manage it as a business

Manage IT
as a Business
How to Achieve Alignment
and Add Value
to the Company
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Manage IT
as a Business
How to Achieve Alignment
and Add Value
to the Company
Bennet P. Lientz
Anderson Graduate School of Management
University of California, Los Angeles, California
Lee Larssen
The Strategic Edge
Amsterdam
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Boston
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Heidelberg
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London
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New York
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Oxford
Paris
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San Diego
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San Francisco
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Singapore
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Sydney
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Tokyo
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Elsevier Butterworth–Heinemann
200 Wheeler Road, Burlington, MA 01803, USA
Linacre House, Jordan Hill, Oxford OX2 8DP, UK
Copyright © 2004, Elsevier Inc. All rights reserved.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in
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Recognizing the importance of preserving what has been written, Elsevier prints its books on
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Library of Congress Cataloging-in-Publication Data
Lientz, Bennet P.
Manage IT as a business: how to achieve alignment and add value to the company /Bennet P. Lientz
and Lee Larssen.
p. cm.
Includes bibliographical references and index.

ISBN 0-7506-7825-9 (pbk. : alk. paper)
1. Information technology—Management. 2. Information technology––Economic
aspects. I. Larssen, Lee. II. Title.
HD30.2.L54 2004
004Ј.068Ј4—dc22 2004005623
British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library.
ISBN: 0-7506-7825-9
For information on all Butterworth–Heinemann publications
visit our Web site at www.bh.com
04050607080910 10987654321
Printed in the United States of America
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v
Contents
Preface xv
Part I
Govern and Plan Information
Technology
Chapter 1
Introduction
Issues with Information Technology and Management 3
Some Past Attempts at Improving IT 4
Efforts at Improving Business Processes 5
A Brief Review of IT Governance 6
Trends and Challenges in IT Governance 7
A Winning Approach for IT Governance 9
Benefits of the Approach 11
Organization of the Book 12
Alignment of IT and the Business 13

Manage Risk 14
Examples 15
Lessons Learned 16
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Performance Measures for the IT Organization 16
Summary 18
Chapter 2
IT Oversight and Governance
Introduction 21
General Purpose and Scope of Oversight 22
The Role of Business Processes 24
The Missing Roles of IT Governance that Cause
Business Failure 28
Modern Governance of IT 30
Modern Roles and Responsibilities of IT 32
Modern Roles and Responsibilities of Business
Units 33
IT Governance and Business Vision, Mission, and
Objectives 34
Benefits of Effective IT Governance 39
Alignment of IT and the Business 40
Manage Risk 40
Examples 40
Lessons Learned 41
Performance Measures for IT Oversight and
Governance 42
Summary 42
Chapter 3
Technology Assessment, Management, and
Direction

Introduction 45
Ten Myths about Technology 49
Steps in Technology Management 50
Assess Your Current Technology 51
Identify and Track New Technology 52
Select the New Technology 54
Develop a Framework for Technology Implementation and
Support 54
Implement the New Technology 55
Critical Success Factors for Technology
Management 56
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Alignment of IT and the Business 56
Manage Risk 58
Examples 58
Lessons Learned 59
Performance Measures for Technology
Management 60
Summary 61
Chapter 4
Develop Your Strategic IT Plan
Introduction 63
Measure Current IT 65
Review the Existing Business Plans and
Business Direction 66
Develop the Initial IT Strategic Plan 66
Relate the Strategic IT Plan to the Business Units 72
IT Planning Guidelines 73
Get the IT Strategic Plan and Action Items

Approved 75
Resource Management and Allocation 76
Update Your IT Strategic Plan 78
Alignment of IT and the Business 79
Manage Risk 79
Examples 80
Lessons Learned 81
Performance Measures for IT Planning 81
Summary 82
Part II
Manage the People and the Work
Chapter 5
Manage Risk and the Project Portfolio
Introduction 85
Where and How IT Projects Originate 86
Assess Current Projects 89
Project Evaluation and Selection 91
Contents vii
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Comprehensive Resource Allocation 93
Set Up a Winning Project 95
Define the Role of Management 97
Report on the Project 97
Hold Project Meetings 98
Implement Collaboration in Projects 99
Track Projects 99
Perform Multiple Project Analysis 100
Alignment of IT and the Business 100
Manage Risk 101
Examples 103

