David Consulting Group Overview of Budget Management Definition Active, on-going, company-wide process of reviewing and adjusting the IT spending plan to ensure that allocated budgets Are being spent effectively Remain within budget parameters Are in-line with the governance model The goal of BGM is improved cost predictability for IT services. What’s in scopeWhat’s out of scope Planning Scope Alignment Process Governance Budget Governance Accountability Performance Management Active Monitoring Variance Management Predictability Portfolio Management [see Portfolio Management] Multi-year trending of projects and budget categories [see Budget Oversight and Performance Analysis] Total Cost of Ownership Management Cost Analysis [see Total Cost of Ownership ] Strategic planning process to set business/IT capability development [see Strategic Planning] Funding & financing prioritisation [see Funding and Financing] Deciding on Costs and Revenue allocations [see Accounting and Allocation] Budget planning Establishing an effective budget process Assigning budget accountability Day to day tactical monitoring of budgets Month to month budget predictability and variance management

©2011 David Consulting Group © 2013 David Consulting Group Overview of Budget Oversight and Performance Analysis(BOP) Definition The periodic offline comparison of IT spending versus the IT plan, which provides a stimulus for re-profiling or reprioritisation of budgets. BOP ensures that budget targets are being met and it improves the quality of future forecasts. Multi-year tracking and trending of IT projects and IT budget categories Strategic reviewing of budgets versus actual spend Rebalancing and reprioritisation of budgets Deciding on future IT funding levels and allocation Communicating to key business stakeholders on IT budget performance metrics Day to day monitoring of budgets (refer to Budget Management) Managing the portfolio (refer to Portfolio Planning and Prioritisation) Managing TCO costs analysis (refer to Total Cost of Ownership) Establishing business/IT capability development (refer to Strategic Planning) Prioritising of funding and financing (refer to Funding and Financing) What’s in scopeWhat’s out of scope Budget Alignment and Communication Analysis Scope, Granularity, and Sophistication Metrics Reporting Impact on Planning Tools and Processes Impact on Cost Management 7 Dimensions Data Consistency Alignment Impact and Value

©2011 David Consulting Group © 2013 David Consulting Group Overview of Total Cost of Ownership Definition Total Cost of Ownership tracks, compares, and controls all direct and indirect costs (including people, processes and methodologies) associated with IT assets (infrastructure and systems) in order to maximise value. Accurate understanding of current and future TCO over the full IT asset lifecycle leads to more informed budgeting and portfolio management decisions. Cost calculation (Acquisition, Operating, Control, End of life decision making) A normalised approach to IT asset cost comparison IT planning using TCO Communicating use and benefit of TCO Refinement of IT spending plan (based on calculated TCO) (BGM) Allocation/chargeback of direct and indirect costs (AA) What’s in scopeWhat’s out of scope

©2011 David Consulting Group © 2013 David Consulting Group Agenda Getting the most bang for your buck from IT-CMF: Why the Financial CC’s? What are the Financial CC’s? Feedback – Q&A How can you get started on the Financial CC’s?

©2011 David Consulting Group © 2013 David Consulting Group Feedback – Q&A – Show of hands Who understands the difference between the Financial CCs? Whose companies have all these capabilities? Some? None? Does anyone’s company have all these functions clearly separated out with different people responsible? BGM? TCO? AA? FF? BOP? Does your company have all of these Financial CC’s “inside” IT? BGM? TCO? AA? FF? BOP? Does anyone think their company has some examples of good practice for the financial CCs? How many people would like to volunteer to participate in the Financial CC’s work group?

©2011 David Consulting Group © 2013 David Consulting Group Agenda Getting the most bang for your buck from IT-CMF: Why the Financial CC’s? What are the Financial CC’s? Feedback – Q&A How can you get started on the Financial CC’s?

