When IT is a cost center to enable and support a core business (like financial services, credit card, etc) the investment decision with in IT requires a clear plan from the office of CIO and the plan is to align to the IT strategy. Investment management plan provides a guidelines to the senior management team of the IT organization to make the decision on projects, technology , people and process. Without the investment management plan, the organization investment and expenditure may not directly support the IT strategy.
Generally IT budget has the following category. Some of the categories are expenditure not investment.
- Maintenance & Enhancement
- Lights on
- Internal IT special projects (innovation or cost optimization)
Projects, technology and internal IT special projects are considered as investment and other categorize are expenditure. IT investment management is a structure and governance for the projects, technology and internal IT special projects.
Projects are major initiative an organization under take for that year to meet the organization goal. The project selection for each year will under go an internal process. The executive team will be part of the process and other key stakeholder (ideally from all the business process area) will participate to select and prioritize the projects and budget for those projects.
The projects for each year of an organization should be decided based on the current state of the organization and immediate requirements. In this market condition most of the industry segment (may be not oil & gas companies) are looking for the cost efficiency to sustain and continue the operation. For example, the financial industry (like Citi) are looking for funding to run their business. Looking for external investors like Abu Dhabi or Dubai etc and also they may look for innovative ways to bundle the securities to mobilize more funding or look for only a best customers to improve their securitization standards. The projects for this year for Citi will be more focused on this line of business. IT department will adjust their priorities and take this projects to support & enable Citi’s business. The IT projects are driven by the business team based on the current immediate needs. Strategic projects which may not fetch immediate benefits to the organization will be in the list and it will be prioritized accordingly.
Maintenance & Enhancement
Minor changes to the existing systems but a project. It is fine tuning the existing systems to continue to support and enable the core businesses. In few cases, regulatory requirements also will come under maintenance & enhancement IT budget bucket. This expenditure generally can not be avoided.
This bucket is for keeping the system running to support and enable the core business. It is a regular maintenance like ensuring the log files are rotated, database back ups are taken, systems are regularly monitored etc. Some of the maintenance and enhancement may come under lights on. This expenditure can not be avoided.
Technology priority matrix (a different perspective of technology road map) is a list of technology and its priority to the company. For example, for financial service company the top most priority is to secure the systems to protect the consumer data.
An example of technology priority matrix:
- Security Technologies
- Business Intelligence
- Business Process management
- Enterprise systems
- Infrastructure technologiesAll the technological investment will be made based on technology priority matrix.
It is a fixed cost for the running all the systems. It includes hardware, software, network, software license, desktop, system monitoring, mainframe, web environment. Every organization has a hosting cost and it generally it is a majority of the IT cost. It is slowly going to become a commodity and IT organization will not focus primarily on the hosting and focus on the business value augmentation.
IT special projects
Most of the organization does not have the IT special project bucket within their IT investment management plan. The purpose of this category to have funding to drive innovation, cost optimization (hosting provider evaluation), sourcing advisory, application portfolio assessment and etc. The special project priority matrix is created in collaboration with the senior and executive management of IT based on the IT strategy and direction. For an example, a special projects priority matrix is given below
- Cost optimization
- Organization alignment
2 thoughts on “IT Investment Management”
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Good Artical . Thanks for help.