The Effective CIO How to Achieve Outstanding Success through Strategic Alignment, Financial Management, and IT Governance http://avaxhome.ws/blogs/ChrisRedfield OTHER NEW BOOKS FROM AUERBACH The Business Value of IT: Managing Risks, Interpreting the CMMI®: A Process Optimizing Performance and Improvement Approach, Second Edition Measuring Results Margaret K. Kulpa and Kent A. Johnson Michael D. S. Harris, David Herron, ISBN: 1-4200-6052-X and Stasia Iwanicki ISBN: 1-4200-6474-6 Knowledge Management, Business Intelligence, and Content Management: CISO Leadership: Essential Principles The IT Practitioner's Guide for Success Jessica Keyes Todd Fitzgerald and Micki Krause ISBN: 0-8493-9385-X ISBN: 0-8493-7943-1 Manage Software Testing The Debugger's Handbook Peter Farrell-Vinay J.F. DiMarzio ISBN: 0-8493-9383-3 ISBN: 0-8493-8034-0 Managing Global Development Risk Effective Software Maintenance and James M. Hussey and Steven E. 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Tayntor ISBN: 0-8493-9275-6 ISBN: 1-4200-4426-5 The Insider's Guide to Outsourcing Risks Successful Packaged Software and Rewards Implementation Johann Rost Christine B. Tayntor ISBN: 0-8493-7017-5 ISBN: 0-8493-3410-1 AUERBACH PUBLICATIONS www.auerbach-publications.com To Order Call: 1-800-272-7737 • Fax: 1-800-374-3401 E-mail: [email protected] The Effective CIO How to Achieve Outstanding Success through Strategic Alignment, Financial Management, and IT Governance | Eric J. Brown William A. Yarberry, Jr. Boca Raton London New York CRC Press is an imprint of the Taylor & Francis Group, an informa business AN AUERBACH BOOK Auerbach Publications Taylor & Francis Group 6000 Broken Sound Parkway NW, Suite 300 Boca Raton, FL 33487-2742 © 2009 by Taylor & Francis Group, LLC Auerbach is an imprint of Taylor & Francis Group, an Informa business No claim to original U.S. Government works Printed in the United States of America on acid-free paper 10 9 8 7 6 5 4 3 2 1 International Standard Book Number-13: 978-1-4200-6460-5 (Hardcover) This book contains information obtained from authentic and highly regarded sources. Reasonable efforts have been made to publish reliable data and information, but the author and publisher can- not assume responsibility for the validity of all materials or the consequences of their use. 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CCC is a not-for-profit organization that pro- vides licenses and registration for a variety of users. For organizations that have been granted a photocopy license by the CCC, a separate system of payment has been arranged. Trademark Notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. Library of Congress Cataloging-in-Publication Data Brown, Eric J. The effective CIO: how to achieve outstanding success through strategic alignment, financial management, and IT governance / Eric J. Brown, William A. Yarberry, Jr. p. cm. Includes bibliographical references and index. ISBN 978-1-4200-6460-5 (alk. paper) 1. Chief information officers. 2. Information technology--Management. 3. Information resources management. I. Yarberry, William. II. Title. HD30.2.B79 2009 658.4’038--dc22 2008044335 Visit the Taylor & Francis Web site at http://www.taylorandfrancis.com and the Auerbach Web site at http://www.auerbach-publications.com Dedication To my lovely wife Anne, son Remington, daughter Kira-Nariese, brothers Mark and Tate, and for my parents, Ko`u mau makua i ola mau i ko makou pu`uwai. Mahalo no kou aloha me kou kako`o. —EJB To Carol, Will, Libby, and my parents. Thank you for your love and support. —WAY Contents Preface .........................................................................................................xiii Acknowledgments .........................................................................................xv The Authors ..................................................................................................xix 1 Core Skills and Career Development .....................................................1 CIO Roles — A Sampler. .............................................................................2 No One Is Planning Your Career .................................................................3 Strategic Planning ........................................................................................6 Technical Expertise ......................................................................................8 The Generations ...........................................................................................8 What Affects Compensation? ......................................................................9 CIO Viruses ...............................................................................................11 The Magic “AND” .....................................................................................12 References ..................................................................................................13 2 Information Technology Governance ..................................................15 CIO Success Pills — For Best Results, Take with Governance ..................15 Alignment — How to Avoid Growing Weeds ............................................16 First Step — Make Sure a Business Strategy Exists .....................................16 Prioritization ..............................................................................................19 Alignment Tools ........................................................................................19 Value Delivery...................................................................................22 IT Risk Management........................................................................23 Compliance ...............................................................................................24 Ten Steps to Sarbanes-Oxley Compliance ........................................25 Resource Management ...............................................................................31 Performance Management .........................................................................31 The Nut-and-Bolt Stuff — Managing Your Own Department with Governance ................................................................................................32 References ..................................................................................................34 vii viii n Contents 3 Information Technology Finance .........................................................37 Budgeting ..................................................................................................38 Constructing the Budget ..........................................................................40 Rational Buying .........................................................................................43 Managing the IT Investment ....................................................................46 SOP No. 98-1 ............................................................................................50 Cost Management .....................................................................................52 