Every enterprise is facing or will soon face replatforming decisions. New IT Alternative Delivery Vehicles and Services (ADV&S) are viable and often attractive alternatives to the status quo. While issues such as flexibility, agility and responsiveness are critical in the replatforming decision, money is the lingua franca at the center of all these issues. It is particularly important in making the key decisions on the evolution of IT platforms and associated workloads.
As we have noted in an earlier post, these decisions demand the answer to at least six critical questions.
How much will it cost to continue as-is?
Which candidate workloads to forecast?
What is the TCO of targeted workloads?
What is the TCO of alternative scenarios?
What do you need to make a defensible and informed decision?
How will the solution perform over time?
While TCO of the status quo can be estimated fairly accurately, the TCO of immature and evolving IT ADV&Ss are subject to greater estimation variance and uncertainty. This asymmetric analysis must be as structured and transparent as possible. Not only is the current financial investment analysis critical, but also it will need to be examined, refined and adjusted as the ADV&Ss evolve. We need to bring ORDER to the process.
What is IT Business Case ORDER?
ORDER is the traceable and transparent framework with which the questions are addressed and the decisions made. ORDER is an acronym for Objective, Rapid, Defensible, Efficient and Repeatable. So let’s define and drill down on how ORDER can be applied to IT financial decisions.
There are three relevant definitions of objective to consider.
Not influenced by personal feelings, interpretations, or prejudice; based on facts; unbiased: an objective opinion.
A thing aimed at or sought; a goal.
The lens in a telescope or microscope nearest to the object observed.
An example of the first definition is the use of Gartner to drive an organization’s IT decisions. Gartner’s power is that it is perceived as an objective and credible observer of the industry. However, having been an analyst at Gartner for many years, I can safely say that bias is a natural component of human thinking. Adding more influence to the opinion is the addition of an independent third party, where biases are abstracted and diluted compared to the biases first and second parties of the buyer and the seller.
The second definition relates to having a clearly defined goal. Without that, there are no targets. Without targets, there can be no expected outcomes. Without expected outcomes, there can be no business case.
The third definition means that the methodology and tools used to build a business case need to be close to the business and the supporting IT functions. The devil is in the details.
With the pace of business and technology change, time to decision is often the difference between catching the wave and missing it. And in today’s IT marketplace there are more options than ever for which path to follow. It could take months to assess the current solution and develop multiple scenarios for change if every business case is built from scratch. However, with a standardized methodology and toolset, this time can be greatly reduced. Time to market is a key value driver for IT projects.
Defensibility in today’s enterprise is a challenge on three axes. (it’s ironic that axes is the plural of both ax and axis) The horizontal axis includes all the parts of the business impacted by the technology. The vertical axis is the chain of command authorized to spend the money. Every major IT decision needs to meet the scrutiny of multiple stakeholders and multiple levels of management.
On the horizontal scale, business users need to know if the proposed technology meets current and future function, availability, and ease of use requirements. The finance and folks need to buy into the cost, risk and benefit ratios, expressed in their terms. The IT department has architectural, operational and skills boxes to check. The procurement and contract management teams are looking at the TCO (hopefully), and the complexity of managing the vendor relationship.
On the vertical scale, most significant decisions require the approval up the management chain while most of the vetting process happens at the “sponsor” level of the hierarchy. This means that the business case often needs to be approved by the boss, then the boss’s boss, and possibly the bosses’ boss’s boss. Each executive level may have its own perspective on the decision. The CIO is looking at how the decision will change the business of IT organization. The CFO is concerned with the cost (hopefully TCO) and risk of the venture. The CEO view is often related to shareholder value and competitive advantage.
Then there is the risk axis running through the middle. Risk is most likely the concern of the finance and IT constituency. Finance is concerned about the risk of not getting the anticipated benefits and legal issues, while IT is focused more on the technical risks like architectural fit and and security.
Efficiency is essentially the optimization of resources needed to perform a task. Business case development can run on a whole spectrum of efficiency, each with its pros and cons.
At one end of the spectrum is defaulting to the seller. Often vendors will develop the business case for free or at a low cost. These value propositions are prepared by “value engineers” using tools developed by the vendor. I have never seen a vendor developed business case not recommend the vendor’s product nor have less than a triple digit ROI. You get what you pay for.
At the other end of the spectrum are the big consultancies - you know who they are. There are two drivers to the big consulting, billable hours and persistent presence. Hiring a big consultancy can be expensive, and if they don’t specialize in cost, benefit and risk analysis, results can be spotty.
Somewhere on the middle of the spectrum is DIY. This can be efficient if the skills and resources are available to perform the analysis. However, this approach could run counter to the above tenets of objectivity and defensibility. It may also have an impact on rapidity if the resources are not dedicated to the project.
Consistency and standardization of business case development is a powerful driver of efficiency and defensibility. Repeatability implies that there is a defined methodology and toolset and database that that can be applied to IT financial decision support in case after case. This will certainly help the defensibility of business propositions in that the process is well understood by all parties.
Repeatability also means that the benefit realization can be measured over time using the same process.
Business cases that are built with the ORDER framework are the foundation of making the best decisions on your IT evolution. We will discuss how our Workload TCO Analyst embodies the ORDER framework in a future post. Meanwhile, contact the TCO Alliance at firstname.lastname@example.org to bring ORDER to your IT investment decisions.