* 2009 ISACA All rights reserved. Unlocking the Value of Technology InvestmentsSpeaker Name/TitleDate

2009 ISACA All rights reserved. *The Importance of Reliable InvestmentYet more than 2 out of 10 enterprise IT projects are outright failures.*You would not buy a car that failed to start 20 percent of the time.You would not invest in a mutual fund that consistently lost 20 percent of its value.*The Standish Group, 2006

2009 ISACA All rights reserved. *IT Investments Bring Both Value and RiskIT investments are about enabling business change and can bring enormous returns if managed properlyYet, without effective governance and good management, there is an equally significant risk to destroy valueThe concept of value relies on the relationship between meeting the expectations of many differing stakeholders and the resources used in doing so. The aim of value management is to reconcile these differences John Thorp, CMC, I.S.P.Val IT researcher and developer and author, The Information Paradox [as adapted from the Institute of Value Management]

2009 ISACA All rights reserved. *A New Approach is NeededManaging IT-enabled change requires that IT investments be managedOne approach is to apply the principles of financial portfolio management to evaluating, selecting and managing IT investments over their full economic life cycleA Massachusetts Institute of Technology (MIT) (USA) study of more than 300 enterprises in 23 countries found that faster-growing and more agile firms such as 7-11 Japan, United Parcel Service (UPS) and ING Direct all had a portfolio approach to IT management

2009 ISACA All rights reserved. *Val ITProven practices and techniques for evaluating and managing investment in business change and innovationVal IT helps executives:Increase the probability of picking winnersIncrease the likelihood of IT investment successReduce surprises from IT cost and delivery date overrunsReduce costs due to inefficient investments

2009 ISACA All rights reserved. *Developed by the Leaders in IT GovernanceCreated by ISACA, Fujitsu Consulting, ING and SeaQuationProfessional association with 86,000 constituents. Worldwide leader in IT governance, control, security and assurance. Offers the CISA, CISM and CGEIT certifications.

2009 ISACA All rights reserved. *Why Val IT?An organisation needs stronger governance over IT investments if:IT investments are not supporting the business strategy or providing expected valueThere are too many projects, resulting in inefficient use of resourcesProjects often are delayed, run over budget, and/or do not provide the needed benefitsThere is an inability to cancel projects when necessaryIt needs to ensure compliance to industry or governmental regulations

2009 ISACA All rights reserved. *The strategic questionThe architecture question The value question The delivery questionA Comprehensive ApproachMany enterprises practice elements of Val IT alreadyVal IT provides a consistent, repeatable and comprehensive approachIT and business become equal shareholders because Val IT helps management to answer these key questions:* * Based on the Four Ares as described by John Thorp in his book The Information Paradox, written jointly with Fujitsu, first published in 1998 and revised in 2003

2009 ISACA All rights reserved. *The Seven Principles of Val IT IT-enabled investments will:1.Be managed as a portfolio of investments2.Include the full scope of activities required to achieve business value3.Be managed through their full economic life cycle Value delivery practices will:Recognise different categories of investments to be evaluated and managed differentlyDefine and monitor key metrics and respond quickly to any changes or deviationsEngage all stakeholders and assign appropriate accountability for delivery of capabilities and realisation of business benefitsBe continually monitored, evaluated and improved

2009 ISACA All rights reserved. *How Val IT WorksEstablish informed andcommitted leadership.Align and integrate valuemanagement with enterprise financial planning.Define andimplement processes.Establish effectivegovernance monitoring.Define portfolio characteristics.Continuously improve value management practices.Establish strategic directionand target investment mix.Evaluate and selectprogrammes to fund.Determine the availability and sources of funds.Monitor and reporton investmentportfolio performance.Manage the availabilityof human resources.Optimise investmentportfolio performance.Understand the candidateprogramme andimplementation options.Develop the detailed candidateprogramme business case.Develop the programme plan.Launch and managethe programme.Develop full life cycle costsand benefits.Update operationalIT portfolios.Develop and evaluate the initial programme conceptbusiness case.Update the business case.Monitor and report onthe programme.Retire the programme.Value Governance (VG)Portfolio Management (PM)Investment Management (IM)

2009 ISACA All rights reserved. *Top Organisations Support Val IT For more information, please visit www.isaca.org/valit- Craig Symons, Vice President, Principal Analyst Forrester Research in the Report From IT Governance to Value Delivery 22 June 2007Organisations struggling to execute IT strategies that deliver business value and to communicate this value to stakeholders should evaluate Val IT as a tool for improved value delivery.

