finding it value – getting it right
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Nov-08 ConfidentialConfidential 1
Finding IT value – getting it rightFinding IT value – getting it right
Nov-08 Confidential Slide 2/23
SondageSondage
Survey How many people
have Blackberrys? How many people are
pleased with there IT department?
How many people feel that they get better service from IT than Finance and HR?
IT Jeopardy In 6 months
31,000 2,100
40,000 $10 billion ± $3 billion +
Nov-08 Confidential Slide 3/23
TopicsTopics
IT and its weaker sibling IM, are pervasive and ubiquitous.
Nor does it (IT) always work.
The prospect and promise of Web 2.0, with its progeny - Web 3.0
Is IT a sink hole? a tsunami? or simply a
rudderless ship? How do we measure
the value of such a large and critical part of overall operations and the budget?
Nov-08 Confidential Slide 4/23
AgendaAgenda
1. Temperature check The sorry state IM is not IT
2. Stratagems Portfolio Management Val IT Voodoo/Holistic accounting
3. Questions and Answers
Nov-08 Confidential Slide 5/23
Big QuestionsBig Questions
What is the value of Class A building Phones
1 telephone 2 telephones 2 m telephones
A Blackberry A laptop An RDIMS repository
Frameworks Value = Benefits Value = Benefits –
Costs CoBIT
Is IT doing the right things
Is IT doing them right? Is IT doing them well? Are benefits being
realised
Nov-08 Confidential Slide 6/23
IT Governance Institute IT Governance Institute
“A 2002 Gartner survey found that 20% of all IT expenditures is wasted
A 2004 IBM survey of Fortune 1000 CIOs reported a believe of 40% of IT Spending brought no return
A 2006 Standish Group survey found 35% of all IT projects succeeded. (the rest either challenged or failed)
Other surveys 20-70% of large scale
investments wasted, challenged or fails
8% of IT budget brings value
Of 124 financial executives, 80% did not encourage value creation
Nov-08 Confidential Slide 7/23
Everyone is doing it (IT) Everyone is doing it (IT)
Users
1. Super users (HR, FI)
2. Computer analysts
3. Document managers
4. Record managers
5. Archivists
6. Librarians
7. Web masters
Vendors
1. Consultants
2. Contractors
3. Global firms
Trickle Down IT
1. Web 2.0
2. convergence
Nov-08 Confidential Slide 8/23
Moscella’s CurvesMoscella’s Curves
1970 1980 1990 2000 2010 2020 2030
10
100
1,000
3,000#
of
Use
rs ‘
000,
000
SystemsCentric PC
Centric
NetworkCentric
ContentCentric
Grosch’s Law
Moore’s Law
Metcalfe’s LawGilder’s Law
Nov-08 Confidential Slide 9/23
IT is never enoughIT is never enough
IT has been seen as new infrastructure, similar to water, hydro, trail way and telephone systems. The more people make use of, the more benefits
(value) people will gain; Similar to other types of infrastructures, it will be
absolute necessary and somehow “hidden” from people’s daily life.
It’s more widely and deeply involved in people’s life than any other types of infrastructure
It’s more complex than other types of infrastructure and therefore harder to operate and eventually cost more.
Computing and IT/IM and utilities in human civilization history is still in baby ages.
