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Applying IT ResearchFriday 31 May 2002
Neil McCaffrey
research consulting measurement community news
Page 2Sydney University | Applying IT Research| 31 May 2002 | Entire contents © 2002 Gartner, Inc. All rights reserved.
Agenda
What is (IT) consulting?
Why use research?
Examples
Page 3Sydney University | Applying IT Research| 31 May 2002 | Entire contents © 2002 Gartner, Inc. All rights reserved.
What is (IT) Consulting?
Page 4Sydney University | Applying IT Research| 31 May 2002 | Entire contents © 2002 Gartner, Inc. All rights reserved.
What is consulting?
Consulting Advice Should Be:Consulting Advice Should Be:
Based on fact
Universally understood Relevant to the issue at hand
Perceptive
Page 5Sydney University | Applying IT Research| 31 May 2002 | Entire contents © 2002 Gartner, Inc. All rights reserved.
The Consulting Process — It’s just problem solving!
Develop situation, complication and ?
Propose hypothesis
Prove/disprove hypothesis
Present findings
Page 6Sydney University | Applying IT Research| 31 May 2002 | Entire contents © 2002 Gartner, Inc. All rights reserved.
Engagements usually address one or more of four questions
What should we do?
How should we do it?
Should we do it?
Why did it happen?
Key questions ...
Source: Barbara Minto; The Minto Pyramid Principle
How?
Why?
How do you know?
… then ...
How? — Steps
Why? — Reasons
How do you know? — Proofs
… by
Page 7Sydney University | Applying IT Research| 31 May 2002 | Entire contents © 2002 Gartner, Inc. All rights reserved.
IT context — the IS Management Process
Set DirectionImplement Plan
Manage Services
Review
Manage demand
How can we be more effective?
Manage supply
How do we do things
efficiently?
IS Management process
Key issue
Responsibility
Delivery
Corporate
IT&T
BU’s IT&T
ESP
Page 8Sydney University | Applying IT Research| 31 May 2002 | Entire contents © 2002 Gartner, Inc. All rights reserved.
Why use Research?
Page 9Sydney University | Applying IT Research| 31 May 2002 | Entire contents © 2002 Gartner, Inc. All rights reserved.
Research can provide answers to the “How? Why? How do you know?”
What should we do?
How should we do it?
Should we do it?
Why did it happen?
Key questions ...
Source: Barbara Minto; The Minto Pyramid Principle
How?
Why?
How do you know?
… then ...
How? — Steps
Why? — Reasons
How do you know? — Proofs
… by
Well other organisations have done it like this...
How? — Steps
Product xyz provides the required functionality
Why? — Reasons
All of the 375 clients that have implemented this solution have finished in under three months
How do you know? — Proofs
Page 10Sydney University | Applying IT Research| 31 May 2002 | Entire contents © 2002 Gartner, Inc. All rights reserved.
The type of research will vary upon the stage in the process
Set DirectionImplement Plan
Manage Services
ReviewIS Management process
TrendsForecasts
FrameworksApproaches
Estimating tools
ProcessesMethodologies
MetricsStandards
Page 11Sydney University | Applying IT Research| 31 May 2002 | Entire contents © 2002 Gartner, Inc. All rights reserved.
Examples
Page 12Sydney University | Applying IT Research| 31 May 2002 | Entire contents © 2002 Gartner, Inc. All rights reserved.
Telecom 12.70 $10.4K 72Insurance 9.42 17.4K 67Fin./Banking 8.66 19.1K 76Services 6.47 7.1K 78Retail/Wholesale 4.54 3.1K 73Hospitals 4.53 1.7K 72Utilities 3.86 5.6K 77Transportation 3.30 1.4K 77Manufacturing 2.99 4.1K 76
Total IT Spending as a Percent of Revenue will continue to increase highlighting a need to understand and apply investments strategically
IT Spending % Revenue
Central IS Budget Per Employee
IT Baseline/ Infrastructure
as % IS Budget
Key Technology Discontinuities
S/360Mainframe
PC-Client/Server
Web-Internet
1970
10.0%
Accelerating Business Unit Spending
North America
Western Europe
Asia/Pacific (Dev.Economies)5.0%
020102000199019801960
Source: US Department of Commerce/Gartner
Page 13Sydney University | Applying IT Research| 31 May 2002 | Entire contents © 2002 Gartner, Inc. All rights reserved.