2009 ISACA All rights reserved. *Getting StartedVisit www.isaca.org/valit to learn more or download a free copy of the Val IT framework, Getting Started With Value Management and The Business Case.

*Few enterprises today could operate for long without their IT infrastructure. While there are many examples of enterprises generating value from investing in IT, many executives are rightfully questioning whether the business value realised from IT projects is commensurate with the level of investment. Essential to the question of IT value is how reliable the investment return on projects are. Recent studies indicate a great deal of potential waste associated with IT investments: A 2006 study conducted by The Standish Group found that 19 percent of all IT projectsor the equivalent of 2 out of 10were outright failures. Sixty-five percent were either challenged or failed. A 2004 IBM survey of Fortune 1000 CIOs found that, on average, CIOs believe that 40 percent of all IT spending brought no return to their enterprises. A Gartner survey in 2002 found that 20 percent of all expenditures on IT is wasteda finding that represents, on a global basis, an annual destruction of value totaling about US $600 billion.*IT-enabled investment can bring huge benefits. Indeed, a study carried out within global financial services group ING indicates that such investments offer the opportunity to deliver greater rates of return than almost any other conventional investment. This research, carried out in mid-2004, indicates that, in comparison to commercial real estate, publicly traded equities and sovereign bonds, the return on a well-balanced portfolio of IT-enabled investments can be significantly higher.

While innovative technology projects can effectively help an enterprise to enter new markets, drive greater efficiency or provide better customer service, an over-reliance on technology projects that fail to meet the demands of multiple stakeholders can actually introduce greater risk of loss.

*The message is clearIT-enabled investments can bring huge rewardsbut only with the right governance and management processes and full engagement from all management levels. Until now, organisational leaders have not had a clear way to consider investments involving IT or how to report on or monitor the potential success or failure of these investments.

What has been missing for many years has been ready access to a structured approacha comprehensive, proven, practice-based structural frameworkthat can provide boards and executive management teams with practical guidance in making IT-investment decisions and using IT to create enterprise value. In fact, many enterprises are finding that they are able to achieve greater alignment and return of investment (ROI) by using financial portfolio techniques to manage their IT investments.

Note: The quote on the slide was used in the ISACA Enterprise Value: Governance of IT Investments, the ING Case Study, which was withdrawn in 2009.

*The Val IT framework is an IT governance framework that helps board and executive management ensure that IT investments, services and assets are managed throughout their full economic life cycleand that they continue to deliver optimal benefits, at an affordable cost, with acceptable levels of risk. Val IT consists of a set of guiding principles and a number of processes conforming to those principles that are further defined as a set of key management practices. The framework addresses outcomes, assumptions, costs, and risks related to a balanced portfolio of IT-enabled business investments. It also provides benchmarking capability and allows enterprises to exchange experiences on best practices for value management.

Used with considerable success by leading enterprises for many years, the proven value management processes and practices within Val IT are presentedfor the first time everas one single integrated framework that provides business and IT decision makers with a comprehensive, consistent, and coherent approach to creating concrete and measurable business value.

Val IT helps executives: Increase the probability of picking winners Increase the likelihood of project success Reduce surprises from IT cost and delivery date overruns Reduce costs due to inefficient investments

*Val IT is the product of a collaboration amongst several leading organisations that were interested in the subject of formalising a value management framework and linking it to empirical measurement. As people from these organisations met each other and realised they were pursuing common projects and had shared goals, they decided to work together. Representatives from ISACA, ING, Seaquation and Fujitsu Consulting first met in Brussels in 2005, and it was then that the Val IT initiative got underway.

