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The Executive’s Guide to Information Technology, Second Edition

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"This book is important reading. It offers practical, real-world insight and pragmatic no-nonsense approaches for people who have a stake in corporate IT. "
—Lynda Applegate, Henry R. Byers Professor of Business Administration, Harvard Business School

"Information systems and processes are very important parts of our due diligence assessment of a company—yet the jargon is often more difficult to understand than many foreign languages. Baschab and Piot effectively translate IT into words and concepts that businesspeople can easily understand and act upon. This book is a helpful reference guide for corporate executives and private equity groups of all types."
—Neal Aronson, Managing Partner, Roark Capital Group

"Business success increasingly depends on effective use of IT. Effective use of IT depends on the kind of in-depth, practical insight in this book. Baschab and Piot provide a pragmatic approach to information systems investment that should be required reading for senior executives and CIOs alike."
—Erik Brynjolfsson, Schussel Professor of Management, Director of the Center for Digital Business, MIT

"This book should provide valuable guidance for management and technology consultants. The Executive's Guide to Information Technology provides field-proven insight on all important aspects of IT planning and execution, from governance to applications to operations and infrastructure."
—Gary J. Fernandes, former vice chairman, EDS, member of the Board of Directors, Computer Associates

"Baschab and Piot do a great job of laying out the fundamental issues and challenges that every IT organization faces. More often than not, the issues are not technical in nature, but are a reflection of how the IT and business teams work together to define, execute, and implement new business tools. The threshold issue is leadership. Often it is difficult for business leaders to feel that they have the skills and perspective to provide that leadership on technical projects. The Executive's Guide to Information Technology provides non-technical business leaders a solid framework for engaging with their IT peers."
—Tom Nealon, Chief Information Officer, J.C. Penney

Table of Contents

