IT Governance and Project Portfolio Management

Cutting costs and adding value with Scientific-Atlanta's IT shared services

By: Ed DePrimo
Director of Applications
Scientific-Atlanta
(Issue Details: Volume 6, Issue 1, March 2004).

Given limited IT resources, many organizations are struggling with how to

prioritize projects and focus on tangible business benefits. Scientific-Atlanta’s
management team responded to the challenge by introducing, in 2002, a process
to improve how value-added projects were identified and delivered within the
business.

Introduction

Scientific-Atlanta, a leading broadcast and broadband technology company,

introduced the shared services organizational model while implementing SAP
during the mid 1990s. SAP replaced multiple legacy information systems and
provided the backbone infrastructure for consistent operational and financial
business processes. Technology, in this instance, was an enabler for broader
changes that lowered operating costs, improved financial reporting, and increased
organizational responsiveness. This model continues to be leveraged by applying
a consistent business model for acquisitions, facilitating changes in manufacturing
operations and improving overall financial controls. As the business shared
services model expanded at Scientific-Atlanta, so the IT role within the
organization also changed.

IT Evolution

The first step in this evolution was to consolidate most IT functions within the
shared services organization and prove the model could provide both lower net
operating costs and high service levels. A cost charge-back system was
established that provided a transparent view of IT costs and cost drivers. This
process is reviewed and improved based on feedback from the business
community that ultimately pays for IT. When business conditions warrant a
change or a new system is required, both IT and the business can work together
to understand the cost implications of those changes.

To address the concern regarding service levels a formalized process was

established to measure end user satisfaction on individual systems and for
specific categories. While those statistics confirmed improved overall satisfaction
levels, IT management continued to place a strong emphasis on customer
satisfaction and developed a highly responsive organization. The customer service
culture was further supported by the fact that the Corporate IT staff consisted of
many people recruited from business operations. This model has progressed to
include formal Service Level Agreements (SLA’s) for IT systems and end-user
support.
A third driver in the IT shared services model is the concept of providing value-
added services to the business. Working groups within the business were
established as an outgrowth of the SAP implementation. These groups were used
as a means to identify new projects, prioritize initiatives, eliminate roadblocks,
and track progress. There are eleven Project Action Committees (PACs) that meet
with IT on a monthly basis to manage this project portfolio.

The IT shared services model has been successful and continues to expand in
scope, both in terms of systems supported and by the inclusion of IT staff in
regional locations. IT has established itself as an organization that provides both
a low cost IT utility service to multiple business units as well as a partner in
providing value-add services.

IT Governance

In 2002, Scientific-Atlanta senior management implemented a process to improve

how value-added projects were identified and delivered. Given limited IT
resources a need arose to prioritize projects and focus on tangible business
benefits. An IT Executive Review Committee (ITEC) was established to approve all
IT projects categorized as value-added. The committee consists of the CFO, COO,
the president of each Business Unit, VP of Manufacturing, VP of Procurement, and
the CIO.

Projects are presented for approval by business sponsors – not IT. The business
sponsor is also required to confirm benefits realized from a project. This closed
loop review process is important and has had a significant impact on the level of
value provided from IT to the business and the partnership relationship between
IT and the business.

Scientific-Atlanta uses a gating methodology for high level project oversight.

During each stage in the project a series of questions are evaluated to determine
whether to move forward to the next stage. This gating approach is designed to
create a funnel of projects with a well defined backlog, and a clear picture of the
delivery status of the project portfolio.

The ITEC evaluates projects as Concepts or Defined initiatives prior to approving

funding for the project. Upon completion, the ITEC evaluates Launched projects
to confirm benefits were realized.

The keys to successful IT projects are strong business sponsorship, measurable

business value, and quality project execution. Business sponsors are aware they
need to provide sponsorship and a business case. IT is responsible for aligning
business needs with appropriate technology options, strong project management
execution and a reliable infrastructure.

Project Categories
Projects are categorized in one of five groups in order to set expectations of the
potential business value and to assure IT efforts are balanced across multiple
business needs.

Direct Cost Savings – This is normally the highest priority project type and
requires that tangible and measurable cost reductions will be achieved after the
project is completed. Many times this is measured in inventory reductions,
headcount reductions, lower material costs, or some other direct cost reduction
that can be financially reported. Examples include projects in procurement that
helped reduce material costs, manufacturing projects that reduced headcount and
material costs, and engineering projects that improved parts reuse in new
products eliminating the need to purchase new components.

Business Enabling – These projects enable the business to meet other tangible
goals that require IT as an enabler but do not depend entirely on IT for success.
Examples include business acquisitions, additional revenue opportunities, or
systems implemented in new areas of the business. Two acquisitions were
governed by this methodology; systems have been developed that enabled new
revenue streams and other initiatives have been undertaken to improve customer
service.

