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Achieving Business Value from Technology: A Practical Guide for Today's Executive

Achieving Business Value from Technology: A Practical Guide for Today's Executive

Tony Murphy

ISBN: 978-0-471-27314-1

Oct 2002

254 pages




""Clearly, IT investments have never before played such a critical part in business growth. The book addresses the weakness existing in most management systems involving the lack of a systematic process to realize the economic benefits of the IT investment and provides a clear A-Z methodology for business to bridge this gap. This book is clearly written for all levels and backgrounds in business management and is a must-do for those whose business involves IT, is considering IT, or would like to significantly tailor IT investments for their economic advantage.""
—Professor Richard P. Wool, University of Delaware, President and CEO, Cara Plastics Inc.

""Tony Murphy addresses the difficult question of the value of IT investments head on. He translates an elegant theory into effective practice. The case studies in the book effectively reinforce his key messages.""
—Dr. Dermot Moynihan, Senior Vice President, World Wide Chemical Development, GlaxoSmithKline

""This book is the answer to most CIOs' need for a well-structured, pragmatic, and easily implemented set of tools and practices designed to answer the universal problem of managing and measuring IT's contribution to the business. Tony Murphy's unique blend of practical experience, industry best practice, and excellent communication skills provides the reader with a valuable-and highly readable-guide on how best to achieve that elusive objective of reliably realizing the business benefits of IT investments.""
—Michael Rice, oup Director of IT, Kerry Group plc

""At Oxfam we are one year into a three-year IT strategy based on the principles Tony Murphy lays out in this book, and there is a real, positive difference in how IT is perceived, and in its real strategic position within the organization. If you have ever wondered just how you can gain strategic alignment for your IT function, and then how to make the practical link to IT investment for the organization, Tony has provided a framework that joins them both.""
—Simon Jennings, Head of Information Systems, Oxfam GB

Introduction xi

Chapter 1: Industrial Age Thinking for Information Age Problems 1

Business Value from Information Technology (BVIT)—A Large and Growing Problem 2

Learning from Case Studies 3

What Do These Case Studies Have in Common? 11

Some Historical Perspective 12

Drawing Conclusions from These Changes 23

Revisiting the Case Studies 27

Industrial Age Thinking for

Information Age Problems 30

The Limitations of Financial Metrics 30

The Value of Financial Techniques for IT Investment Appraisal 36

What Else Do We Need? 36

Summary 38

Chapter 2: The Five Pillars of Benefits Realization 39

Pillar 1: Strategic Alignment 42

Pillar 2: Business Process Impact 45

Pillar 3: Architecture 52

Pillar 4: Direct Payback 61

Pillar 5: Risk 66

Summary 76

Chapter 3: P2—Process 77

Step 1: Setting the Ground Rules 81

Step 2: Defining IT Value Standards 90

Step 3: IT Value Analysis 95

Step 4: IT Value Project Management 113

Step 5: IT Value Achievement 118

Step 6: IT Value Management 127

Selecting Specific Products and Vendors 140

Refinements 142

Sensitivity Analysis 146

Investment Scope 147

Summary 148

Chapter 4: P3—People 151

Roles—A Foundation Stone of Effective Governance 153

The IT Council 155

The IT Investment Board 157

The Office of Architecture and Standards 159

The Project Office 163

Summary and Next Steps 165

Appendix A: Sample Value Standards 169

Strategic Alignment 169

Payback 171

Architecture 173

Business Process Impact 174

Risk 174

Appendix B: Sample Value Standards Scoring Metrics 177

Business Process Impact 177

Architecture 180

Risk 181

Appendix C: Completed Weightings 183

Appendix D: From the Field—Investment Case Worked Example 185

Appendix E: Quantifying End-User Benefits 201

Preliminary Information 201

Opening the Meeting 202

Resolution of Inconsistencies 202

Quantifying the Benefits 203

Refine Quantification 205

Cross-Verification 205

Appendix F: Gartner Recommended Approach to Risk Management 207

Collaborative Risk Management 207

Risk Assessment Processes 208

Predictability and Complexity of Risks 215

Summary 216

Appendix G: Analytical Hierarchy Process/Analysis 217

Appendix H: Probability Analysis (Monte Carlo Simulation) 227

Appendix I: Gartner Approach to Change Management: Strategic Planning Assumption 231

The Need for Change Management 231

The Human Response to Change 233

Appendix J: Financial Metrics 239

Net Present Value (NPV) 239

Internal Rate of Return (IRR) 239

Index 243