Five Essential Steps Towards an IT Strategy

IT strategy and planning is hard and time consuming. In this blog, I offer a pragmatic approach to conducting IT strategy effort even in the absence of a business strategy.  Just to be clear, a comprehensive IT strategy requires a well-defined business strategy.  However, some IT planning tasks cannot wait and should not wait for a business strategy to be fully developed.  In this blog, I propose a five-step approach to developing an IT strategy that is especially effective in situations where there is no clearly codified business strategy.

But first, let’s define what a strategy is.  As succinctly put by Duncan Bucknell, “A strategy is a solution to move from where you are now (A) to where you want to be (B)…or put another way, it is what you want to happen to achieve an end”.

I propose the following five essential steps that I have successfully applied in developing effective IT strategies:

  1. Review and Evaluate IT Assets
  2. Conduct Capacity Planning
  3. Review and Evaluate IT KPIs and SLAs
  4. Assess the Delivery of IT Projects
  5. Review and Evaluate the History of IT Budgets

 slice1

This step involves the task of finding out the status of your IT assets.  In Bucknell’s strategy “definition” above, you need to find out where point “A” is in your IT department.

Your spreadsheet or database of IT assets should include the full inventory of hardware and software products, tools, and utilities.  Then you need to make sure that all of your IT assets are accounted for in a structured format.  Whether you are using a sophisticated and expensive IT Asset Management (ITAM) tool or a simple spreadsheet to track your IT assets, you need to collect certain attributes or metadata about your assets.  If you don’t have your IT assets accounted for, then you are in a very difficult situation and your strategy becomes to catalogue your IT assets.

Below is a sample spreadsheet with a minimal set of attributes on IT assets.

 tabelsample

In our asset inventory system or spreadsheet, we need to highlight each assets with one of the three traffic light colors: Red, Amber or Green to get the so called RAG status. The assets highlighted in red require immediate plans, with the possibility to be upgraded or replaced in the following year.  The assets in yellow might need to be replaced in the following two to three years.  Below are simple steps that help you determine how to color the rows in the spreadsheet:

  1. Highlight assets in red if the End of Support Date falls within the next year or earlier and its upgrade or replacement requires time and substantial effort. If you plan correctly on annual basis, you should never end up with assets in red. The planning task then becomes to assess the cost of and timeline required to upgrade or replace these assets.
  2. For assets with no End of Support date but with an End of Sale date that is occurring within the next year or earlier, then it is highlighted in yellow to plan for replacement in the next two to three years.
  3. Assets that have no End of Sale or End of Support dates, or these dates are far out in the future, are colored in green and the planning tasks becomes to account for their maintenance cost.

The IT budgetary plans start to shape up by adding up the costs of upgrading, replacing or maintaining the IT assets. Then your PMO is responsible for putting the upgrade or replacement plans.  Software products, especially COTS products such as ERP, CRM and SCM, require substantial resources to upgrade or replace. Therefore, these assets call for special attention and careful planning to replace or upgrade and require annual reviews of the vendors’ roadmap.

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Capacity planning is essential for survival in IT departments especially in businesses where growth is steady or exponential.  Your business might not have a clearly spelled out business strategy or plans, but you can demand that the commercial team figure out certain basic business KPIs and predict them in the next one to three years.  For example, a simple KPI such as the number of expected customers, users, or subscribers to your business products or services has an impact on the capacity of IT systems.  You also need to know the number of your own employees or contractors who will work on delivering the products and services to your customers.  These numbers determine the amount of disk space, computing power, connectivity and network capacity, software license needs and the number of end user devices required to support your employees/contractors.  Details on how to conduct capacity planning can be found in chapter 2 of Gary Cokins’ book: “CIO Best Practices: Enabling Strategic Value With Information Technology”.

 slice3

As part of understanding where you are at present (point “A”) as the first step in IT strategic planning, you also need to know what are your current KPIs and SLAs. Therefore, you need to have an inventory of meaningful KPIs and SLAs with the business.  In his blog Myles Suer suggests 7 so called magnificent IT KPIs. In addition to these KPIs suggested by Suer, you will most likely need KPIs that are more meaningful to the business such as the ones that measure the efficiency of running the IT department in terms of revenue per customer.  Other business KPIs can be related to IT cost per business service delivered or YoY IT Budget spend vs. revenue growth.

So when the list of KPIs is compiled the next task would be to enter these KPIs into a spreadsheet similar to the one below and define if their current values are acceptable to IT and to the business leadership; then define the future values and define the actions or future projects that might be required to achieve the new KPI value as in the example below.

tabelsample2

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Every year you need to have an answer to a very simple yet convoluted question: what is the percentage of projects completed within budget and planned timeline in the previous year?  This measure is obviously a KPI, but it needs to be addressed separately due to its significant impact on the strategy and planning process.  Answering this KPI question reveals a lot about the IT department and its capacity and capability to deliver IT projects and in a way allows you to strategize and plan from an internal IT perspective.  Capacity and capability does not mean just the ability to collect requirements, design, develop, and deploy systems, it also includes the IT human capacity and ability to manage multiple projects even when these projects are fully outsourced.  This KPI can also reveal many issues related to project delivery methodology, processes, tools and techniques. It will help you raise many questions that might help identify problems, the solution to which become a projects or an initiatives on your strategic plan.

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Reviewing the IT budgeted versus the actual spend KPI in the previous two to three years provides another important insight into the capacity and capability of the IT department to deliver projects, solutions, products and services.  IT strategic planning requires the right funding where you don’t budget higher and end up spending less and unnecessarily tying up the company’s financial resources.  You also, don’t want to under budget and end up with projects that cannot be completed due to lack of proper funding.  Reviewing how much you spent in the last two to three years and on what, will give you great insight into how much you should budget and for what in the next three years.

Applying the five steps above will allow you to create a pragmatic IT strategy with budget estimates and execution plans that can help you run the IT department for the following 3 years.  However, CAPEX planning will require a business strategy, which takes us back to where we started, having a business strategy will be required for a comprehensive IT strategy.

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