Compliance/Security – These projects support regulatory requirements, required

business changes, or improved IT security of existing systems. Examples include
trade compliance systems, Sarbanes-Oxley and other government reporting, and
various IT security activities. Senior management oversight of this project
category has resulted in a focused and prioritized approach to managing an
increasingly complex area.

Process Improvements – These projects are defined as having indirect business

benefits that are measured by an improvement in a key performance indicator.
Examples include: faster inventory replenishment, shorter financial closing times,
product set up workflow enhancements, and other improvements to business
productivity. Traditionally, this has been a "soft" benefit area that consumed a
large portion of IT resources.

Infrastructure Investments – These projects are traditional IT infrastructure

investments required to maintain existing systems and platforms. Examples
include application software and database upgrades, hardware upgrades, system
migrations, etc.

Trends

A significant trend resulting from this governance process has been a reduction in
the number of productivity improvement projects with "soft" benefits. These
types of projects are either rejected or sent back to the PACs for further
quantification of benefits. Many times these projects become the basis for a more
tangible cost reduction or compliance project which is justified on specific
business value.
A second trend has been the formalization and visibility of IT infrastructure
projects. Traditionally, these projects have not been justified based on their
business value. The CIO normally sponsors these projects but the rules for
approval remain the same: identifying business value and measuring benefits
upon completion. Support from senior management for resources dedicated to
infrastructure projects has improved as a result.

Lessons Learned

Joint Responsibility Works – Business sponsors and IT are jointly responsible for
the success of projects. Project lifecycle management from definition and
approval through launch and benefit realization is the responsibility of both
parties. More projects are successful as a result, and projects are more
meaningful to the business. The IT staff considers itself empowered and real
contributors within the business.

Full Cycle Business Sponsorship is Key – All business sponsors are not created
equal. The closed loop benefit confirmation requirement has highlighted business
sponsors that will work hard to help sell a project and get approval to move
forward. However, they are not always good partners when the time comes to
confirm business value. These business sponsors have difficulty the next time
they present a project for approval.

Project Definition is Critical – The knowledge that a project will be formally

reviewed for the value received after implementation places pressure on the front
end project definition and approval stages. Project benefit calculations are defined
early, and reporting requirements are considered part of the overall deliverable.

IT Backlog Reduced – There has been a reduction in the number of backlogged IT

projects, but an increase in the size and complexity of active projects. Projects
that are not justified are combined with others to create a tangible business case
or are eliminated. A long list of small projects leads to the ultimate senior
management question of "why bother?" This governance approach requires
consistent focus on projects that make a difference to the business.

IT Influence Expands – IT influence is expanding as the value proposition is

confirmed and communicated. The visibility inherent in the governance review
process places pressure to bring forth larger, more significant, initiatives. In
addition, the feedback from executives has generated project ideas in
engineering, manufacturing, sales, and other areas beyond traditional "back
office" systems. IT is evolving beyond a traditional "SAP shop" to encompass
more systems in other areas of the business.

Embrace "Shadow IT" Groups – Business units that continue to have local IT staff
can participate in this process. The benefit is additional value-added project ideas
from local IT teams and improved alignment with business unit executives. This
change is most apparent in the manufacturing and engineering areas of the
business.
Governance is a Double-Edged Sword – The visibility of value-added IT projects
at the executive level will raise the performance bar for IT. This process is a good
marketing opportunity for IT to show the value delivered to the business. The
process also requires IT to make a consistently strong business case for the
money being invested in people and technology.

Next Steps

Scientific-Atlanta continues to make changes to this overall process based on

good and bad experiences. Two important changes underway are described
below.

1. Project Prioritization and Resource Management – The combination of staff

reductions and a formal project approval and closure process by the ITEC has
created project priority conflicts. Prior to this process individual PACs had more
authority and resources at their disposal to influence IT project priorities. Larger
enterprise-wide projects consume IT resources across multiple functional areas.
Scientific-Atlanta is now working on a means to improve coordination and
prioritization of projects across the organization.

2. Project Delivery – The IT Governance process has focused IT on larger, more

complex projects with higher value to the business. These projects now have
senior management sponsorship and visibility. This has increased the pressure for
quality project management and execution. Scientific-Atlanta’s IT organization is
developing a new operational model that supports the dual roles of providing
quality support for existing systems and faster delivery of high value projects to
the business.

About the Author

Ed DePrimo has worked in the Information Technology field since the mid
1980s. He started his career in technical support and system administration. He
has held senior IT management positions and worked with all levels of
organizational management to identify, scope and prioritize IT initiatives. His
current position is the Director of Software Applications for Scientific-Atlanta in
Atlanta, Georgia.

Ed holds a Bachelors of Science degree from the State University of New York
and a Masters in Information Systems degree from Boston University.
Ed.DePrimo@sciatl.com

Copyright © 2008 SSON. All Rights Reserved.

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