Finding IT value – getting it right

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 +


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?


AgendaAgenda

1. Temperature check The sorry state IM is not IT

2. Stratagems Portfolio Management Val IT Voodoo/Holistic accounting

3. Questions and Answers


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


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


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


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


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.


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


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


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


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


““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.


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.


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?


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


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



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



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



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


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


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


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


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


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)


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


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


Questions ?Questions ?

Alex Beraskow [email protected] 613.234. 8638

If everyone is doing, can it be wrong?

Beraskow’s Law 1/3 – platform 1/3 – project 1/3 – recurring 1/3 – transformation

Finding IT value – getting it right

Documents

Transcript of Finding IT value – getting it right