Linkage of Corporate Strategy to IT Strategy via IT-CMF

Why IT - CMF For IT Strategy - It differs from other IT frameworks in several fundamental respects:
• It is comprehensive. While other frameworks focus on one dimension of IT management—for example, ITIL (Information Technology Infrastructure Library) concentrates on infrastructure and operations, while CMMI (Capability Maturity Model Integration) focuses on application development—the IT-CMF examines the full spectrum of dimensions.

• It is holistic and value-focused. Other frameworks tend to focus solely on IT process maturity, which by itself does not create business value. The IT-CMF, however, focuses on the business value delivered by IT and how a combination of process, skills, culture, and tools can maximize that value.

• The IT-CMF is also action oriented. An IT-CMF assessment not only confirms the IT organization’s current maturity for a given capability or set of capabilities, it also defines both short- (that is, 12-month) and medium-term (that is, two- to three-year) target maturities and the results the IT organization could expect to achieve by hitting those targets. Further, it identifies the specific steps necessary to achieve those targets, as well as appropriate metrics to use to track progress—and can provide case study examples of companies that have taken similar measures.

• Finally, the IT-CMF is not disruptive. Assessments for some frameworks require armies of consultants with clipboards and can be highly disruptive to day-to-day operations. IT-CMF assessments, in contrast, can gather the necessary information and achieve a credible degree of rigor without being obtrusive.

Overview on IT - CMF can be found here.

Source : BCG  and IVI

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 Source: Gartner

IT Economics for Business - II

Real Options Valuation (ROV):
A complex technique than TCO, ROI and EVA. It is based on the financial estimation techniques used in stock options theory. ROV is used to modify the ROI calculation by considering the value that the current project could contribute to future projects. This approach typically enhances the ROI of projects such as IT infrastructure. The cost of implementing a whole new infrastructure for just one project for one business unit’s needs is so burdensome that no one business unit could ever justify starting the new infrastructure. However, the overall value of the new infrastructure to all the business units in the organization could be huge. ROV provides a technique for justifying that first project based on the future derived value.

Return on Assets (ROA):
A popular measure for the performance of companies, ROA can also be applied specifically to IT assets.ROA for IT assets can be calculated by isolating the IT-specific assets from the organisational assets and the net income due to IT assets from the overall net income. This can be hard to do, and the accounting systems need to be set up appropriately to provide any chance of achieving this on a repeatable basis. ROA approach has deeper implications than might be immediately obvious.

 Return on Infrastructure Employed (ROIE):
 ROIE is similar to ROA, but it focuses on IT services rather than IT assets. With ROIE, IT service cost (including depreciation) is the basis for computing a return. While ROIE can be used for a single project, it works best when calculated for aggregations of projects. For example, it might be used to compare the performance of different in-house or outsourced IT Providers. ROIE might be improved by providing the same IT service at a lower cost or by containing the cost growth of providing a particular IT service to less than the rate at which the organisation’s net income is growing.

Part 1 is here

Source/Credit: The Business Value of IT