Managing IT demand 101

Call them what you want — business systems planners, IT account consultants, IT relationship managers or business technology liaisons — they are responsible for helping ensure that IT demand is balanced with supply. Until recently, I assumed that most of these professionals understood demand management and their role in facilitating a win-win handshake between IT and the business. Surely, we have evolved beyond the order-taking era of IT.

Boy, was I wrong. While facilitating a planning session with a Fortune 50 company, I assumed that the IT account consultants would want to dive deep into demand management issues and opportunities. Instead, while presenting the demand management framework, I received push-back in the form of the question “What right does IT have to tell the business what they can and cannot have?”

I took a deep breath and checked my watch. I had just been transported back to 1994, when conventional wisdom held that IT delivery issues could be fixed with supply-side tactics, such as improved capacity planning and project management, standard software development approaches and alternative sourcing strategies. As I readied myself to shift into coaching mode (and give them a primer on demand management, whether they wanted it or not), my facilitator survival instincts won over, and I let them define their top issues and opportunities. (As you’d expect, they decided to tackle the supply side.)

Well, I’m out of facilitator mode, back into coaching mode and, last I checked, it’s 2004 and well past the time for all IT professionals to have a firm grasp of demand management and its supporting mechanisms. In one of my previous columns, “IT Economics,” I defined demand management as allocation of capital and human resources to the highest-value opportunities. Demand management is important because it helps the enterprise get the most out of its scarce resources and allows IT to focus the company agenda and improve delivery.

Evaluate the health of your demand management mechanisms with the following overview of the key mechanisms.

Strategic IT planning: Most of us are familiar with what strategic IT planning should be — even if our actual practice is short of the mark. To grease the wheels of demand management, the strategy-making process needs to result in a finite set of opportunities. You accomplish this by prioritizing based on some type of strategic filter. Once you have worked with business execs to identify the IT-enabled business opportunities, technical types can further manage demand by roughing out the architectural requirements, constraints and standards necessary to minimize the technical footprint.

Portfolio management: This is a fancy term for the process of determining (and monitoring) how much money the enterprise should spend on the various categories of IT-enabled business investments. Typically a senior executive responsibility, the portfolio management process should result in a multiyear forecast of IT spending. This “funding envelope” is a critical feature of demand management, since it constrains overall demand and results in increased project scrutiny.

Delegated authority: Once the IT governance group has determined your targeted IT portfolio, it’s time to establish the oversight mechanisms necessary to realize the portfolio objectives — with minimal bureaucratic heartburn for all involved. Figure out which investments require senior-level oversight and delegate the rest to individual business executives in the form of “capital checkbooks.” (By this, I mean a virtual checking account that business execs can spend as they see fit, during the course of the fiscal year, on IT-enabled business initiatives.)

These are an effective demand management tactic because the executives gain authority over tactical IT decisions as long as they live by the enterprise rules on investment type and approach, funding limits and value targets.

Financial planning: When the strategy, portfolio and authority decisions have been made, then the financial planning process is a simple, albeit painful, process of filling in the details of who budgets for what and how much. Under a process defined by the CFO or controller, the capital checkbooks are budgeted at the appropriate organizational level and operating expenses are aligned accordingly. At this point, the capital within the checkbooks has been earmarked for potential opportunities, but the actual allocation is spread out throughout the year so that funding is available for new projects.

Prioritization and sequencing: This is where demand management lives or dies. Effective governance — at enterprise, divisional, business unit and departmental levels — is necessary to review the various investment proposals for strategic fit, criticality, value and compliance with rules on approach, risk mitigation and architecture. If the governance process is transparent, accessible, lean and time-sensitive, then you have a better shot of gaining compliance from the organization and avoiding the spillover of demand into unofficial and uncontrolled channels.

Value realization and accountability. One of the best ways to manage demand is to require value commitments as a prerequisite to project funding. Then you can monitor value realization as part of the governance process. Allowing non-monetary value commitments, in the form of improvements to operational measurements (such as a commitment to increase distribution cycle time by 50 per cent), is the most practical approach.

Demand management is a cyclical process, beginning with strategic planning and ending with the realization of value. Each step helps set up the later stages for success.

Returning to the question posed during my 1994 time warp, IT most certainly does not have the right to tell the business what it can and cannot have, but CIOs do have the responsibility to ensure that the enterprise gets the most out of its IT investments — while maintaining a reputation for good customer service.

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