Supply Chain Management in Transition
Nonlinear Supply ChainNonlinear Supply ChainBasis for Collaborative InteractionsBasis for Collaborative Interactions
InfrastructureInfrastructure
OEMOEM
ResellerReseller
C-CommerceC-CommerceNear real-timeNear real-time
Rich informationRich informationMany-to-manyMany-to-many
WorkflowWorkflowEnd UserEnd User
End UserEnd User
End
Use
rE
nd U
ser End U
serE
nd User
SupplierSupplier ContractContractManufacturerManufacturer
Linear Supply ChainLinear Supply Chain
E-CommerceE-CommerceManual (mail, fax, phone)Manual (mail, fax, phone)EDIEDIOne-to-oneOne-to-one
ManufacturerManufacturer
DistributorDistributor
RetailerRetailer
SupplierSupplier
End UserEnd User
Infra-structure
Infra-structure
DistributorDistributor
Page 14Sydney University | Applying IT Research| 31 May 2002 | Entire contents © 2002 Gartner, Inc. All rights reserved.
Independent Work
Mobile/Fully Digital
Reliance on Paperand Location
Office = LocationBandwidth rulesVisual interfacesPhysical environment
Office = ConnectionUbiquitous accessStandardised interfaceService-based
Office = AttentionWearable or mobile devicesWireless connectivityInstant-on
Office = CommunityVirtual communitiesWorkflowMonitoring and access
Need for Supervision
Office 2010 — The Wall Comes Down as inter-organisation and inter-site collaboration becomes the norm
Page 15Sydney University | Applying IT Research| 31 May 2002 | Entire contents © 2002 Gartner, Inc. All rights reserved.
Technologies to Keep on the ‘Radar Screen’
1) Automatic platform 1) Automatic platform adjustment as adjustment as generally adopted generally adopted standards. standards. Action: Action: Drive cross-LOB data Drive cross-LOB data synergies.synergies.
6) Digital signatures are a top 10 cost saver 6) Digital signatures are a top 10 cost saver in > 50% of enterprises. in > 50% of enterprises. Action: Focus on policies as much Action: Focus on policies as much as technologies, use internally sooner as technologies, use internally sooner rather than later. rather than later.
4) Transactional data 4) Transactional data increases 20 to 30 times.increases 20 to 30 times.Action: “Rearchitect”Action: “Rearchitect”B/O for scalability.B/O for scalability.
2) 80% of corporate 2) 80% of corporate customer interaction is customer interaction is electronic. electronic. Action: Invest in staff Action: Invest in staff training and prepare a training and prepare a labor redeployment labor redeployment strategy.strategy.
3) Privacy and security3) Privacy and securityissues begin a period issues begin a period of intense political of intense political debate. debate. Action: Drive an Action: Drive an industry consensus and industry consensus and lobby.lobby.
5) Decision support staffing triples 5) Decision support staffing triples over 2000 levels. over 2000 levels. Action: Rethink hiring strategy Action: Rethink hiring strategy and skills inventory.and skills inventory.
7) Bandwidth increases 7) Bandwidth increases 100 fold over 2000 levels, 100 fold over 2000 levels, but demand increases more. but demand increases more. Action: Reinforce functionality Action: Reinforce functionality over “featurality.over “featurality.””
8) More than 75% 8) More than 75% of customer feedback of customer feedback analysis is automated.analysis is automated.Action: Guard the Action: Guard the “crown jewels.”“crown jewels.”
20042004 20062006 200820082002200220002000 20102010
Page 16Sydney University | Applying IT Research| 31 May 2002 | Entire contents © 2002 Gartner, Inc. All rights reserved.
Transaction volumes/ values are also predicted to grow aggressively — has the customer base been profiled against early adopter industry verticals and product types?
0
10
20
30
40
50
60
70
80
90
100
• Few companies transact regularly (4 txns is an anecdotal hurdle rate)
• Enterprises that purchase more than 1% of inputs electronically are almost nil
• Substantial portion of activity is “sourcing” with few actual transactions
Man
ufac
turi
ng
Fin
anci
alS
ervi
ces
Dis
trib
utio
n &
Ret
ail
Bus
ines
s S
ervi
ces
All
ent
erpr
ises
To purchase To sell
%
Hong Kong & Singapore e-Business Survey(1)
Source (1) Hong Kong and Singapore medium/large enterprise e-marketplace usage survey Q4 00 (203 enterprises) (2) Asia Pacific e-Marketplaces survey
% of companies that have used marketplaces
0 5 10 15
Textile mills
Desk/Off ice supplies
Logistics/SCM/Warehouse Services
Industrial machinery and equipment
Paper
rinting and publishing
Textiles and clothing
Construction materials
Chemicals
Consumer electronics
Top 10 transaction value by product type (%)(2)
• The most popular commodities to date that have been traded in e-marketplaces are consumer electronics, chemicals and construction materials
• The number one position of consumer electronics correlates with a general early adoption of new technologies by this industry (this is a target industry for Ariba)
• Has the correlation between heavy users of trade finance such as retailers and the food industry and their rate of technology adoption been tested?
