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  • CFO.com | US

Red Light/Green Light for Tech Spending

For finance executives, better controls on technology spending start with better controls on which projects get the go-ahead.

When Libbie Bock weighs the costs and benefits of technology projects at The Hartford Financial Services Group Inc., she gets closer to the process than most of her peers. Bock is chief financial officer of The Hartford’s 2,000 strong information-technology unit — literally a CFO of IT. In that atypical role she rides herd on the company’s restructured governance processes for approving projects, from a new underwriting application to a full-blown claims administration solution.

Like many other companies, The Hartford ($22.7 billion in 2004 revenue) sought a more balanced view of IT projects and a methodology for ranking and approving them. “Any investment in a project over a couple hundred thousand dollars must go through a pretty rigorous process now,” says Bock from the insurer’s Connecticut headquarters.

Each month more than 20 proposed projects that require technology resources land on Bock’s desk, generally sent over by business managers but sometimes passed upward by the IT staff. Before overhauling its project governance structure last December, IT “acted more like an order taker and not a consultative partner,” says Bock. Today, she notes, “We spend nearly as much time assessing the business value of projects as we do executing them.”

Managing the Outcome Before Measuring ROI

There are three phases in the life of an IT project: 1) project development, which begins with articulating a business problem and a possible IT solution and extends through the building of the business case; 2) implementation, from selecting the vendor to the project’s “go live” date; and 3) assessment, when the project’s effectiveness and return on investment will later be measured and analyzed.

In recent years ROI has attracted more than its share of attention, but for finance executives who oversee technology costs, that first phase — when business needs are evaluated against the efficacy of IT solutions — is the most crucial. The project development phase “is where all the costs and benefits are explicitly, if not exhaustively, detailed to ensure management of the expected outcome once dollars are invested,” says Greg Balestrero, chief executive officer of the Project Management Institute, a non-profit advocacy association for the project management profession.

During that phase, business leaders define the business case for the project and estimate the expected value it will deliver. A project leader is selected, and he or she assembles a team that develops a budget, initiates the vendor-selection process, and frames a comprehensive view of project risks and how to mitigate them. “This is not just about project initiation,” says Balestrero, “it’s about aligning projects with strategy and then selecting from a portfolio of strategic projects the major initiatives that will propel the organization forward.”

It’s prudent, then, to recognize that ideas for IT projects “can come from anywhere, but they’re not all good places,” says Forrester Research analyst Margo Visitacion. A chief executive might have a “eureka moment” in the middle of a symposium or while reading a magazine. A manager may look at the business’s competitors (or listen to its customers) and recognize the need to do something better, faster, or simply different. And “some ideas bubble up from IT,” which has its antennae out for the next great technological breakthrough, adds Visitacion.

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