Count Houghton Mifflin Harcourt (HMH) among those companies that believe IT governance done right frees up time and money. When education publishers Houghton Mifflin and Harcourt merged in 2007, IT leaders on each side knew the stakes. Sixteen million dollars of the merger’s $300 million savings was to come from IT spending, says CIO Paul Wilcox. “We had to flush a significant amount of expense out of both IT groups,” Wilcox says, “and still had to bring the company forward.”
Rather than disintegrating into a battle or delaying business projects while the $4 billion deal shook out, the combined IT team created project approval processes that, two years later, ensure that IT work is aligned with business goals and that revenue-generating projects get top priority.
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The haggling over what major IT work will get done in a given year is an open conversation among all major lines of business for the first time in either company. A business technology council of senior leaders makes the decisions. There is also a process for dealing with new project proposals and small, one-off requests that arise as the year goes on.
Projects that Make the Grade
Once the company has defined annual strategic business goals, proposals for major projects–requiring at least 160 man-hours–are slotted into those areas. If a big project doesn’t support a corporate goal, it’s deferred or dropped. A weighting system gives each surviving proposal up to 100 points. A project that will generate revenue generally gets more points than one that will cut costs, says Eric Blaustein, vice president of information technology.
Like HMH’s system, the most effective governance stretches beyond an efficient way to prioritize IT work to selecting projects that generate the most value, whether or not they involve IT, says Chris Potts, corporate IT strategist at Dominic Barrow in London. “You have a business case with numbers. Then there is subjective discussion and evaluation.”
For example, HMH recently had to retire some teaching materials that involved software and several servers. At the same time, the city of Detroit had bought a classroom management system. In the past, the company would have removed the old hardware and software from the schools where it was running, but left thorough decommissioning, such as wiping disks, until later so staff could work on the new project, Wilcox says.
But business leaders recognized that IT could break down the old systems and at the same time configure them for Detroit. “These [situations] in the past had eluded us,” Wilcox says.
The IT group also had to figure out how to fit in ad hoc work, such as a new report from a business intelligence tool. “Everyone comes in with something that is small and ought to be able to be done quickly but it drags you down bit by bit,” Wilcox says.
Yet devising a full business case for every proposal takes too much time away from working on projects, Blaustein adds. Instead, the company created an evaluation process for smaller projects that doesn’t mandate such detailed numbers. If the proposal becomes high-priority, a full business case is done.
The new openness, with its rankings and cross-functional discussions, takes some of the politics out of vying for dollars, Wilcox says. “It allows people to see that their project was important but this other one helps us get $5 million in revenue,” he says. “If your project wasn’t funded you know why.”