There are clear indications that the recession is beginning to bite and many expect worse to come. Past experience of similar economic slowdowns suggests IT will be a prime target for cost reduction. Line-of-business managers will want savings to be achieved without incurring additional cost, or jeopardising initiatives already in progress. Meanwhile, the technology leader will want to minimise long-term harm to IT capabilities as, undoubtedly, an upturn will occur eventually.

Some cynics might think cost cutting is easy ­ just start with the workers whose surnames begin with “A” and work through the list until all the targets are hit. But intelligent cost reduction is a very different matter.

Some cost-cutting actions are painful and others are extremely painful. A policy of slash and burn, although quick and apparently effective, could have a serious impact on an IT department’s ability to operate at the heart of its organisation.
Many IT leaders now face the unappealing prospect of being criticised either by senior management for not reducing costs sufficiently, or by users frustrated that their planned initiatives are not being delivered.

The best action is to take steps to satisfy both groups and, at the same time, achieve improvements of a lasting value ­ hence turning adversity to advantage.

Improved filtering of projects

One route to achieving advantage is to improve the filtering, scoping and prioritisation of IT-enabled business-change programmes. Improved filtering can reduce costs through the early termination of ill-conceived initiatives.

It is often difficult to filter and scope programmes because as a change idea develops, the project begins to take on a life of its own. One manager reinforces the benefits to the next and the programme is soon being touted as a way to solve all problems.

While technology is invariably central to business-change initiatives, the IT function is sometimes not involved in early discussions and its informed views are not heard. Even when IT is involved, it is often seen as being too cautious and acting as a negative influence on progress.

Often, in an attempt to move forward, an incomplete business case is presented to senior management. Unfortunately, by this stage the programme may have become very political ­ rationality fades into the background and the decision process becomes emotional.

Added to this is the problem of scope inflation. Long-standing wishlist items that were not viable are piggybacked on to the programme, and the focused £1m investment becomes the general £5m cure-all solution.

To avoid such a scenario, IT and the business must work together to bring realism to bear on an idea before it gains a head of steam.

Another difficulty experienced when filtering is that each idea is seen by the sponsoring business manager as being a top priority, and is presented as such to senior management. The board then tends to approve each case individually, rather than reviewing the overall demand portfolio.

Such an approach often leaves IT struggling to satisfy non-prioritised demand, with ever-reducing resources. We have encountered IT teams that are valiantly applying portfolio and programme management software to prioritise projects in the face of unco-ordinated demand based on IT resource availability, but software will never force a quart into a pint bottle. Demand must be prioritised by the business before supply considerations are brought into the equation.

Achieving effective filtering necessitates the early involvement of IT. Such intimacy will be encouraged by the business if it feels IT offers something that would otherwise be unavailable.

One route is for the IT department to facilitate a non-bureaucratic, early scoping approach that results in a map of the proposed initiative. Mapping meetings should always involve the business members of the programme team, be orchestrated by a business analyst or account manager from IT, and need to address a whole collection of challenging questions that are posed in a non-threatening and supportive manner.

The map should show how the proposed initiative links to the organisation’s strategy and demonstrate which key business performance indicators would be improved. It should also outline the IT and business changes required to secure anticipated benefits.

By providing a clear visual representation of the proposed programme, mapping results in a better shared understanding among all of the individuals involved. The approach also acts as an effective communication medium for presenting the idea to senior management and the wider organisation.

Our experience suggests an initial programme map can be completed within four hours and the process often uncovers issues not previously considered by the participants.

Building the business case

The first mapping meeting is just the initial step in a series of stages designed to scope, rank and eventually create a complete business case. Throughout these stages, the project’s senior sponsor should review the programme’s alignment with business goals and potentially re-scope the programme ­- or even reconsider its viability.

In the words of a sponsor when presented with the map of a proposed initiative: “I can now see the links with our business goals are somewhat tenuous. Given the shortage of resources, should we be pursuing this programme at all?”

For those programmes that pass the initial hurdle, the team can continue to configure the project by defining the required business change and IT components. Then with this enhanced understanding it is possible to rank both the benefits and business changes on two scales ­ one reflecting the magnitude of the benefits, and the other reflecting the effort required to execute the business change.

Such information will facilitate early prioritisation of programmes from the perspective of the business users. This is an important step, as effectively the user is deciding whether programmes should be continued to the full business case stage. Significant resources can be saved by early cessation of programmes.

Larger and more complex organisations may well need to capture programme information in a consistent manner. And the high-priority programmes that pass the analysis stage should progress to the production of a comprehensive and complete business case, including all financially quantified benefits, change implications, business resources and costs.

In short, organisations should have an explicit business-led process for achieving early filtering and to promote active discussions regarding programme priorities. This process results in a portfolio of programmes that is prioritised solely by demand, rather than being confused by supply availability.

Producing a demand portfolio is far beyond the usual tick-in-a-box approach. It requires greater clarity and specificity, concerning benefits, business changes and IT requirements. Such rigour is not easy to achieve and demands close co-operation between IT and the business.

And the change in approach has to be reinforced by the governance groups that need to be ruthless in selecting only programmes closely aligned with the business direction.

The silver lining of the current gloomy economic situation is that it may well facilitate the creation of tighter controls to better manage the demands for IT services. Being proactive in applying a demand-based filtering approach
will put IT on the front foot, turning adversity into advantage.

Chris Edwards is professor of management information systems and Rob Lambert is senior lecturer in management information systems at Cranfield School of Management