Technology Investment and Benefits Realization - let's close the loop

As we emerge from the pandemic, attention will be drawn to assuring value and investing in initiatives that move the organization forward. Many companies have project or investment selection processes in place that may look at the Business Case Justification, Return on Investment (ROI) / Cost Benefit (CBA) Analyses; and sometimes, it might include the Total Cost of Ownership (TCO) analyses, but rarer still do we find a process to measure the promised benefits of the investment.  At DGCpartners, we’re expanding the dialogue about the responsibility of enterprise governance to monitor these investments in business-IT systems from “measuring that business-IT is doing things right” to “measuring that the business-IT systems position the organization to deliver optimum value, now and into the future.”

Mature and effective enterprise governance models stretch the existing enterprise governance to include business-IT elements and complete the system investment life cycle. Enterprise governance may be effective during the development and approval of business cases and project plans for business and technology investments, but many CFO’s, COO’s, and CEO’s complain that “these systems cost a lot of money, we don’t know where it’s going, and we never seem to get the benefits that were set out in the business case.”   There's little evidence that, after systems go-live, enterprise governance examines how well the business-IT systems actually support the business processes and achieve the planned investment goals [ROI].  A significant opportunity for improvement in business case and investment rationalization gets lost when organizations don't close the loop. It becomes an even greater problem (orders of magnitude bigger) when you look at Mergers & Acquisitions – where monitoring seems to cease at the ‘deal’ and not carry though into the Post-Merger Integration (PMI).

The all too often-grandiose claims of benefit / savings rarely appear in performance measures and/or make it to the bottom line. Peter Drucker is credited with the adage of “what gets measured, gets managed” – it clearly applies here. Too often governance boards are not requiring post-implementation monitoring / reporting; although, in many cases, business-IT systems and processes supported by these systems may not be producing the expected benefits. Nor do they challenge the organization to exploit the potential that may exist to produce additional value in terms of significantly improved productivity, profitability, and competitiveness.

Why are gaps not being detected, corrected, monitored & addressed by governance for strategic (business-IT) investments?

Enterprise-IT governance must make sure there are relevant metrics and methodology to support effective governance of investments in these systems / investments. The tiered governance model we suggest to our clients leverages stakeholder engagement in the right meetings, thereby fostering accountability that is critical to success.

Major business-IT core systems evolve over a period (often years), with new releases often being either delayed or implemented as only technical upgrades. Over time, these systems deviate from the standard software and incorporate custom code with little or no implementation of updated best practice business-IT processes. All too often, this custom code has crept into the environment that can be replaced by additional standard functionality provided in the more recent releases.

Carrying unnecessary custom code forward increases ‘technical debt’ and the associated migration and ongoing costs and risk - with the potential to impair the business benefits delivered by the business-IT processes.

Post-Implementation - Key Stage

Post-implementation is the key stage where improved governance assures regular and periodic measures and monitors of the effectiveness and efficiency of the business processes supported by the business-IT investment and their actual usage within the business. An appropriate benefits realization methodology, consistent metrics and benchmark data are essential for the effective performance of these tasks. Without the business case, agreed metrics / measures, and management plans for migrating to future environments (e.g., consolidations and cloud), organizations may build expectations on obsolete information, opinions, and guesses. To reap the maximum benefit of the journey to new performance levels, it is imperative to establish and periodically update solid facts about a system’s current maturity and optimization levels. The costs, risks and benefits associated with actions to optimally position the system along the journey to the new environment can then be accurately calculated and included with confidence in the business case and project plan.

Call to action!

Executives should be concerned about enterprise governance of business-IT systems - especially if your PMO | Operations | IT organizations cannot answer the following questions, based on consistent metrics and an established methodology:

• How do our systems measure up against the approved business case justification?
• How do we know (i.e., what metrics / methodology are we using?)
• How often do we measure and what does the latest data show us?
• How is our leadership (e.g., CEO, COO, CFO, etc.) and audit team regularly updated on the results?

Note: If these questions cannot be quickly, consistently, and confidently answered then there’s a problem!

All initiatives, irrespective of size, should have a Benefits Realization Plan (DGCpartners - also called Post-Implementation Savings Model or Break-Even Analysis). A Benefits Realization Plan is tailored to the requirements of the initiative and will include the work to track, manage and review the Realization of the expected benefits.

If the plan is being authored by Finance, IT, or a PMO, the affected business areas (process owners & end-users) MUST be consulted to ensure all relevant and related work in operational areas is considered in the construction of the Plan and in its execution and maintenance. The model rounds out the system development life cycle (methodology) and can leverage a scalable ‘templated’ approach to assure crucial elements aren’t missed. It model is tailored to reflect / follow the approvals pertinent to the governance arrangements set out in an organization’s Investment Rationalization | Business Case-Cost Benefit | Cost Engineering - Benefits Management Framework and for the initiative itself. It will be the responsibility of a business-IT executive sponsor / business representative to execute and to report progress against the plan, well after the project has closed and the project manager has moved on. Ideally, especially for strategic initiatives, there must be a post-implementation reviews to assess benefits achievement (realization) against the expectations and to note any lessons that could be fed to other initiatives. Depending on the plan and governance model, this interval can be planned at 30-90-180-365 days after implementation.

It is common for the total cost of an initiative to disregard the operational work required to ensure the benefits of a change are realized. Left ignored, this may result in significant cost escalation and extension of time and/or non-completion of the work in operational areas resulting in the benefits not being realized.

Senior leadership should be genuinely concerned if significant investments and recurring expense (e.g., Total Cost of Ownership) over lengthy periods of time are not subject to significant enterprise governance and process assessment rigor.

Don Gleason is the Chief Administrative Officer and Managing Principal - Programs & Services with DGCpartners LLC.

About DGCpartners LLC

DGCpartners helps clients gain control of costs and schedule for their most strategic initiatives – building, driving, and mentoring teams in best practices to assure sustainable change management discipline and business transformation success.

• Leverage effective Enterprise-IT Governance approaches, processes, guides, training, and checklists that aid Business-IT investments and assuring Return-On-Investments
• Evaluate & summarize relevant findings, including operational risks, financial and operational implications, and mitigation strategies
• Gain access to deep functional knowledge and experience needed for detailed analysis and supplement leadership teams
• Leverage the strategic planning, solution selection, and implementation planning to align value drivers and understand a more complete view of cost implications
• Accelerate the assimilation of Business and IT resources and process across the enterprise

To get you started on the right path that uses your team to assure a sustainable transformation & change management - Reach out to me here on LinkedIn, Twitter, or visit our website for more information: DGCpartners.

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