  1. Copyright
  2. Foreword
  3. Preface to the Second Edition
  4. Preface to the First Edition
    1. How This Book Is Organized
      1. Part I: The Effective IT Organization
      2. Part II: Managing the IT Department
      3. Part III: Senior Executive IT Management
    2. Terminology
  5. Acknowledgments
  6. About the Authors
  7. I. The Effective IT Organization
    1. 1. The IT Dilemma
      1. What Good Is Information Technology?
      2. Information Technology Misery
      3. A Burning Platform
      4. Information Technology Satisfaction?
      5. The Information Technology Dilemma
      6. Notes
    2. 2. IT Ineffectiveness Sources and Causes
      1. Symptoms of IT Distress
        1. Business Satisfaction
        2. Budget Problems
        3. Project Effectiveness
        4. Staffing Problems
      2. Proximate and Ultimate Causes of IT Ineffectiveness
      3. Steps to Effective IT Management
      4. Notes
    3. 3. Information Technology Costs
      1. Why This Topic Is Important
      2. Introduction to Benchmarking IT Spending
      3. IT Spending—Trends, Comparisons, and Benchmarking
        1. The IT Capital Budget
        2. Total IT Spending
        3. The Quality of IT Spending
        4. Defining IT Spending and Identifying Hidden Costs
        5. How to Estimate Appropriate IT Spending Levels
          1. Benchmarking Using IT Spending as a Percent of Revenue
          2. Benchmarking Using IT Spending per Employee
          3. Benchmarking against Peer Group Using Company Size
          4. Benchmarking Using Linear Equation Based on Key Drivers of IT Spending
      4. Key IT Cost Drivers
      5. Scale Economies
      6. Aligning IT Spending with Business Strategy
      7. Taking Action Based on Spending Benchmarks
      8. IT Spending Decisions: Summary
      9. Notes
    4. 4. IT Scope and Strategy
      1. Why This Topic Is Important
      2. Scope of IT Activities
        1. Governance
        2. Problem Management
        3. Operation and Infrastructure Baseline Support and Projects
        4. Application Baseline Support and Projects
        5. Scope of IT
      3. Setting IT Strategic Priorities
        1. IT Pragmatism
        2. Level I: Operations and Infrastructure
        3. Level II: Business Supporting Applications
        4. Level III: Competitive Parity Plus
        5. Level IV: Business-IT Alignment
        6. Level V: Setting the Agenda
        7. In Summary
      4. Methodologies for IT Management
        1. Information Technology Infrastructure Library
        2. IT Service Management
        3. ISO/IEC 20000
        4. ISO/IEC 17799
        5. Control Objectives for Information and Related Technology
        6. Zachman Framework for Enterprise Architecture
      5. Notes
  8. II. Managing the IT Department
    1. 5. The IT Organization
      1. Why This Topic Is Important
      2. IT Organization Overview
      3. IT Department Organization Structure
      4. IT Operations and Infrastructure Group
        1. Help Desk
        2. End-User Support/Break-Fix Group
        3. Network Administration Group
        4. System Administration and Computer Operations Group
        5. Telecommunications Services Group
        6. Operations Manager
        7. Process Responsibility in IT Operations
        8. Key Drivers for IT Operations Structure and Staffing Levels
      5. Application Development and Support
        1. Application Development Teams
        2. Application Support Group
        3. Application Testing
        4. Database Administrator
        5. Electronic Data Interchange/Application Interface Specialist
        6. Business Analyst Group
        7. Manager of Applications Management
        8. Key Drivers for IT Development Structure and Staffing Levels
        9. Separation of Responsibilities between Operations and Applications Groups
      6. CIO and Administrative Support
      7. Other IT Organizational Issues
        1. Mix of Contract and Employee IT Personnel
        2. IT Accountability
        3. Large Company Considerations
      8. Summary
      9. Resources
      10. Note
    2. 6. The Chief Information Officer
      1. Why This Topic Is Important
      2. Critical Role of the CIO
      3. The Talent Challenge
      4. Responsibilities and Skills Needed
      5. How Successful CIOs Allocate Their Time
      6. Recruiting and Retaining the Ideal Candidate
      7. Other Factors Impacting the CIO’s Role
      8. Getting Promoted
      9. The Role of the IT Steering Committee
      10. Evaluating the CIO
      11. The CTO
      12. Organizations for CIOs
      13. Notes
    3. 7. IT Standards
      1. Why This Topic Is Important
      2. Standard Setting for Technology Areas
      3. Framework for Setting Technology Standards
        1. Decision Factor: Mission Criticality
        2. Decision Factor: Unit Volume
        3. Decision Factor: Stability of Area Supported
        4. Decision Factor: Expected Asset Lifetime
        5. Decision Factor: Level of Customization
        6. Decision Factor: Interfaces with Other Systems
        7. Decision Factor: Current and Future Transaction Volume Required
        8. Decision Factor: Organization Growth Plans