Nov-08 Confidential Slide 10/23
GOC IT SpendGOC IT Spend
Category 2004-2005 2005-2006 2006-2007
$ Million $ Million $ Million
Computing Hardware /Software $939.8 $844.8 $738.2
Computing Services $187.1 $199.0 $26.2
Communications Equipment $381.5 $419.7 $401.3
Communications Services $473.0 $488.6 $562.1
Professional Services $490.4 $538.6 $717.7
Maintenance $401.4 $394.5 $409.2
Total $2,873.2 $2,885.2 $2,859.4
Nov-08 Confidential Slide 11/23
Gross CalculationGross Calculation
40,000 FTEs 7,000 single shingles ≈ 15%-20% of GoC
operating Budget
SWE $4,000
O&M $1,715
Capital $1,140
Amortisation $1,000
Accommodation $1,000
Misc $500
∑ $9,355
Nov-08 Confidential Slide 12/23
Sourcing StrategySourcing Strategy
4 Different Options….4 Different Options….•
Acc
ou
nta
bil
ity
•V
isib
ilit
y•
Ris
k
Smart Buy• Cost certainty• Cost visibility• Accountability• Contractual commitment• Results based
Fixed Cost Variable Cost
Build
Buy• Out Source• Systems
integration
• Partner
• Consulting
• Contracting• Staffing
• In Source• Employees
Cheap Buy• Best Effort • Inputs based
Option 1 Option 2
Option 3
clie
nt
shar
ed
risk
Nov-08 Confidential Slide 13/23
The State of the UnionThe State of the Union
The Good
Methodologies• CoBIT• ITIL• RUP• CMM• PMBoK
The Bad The Ugly
• ½ life ≈ 3 years• No unified
theory• # service firms• 85% product
innovation fails• No cost
sensitivity
• No sourcing strategy
• No metrics• Procurement• No visibility of
it all• No benefits
harness
Nov-08 Confidential Slide 14/23
““IT Doesn’t Matter”IT Doesn’t Matter”
IT is done as Nicholas Carr has pointed out in the Harvard Business Review. IT – the raw infrastructure - is no longer a source of competitive advantage and in fact is a commodity.
Nov-08 Confidential Slide 15/23
Mastering the Three Worlds of ITMastering the Three Worlds of IT
3 critical responsibilities wrt IT choose technologies for the
true needs of the business smooth the adoption of those
technologies encourage their exploitation
by leveraging already standardized data and work flows.
Function IT spreadsheet and word-
processing applications--that streamline individual tasks.
Network IT capabilities like e-mail,
instant messaging, and blogs and helps people communicate with one another.
Enterprise IT customer resource
management and supply chain management
re-create interactions between groups of workers or with business partners.
Nov-08 Confidential Slide 16/23
Six IT Decisions Your IT People Six IT Decisions Your IT People Shouldn't MakeShouldn't Make
Managers complain that they don't see much business value from the high-priced systems they install, but they don't understand the technology well enough to manage it in detail. So they often leave IT people to make, by default, choices that affect the company's business strategy.
six key IT decisions. Strategy
How much should we spend on IT?
Which business processes should receive our IT dollars?
Which IT capabilities need to be companywide?
Execution How good do our IT
services really need to be? Which security and privacy
risks will we accept? Whom do we blame if an IT
initiative fails?
Nov-08 Confidential Slide 17/23
Overall SituationOverall Situation
Resources Not enough money
New projects Capital
Not enough people IT is increasingly
complex No difference
Discretionary vs. non Stop or go
90-100% of budget for ongoing
Can’t develop capacity or capability for new technologies
Nov-08 Confidential Slide 18/23
Portfolio ManagementPortfolio Management
1. What are we doing?
2. How much does it all cost?
3. What should we stop? Continue?
4. What is the resource gap - ±? 1. Does the
proposed activity make sense?
2. Does the portfolio of activities make sense?
3. Can we be successful?
1. Assign priorities2. Plan activities
± gap
Project/Support proposals
stopcontinue
Prioritized Recommendations
Stage 1 Stage 2 Stage 3
Nov-08 Confidential Slide 19/23
Portfolio ManagementPortfolio Management
Stage 1Preliminary Scrub-down
· Scrub-down all existing activity: costs, characteristics, etc. · Use Service Catalogue as input· Use criteria in Report Card: determine what to stop, what to continue
·
··
Stage 2.1Activity Review
· Does the activity make sense ?
7 56
121110
8 4
21
9 3
One Time
·
··
Stage 2.2Portfolio Review
· Does the suite of activities (portfolio) make sense ?
Stage 2.3Resource Review
· Can we afford it?· Do we have any
resource gaps ?
