The Big Ask

To help organisations understand exactly where the value lies in their IT, Gartner is encouraging them to rank their entire portfolio of applications according to their value to the organisation, and then to ask why?. "To get the value you've almost got to step back and say: 'How would I do things without this?'," Roberts says.

It is an approach endorsed by the IT Investment Portfolio Model championed by Meta Group board member Dr Howard Rubin. Rubin's model encourages IT executives to look at their IT dollars as part of an investment fund and to see themselves as fund and portfolio managers whose goal is to allocate investments in a manner that will support their company's business strategy (see "Mix IT Up", page 78). Many CIOs agree that in assessing value the organisation should draw a clear distinction between money spent on keeping IT running day-to-day and the discretionary spend on applications, where the business typically is gaining much more of a say. For instance, Palmer says organisations benefit when they use different ways of determining IT value for different types of projects.

"Sometimes it's about replacing an obsolete technology, and people generally understand the need to do that, as long as they've got good value out of their historical investment," he says. "Sometimes you're trying to introduce something new, and they may be very interested in whether this is actually going to be used, who will use it and what value it's going to deliver. In those circumstances you might be better off delivering some sort of potential use scenarios to give people a clear understanding of how this will pay out on the business side."

CIOs are also increasingly imposing on the business at least some onus to prove the value of the applications IT will deliver.

Suncorp Metway group executive IT Carmel Gray says that like most organisations, the banking and general insurance group finds it relatively easy to benchmark ongoing IT operations. The bulk of the Suncorp efforts instead go to proving the value it gets from expenditure on applications. Last April Suncorp set up a single corporate projects division to look after management of all projects across the group. Gray says the organisation has a process in place, jointly run with the business, giving business units the responsibility for prioritising all changes and enhancements on the basis of value to the business.

"It's a participative thing, and the business is really calling the shots on that discretionary spend on applications," Gray says. "When you come to new innovations, the major projects that these days all contain an element and usually quite a large component of IT, I think we're very mature there. The corporate projects group reports to another group executive, a peer of mine. We run them as business projects not IT projects, and we have a very strong methodology in terms of both assessing the return you're going to get for the project and then for measuring and making sure that the benefits you get are actually realised and sustained."

General manager of the corporate projects division Paul Smeaton says the division has created a projects governance committee, essentially a sub-committee of the executive, which reviews all business cases for projects. There is also a benefits realisation framework comprising a series of gates - investigation, detailed planning, final investment - which each project initiative must go through.

"I wanted to take a strong outcome focus, we wanted to group all our projects into a portfolio, and understand from a Suncorp Metway/GIO perspective the mix of projects to make up that portfolio, to ensure we get the best return on our investment," Smeaton says. He says the approach means that Suncorp understands more about each project with each gate it passes, and that it can pull the plug at any time it feels the project is not worth pursuing.

"I think the key advantage is taking a portfolio approach, so you can approve projects in the context of the portfolio of projects, as opposed to approving a project in isolation from others. The second thing is taking very much an outcome focus; in other words understanding all the things you need to do to get the outcome. And the third main thing is the gating process. Because we break a project up into a series of gates, you can control the investment into that project, so you don't allocate all the funds up front and hope for the best. Instead, you break it into manageable chunks and you only get through to the next gate if it actually makes sense to continue with the project," Smeaton says.