Six steps to plan and prioritise IT investments

IT service management can play an important part in identifying the right IT investments to make.

I recently read an article titled IT investments deliver profits, study finds. I guess we shouldn’t be surprised by that, nobody would invest in IT if they didn’t get a return for their investment.

The article reports the findings of research published in MIS Quarterly which found that:

  • The effect of IT investments on sales and profitability is higher than that of other discretionary investments, such as advertising and research and development (R&D).
  • Most of IT’s impact on profitability is accounted for by IT-enabled revenue growth.
  • A $1 increase in IT expenditure per employee was associated with a $12.22 increase in sales per employee.
  • There is no evidence for the effect of IT on profitability through operating cost reduction.

I have also seen a number of other articles about how important it is for IT to invest in technology of one sort or another, and how this will deliver value for the business. Everyone seems to agree that we need to invest in IT to grow the business, but there is very little advice on how to identify the right investments to make. This is where IT service management can play a part. Processes such as strategy management, service portfolio management and demand management can help you to identify and prioritise the best investment opportunities, but it is really important to approach these in the right way.

Here are some practical steps you can follow to carry out a review of your service portfolio:

Ensure you have a good understanding of your overall strategy

You must have a clear understanding of what you are trying to achieve as a service provider before you can analyse your service portfolio. Make sure you know:

  • The vision and mission of your organisation.
  • Which customers and markets you are going to work with.
  • What will make you distinctive or special to those customers or markets.
  • Your very high-level objectives and critical success factors.

This governance work is an important foundation to everything else that you do as a service provider.

Understand customer outcomes

Listen to your customers. Forget about IT services and talk to your customers about their business. For each customer, make sure you understand:

  • Their vision and mission.
  • Their objectives and critical success factors.
  • Their business processes.
  • The outcomes that are important to them.

Create a list of all the important customer outcomes, and then ask:

  • How critical is each outcome to the customer?
  • How well do they currently achieve each outcome? Don’t think about IT during this step.
  • How effective is IT support for this outcome?

I often use a simple one to five rating for each of these three factors, to provide a simple way of comparing and analysing the results of this work.

Review existing services

Create a complete list of your existing IT services. If you already have a service catalogue then this step will be easy, otherwise you will have to do some discovery work to identify what services are being delivered.

Create a cross reference between existing services and customer outcomes. I usually use a spreadsheet for this, with outcomes across the columns and services down the rows.

When you can see the relationships between existing services and customer outcomes, combined with information about the criticality of each outcome and how well it is being met, you will find it very easy to identify:

  • Opportunities for new services that could create significant value for your customer(s).
    Services that don’t contribute to any required outcomes, which should be retired (zombie services).
  • Services with overlapping functionality, which might benefit from rationalisation.
  • Services that are not making a good contribution to customer outcomes, which may need to be renewed or replaced.

Prioritise portfolio changes

You should now review all of the opportunities you have identified in terms of:

  • Criticality of associated business outcomes, and how well these are met.
  • Cost of each new or changed service.
  • Urgency in relation to business changes and opportunities.
  • Risks of making the change, and risks of not making the change.

This will result in a prioritised list of potential changes to your service portfolio, based on risks, costs and benefits.

Document the service portfolio

Document the current and future state of the service portfolio, including information about the outcomes supported by each service. Ideally this should be a visual representation that is easy to share with other people.

Next steps

Communicate the portfolio to your stakeholders, identify business sponsors for the changes that are needed and create business cases to support the investment required.

Stuart Rance is a member of the IT Service Management Forum (itSMF UK), and an IT service management expert at HP.

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