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The Real Business of IT:

How CIOs Create andCommunicate Value

Richard Hunter

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The value of an exercise machine is measured by its

impact on the users performance

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IT organizations that show value take 3 steps in

a particular order

Change the way you think

Show value for money, meaning theright services at the right level of

quality and the right pricePosition IT as an investment in near

and long term business performance

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Change what you think first

There is no such thing as an ERP project.

IT doesnt align with the business--IT is the

business, just like sales or manufacturing.

Maturity matters plenty, but it s not a

business outcome--so it has no place in a

discussion with anyone outside IT.Peopleespecially business-savvy people--

matter more than machines.

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Maturity is not value, but value cant be measured

or improved in an immature organization

If the processes are like a black box,its hard to do a benchmarktoo

much work, not enough outcome.

Daniel Janeba, CIO, Zentiva

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Show value for money: never, never, ever

discuss cost apart from quality of service

Source: Intel

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Case study: whats the value of subsecond response

time?

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Use the virtuous cycle to position IT as an

investment in business performance

Source: Westerman/MIT CISR

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Assess investments in business performance

using operational measures

SupportSupportServicesServices

SupplySupplyManagementManagement

AGGREGATES PRIMESBUSINESSASPECT

DemandDemandManagementManagement

On-TimeDelivery

ServiceAccuracy

AgreementEffectiveness

CustomerResponsiveness

Target MarketIndex

Product PortfolioIndex

Sales OpportunityIndex

Sales PriceIndex

CustomerRetention Index

SalesEffectiveness

MarketResponsiveness

Market CoverageIndex

Market ShareIndex

Configure-abilityIndex

ChannelProfitability Index

Opportunity/ThreatIndex

Cost of SalesIndex

Sales CycleIndex

ForecastAccuracy

Sales CloseIndex

Product DevelopmentEffectiveness

New ProductsIndex

Feature FunctionIndex

Time to MarketIndex

R&D SuccessIndex

ServicePerformance

Order FillRate

MaterialQuality

Customer CarePerformance

TransformationRatio

SupplierEffectiveness

Supplier On-TimeDelivery

Supplier ServicePerformance

Supplier OrderFill Rate

Supplier CarePerformance

Supplier MaterialQuality

Supplier ServiceAccuracy

Supplier Trans-formation Ratio

Supplier AgreementEffectiveness

OperationalEfficiency

Cash to CashCycle Time

ConversionCost

AssetUtilization

SigmaValue

HumanResources

Responsiveness

RecruitmentEffectiveness Index

HR AdvisoryIndex

BenefitsAdministration Index

HR TotalCost Index

Skills InventoryIndex

EmployeeTraining Index

InformationTechnology

Responsiveness

SystemsPerformance

New ProjectsIndex

IT SupportPerformance

IT TotalCost Index

PartnershipRatio

Service LevelEffectiveness

Finance & RegulatoryResponsiveness

ComplianceIndex

AccuracyIndex

AdvisoryIndex

Cost of ServiceIndex

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Invest transparently: whatever the model is,

stick to it

Source: Sam Coursen, CIO, Freescale Semiconductor

Project Name IRR Payback NPV ($M)

RevenueGross

Margin

Increase

GrossExpenseReduction

OperatingExpenseReduction

WorkingCapital

Expense

ReductionProject 1 58.400$ -$ -$ -$

Project 2 -$ 113.100$ -$ -$Project 3 -$ 6.288$ 2.695$ -$

Project 4 10.146$ -$ -$ -$Project 5 12.950$ -$ -$ -$

Project 6 -$ -$ -$ -$Project 7 8.000$ -$ -$ -$

Project 8 -$ -$ 1.764$ -$Project 9 0.857$ 50.889$ 138.879$ 13.972$Project 10 -$ 0.630$ 1.058$ -$Project 11 -$ -$ -$ -$

Project 12 -$ -$ -$ -$Project 13 -$ -$ -$ -$Project 14 -$ -$ 0.450$ -$Project 15

Project 16 -$ -$ -$ -$Project 17 -$ -$ -$ -$

90.353$ 170.907$ 144.846$ 13.972$

Financial MetricsProjectsP&L Business Impact

(2008-2014)

SubtotalTotal P&L Benefits $420m

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Execute, execute, execute

Which of these 3 things needs the most help inyour enterprise?

Business Process Redesign

Application Development Enterprise change management

If youre like most enterprises, the answer is

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Measure the value, or watch it slip away

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Never forget what its all about

Change what you think and say before youchange anything else, and focus your

comments always on business outcomes. Show value for moneythe right services, at

the right level of quality, at the right price.

Show the value of IT as an investment inbusiness performanceoperationally andfinancially.

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