©2011 David Consulting Group © 2013 David Consulting Group Next Steps? Assess your current status with an Executive Assessment –Review status against other companies Decide what are the most important and urgent CCs for you –not everyone process needs to be at the highest level – you decide not the model Assess your capability in those CCs Determine and deliver improvement activities Repeat regularly AND/OR.. Consider dipping a toe in the water by joining a CC Workgroup or with a CC Validation Workshop from a CC Workgroup …

©2011 David Consulting Group © 2013 David Consulting Group What is a CC Workgroup ?  IVI researches, develops, and disseminates the IT-CMF framework to enable more value from IT investments and practice  Open innovation collaboration approach between academic and industry practitioners to develop and sustain the Critical Capabilities(CCs)  IVI facilitates members interested in advancing knowledge of particular CCs through participation in CC Workgroups  Individuals with expertise in the particular CC area join that Workgroup  Regular workgroup meetings  Review and contribute to the development of the CC outside meeting  Time commitment typically 1-2 hours per week

©2011 David Consulting Group © 2013 David Consulting Group Why get involved ?  Network with like-minded peers  Benefit your organisation’s capability  The chance to contribute to IT-CMF development  Develop your expertise in the CC area  Add IT-CMF to your CV  Participate in a Validation Workshop [VW]  How ?... Contact appropriate CC Researcher

©2011 David Consulting Group © 2013 David Consulting Group Initial background research and scope suggestion Industry and academic literature, business press, practitioner 1:1 interviews Architectural WG peer review prior to TC submission Proceed to develop initial blueprints and artefacts Comparison with industry frameworks Extensive references consulted (industry & academia) through Workgroup (WG) participation of key opinion leaders (KOLs), subject matter experts (SMEs), industry practitioners, academia WG Peer Review External Audit Review, further blueprint & artefacts developed Peer reviewed with 3-5 external organisations and key opinion leaders of full blueprint material WG Peer Review Editor review* Case Studies Evaluation & Approval for Wider Release/Publication Pilot Assessment - Min three individuals at three organisations formally assessed using artefacts and approaches validated/updated OR Validation Workshop - Min three individuals at three organisations formally walk-through CC artefacts and approaches. Feedback validated using qualitative methods. WG Peer Review Material & artefacts formally released for wider distribution and use Editor review Critical Capability Development Stages Key Learnings Update Key Learnings Update Key Learnings Update Key Learnings Update Increasing rigor applied

©2011 David Consulting Group © 2013 David Consulting Group A Validation Workshop? Your opportunity to ‘test drive’ a CC and get  Wider exposure to IT-CMF in your organization  Wider understanding and support for IT-CMF  The chance to contribute to IT-CMF development  The opportunity to complete a self-assessment in the Critical Capability  Interaction with the IVI Research group

©2011 David Consulting Group © 2013 David Consulting Group Feedback Required The reviewers respond from their perspective on: Awareness Deck, Assessment questions and possible responses & Practices, Outcomes and Metrics[POMs] 1.Relevance of concept - Does the CC material represent their view of the capability? 2.Currency of concept - Does the CC material represent to most up to date thinking around the capability? 3.Clarity of concept - Is the CC material clear in its message, and easy to understand? And … Share examples of CC best practice in the organization

©2011 David Consulting Group © 2013 David Consulting Group Test and Validation: Stage 4 of CC development Validate and Test by reviewing: Awareness Deck contents [ Central documentation of critical capability ] Assessment questions and possible responses [ link to complete assessment individually online ] Practices, Outcomes and Metrics [ Detailed POM list, by maturity level ] Provide examples of CC best practice in the organization Output Informal assessment of the organisation Revised CC materials through incorporating workshop feedback

©2011 David Consulting Group © 2013 David Consulting Group CBB Current & Future Maturity Ranked by Importance

©2011 David Consulting Group © 2013 David Consulting Group Current Opportunities Critical CapabilityWGV WResearcher AA (Accounting & Allocation) Catherine Crowley BGM (Budget Management) Catherine Crowley BOP (Budget Oversight & Performance Analysis) Catherine Crowley CAM (Capability Assessment & Management)  Marian Carcary FF (Funding & Financing) Catherine Crowley PPM (Program & Project Management)  Una Downey SD (Solutions Delivery) Louise Veling SUM (Supplier Management) Sinéad Murnane TCO (Total Cost of Ownership) Catherine Crowley TIM (Technical Infrastructure Management) Conor O’Brien UED (User Experience Design) Louise Veling UTM (User Training Management)  Eileen Doherty

©2011 David Consulting Group © 2013 David Consulting Group Special Offer : Free IVI workshop for TCO or BGM & BOP or FF & AA!!! Questions? Mike Harris AND … Free signed copy of my book If you sign up for a FREE IVI Workshop today!