        9. Decision Factor: Size/Type of User Base
        10. Cost as a Criterion
      4. Free and Open Source Software
        1. FOSS Benefits
        2. FOSS Options
        3. FOSS Licensing
        4. Justifying FOSS in the Enterprise IT Department
        5. FOSS Resources
      5. Product Life-Cycle Analysis and Implications for Technology Standard Setting
      6. Communicating IT Standards to the Business
      7. Enforcing IT Standards
      8. What to Do When You Inherit a “Highly Heterogeneous Environment”
        1. First, Understand “Why”
        2. Document Everything
        3. Quantify the Implications
        4. Build a Migration Plan
        5. Set Expectations
        6. Execute the Plan
      9. Summary
      10. Sources of Information for Assessing Technology Standards
      11. Notes
    4. 8. IT Operations and Infrastructure
      1. Why This Topic Is Important
      2. Scope of Operations
        1. LAN/WAN Network Infrastructure Management
        2. Systems Management
          1. Patch Management
          2. Configuration Management
            1. Key Features of an Effective CMBD
          3. Server Virtualization
          4. Branch Office Support
        3. Systems Monitoring
        4. Security Management
          1. Nonstop Threats
          2. Security Breach Consequences
          3. Common Threat Sources
          4. Commonsense IT Security Precautions
          5. Planning for Data Theft
          6. Other Considerations
        5. Data Center Management
          1. Physical Site
          2. Environmental and Security Monitoring
          3. Emergency Power Off Switches
          4. Power
          5. Cooling
          6. Ventilation
          7. Humidity
          8. Equipment Distribution
          9. Fire Prevention, Detection, and Suppression
        6. Messaging Management
          1. E-mail System Support
          2. Other Messaging
        7. Telecom Equipment and Administration
          1. Voice Over IP
        8. Disaster Recovery
          1. Creating a Disaster Recovery Plan
          2. Periodic Disaster Recovery Plan Review
          3. Data Protection: Implementing Effective System Backup Solutions
          4. Backup Media
          5. Media Rotation
          6. Incremental and Full Backups
          7. Compression and Encryption
          8. Archiving Data
          9. Other Devices
        9. IT Asset Management
        10. Daily Systems Operations
        11. Change Control
        12. Demand Management
      3. Performance Management and Service Level Agreements
      4. Techniques for Standardizing IT Operations
        1. Create Inventory of Routine Tasks
        2. Develop Standard Operating Procedure for Task
        3. Test the Standard Operating Procedure
        4. Set Labor Standard for Task
        5. Create Final Documentation and Checklist
        6. Add to SOP Master List and Train
        7. Incorporate into Staff Evaluation Processes
        8. Use for Managing and Measuring Staff
        9. Update/Refresh SOP
      5. Setting Staffing Resource Levels
      6. Importance of Process Improvement and Root Cause Analysis
      7. Communicating Success
      8. Evaluating Infrastructure Investments
        1. Popular Methodologies
        2. An Investment Evaluation Framework
      9. Summary
      10. Resources
          1. Operations
          2. Investment financial value calculation
      11. Notes
    5. 9. IT Problem Management
      1. Why This Topic Is Important
      2. Problem and Request Management
      3. Managing an Effective Help Desk
        1. Help Desk Staffing
        2. Staff Training: Specialists versus Generalists
          1. Determining Required Agents
        3. Staff Incentives
        4. Help Desk Escalation
          1. Ticket Status
          2. Ticket Acquisition
          3. Ticket Assignment
        5. Help Desk Metrics
        6. Help Desk Technology
          1. Telephony
          2. Ticket Management
          3. Alternative Ticket Acquisition
          4. Self-Service
          5. Remote Login
      4. Help Desk Outsourcing
      5. Notes
    6. 10. Application Management
      1. Why This Topic Is Important
      2. Architecture
        1. Application Architecture
        2. Application Architecture—Baseline
        3. Target Application Architecture
        4. Building the Target Application Architecture Migration Plan
        5. Service-Oriented Architecture
      3. Application Strategy
        1. Application Priority Assessment
        2. Upgrade/Enhance Existing Applications versus Replacement
        3. Developing Custom Applications versus Implementing Package Applications
      4. Software as a Service
        1. Integrated Applications versus “Best of Breed”
      5. Maintaining Existing Applications
        1. The Application Help Desk Concept
        2. Setting Service Level Agreements
        3. Key Roles in Application Management
        4. Application Environments Management
        5. Application Performance Management
        6. Application Release Management
        7. Web Management
        8. Application Life Cycle
        9. Application Management Best Practices
      6. Developing New Applications
        1. Structuring Projects