Lessons Learned 104
Performance Measures for Risk and Project Management 105
Summary 105
Chapter 6
Manage the IT Staff
Introduction 107
Evaluate the Current Staff 108
Recruit and Hire New IT Employees 111
Allocate Personnel Resources 112
Build a Collaborative IT Culture 114
Motivate IT Employees 114
Deal with Personnel Issues 115
Upgrade Skills of Junior Employees 116
Alignment of IT and the Business 116
Manage Risk 117
Examples 118
Lessons Learned 119
Performance Measures for IT Staffing 119
Summary 120
Chapter 7
Manage the Work
Introduction 121
Check on Work Informally 122
Assess Your Methods and Tools 123
Organize IT Work Efforts 125
Review Work and Project Milestones 125
Deal with Issues 127
viii Contents
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Use Lessons Learned Effectively 128

Decide on the Approach for Documentation 131
Introduce New Methods or Tools 133
Alignment of IT and the Business 134
Manage Risk 135
Examples 135
Lessons Learned 136
Performance Measures for Work Management 136
Summary 137
Part III
Direct and Coordinate IT
Chapter 8
Coordinate Business Unit Activities
Introduction 141
Collaborate on Defining the Roles of Business Units in IT 142
Create Long-Term Process Plans 145
Develop a Business Unit IT Strategy 148
Provide Effective End User Support 150
Alignment of IT and the Business 150
Manage Risk 151
Examples 151
Lessons Learned 152
Performance Measures for User Relations 153
Summary 154
Chapter 9
Direct Outsourcing and Manage Vendors
Introduction 155
Some Examples of Outsourcing Success and Failure 158
Pursue an Organized Approach to Outsourcing 158
Develop an Overall Outsourcing Strategy 159
Determine What Is to Be Outsourced 160

Prepare for Outsourcing 162
Prepare the Request for Proposal 163
Select the Right Vendors 164
Plan and Execute the Transition of Work 165
Contents ix
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Manage the Outsourcing 165
Manage Multiple Vendors 166
Alignment of IT and the Business 166
Manage Risk 167
Examples 167
Lessons Learned 169
Performance Measures for Outsourcing 169
Summary 170
Chapter 10
Communicate with Management
Introduction 171
Implement Collaboration in Management Communications 172
Use Informal Communications 173
Make Formal Presentations 174
Present the Overall Status of IT 175
Report to Management on Status 176
Address a Specific Issue 177
Propose New Work 178
Present an IT Budget 179
Communicate with Business Unit Managers 180
Alignment of IT and the Business 181
Manage Risk 182
Examples 182
Lessons Learned 184

Performance Measures for Management
Communications 185
Summary 186
Chapter 11
Software Packages and System Development
Introduction 187
Evaluate the Process and System and Determine
Requirements 189
Make the Buy or Build Decision 193
Evaluate and Select Software Packages 194
Implement the Software Package 195
Perform Software Development 196
x Contents
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Carry Out Data Conversion 196
Produce Operations Procedures and Training Materials 197
Conduct the Training 197
Gain User Acceptance 198
Alignment of IT and the Business 198
Manage Risk 199
Examples 199
Lessons Learned 200
Performance Measures for Packages and Development 200
Summary 201
Chapter 12
Implementing Change in IT Management
Introduction 203
Implement New Roles and Responsibilities for IT 203
Instill Greater Collaboration 204
Measure What You Have, Do, and Where You Are Going 206

Become Issues Focused 208
Implement More Dynamic Resource Allocation 209
Become Process Oriented 209
Align IT and the Business 210
Redirect IT Resources 210
Implement More Effective Project Management 210
Deal Effectively with Resistance to Change 211
Examples 214
Tactics for Implementation 215
Performance Measures for Implementation 215
Summary 216
Part IV
Address Specific Challenges
Chapter 13
Personnel and Staffing Issues
Introduction 219
IT Staff Turnover is High 220
Contents xi
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IT Morale is Low 221
There is Poor Communications between IT and Users 222
Too Much Critical Work Depends on the Same Few People 224
IT Staff Members Work in Isolation 225
Supervisors Lack Management Skills 226
Chapter 14
Systems and Technology Issues
Introduction 229
The Wrong Technology is Selected 229
There are Integration Problems with the Technology 231
The Technology Does Not Deliver Results 233

