Discussion Question Cathy Benson, the director of the newly created IT Investment Office, is tasked with the “design and implementation of a detailed investment optimization process to be implemented throughout the bank in time for the next budget cycle.” She has three months to do this, and it must be in accordance with the five established principles to guide the bank’s IT investment process. Your task is to design and implement the following:A thorough and rigorous method of project categorization and prioritizationA comprehensive and holistic governance of IT spending and benefits delivery at all levelsAn annual IT planning process that provides transparency and accountability for all types of IT spending and that creates an integrated and strategically aligned development portfolio MINI CASE: IT Investment at North American Financial¶Caroline Weese checked her makeup and then glanced at her watch for the tenth time. Almost 10:45. Showtime. AsNorth American Financial's (NAF) first female CIO, she knew she had to be better than good when she met with thecompany's senior executives for the first time to justify her IT budget. They had shown their faith in her threemonths ago by giving her this position, when NAF's long-serving senior vice president of IT had had to retire earlydue to ill health. But women were just beginning to crack the glass ceiling at the bank, and she knew there was a lotmore riding on this presentation than just this budget.That said, the budget situation wasn't great. As she well knew from her earlier experience in more subordinate roles,the CIO had the unenviable task of justifying the company's $500 million budget to a group of executives who onlysaw the expense of IT, not its value. This was especially frustrating because NAF's IT management was excellent,when looked at by any standard. NAF's IT group consisted of almost 7,000 professionals who followed all therecommended standards such as CMM, CMMI, ISO9001, and ITIL to ensure that its IT processes were efficient,cost effective, and on par with, if not higher than, industry standards. It had been certified at a minimum Level 3-CMMI and was an industry leader in delivering projects on time, on budget, and in scope. But in the past few years,NAF executives had implemented rigorous cost-containment measures for IT, leaving the CIO to struggle to be allthings to all people."They want innovation, they need reliability and stability, and we're required by law to meet ever-more stringentgovernment regulations, but they're still nickel-and-diming us!" Caroline thought indignantly. She envied the bank'sbusiness units that could clearly show profit-and-loss statements, and their ability to make strategic decisions aboutwhat to do with the excess capital they often had. In her world, business strategies changed regularly, and, thus, IT'sgoals had to as well. But strategies were not linked to budgets, which were typically set six to nine months inadvance. As a result, IT was always struggling to keep up and find the resources to be flexible.She squared her shoulders, took a deep breath, pasted a smile on her face, and pushed open the door to the executiveconference room to face her colleagues and her future. The room was full of "suits" a few females here and there,but mostly tough, middle-aged males who expected answers and action. Following a few pleasantries about how shewas adjusting to her new role, they got down to business. "The thing we're most concerned about, Caroline," saidBill Harris, NAF's CEO, "is we simply don't see where we're getting value from our IT investments. There's noproof in the bottom line." The CFO added, "Every year we approve hundreds of millions of dollars for IT projects,which are supposedly based on sound cost-benefit analyses, but the benefits never materialize." Heads around theroom began nodding.Caroline's mind was whirling. What did they really want from her? Pulling her thoughts together quickly, sheresponded. "If you're looking for IT to tell you which projects will deliver the most business value, or if you wantme to monitor the business units after the projects they asked for are implemented to see if they are delivering value,you're asking me to do something that's well beyond IT's scope of expertise. We're not the experts in your businesscase, and it shouldn't be up to us to monitor how you use the technology we give you. I'll take full responsibility forthe quality of our work, its timely delivery, and its cost, but we really have to work together to ensure we'reinvesting in the right projects and delivering benefits.""What do you recommend then?" asked Sam Patel, head of Retail Banking. "I think we need an IT Investment-Committee that I would co-lead jointly with you, Matt," Caroline said while looking pointedly at the CFO. "Weneed a strong partnership to explore what can be done and who should be responsible for doing it. Finance is theonly place where all the money comes together in this organization. Although I have to pull together an IT budgetevery year, it's really contingent on what each business unit wants to spend. We don't really have an enterprise ITbudgeting process that looks across our business silos to see if what we're spending is good for NAF as a whole.Matt Harper looked thoughtful. "You could be on to something here, Caroline. Let's see if we can figure this outtogether."The rest of the meeting passed in a blur, and before Caroline knew it, she and Matt were trying to identify who theyshould assign to help them look at their IT investment challenges. These were significant. First, there wasinconsistent alignment of the total IT development budget with enterprise strategies. "We have enterprise strategiesbut no way of linking them to enterprise spending," Caroline pointed out. IT budgets were allocated according to thesize of the business unit. Smaller lines of business had smaller IT budgets than larger ones. "For some smallbusiness units like ours, government mandatory projects eat up our entire IT budget," complained Cathy Benson,senior