        2. Managing the Software Development Effort
        3. Development Methodologies
          1. Waterfall
          2. Example Waterfall Methodologies
          3. Rapid Application Development
          4. Agile
          5. Extreme Programming
        4. SEI, CMU, CMM for Software
      7. Implementing Packaged Applications
        1. Estimating
        2. Managing Milestones
        3. Conference Room Pilot
        4. Business Process Definition
      8. Quality Assurance Testing
      9. Summary
      10. Notes
    7. 11. IT Human Resources
      1. Why This Topic Is Important
      2. Introduction to IT Human Resources
      3. IT HR Life Cycle
        1. Step 1: Determine Personnel Needs
          1. Use the Organization Chart
          2. Perform a Swap Analysis and Identify Personnel Gaps
          3. Determine Staffing Strategy
          4. Define Roles and Responsibilities
          5. Create Final Hiring Plan
        2. Step 2: Candidate Sourcing Strategy
          1. Permanent and Contract Candidate Sourcing
          2. Additional Screening for Permanent Hires
          3. The Recruiting Funnel
          4. Working with Agencies and Technical Recruiters
        3. Step 3: Effective Interviewing
          1. High-Volume Interviewing
          2. Interviewing Contractors
        4. Step 4: Effective Hiring
          1. Finalizing an Offer
          2. Checking References
          3. Ramping up New Hires Quickly
        5. Step 5: Managing the Workforce
          1. The 10-Percent Attrition Model
          2. IT Staff Career Development
          3. Key Drivers of Staff Retention
          4. Compensation
          5. Handling Layoffs
          6. Management Coaching
          7. Creating Performance Plans
      4. Summary
      5. Resources
      6. Notes
    8. 12. Vendor Selection
      1. Why This Topic Is Important
      2. Application Vendor Economics
      3. Vendor Selection Methodology
        1. Overview of Methodology
        2. Scope and Requirements Definition
          1. Set Scope for Business Areas Supported
          2. Establish Evaluation Team
          3. Inventory Business Requirements/Set Priority/Weighting
          4. Generate Preliminary Cost/Benefits Model
        3. Preliminary Vendor Screening
          1. Preliminary Vendor Identification and Screening
          2. Build First-Screen Evaluation Framework and Weighting
          3. Determine Preliminary Vendor Approach
          4. What If No Vendor or Set of Vendors Emerges from the Analysis?
        4. Manage RFP Process
          1. Create RFP
          2. Issue RFP
          3. RFP Response Assessment
          4. Refine Vendor List
        5. Vendor Due Diligence
          1. Update Due-Diligence Evaluation Framework
          2. Conduct Functional Due Diligence
          3. Conduct Technical Due Diligence
            1. Technical Platform—Options and Requirements
            2. Transaction Volume Support and Scalability
            3. Development Environment/Approach
          4. Conduct Company Due Diligence
          5. Check Vendor References
          6. Conduct Gap Analysis
        6. Supplemental Vendor Selection
          1. Hardware Vendors
          2. Professional Services Providers
        7. Project Planning and Approval
          1. Build Preliminary Project Plan
          2. Perform Next-Round Economic Analysis
          3. Project Presentation/Approval
        8. Vendor Negotiation
      4. Resources
          1. Requirements methodologies
          2. Project management
          3. Negotiating
      5. Note
    9. 13. Vendor Management and Outsourcing
      1. Why This Topic Is Important
      2. Vendors as Partners
      3. Vendor Management Role
      4. Taking Control of Vendor Management
      5. Beginning New Vendor Relationships
      6. Vendor Contracts
      7. Managing Vendor Performance
      8. Working with Vendors’ Other Customers
      9. Vendor Recompetes
      10. Offshoring and Outsourcing
        1. Offshoring
        2. Outsourcing
      11. Managing Troubled Vendors
      12. Ethics in Purchasing and Vendor Management
      13. Summary
      14. Resources
      15. Notes
  9. III. Senior Executive IT Management
    1. 14. Business Communications
      1. Why This Topic Is Important
      2. Benefits of Improving the IT/Business Relationship
      3. How to Improve the Relationship between IT and the Business
        1. Set Goals for Each Level of the IT Organization
        2. Improve Social Interaction with the Business
        3. Improve Verbal and Written Communication Skills
        4. Hold the Business Units Accountable
        5. Build Communication and Relationship Attributes into Personnel Reviews
        6. Recruit Staff from the Business Side
        7. Promote IT
        8. Build Online Communication Mechanisms
      4. Make the Changes Permanent
      5. Notes
    2. 15. IT Budgeting and Cost Management
      1. Why This Topic Is Important
      2. Introduction to the Budgeting Process
      3. The Corporate Budgeting Process
      4. Understanding the Difference between Enterprise IT Spending and the IT Department Budget
      5. Key Components of the IT Budget
        1. Hardware
        2. Software