The Technology was Imposed On Us 234
Legacy Systems Consume Too Many Resources and
Are Inflexible 236
There is High Backlog of Work 237
Chapter 15
Management Issues
Introduction 239
Management is Not Involved in IT 239
Some Managers are Overinvolved with IT 241
Management Places Unrealistic Demands on IT 242
Management Falls under the Influence of
Vendors 244
Management Changes Direction 245
Middle Level Managers Resist IT Efforts 246
Chapter 16
Business Unit Issues
Introduction 249
The Wrong Employees Are Assigned to IT
Work and Projects 250
Employees Resist Change 251
There are Too Many Exceptions and Workarounds 253
There are Shadow Systems in the Department 254
Several Business Departments Do Not Get Along 256
There are Problems with the Business Rules and Policies 257
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Chapter 17
Vendor and Outsourcing Issues
Introduction 259
Vendor Performance is Poor 259

There is Substantial Turnover of Vendor Staff 261
Multiple Vendors are Fighting 263
The Vendor is Not Managing Their Work 265
There is a Difficulty in Transferring Knowledge from
the Vendor 266
There are Problems in Vendor Communications 267
The Vendor Has a Close Personal Relationship
with a Senior Manager 269
Appendix A: Magic Cross Reference 271
Appendix B: References 273
Appendix C: Websites 275
Index 277
Contents xiii
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xv
Preface
THE SITUATION IN IT TODAY
Many IT projects and efforts fail to deliver the benefits to the business that
were promised. IT is often viewed with skepticism, distrust, or distain. Critical
processes lack adequate supporting systems. Yet, IT managers and staff work hard
to meet the needs of the business in terms of satisfying department and business
needs. Systems are put in place; network operations are reliable and stable. The
result is a misalignment of IT with the business. There have been a number of
books written on IT alignment. These often do not provide detailed direction or
steps to take. Then there are other books that deal with IT management. However,
these present the view of IT as reactive to requests. They treat IT management
from a technical and business view. They ignore the politics and the real world of
IT. This book provides a down-to-earth approach for better managing IT and
achieving increased alignment with the business.

HOW DID WE GET HERE?
At the start IT was often a part of accounting. It was viewed as strange and
technical. Most of the early systems provided no direct support for business work
and processes. Instead, users would do the work and then record the results after
the fact. IT responded to many requests and managed the backlog of work.
Programming was difficult and complex.
Online systems and microcomputers changed things. IT got closer to the work.
People performed the work using systems. This was a fundamental change as it
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put IT close to the business. E-Business, ERP, and other systems then took this a
step by replacing some of the labor and manual effort and automating the trans-
actions and work.
Business managers have had many bad experiences with technology that did
not deliver the benefits that were claimed. Systems that were to cut paper, save
time, increase productivity, and reduce costs failed to deliver. In many cases,
things actually got worse. This is not unusual today.
Yet, with technology advances and more and expanded use by the business, IT
management often did not catch up. Many IT groups today are run and managed
about the same as they were 20 years ago. They take requests in from users. They
assign resources to the requests. Much of the resources of IT are dedicated to
support and maintenance.
Let us summarize some of the problems associated with IT.
• New technology promises benefits that are not delivered.
• Systems are implemented that are not used properly and fail to yield the
benefits.
• Many IT projects are started and often either fail or run severely over
budget and behind schedule.
• Users often resist change and new systems.
• There is miscommunication between IT and the business.
• IT plans are often not taken seriously by either IT or the business.