*The single most effective means of continually ensuring that IT contributes measurable value to the enterprises objectives is a strategic, leadership-sponsored commitment to establishing a comprehensive IT governance capability.

All enterprises practice some form of IT governance, but what you are doing today may not be enough. If you look over this list and feel that your enterprise would benefit from doing one or more of these better, you would benefit from taking a more formalised and enterprisewide approach to your IT governance.*Val IT helps executives focus on two of four fundamental IT governance-related questions: Are we doing the right things? (the strategic question) and Are we getting the benefits? (the value question). COBIT, on the other hand, takes the IT view, helping executives focus on answering the questions: Are we doing them the right way? (the architecture question) and Are we getting them done well? (the delivery question).

The strategic question. Is the investment: In line with our vision Consistent with our business principles Contributing to our strategic objectives Providing optimal value, at affordable cost, at an acceptable level of risk

The value question. Is the investment: A clear and shared understanding of the expected benefits Clear accountability for realising the benefits Relevant metrics An effective benefits realisation process over the full economic life cycle of the investment

The delivery question. Do we have: Effective and disciplined management, delivery and change management processes Competent and available technical and business resources to deliver: The required capabilities The organisational changes required to leverage the capabilities

The architecture question. Is the investment: In line with our architecture Consistent with our architectural principles Contributing to the population of our architecture In line with other initiatives

*Val IT consists of a set of guiding principles and a number of processes conforming to those principles, which are further defined as a suite of key management practices: IT-enabled investments will be managed as a portfolio of investments. Optimising investments requires the ability to evaluate and compare investments, objectively select those with the highest potential to create value, and manage all the investments in order to maximise value. IT-enabled investments will include the full scope of activities required to achieve business value. Realising value from IT-enabled investments requires more than delivering IT solutions and servicesit also requires changes to some or all of the following: the nature of the business itself; business processes, skills and competencies; and organisation; all of which must be included in the business case for the investment. IT-enabled investments will be managed through their full economic life cycle. Business cases must be kept up to date from the initiation of an investment until any resulting service is retired. Value delivery practices will recognise that there are different categories of investments that will be evaluated and managed differently. Such categories might be based on management discretion, magnitude of costs, types of risks, importance of benefits (e.g., achievement of regulatory compliance), types and extent of business change. Value delivery practices will define and monitor key metrics and respond quickly to any changes or deviations. Metrics must be established and regularly monitored to ensure that value is created and continues to be created throughout the investment life cycle. Value delivery practices will engage all stakeholders and assign appropriate accountability for the delivery of capabilities and the realisation of business benefits. Both the IT function and the other parts of the business must be engaged and accountablethe IT function for IT capabilities, and the business for the business capabilities required to realise value. Value delivery practices will be continually monitored, evaluated and improved. As enterprises gain experience with Val IT practices, learning can be applied so that the selection of investments and the management of them improve each year.*There are three overall domains in Val IT: Value Governance, Portfolio Management, and Investment Management. Each domain comprises a number of processes and key management practices.

Value Governance (VG)The goal of value governance is to optimise the value of an organisations IT-enabled investments.

Portfolio Management (PM)The goal of portfolio management is to ensure that an organisations overall portfolio of IT-enabled investments is aligned with and contributing optimal value to the organisations strategic objectives.

Investment Management (IM)The goal of investment management is to ensure that an organisations individual IT-enabled investment programmes deliver optimal value at an affordable cost with a known and acceptable level of risk.

The guide and examples presented in the Val IT framework are applicable to all enterprises. This guidance, however, is not intended to be prescriptive, and should be tailored to fit the enterprises management approach. Small and medium-sized enterprises can adapt the templates and make them simpler to create and maintain. But in all cases the model adopted should cover business alignment, cost and benefits (financial and non-financial), and risks since these play a major role in every investment analysis.*Val IT has received support from Forrester Research. The tool has been deliberately designed so enterprises of all sizes and in all industries (including public and private businesses, and governmental and academic entities) can benefit from these tools. You can find sample companies and case studies for Val IT implementation at our web site.*Learn more at the web site. Additional case studies are available as well.