Modern IT Portfolio Management: Why the need for a business model?
October 19, 2013 Leave a comment
This morning I started R&D for on developing business models for the Modern IT Portfolio Management Practice. Why Business Models for the practice one would ask? A answer is simpler and more complex than one would think. Over the past several decades I’ve continually been throw or volunteered to drive IT Economic methods in various corporations; DMR, IBM and Microsoft the ones picking up the tab for such work. Each iteration of developing these methodologies has brought with it greater mathematical sophistication.
IT Economics History
In the 1980s while working on Investment Strategies for Information Systems (ISIS) at IBM, the state of the art practice for IT Economics and Finance was a simple stack ranking of projects based upon a simple ROI calculation [ROI = (Gain from investment – cost of investment) / cost of investment]. As electronic spreadsheets were just on the edge of acceptance much of this calculation was either done programmatically or on tabular paper by consultants and/or someone reporting to the Vice Presidents of Finance. The work of Marylyn Parker and Robert Benson miles away in the IBM Systems Center Lab in Los Angles was still in process. Despite the groundbreaking work on decision theory for IT Investment Management this group developed [Balanced Scorecard before Balanced Scorecard], it never gain acceptance within IBM as a practice. There are many reasons for this; the strongest for such was this was research and journal article materials. At that time IBM was structured to deliver hardware or software products; it would be a decade before IBM would seriously invest in IT Professional Services as a line of business.
Microsoft Round One
Years later just after departing DMR Consulting I agreed to assist my former employer, Microsoft. The issues of Total Cost of Ownership (TCO) were having an impact of sales to large corporations and a means to breakout of the desktop was needed. At the urging and recommendation of the former CIO to I was asked to assist in development and training of field staff on a fast and light Economic Justification methodology; thus Rapid Economic Justification (REJ) was born. The approach formalized calculating cost and benefits, and added spreadsheets to automate the process cutting down cycle time from what was several weeks or months to a potential week of activity. It was moderately successful as a secondary practice. Giuseppe Mascarella, the project manager and lead, and I would commiserate about this often. Why was this more successful? Clearly there is a need for this practice. Financial Consulting firms are brought in for similar activities in other domains all the time. Something must be missing but what?
Microsoft Round Two
After completing reengineering assignments for IBM corporation and a small boutique consulting firm I returned to Microsoft specifically to develop IP for the IT Strategy and Architecture practice within Microsoft Services. Microsoft had matured a bit. The had reestablished the concept using economic justification and brought in a few of former IBMers and other consultants in the IT economics field to created a rebranded IT economics practice. Value Realization Framework (VRF). The methodology had improved, now using concepts that Parker and Benson had pioneered. However, field and customer acceptance has still been a problem. Just prior to departing from Microsoft this time, I had started to have discussions with the lead architect on the project. Having had decades of working this issue he was interested in my insights on what needed to be changed or augmented. We had started to brainstorm a plan to address the situation when Microsoft has announced the new corporate strategy: Devices and Services: Read into that Microsoft has updated its business lines and branding to mean Hardware &, Software products and IT Services (i.e., hosting of software applications). This placed the emerging practice back to a potential REJ status, a nice to have but not really of importance expect when needed to make a sale.
Intellectual Arbitrage Group
During the past few decades I have been researching, gathering lessons learned, brainstorming and coming up with insights from these initiatives under the brand Intellectual Arbitrage Group. One might say this is my continual entrepreneurial venture. IAG has been a vehicle for me to collaborate with many of the great thought leaders in this and related domains. The one clear insight I’ve come up with has been that the reason most of these initiatives continue to fail at crossing the chasm is that the intent and mission of IT Economics has always been secondary in the minds of the sponsors. That is to say IT Economics is not a line of business practice but a marketing tactic for the line of business. As such the business model is flawed from the outset and thus creates a chain of decisions which will naturally lead to limiting its acceptance and adoption by the field. This becomes the mission for Intellectual Arbitrage Group (IAG) and the Structure in Threes book development this blog chronicles. This morning’s activities are continuing to research and brainstorm using the business model canvas that Alexander Osterwalder has assembled along with the MIT 24 step approach to entrepreneurship that Bill Aulet has outlined has documented in his book.