That is not to say that IT is bad or that IT does not deliver. IT managers and staff
toil endlessly to satisfy needs. Yet, sometimes they are as frustrated as the users
and managers. They would naturally like to see more success and then recognition
of their efforts.
PURPOSE OF THE BOOK
The goals of this book are to:
• Show how to align IT and the business.
• Gather and use lessons learned to cumulatively improve IT performance.
• Develop methods that make IT more proactive in helping the business and
its processes.
• Measure IT activities using realistic performance measurement.
• Show how to improve the communications with management.
• Build a more positive, collaborative approach within IT.
• Create teamwork with business departments and staff in doing work together.
• More effectively manage vendors.
• Avoid negative surprises.
• Ensure that more projects are completed on-time and within budget.
• Assure that benefits from systems projects and work result in tangible
benefits.
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Preface xvii
• Establish a strategic IT plan that is effective and used.
• Indicate approaches to increase effectiveness and reduce IT costs.
Nothing in this book requires you to spend money. Rather, over 200 specific
guidelines and methods are provided for you to employ.
Specific problems that are addressed in this book include:
• Misalignment of IT and the business. IT often tends to be reactive to the
individual business request.
• Poor IT project selection. Projects are selected for tactical, not strategic

reasons.
• Mismatch between where IT resources go and where the needs are.
Critical processes do not receive sufficient resources and attention.
• Focus on intangible benefits. Focusing on intangible benefits can lead to
the wrong work being performed.
• Misallocation of IT resources. Too much of IT resources are consumed in
maintenance, operations, and support activities.
• Cope more effectively with political and cultural factors.
APPROACH OF THE BOOK
The approach in this book is focused on how to improve IT work, perform-
ance, and alignment. There has been enough written about the problems and
generalities of “what.” The following themes are pursued:
• Creation of more proactive approach for IT.
• Alignment of IT to the business through business processes, planning, and
work.
• Implementation of realistic measurements of IT and IT-related work as
well as processes.
• Establishment of a low overhead IT planning approach.
• Collaboration and communications as focal points.
• Stress on tangible benefits from IT work.
• Improved methods of IT resource allocation.
• Proactive management of risk and issues related to IT work.
ORGANIZATION OF THE BOOK
The book is organized into four parts.
• Part I—measure, plan, and control of IT.
• Part II—manage IT resources and work.
• Part III—coordinate vendors, business units, and management.
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• Part IV—deal with detailed and frequently encountered IT issues and
problems.

Each chapter in the first three parts is divided into the following sections:
• Introduction—this provides background for the material in the chapter
along with considering the traditional approaches followed for the work.
• Specific sections for the subject of the chapter that provide guidance.
• Alignment with the business—how the methods of the chapter help you to
align IT with the business.
• Manage risk—specific ways to deal with risk.
• Examples from three organizations of different sizes and types.
• Lessons learned—detailed guidelines on how to carry out the methods.
• Performance measurement for the specific area—provides a scorecard for
evaluation of your work.
• Summary.
The last part of the book addresses specific, commonly encountered problems.
For each issue we consider:
• Background of the issue.
• Impact(s) of the issue.
• Prevention of the Issue.
• Detection of the issue.
• Actions to take regarding the issue.
AUDIENCE OF THE BOOK
There are a number of people who will find this book useful and many have
found the techniques to be valuable in the past.
• Senior management who oversee IT.
• Business managers involved in the processes.
• IT managers and staff.
• Project leaders of IT-related projects.
• Individuals involved in change management, process improvement, Six
Sigma, and process improvement.
• Consulting, ASP, and vendor managers and their staff.
• Technology developers.

• Students involved in learning information technology.
ABOUT THE AUTHORS
Combined, the authors have over 45 years of hands-on experience in IT. We
have managed nine IT groups of different sizes. We have consulted with over
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Preface xix
95 IT and business groups in over 40 countries. When we started, we tried to
apply traditional methods and techniques. When these failed, we began to impro-
vise new methods. This book is a culmination of this experience. Our overall goal
is to give you specific, tangible tools that help you manage and do IT work more
efficiently and effectively, and to benefit the business more.
The techniques in this book have been implemented in over 60 organizations
around the world in over 20 industries ranging from government, transportation,
logistics, banking and finance, insurance, aerospace, high technology, manufactur-
ing, real estate, utilities, natural resources, engineering, petroleum and energy, and
medical care. The methods work and feedback on them have also served to enhance
the methods further.
FEATURES OF THE BOOK
Some of the key features of the book are:
• Coverage of all aspects of IT—planning, management, operations,
software development, technology selection and improvement, process change,
and support.
• Over 250 specific guidelines for IT management.
• Specific steps to align IT with the business.
• Scorecards and methods for measuring IT performance as well as vendor,
management, and user involvement.
• Critical success factors for greater IT success.
• How to address key issues in IT management.
• How to oversee vendor work.

