5 The Empirical Setting
5.2 The IT project prioritization process
5.2.2 Overview of the IT project prioritization process in the organization
The prioritization process takes place at two different levels. First, at the System Steering Group (SSG) level projects from a specific department or a number of directly related departments are gathered and prioritized. Second, at the IT committee level, the prioritized lists from the SSGs are consolidated and the budget is distributed. This project prioritization process is conducted as part of IT governance. Figure 16 presents the official IT governance structure that is in control of resource allocation, budget and development planning. One of the development directors uses the government model to illustrate the size and complexity of the organization and its governance structure:
An organization this size is like looking at a government setup. We have so many interrelations with governmental bodies that all kinds of changes have to be passed through very formalized channels... (Interview with Development Director 4)
The system working groups (SWG) are responsible for selecting, prioritizing and approving operating and maintenance tasks, but not project development, in the system management areas of a department according to their resources. The task budget is granted by the corresponding SSG after the approval of the IT committee.
Figure 16: The Group IT governance model
The difference between a task and a project is the scale of work to be performed. Thus, tasks are smaller in size both in terms of resources and budget. A task has a budget of up to 3 million DKK and can be prioritized by the SWG or the development director/development manager jointly with a business sponsor. A project, on the other hand, has a budget over 3 million DKK and requires the approval of the SSG to which it belongs at a minimum, and the approval of the executive board if it exceeds 20 million DKK.
The SSGs draw up, prioritize and advocate for a list of projects to be implemented for the coming year. The number of projects on the list varies depending on size of the departments involved in terms of employees but also on the needs of the business units that it supports. The list serves the interest of a specific business area in terms of IT systems for the coming year. The members of a SSG are the development manager or
managers, the director of the departments that are under the specific SSG, and the development directors of other interrelated areas. Additionally, business representatives sponsoring the proposed projects, IT employees specialized in the respective domains, and the CIO and the Chief Operation Officer (COO) of the Danske Bank Group are members of a SSG. In most of the SSGs a senior business representative (or the COO or the CIO) serves as chairman. There are 21 SSGs governing the 38 departments of the 7 developments areas of the organization. Table 10 shows the relationship between the organizational structure and the governance structure.
Once the SSGs have approved the list of projects for the following year, the list is forwarded to the project portfolio management office (PPMO), which consists of three portfolio managers.
The PPMO is in charge of gathering the lists of prioritized projects from the different SSGs and provides a consolidated list of projects to the IT committee. The committee is the final approval body of the IT project portfolio for Group IT, and its members conduct project prioritization across the different SSGs. The committee has six members: the CIO, the COO, the chief financial officer (CFO), the senior representative of the business units and two members of the executive board. The members of the PPMO are also present at the meeting to support the committee with information provision.
The IT committee members meet for this activity during the last quarter of the year.
During the IT committee meeting all SSG chairmen together with the development directors provide a 30 minute presentation in which they explain why the organization should invest in their SSG and approve projects that they have proposed. The total budget for the coming year has been roughly decided before the meeting by the executive board. This has an impact on the prioritization process of the projects in the
SSGs. The governance structure does not prescribe at this stage how the decision makers should prioritize between SSGs or between the projects of each SSG.
Development area Corresponding system
steering groups Department Retail solutions Real Estate Finance Real Estate Finance
Day2Day Finance Day2Day Finance
Channels Card Systems
Branch Systems Retail eBanking
CRM CRM systems
Business controlling systems
Loan Systems Loan Systems
Credit Systems Credit systems Finance, Accounting &
Management Information Systems
Risk Management Systems Group Finance Systems Business Intelligence Systems DW/BI Foundation Data Warehouse
Business Intelligence Competency Center Corporate development Asset Finance Asset Finance
Asset Management Asset Management Corporate Back Office Treasury
Corporate e-Banking Corporate eBanking Corporate Front Office Custody
Investment Forex – Exchange rates
Securities Business infrastructure
systems
Foundation Customer & Account Systems Price Systems
Document Systems Document Systems HR & Organisation HR systems Payment Systems Payment Systems IT Service Management Technology & Demand
Management
Technology Management Knowledge Systems IT Service Management IT Operational Excellence
IT Infrastructure and Service Management Support
Demand Management Pension & Insurance Pension & Insurance Bank Pension
IT Life and Pension IT Development
Processes & Tools
Development Processes Architecture Business Development Development Tools and Databases Front End and Microsoft Tools Management Processes Step 123
Table 10: The system steering groups (SSGs) and the development areas they serve
Each year the number of projects that have to be prioritized by the IT committee varies between approximately 150 and 400 IT projects. Specifically, in 2010 the SSGs submitted a total of 318 projects for prioritization of which the IT committee approved 130 for the year 2011. Roughly 1,500 out of 2,200 employees are allocated to these projects that compose the development activities in Group IT. The rest are assigned to maintenance and operational activities.
