The first stage (or gate, or stage gate) of the funnel represents "ideas" or opportunities, which comprise only high-level information and estimates for timescales, costs and benefits. Ideas generally represent work intake that IT has not yet had the chance to evaluate in detail, but which needs to be acknowledged as having entered the pipeline.

As part of a filtering and screening process, these ideas then move down to the next stage, called "project requests," during which they are further qualified with quantifiable cost and benefit information, to a level of detail which makes high-level planning and a cost-benefit analysis possible. It is during this stage that the business case is built for executive sponsorship and approval.

Finally, once the business case has been approved, the project request moves down to the stage where it becomes a project -- though strictly speaking these would not just be new projects, but also work related to production applications, upgrades, etc. At this stage, detailed planning, budgeting and resource allocation (where possible) takes place.

Demand for IT products and services originates from customers in the business in the form of ideas or opportunities, with high-level information on timing, costs and benefits.

At the one extreme (unfortunately quite common), IT is simply an internal service provider operating under the traditional client/vendor model and focused on satisfying user requirements. In essence it is a passive order taker disconnected from the business and not involved in understanding what lies behind customer demand.

At the other extreme (unfortunately not very common), IT is a strategic differentiator and is part of a joint IT/business group responsible for process improvement and business innovation. Here we would have account managers responsible for understanding customer demand and full IT participation in the decision-making and approvals process. This will be covered in more detail in chapter eight of IT Success: Towards a New Model for Information Technology, when discussing roles and responsibilities under the new business model, but at this stage let us focus on capturing and managing demand, regardless of how it occurs.

There are two categories of demand: planned and unplanned.

Planned demand arises as part of the annual planning process, which results in the "IT Plan" (which is what IT is supposed to deliver) and the corresponding budget for the next financial year. This would be the case for large, departmental or enterprise-wide projects which cannot be funded on-the-fly during the current budget cycle, but also for keeping the lights on.

Unplanned demand corresponds to the huge amount of unpredictable work that IT does which is not contained in well-defined project structures. These include things like change requests, feature requests and bug fixes which arise from changing business and regulatory environments, changes in strategy, company reorganizations, mergers and acquisitions, insufficiently tested systems, etc. Some of these requests will become input for the next planning cycle, but most will have to be done inside of the current budget cycle.