        3. Labor
        4. External Service Providers
        5. Data Communications
        6. Other
        7. Estimating Hardware Requirements
        8. Estimating Software Requirements
        9. Estimating Internal and External Labor Costs
        10. Typical Breakout of Spending
        11. Assumptions
      6. How to Budget
        1. The Basics
        2. Timing
        3. Budget Creation Methods
          1. Zero-Based Budgeting
          2. Run-Rate Budgeting
      7. Key Cost Drivers
      8. Managing Capital Expenditures
        1. Minimizing Capital Expenditures
      9. Lease versus Buy Decisions
        1. Buying Equipment
        2. Leasing Equipment
      10. Auditing the IT Department
      11. Contingency Planning
      12. Managing the Budget
      13. Handling Out-of-Budget Business Unit Requests
      14. Chargebacks
      15. Summary
      16. Resource
      17. Notes
    3. 16. Effective Decision Making and Risk Management
      1. Why This Topic Is Important
      2. Risk Management: A Balancing Act
        1. The Critical Role of Decision Making in Risk Management
      3. Relationship between Risk and Cost
        1. Capital Expenditures and IT Spending
        2. IT Outages and Recovery
        3. Setting Service Levels
        4. Setting Capacity Levels
      4. Risk Management Methodology
      5. Incident Postmortems
      6. Responsibility for Risk Management and Quality Assurance in the Organization
      7. Summary
      8. Resources
      9. Notes
    4. 17. Demand Management and Project Prioritization
      1. Why This Topic Is Important
      2. The Impact of IT Demand Management on Project Performance
      3. The Price of Project Failure
      4. Why Good Project Management Is Not Enough
        1. Too Many Projects
        2. No Project Gatekeepers
        3. Too Many Simultaneous Projects
        4. Moving the Goalposts
        5. Too Much Elapsed Time
        6. Overambitious Goals
        7. Indistinct Goals
        8. Unclear Benefits
        9. Heterogeneous Technology
        10. Overconfidence Bias
        11. Outsiders Drive the Agenda
        12. No Individual Accountability
        13. Project Size
        14. Too Many Moving Parts
        15. Poor Communication
      5. A Methodology for IT Demand Management
        1. Inventory All Potential Projects
        2. Project Definition and Proposal
        3. Project Approval
        4. Project Prioritization
        5. Key Components of the Prioritization Process
          1. Determine Project Financial Value
          2. Assess Project Risk
          3. Assess Project Strategic Value
          4. Assess Current System Adequacy
          5. Prioritize Projects
          6. Incorporate Other Factors
          7. Finalize Priorities and Sequence Projects
          8. Assess IT Department and Organization Capacity
        6. Commission Projects
        7. In-Process Projects
        8. Project Completion and Review
        9. Key Success Factors for Project Management
        10. Managing Resources Effectively
      6. Resources
          1. Project financial value calculation
          2. Project planning
          3. Project management
          4. Team leadership
      7. Notes
    5. 18. IT Performance Measurement
      1. Why This Topic Is Important
      2. Value of Measurement
        1. Benefits of IT Measurement
          1. Improved Customer Service
          2. More Efficient Allocation of Resources
          3. Improved System Performance and Uptime
          4. Reduction In Risk and Unplanned Activities
          5. Increase In Staff Productivity (Development and Support)
          6. High Performance Culture
        2. The Costs of IT Measurement
      3. Developing an IT Measurement Program
        1. The IT Dashboard
        2. Evaluate Metrics
        3. Develop Dashboards by Area
        4. Define Target Performance for Each Metric
        5. Develop Summary Dashboard
        6. Baseline Current Performance
        7. Develop Management Process for Data Collection, Analysis, and Reporting
        8. Reassessment of the Measurement Program
        9. Evaluate and Take Action
      4. IT Metrics
        1. Objective Metrics
        2. Subjective Metrics
      5. Periodic IT Health Check
      6. Resources
      7. Notes
    6. 19. IT Governance
      1. Why This Topic Is Important
      2. IT Governance
        1. Key Activities in Governance
      3. Control and Audit
      4. Functions Supporting IT Governance
      5. IT Steering Committee Concept
      6. Purpose of an IT Steering Committee
        1. Benefits to the Company
        2. Benefits to the Business Units
        3. Benefits to IT Management
        4. Benefits to the IT Department
      7. Objective of the IT Steering Committee
      8. Membership of the IT Steering Committee
      9. Structure of the IT Steering Committee
        1. Roles and Responsibilities
      10. Operating the IT Steering Committee
        1. Reviewing Critical Issues
        2. Reviewing Status of In-Process Projects
        3. Approve New Projects/Prioritization and Assess Capital Expenditure Requests
        4. Assessing IT Priorities
      11. Summary
      12. Resources
      13. Note