Chap4 Flashcards
Definition of benefits realization
Objective of benefits realization is to ensure that
IT related business investments are delivering value and promised returns
Capabilities that are required are continuously delivering value
Capabilities are delivered on time and on budget
Focus of high expenditure IT investments that are not able to realize their expected business benefits
Business case
A comprehensive business case is critical to the outcome of that projects related to IT
It is the primary tool for articulating and designing benefits realization and expected value ‘
Business case typically has assumptions on how value is delivered in the project and these assumptions need to be well tested so that expected outcomes will happen
Program / Project management
Realization of benefits requires the effective use of IT in conjunction with
Effective program management of IT focuses on
Desired business objectives
Relationship with the various initiatives
How the initiatives contribute to business value
Why is business realization important (7)
Important as not all benefits are equal
There are both business and intermediate benefits
Business benefits are benefits that directly provide value and contribute to the company’s profits
Intermediate benefits indirectly contribute to the company in other ways and do not necessarily provide value
In enterprises intermediate benefits are able to be used to improve business benefits
This can be achieved by managing the investments that are made through their economic lifecycle
Further ensures that the business realization benefits that unfolds are more than what has been invested previously
Without benefits realization, optimal benefits will not be achieved
What is full economic lifecycle management
Main issue with managing programs is that there is a lack of continuity in the program plan when the required capabilities are already achieved
Benefits and value creation are only realized after a certain period of time
So we need the full economic lifecycle management in order to realize the full benefits
5 phases of FELM
Investment phase
Adoption phase
Value creation phase - when performance has reached the expectations and delivered capabilities put into active processes portfolio
Value sustainability phase - ensure that it continues to deliver value
Retirement phase - decommissioning
Aim of portfolio management
Ensure that enterprise gets optimal value from portfolios or IT assets
Processes in COBIT portfolio management process
Establish target investment mix
Review and ensure that the investment mix, based on cost, alignment with strategies and financial measures such as cost and ROI, is optimal.
▪Determine the availability and sources of funds
Find funding source and implications of fund source on return expectations.
▪ Evaluate and select programs to fund
Based on the overall investment portfolio mix requirements, evaluate and prioritize program business cases, and decide on investment proposals. Allocate funds and initiate programs.
▪ Monitor, optimise and report on investment portfolio performance
On a regular basis, monitor and optimize the performance of the investment portfolio and individual programs throughout the entire investment life cycle.
▪ Manage benefits achievement
Monitor the benefits of providing and maintaining appropriate IT services and capabilities, based on the agreed-on and current business case
Benefits of Portfolio Management
▪ Provides a holistic approach towards the achievement of enterprise
objectives by considering a group of activities together.
▪ Promotes sharing, economies of scale, and even providing mutual
benefits where it would have been impossible to achieve without
portfolio management.
▪ Allows the management to allocate resources according to the
relative importance (and urgencies) of each portfolio.
3 ways portfolios can be organized
Categories : programs and projects that belong to the same category can be grouped into a portfolio and managed holistically. This allows for synergies between the projects, allowing for initiatives such as resource sharing and specialization.
▪ Product or service : programs and projects that contribute towards a particular category of service or product can be grouped and managed together as a portfolio. This allows for the timely realization of the benefits when the service or product is launched or delivered to its customers.
▪ Resource usage : programs and projects can be grouped and managed together when they utilize or depend on a certain number of common resources, such as raw materials, parts or expertise.
This allows for initiatives such as specialization and economies of scale to be realized. The resulting product or service can also benefit from innovations due to the resources used
Financially-oriented Cost-benefit
Techniques
▪ Based on quantifiable values, they are preferred as they provide absolute
values to measure benefit.
▪ Payback period – measures the time period necessary to recoup the initial
investment. This is used to evaluate an investment or compare a set of
mutually exclusive investments.
▪ ROI – A relatively simple calculation that provides decision-making information
in terms of a ratio. The ratio of expected profit to the initial investment cost is
compared to the opportunity cost of capital. If return is greater, the greater the
likelihood the investment is undertaken.
Non financially-oriented Cost-Benefit
Analysis
▪ Non financially-oriented CBA tries to overcome problem of financial ROI by finding a
surrogate measure for intangible costs or benefits.
▪ Used when there is an issue with quantifying the value of benefits or difficulty in
identifying benefits or costs which do not have a ready market value.
▪ Useful when benefits are largely intangible.
Some examples of non-financial benefits include:
▪ Organizational flexibility
▪ Ability of the organization to respond and its ease of responding.
▪ Viewed as a source of competitive advantage.
▪ Information economics
▪ Is the notion that information has economic value
Process and Service Measurement
Techniques
▪ Measurement of performance is essential in benefits realization.
▪ Management needs to have an idea of how well benefits are being
realized through the initiatives.
▪ The Balanced Scorecard allows for the evaluation of IT from the
user’s perspective.
What are the six levels of maturity or capability in maturity model
▪ 0 Incomplete process – The process is not implemented or fails to achieve its process
purpose. There is little or no evidence of any systematic achievement of the process purpose.
▪ 1 Performed process – The implemented process achieves its process purpose.
▪ 2 Managed process – The performed process is implemented in a managed fashion, and its
work products are appropriately established, controlled and maintained.
▪ 3 Established process – The performed process is implemented using a defined process that is
capable of achieving its process outcomes.
▪ 4 Predictable process – The performed process now operates within defined limits to achieve
its process outcomes.
▪ 5 Optimizing process – The performed process is continuously improved to meet relevant
current and projected business goals.
▪ Each of the above levels include all the previously described attributes.
▪ Capability maturity measures the level of ‘maturity’ of the process.