The outcome of the project prioritization process is a list of the approved IT projects that will run in the coming calendar year in the Group IT. Within the organization, the project prioritization process and its outcome are referred to as the development plan.
Each SSG has its own development plan. The SSGs and the IT committee update the development three times a year, in Q1, Q2 and Q3. In this study, I observed the prioritization process for 2011 in the organization from the beginning of 2010 through to an organizational portfolio being selected and ready to be executed in 2011.
The SSG members meet four times per year, i.e., quarterly (see Table 11 for the timeline). During the Q1, Q2 and Q3 meetings the SSG members receive an update on the progress of the current year’s development plan and any changes, problems or delays so that they can act appropriately. The members of a SSG are the development manager, the development directors of the department or departments governed by the specific SSG and the development directors of any interrelated areas. Additionally, several business representatives sponsoring the proposed projects and the CIO participate in the SSG. Moreover, in these meetings, the members of the SSG revisit their strategic directions and align them with the organizational strategic focus areas.
The development manager, who serves as the secretary of a SSG, is responsible for driving the prioritization process within it. In the Q3 meeting, the development manager presents a draft list with projects for the next year and invites the SSG members into the discussion. Finally, in the Q4 meeting the SSG members approve the prioritization list to be forwarded to the IT committee for the final approval.
1st Meeting (February – March)
2nd meeting (May-June)
3rd meeting
(August-September)
4th meeting (September-October) SSG
agenda
Q1 rollover of the current development plan.
Q2 rollover of the current development plan.
Q3 rollover of the current development plan.
Project prioritization for development plan.
Approval of development plan for next year and delivery to PPMO.
Table 11: Timeline for the development plan at the SSG level
Once the SSG members have approved the prioritized list for the following year, the list is forwarded to the project portfolio managers at the PPMO. Several activities take place at the PPMO level. First, all projects are inserted into a spread sheet (see Appendix F for an example) along with information such as net present value, costs, number of employees, benefits, schedule, sub-deliveries, project phase, releases, business drivers and strategic focus area for each project in the list. The portfolio managers then analyse the whole portfolio and provide this information as an input to the IT committee members. The IT committee meets six times per year. Each quarter there is an update meeting on the progress of the running projects of each SSG. Budget changes are approved or denied and projects are reprioritized as necessary. Two additional meetings are conducted in which the agenda includes defining strategic focus areas for Group IT. Table 12 presents the timeline of the prioritization process at the IT committee level. In the last meeting the committee meets in order to prioritize and approve the final IT portfolio of projects for the year to come.
1st meeting (March)
2nd meeting (May)
3rd meeting (June)
4th meeting (August)
5th meeting (Septemb er)
6th meeting (October)
IT committee agenda
Update of the project portfolio (Q1).
Half-year update of the project portfolio (Q2).
Strategy and focus areas.
Update of the project portfolio (Q3)
Business five year plans.
Prioritizati on of projects for next year.
Table 12: Timeline of the project prioritization process at the IT committee Level
In brief, the prioritization of projects is a bottom-up process in which project ideas are first gathered and filtered by the SWGs and by the development manager, and further analyzed and prioritized in the SSGs. Finally, the IT committee finally prioritizes within and between the SSGs portfolios, creating the final organizational portfolio of projects for the next year. This final portfolio partly establishes the final budget, an indication of which has already been given by the executive board of Danske Bank Group for the coming year that will be distributed to the SSGs which in turn will distribute to their SWGs. In 2010 the executive board declared that the IT budget for 2011 would be decreased by 4% from the previous year. However, after the final decision at the IT committee meeting the budget was decreased by only 3%, as more projects were considered important. The distribution of the budget, which follows directly after the final decision of the IT committee, is a top-down initiative. Figure 17 shows the bottom up nature of the IT project prioritization and the top-down nature of the budget distribution process.
Figure 17: The bottom-up nature of IT project prioritization and top-down nature of budget distribution
Having presented an overview of the IT project prioritization process in the organization and its governance structure, in the next section I provide a detailed description of the BI output that is infused into this process and the systems and applications that are used in order to produce this output.