CIOs spend 80% of their budgets "keeping the lights on". But their most intractable problem is to get the best return possible from the other 20% of their budget.
Chip maker Intel joined forces with the National University of Ireland in Maynooth and the Boston Consulting Group (BCG), in June 2006 to form the Innovation Value Institute (IVI) in an attempt the find a solution.
The result was the Information Technology Capability Maturity Framework (IT-CMF), which aims to shows organisations how to measure the business value of IT investments, choose the best IT investment proposals, deliver competitive advantage and manage IT investments for optimal business value.
More than 40 organisations have joined IVI, including Microsoft, the oil companies Chevron and BP, Ernst & Young, SAP and insurance company Axa. The IT-CMF framework has been in the public domain for about two years, and firms that have tried it are starting to see results.
Pharmaceuticals company Merck has used the framework to save 8% on its budget for technology innovation and 20% on its total budget for experiments. Intel has reported a 25% improvement in IT capability for 10% less money.
Axa-Tech, the IT division of insurance company Axa, says it has achieved a 96% reduction in set-up working time for new servers, an 81% drop in total cycle time to set-up virtual servers, and a 63% cut in set up times for physical servers using the framework.
And oil company Chevron has decided to use the framework to reorganise and unify its entire corporate IT function.
Mike Bevil, manager of IT innovation at MRL, the research laboratory division of Merck, told Computer Weekly that using the framework had enabled the company to improve the "hit rate" of successful projects (ie, applications where it could measure the profit produced as a result of a new IT system) by 20%. "In general, we can get to the go/no go decision much faster too," he says.
MRL is reassessing its software applications portfolio as use of the framework starts to expand, he adds. One project is to evaluate MRL's future use of cloud computing technologies and suppliers.
"We are seeing how it plays with respect to cost, return on investment, scalability, security and flexibility," says Bevil.
BP group enterprise architect Vincenzo Marchese says BP's enterprise architecture management department has shown big improvements in capability maturity in two years. He puts this down to training and certifying staff in an architecture framework, which improved the quality and consistency of their work.
The IT-CMF has given BP a credible way to measure the improvement in value delivered for the first time, he says. It has helped BP reduce the number of suppliers it deals with and move projects from pilot to production status more quickly.
While manufacturers seem keen on the framework's benefits, IVI wants the IT sector as a whole to adopt it.
Martin Curley, Intel's global director of IT innovation, says he would like two-thirds of all Fortune 500 companies to be using the framework within five years. He is also hoping the Council of Europe will call for its use to evaluate all national and local government IT projects.
Maturity Major Strategies
Managing the IT Budget Managing the IT Capability Managing IT for Business Value Managing IT like a Business
Optimising Sustainable Economic Model Corporate Core Competence Optimising Value Value Centre
Advanced Expanded Funding Options Strategic Business Partner Options & Portfolio Management Customer / Service Focus
Intermediate Systemic Cost Reduction Technology Expert ROI & Business Case Customer / Service Orientation
2. Basic Predictable Performance Technology Supplier Total Cost of Ownership Cost Centre
1. Initial Beginning Beginning Beginning Beginning
Source: Martin Curley, Intel / National University of Ireland
|CMMI v IT-CMF|
| The CMMI model (Capability Maturity Model) developed by Carnegie Mellon's Software Engineering Institute will be familiar to many IT directors. It is a model for improving business processes, particularly software development.
But CMMI falls short on two counts, says Mike Bevil, manager of IT innovation at MRL, the research laboratory division of Merck, the US pharmaceutical maker. One is that users have no input into the development of the CMMI model, the other is that it deals with what is already available, not proposed or innovative systems.
Leading businesses have developed the Information Technology Capability Maturity Framework (IT-CMF) to help businesses measure the value of IT investments.