• How to develop an effective IT strategic plan and planning process.
• How to identify suitable projects that will deliver tangible benefits and
align the business to key processes.
• How to improve communications within IT, with the business, and with
users.
• How to maximize the return on your IT investment.
• How to get more effective user involvement in IT work.
• How to control and direct maintenance, enhancement, and support.
• How to deal with resistance to change and new IT systems.
• How to build better relationships with vendors.
• A simple, down-to-earth, common sense writing style.
• Extensive tables, lists, checklists, and charts for your faster use of the
material.
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Part I
Govern and Plan Information
Technology
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3
Chapter 1
Introduction
ISSUES WITH INFORMATION TECHNOLOGY
AND MANAGEMENT
Information systems and technology have now been around for almost
50 years. During this time, we have all seen many improvements in hardware,
communications, and software. Miniaturization, continuously improved price-
performance, and automation of more complex work are three specific areas of
change. That is the bright side.

The dark side is the fact that the percentage of information technology (IT)
projects and work that fail remains very high. Depending on which survey you
read, you find that less than 40% of IT projects fail to deliver tangible benefits;
less than 50% are completed on-time and within budget. A high percentage never
are completed. Unfortunately, these numbers have not changed for the past
20 years. This is despite improvements in technology, new methods, and tech-
niques that have been created. In this regard, many methods for management of
IT and doing the work in IT have often promised much and delivered little.
Methods come and go. People grasp a new concept hoping that this is the “magic
bullet” for IT success. Yet, failure continues; success remains elusive.
Here are some specific problems with IT and IT management today.
• IT is not perceived as being aligned to the business. Many IT groups
seem to work on marginal projects and work. IT works on the wrong stuff.
• Too much of IT effort and resources are consumed by support and
maintaining the existing IT systems and technology.
• IT becomes too easily enamored with new technology—to the detriment
of meeting real needs.
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• IT is often too reactive to events and demands, rather than being
proactive. Thus, IT never seems to get ahead of the curve.
• Many IT projects that are completed do not result in any changes or benefit.
• IT and IT work seem to be disconnected from process improvement.
• Benefits from investment in new technology are often not perceived to
accrue.
• The entire investment in IT over the past 20 years has been called into
question by some researchers and others.
The impact of these issues on the business is substantial. It is widely perceived and
accepted that businesses depend upon their key processes for revenue and profits.
Successful IT will implement systems and technology that directly support key
processes. Thus, the fate of the business is linked to IT through the business

processes. This is the core of alignment of IT to the business. Successful firms, for
example, Wal-Mart and Toyota, attribute much of their success to the welding of
systems and processes together. Firms that failed, for example, K-Mart, Chrysler in
the 1990s, and others, did not integrate their systems and processes. The result was
that the inventories did not match the needs, higher costs, and loss of market share.
SOME PAST ATTEMPTS AT IMPROVING IT
There have been many attempts to improve both IT and business processes.
It is useful to examine some of these since they reveal characteristics of the
problems that IT management faces today.
• Outsourcing. This idea is not new. It began in the times of Egyptians and
Romans. Machiavelli wrote about mercenary armies in his book, The Prince.
Outsourcing has become popular recently for IT work. There is local
outsourcing as well as international outsourcing. Has outsourcing lowered IT
costs? Sometimes, but not often. Has outsourcing solved many of the IT issues
that were stated above? No. It just changed some. Outsourcing is only a part of
an answer if it is structured and managed.
• Software packages. The purpose of getting a software package is that
you get the benefits of the software faster and there is less risk than with
system development on your own. True, but packages have many limitations
including lack of general flexibility. Many software packages have been
implemented with few benefits because the underlying business processes were
not changed.
• New technology. Whether it be wireless, PDAs, PCs, etc., there is often
excessive hype with any new technology. Management and IT grasp the new
technology often without thinking through the consequences. The results are
failure, lack of faith in IT, and lost opportunities. Technology must be managed
more closely.
4 Chapter 1
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