Page 17Sydney University | Applying IT Research| 31 May 2002 | Entire contents © 2002 Gartner, Inc. All rights reserved.
Each IT function has a different level of complexity and business value to the Service Provider and Service Receiver
Some IT functions have now become a standardised commodity and are of lower of business value (e.g. Data Centre Operations) than other functions (e.g. Systems Integration). These lower value functions can be easily outsourced to one of the many providers which exist in the market without compromising business value. As the complexity of the IT function increases, so to does the value to the business and the relationship complexity which is established to manage the delivery of the function. Each organisation will have a different positioning of its IT functions.
RELATIONSHIP COMPLEXITY
BU
SIN
ES
S V
AL
UE
DesktopOperations
HelpDeskData
Center Operations
ApplicationsDevelopment
ITConsulting
BusinessContinuation
BusinessStrategy
Consulting
SystemsIntegration
ApplicationManagement
Asset Management
NetworkOperations
Page 18Sydney University | Applying IT Research| 31 May 2002 | Entire contents © 2002 Gartner, Inc. All rights reserved.
Gartner Research: ERP II Magic Quadrant — Service Intensive
VisionariesNiche Players
Challengers Leaders
As of 5/01
J.D. Edwards
OraclePeopleSoft
SAPLawson
Epicor
Great PlainsNavison
Sys Union
Sage
Agresso
VisionariesNiche Players
Challengers Leaders
Ability toExecute
As of 5/01
J.D. Edwards
Oracle
PeopleSoft
SAP
Lawson
CODAQSP
Walker
Completeness of Vision
Large scale solutions Medium scale solutions
Page 19Sydney University | Applying IT Research| 31 May 2002 | Entire contents © 2002 Gartner, Inc. All rights reserved.
GlobalSystems
Product line variety
Manufacturing complexity
Global synergies
Site age
Corporate ownership
• Multiple platforms
• Multiple model variants• Few platforms/model variants
• Large domestic assembly (CBU)
• CKD, 60% local content
• High content/process overlap
• Low content/process overlap
• Mature (brown field)
• New (green field)
• Wholly owned subsidiary
• Associate company
A review of reference sites showed five key drivers in a bespoke/ERP decision
ERP(SAP R/3)
• Full SUP import
• Joint venture
Page 20Sydney University | Applying IT Research| 31 May 2002 | Entire contents © 2002 Gartner, Inc. All rights reserved.
Example — Sourcing Strategy
Data Center
Desktop
Networks
Voice
Applications
IT Service Effective
Service Desk
StrategicValue
Efficient RiskExternalSourcing
HighMedium LowSourcing Decision Matrix
Core vs Non CoreCompetencies**
Core
NonStrategic
Non-core
Strategic Value
Outsource
Retain
Outsourceor Spin Off Business
Outsourceor Re-skill/
Re-toolStrategic
Utility(Cost Focus)
FrontierEnhancement(Productivity Focus)
Time andMaterials Cost Plus Business
Benefit-BasedShared
Risk/RewardGain ShareFixed PriceFee for
Service
Single Provider
Best of
Breed
Branded
Services
Joint Ventur
e
InsourceGeneralPrime
Deal Type
Governance Model
Pricing Model
A sourcing strategy identifies how internal and external resources will be identified and applied to support the IT strategy. The sourcing decision is based on a range of criteria but primarily it comes down to ability to execute the required IT strategy and the efficiency of existing operations. The ITOA undertaken in Step 2.1 will determine how efficient existing IT operations are.
For any functions being outsourced, Gartner has identified 3 types of deals an organisation can enter into. In addition, there are 7 governance models and 7 pricing models that can be selected to suit an organisation’s business objectives. In combination these form an outsourcing strategy. This assessment will be performed for Tata Steel’s IT functions.
Once it has been determined what to outsource vs retain an organisational impact assessment will be undertaken using Gartner’s IS-Lite framework.
Page 21Sydney University | Applying IT Research| 31 May 2002 | Entire contents © 2002 Gartner, Inc. All rights reserved.
Originate Negotiate Protect Track/React
Fulfill Settle
Authentication,qualification
Credit verificationCertificate validation
Payment,credit guaranty
EscrowLetter of credit
Credit provision
Cheque, ACH, wire, lockbox, FEDI
Disbursementand collection
Receivablesmanagement
Factoring, “securitization”
LoansLeases
Function Offerings Examples
Identrus,Open Ratings
eCredit, Oinke,eLease
Tradenable, Bolero, TradeCard
Clareon,VeriSign
Orbian,eTime Capital
Financial Elements of Value Chain
Page 22Sydney University | Applying IT Research| 31 May 2002 | Entire contents © 2002 Gartner, Inc. All rights reserved.