Gray Areas and the Tilt .............................................................................54 Chargeback ................................................................................................56 Looking Financially Smart ........................................................................57 Managing Contracts ..................................................................................59 Summary ...................................................................................................61 References ..................................................................................................62 4 Project Management .............................................................................63 Project Organization .................................................................................64 Systems Development Methodologies ........................................................65 Model #1: Informal Approach — Code First, Fix Later ....................65 Model #2: Traditional Approach — Waterfall ..................................67 Model #3: Rapid Prototyping/Rapid Application Development (RAD) ..............................................................................................68 Model #4: Agile Methodologies ........................................................68 Model #5: Rational Unified Process (RUP) ......................................71 Model #6: Out of Scope/Embedded Project .....................................73 Project Dynamics ......................................................................................73 Why Do Projects Fail? ......................................................................73 Planning the Work ...........................................................................75 Project Risk Assessment ....................................................................76 Scope of the Job — The Program Management Office’s (PMO) Dilemma ....................................................................................................81 A Practitioner’s Perspective ........................................................................83 The Future of Project Management ............................................................86 References ..................................................................................................86 5 Creating Good Enough Code ...............................................................89 How Do You Do Good Code? ...................................................................89 How Important Are Coding Standards? ...................................................90 Toolboxes Are Useful .................................................................................91 Some Example Guidelines .........................................................................91 Release Philosophy .....................................................................................91 Porting .......................................................................................................92 The Ultimate Answer — Hire Good Developers and Keep Them Happy ...93 References ..................................................................................................93 Contents n ix 6 Enterprise Architecture ........................................................................95 Develop the Business Model ......................................................................98 Business Drivers and Selling the Enterprise Architecture (EA) ................100 Information Architecture and Process Modeling Perspective ...................101 Technology Architecture Perspective .......................................................105 Road Map to an Effective Architecture ....................................................107 Business Architecture......................................................................107 IT Architecture ...............................................................................108 Pushing Out the EA — Communicating with Management and Employees ................................................................................................109 The Outsourcing Alternative ...........................................................110 Tools ...............................................................................................111 Enforcement and Governance of the EA .........................................111 Architectural Maturity .............................................................................114 Putting It All Together ............................................................................116 References ................................................................................................118 7 Mergers and Acquisitions ...................................................................119 The CIO’s Golden Opportunity...............................................................120 The CIO’s Two Responsibilities ...............................................................120 Responsibility #1: Due Diligence ....................................................120 Staff Due Diligence ...............................................................123 Responsibility #2: IT Integration ....................................................124 One Approach to Integration .................................................126 Success Factors .........................................................................................128 References ................................................................................................128 8 Sourcing .............................................................................................129 The Pendulum of Opinion .......................................................................129 The Traditional Pros and Cons ................................................................130 Pro — From the Provider’s Perspective ...........................................130 Con — From the Customer’s Perspective .......................................131 To Outsource or Not to Outsource? ........................................................133 Xshoring ..................................................................................................134 The Proximity Factor ......................................................................135 Keeping Xshoring and Sourcing in Perspective ...............................136 Sourcing Is More Than IT Services .................................................137 References ................................................................................................137 9 Business Intelligence and Analytics ...................................................139 Getting Started — Selling Business Intelligence (BI) ...............................140 Value Proposition ............................................................................141 Core Components ....................................................................................145