Stage 3Assign Priorities
· Assign priorities using the Prioritization Tool· Complete resourcing Plan
7 56
121110
8 4
21
9 3
OngoingQuarterly
7 56
121110
8 4
21
9 3
OngoingQuarterly
Use Report Card as criteria
Nov-08 Confidential Slide 20/23
Portfolio ManagementPortfolio Management
RunRun EnhanceEnhance TransformTransform
NatureNature
ViewView
AnalogyAnalogy
Break & Fix Repairs “911” + ”411”
Operational
Fix Old ParadigmChange light bulb
Improve current process/ functionality
Incremental change in systems
Wholesale change Change both Systems &
People
Tactical Strategic
New Paradigm Change the lighting system
Improve Old Paradigm Change light fixture
Non Discretionary Discretionary Discretionary
Nov-08 Confidential Slide 21/23
Portfolio ManagementPortfolio Management
TimeframeTimeframe
ActionAction
Proxy Proxy ServiceService
Immediate action < 1 month Patch and/or
workarounds No new programming No training required
Corrective Must fix it, now
Business Business ModelModel
short run 1- 6 months
long run > 6 months
Adaptive Should do it, soon Need to evaluate when to
make the change
Perfective Need to evaluate how to
make the change
Small process/programming changes
Minimal training may be required
New design/ technology/ service
New infrastructure Training required
No Change Some change in
business process New Governance/
Organization Model
RunRun EnhanceEnhance TransformTransform
Nov-08 Confidential Slide 22/23
22
Val ITVal IT™™
Proven practices and techniques for evaluating and managing investment in business change and innovation
Val IT helps executives: Increase the probability of picking winners Increase the likelihood of IT investment success Reduce surprises from IT cost and delivery date
overruns Reduce costs due to inefficient investments
Nov-08 Confidential Slide 23/23
23
Why Val IT™?Why Val IT™?
An organisation needs stronger governance over IT investments if: IT investments are not supporting the business strategy
or providing expected value There are too many projects, resulting in inefficient use
of resources Projects often are delayed, run over budget, and/or do
not provide the needed benefits There is an inability to cancel projects when necessary It needs to ensure compliance to industry or
governmental regulations
Nov-08 Confidential Slide 24/23
24
A Comprehensive ApproachA Comprehensive Approach
Many organisations practice elements of Val IT™ already Val IT™ provides a consistent, repeatable and
comprehensive approach IT and business become equal shareholders because Val
IT™ helps management to answer these key questions:*
The strategic question
The architecture question
The value question
The delivery question
* Based on the ‘Four Ares” as described by John Thorp in his book The Information Paradox, written jointly with Fujitsu, first published in 1998 and revised in 2003
Nov-08 Confidential Slide 25/23
25
The Seven Principles of Val ITThe Seven Principles of Val IT™™
IT-enabled investments will:1. Be managed as a portfolio
of investments
2. Include the full scope of activities required to achieve business value
3. Be managed through their full economic life cycle
Value delivery practices will:1. Recognise different
categories of investments to be evaluated and managed differently
2. Define and monitor key metrics and respond quickly to any changes or deviations
3. Engage all stakeholders and assign appropriate accountability for delivery of capabilities and realisation of business benefits
4. Be continually monitored, evaluated and improved
Nov-08 Confidential Slide 26/23
26
How Val ITHow Val IT™™ Works Works
Establish informed andcommitted leadership.
Align and integrate value management with enterprise financial planning.
Define andimplement processes.
Establish effectivegovernance monitoring.
Define portfolio characteristics.
Continuously improve value management practices.
Establish strategic directionand target investment mix.
Evaluate and selectprogrammes to fund.
Determine the availability and sources of funds.
Monitor and reporton investment
portfolio performance.
Manage the availabilityof human resources.
Optimise investmentportfolio performance.
Understand the candidate programme and implementation options.
Develop the detailed candidate
programme business case.
Develop the programme plan.
Launch and managethe programme.
Develop full life cycle costsand benefits.
Update operationalIT portfolios.
Develop and evaluate the initial programme concept
business case.
Update the business case. Monitor and report onthe programme. Retire the programme.
Value Governance(VG)
Portfolio Management
(PM)
Investment Management
(IM)
Nov-08 Confidential Slide 27/23
Voodoo/Holistic Accounting Voodoo/Holistic Accounting
Recognition IT (and IM) enables
transformation who pays?
Can costs and benefits be measured and realised?
1. Make costs fully visible Portfolio Management
2. Recognise elements R&D IP creation
3. Charge program for new stuff
4. Charge IT infrastructure costs utility
Nov-08 Confidential Slide 28/23
Creating IT ValueCreating IT Value
Decrease costsDecrease costs Sourcing strategy
Some buy, some build Smart buy vs. cheap
buy Fix procurement mess
Delays Incumbency Internet dating Etc.
Increase benefitsIncrease benefits Governance
CoBIT Val IT Make program
accountable More judicious use of
IT Centralisation is not
the answer
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