Example — Enterprise I/T Architecture leverages current investments and is extended by components identified by Gartner as leading or emerging practices I/T Architecture Framework
Layer 9 – Architecture
Governance
Layer 1 - Presentation
Layer 5 - Platform
Layer 6 - Network
Layer 2 – Business Services
Layer 3 –Technology Services
Layer 4 - Data
Incr
easi
ng
ly p
hys
ical
def
init
ion
Incr
easi
ng
ly lo
gic
al d
efin
itio
n
• Windows/Pc• Green Screen• IVR• Web TV
• Pager• Browser• Portable Handheld Devices
• Business Objects• Workflow Services• Document Management Services• Content Management Services
• Business Intelligence Services• Email Services• OLAP• Payment Services
• Integration Solutions• Static Library Services• Dynamic Library Services• Systems Management• Data Management*
• Network Management• Directory Services• Security• Firewall• Application Server
• RDBMS• Unstructured Data
• Sequential Files• OODBMS
• Intel-PC• Mainframes• PDA/Pocket PC• Mobile Phones
• Windows 9x, 2x, NT• OS/390• Windows CE
• TCP/IP• SNA• Frame Relay• ATM
• ISDN• Ethernet• DSL• Wireless
• SDLC• Microwave
Layer 7 – Systems Development Environment
• Use Cases• Object Service
Based Design• Object Oriented
Development• Change
Management• 3GL• Testing• Implementation
Guidelines
• Architecture Office
• Vitality• Compliance• Communicati
on
Layer 8 –
Management
Services
• Security• Backup &
Recovery• Availability &
Performance• Change Mgmt• Event
Monitoring & Mgmt
• Transaction Monitoring and Integrity
• Help Desk• SLAs
Page 23Sydney University | Applying IT Research| 31 May 2002 | Entire contents © 2002 Gartner, Inc. All rights reserved.
Within the IS-Lite Framework there will be an IT organisation structure appropriate for delivering IT services
QualityAssurance
Office ofArchitecture
andStandards
RelationshipManager
ProductOffice
RelationshipManager
Office of Enterprise IT
BUManagement
CIO BUManagement
ProjectManager
ProjectOffice
ProjectManager
BUApplicationsDevelopment
Team
DevelopmentServices
FunctionalApplicationsDevelopment
Team
Competency Centres
Change Management
Advanced Technology Group
Process
Requirements
Assessment
Specification
Design
Build
Test
Developmentmeasured
foreffectiveness
Infrastructure and Production Support
Consolidated Service Desk
Network Apps. Data SystemsTraining Admin.
End User
Productionmeasured
forefficiency
Maintain
Support
Tier 3 Support
Tier 2 Support
Tier 1 Support
Support
Gartner will recommend the appropriate IT organisational structure to deliver services, in an efficient and effective manner. The final structure will depend on what IT functions are retained by Tata Steel versus outsourced. Different skills are required to manage external service providers versus managing internal staff.
An example structure is shown below. The structure will depend on how “big” the final IT organisation is and what functions it performs
Outsourced to external service providers
Embedded in the business
Page 24Sydney University | Applying IT Research| 31 May 2002 | Entire contents © 2002 Gartner, Inc. All rights reserved.
Benchmark — Information Technology Overview Analysis
0
5,000
10,000
15,000
20,000
25,000
30,000
Exp
endi
ture
($'
000)
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Cos
t pe
r U
ser
($)
Occupancy 781 592
External 0 2,373
Personnel 8,003 8,750
LAN / Shared Services 4,019 4,900
Software 2,200 2,651
Hardware 4,690 7,187
Cost per User 2,462 3,307
XYZ Peer XYZ Peer
Characteristic
Minimum Average MaximumComplexity 7.84 7.19 7.86 9.29Number of Users 7,567 4,523 5,691 8,116
Cost per user $2,462 $1,117 $3,307 $6,828
Infrastructure Costs per User $1,461 $411 $1,886 $4,301
Personnel Costs per User $1,000 $562 $1,156 $1,961External Costs per User $0 $127 $265 $566
Cost per FTE $86,885 $57,068 $72,690 $97,685
User per FTE 79.86 40.53 67.73 80.73
FTEs by Cost 92.11 120.38
FTEs by Users 92.11 113.10
Desktop Cost per User $775 $233 $1,233 $2,392
Peer Group
XYZ
0%
10%
20%
30%
40%
0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0
Normalised Key Metric Value
Exp
endi
ture
Per
cent
age
DistributedComputing
Midrange UNIX
Wide AreaNetwork
Midrange NT
IT Help Desk
ApplicationsDevelopment
ApplicationsSupport
0.74
1.28
1.15
1.45
0.89
1.61
1.73
0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0
Distributed Computing
IT Help Desk
Midrange UNIX
Midrange NT
Wide Area Network
Application Support
Applications Development
Normalised Key Metric ValuePeer Normalised to 1