vice president of Business Banking Product Management. This made it extremely difficult to allocate IT.resources strategically- say, for example, to grow a smaller business unit into a larger one. Second, project approvals were made by business units without addressing cross-unit synergies. Looking at theprojects IT had under way revealed that the company had eighteen separate projects in different parts of the businessto comply with anti-money laundering regulations. "We've got to be reinventing the wheel with some of these,"complained Ian Ha, senior director of NAF's Risk and Compliance department.Third, although business cases were required for all major projects, their formats were inconsistent, and the dataprovided to justify the costs lacked rigor. "There seems to be a lot of gaming going on here," observed MichaelCranston, director of Financial Strategy. "A lot of these numbers don't make sense. How come we've never askedthe business sponsors of these projects to take ownership for the business benefits they claim when they ask for themoney in the first place?"Fourth, once a project was approved, everyone focused on on-time, on-budget delivery. No one ever asked whether aproject was still necessary or was still on track to deliver the benefits anticipated. "Do we ever stop projects oncethey've started or review the business case 'in-flight'?" mused Matt. Finally, no one appeared to be accountable fordelivering these benefits once an IT project was developed and implemented; rather, everyone just heaved a great-sigh of relief and moved on to the next project.Because the total IT budget for new development work was allocated by business unit, the result was a prioritizationprocess that worked reasonably well at the business unit level but not for NAF as a whole. Enterprise executivescreated enterprise strategies, but they didn't get involved in implementing them in the business units, which left thebusiness unit heads to prioritize initiatives within their own silo. In prioritization meetings, leaders would arguepassionately for their own particular cause and focusing on their own needs, not on NAF's overall strategies. "Wereally need to align this process with our enterprise priorities," said Caroline. Matt agreed. "There's got to be aprocess to bring all our investment decisions for new projects together so we can compare them across business-units and adjust our resourcing accordingly."Looking deeper into these matters revealed that there was more to IT spending than simply prioritizing projects,however. Almost 60% of the bank's IT budget was spent not on strategic new development projects but onmaintaining existing systems, interfaces, and data. And another 20% was work that had to be done to meet thedemands of government legislation or the bank's regulators. "How is this possible?" asked Sam. "No wonder we'renot getting much bang for our buck!" Caroline exclaimed. "Every time we develop or acquire a new system withoutgetting rid of something else, we add to our application clutter. When we continually add new systems whileholding IT budgets and head counts relatively flat, more and more of our resources have to be devoted to supportingthese systems." New systems meant new interfaces between and among existing systems, additional data anddependencies, and increasing risk that something could go wrong. "We've tried to get the business units interested insponsoring an initiative to reduce duplication and simplify our applications portfolio, but they're not interested inwhat they call IT housekeeping. They don't see how dealing with this will help them in the long run. I guess wehaven't explained it to them very well."Brenda Liu, senior director of IT Infrastructure, added, "We also have to keep our IT environment up to date..Vendors are continually making upgrades to software, and there are also license fees to consider. And, as you know,we have to build in extra reliability and redundancy for our critical systems and data, as well as privacy protectionfor our banking customers. It's an expensive process." "I get all this," said Benson, "but why can't you explain it tous properly? How can you just expect us to accept that 80% of your budget is a black box' that doesn't needjustification? Although every dime you spend may be critical to this company, the fact remains that IT's lack oftransparency is damaging its internal credibility with the business."Round and round the issues they went. Over the next two months, Caroline, Matt, and their team hammered away atthem. Eventually, they came up with a set of five principles on which their new IT investment process would bebased:1. Alignment of the IT development portfolio with enterprise strategies2. Rigor and common standards around IT planning and business casing3. Accountability in both business and IT for delivering value4. Transparency at all levels and stages of development5. Collaboration and cross-group synergies in all IT workIn their team update to the bank's executive committee, Caroline and Matt wrote, "Our vision is for a holistic viewof our IT spending that will allow us to direct our resources where they will have the greatest impact. We propose toincrease rigor and discipline in business casing and benefits tracking so NAF can invest with confidence in IT. Theresult will be strategic partnerships between IT and business units based on trust, leading us to surprise and delightour customers and employees and amaze our competitors."With the executive committee's blessing, the IT Investment Office was created to design and implement a detailedinvestment optimization process that could be implemented throughout the bank in time for the next budget cycle.

In the above-given case, a group of employees filed a lawsuit against their company, alleging age,…

Answered: Cathy Benson, the director of the newly…

Practical Management Science

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ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

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