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Harry Chapman CMC, Principal Bay Area Consulting Group LLC Hchapman@baconsulting.net (415) 971-5746

Intel’s Business Value Index. Harry Chapman CMC, Principal Bay Area Consulting Group LLC Hchapman@baconsulting.net (415) 971-5746. 12. A Common Problem Facing IT. 70% of companies consider IT a cost center (source - the Gartner Group)

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Harry Chapman CMC, Principal Bay Area Consulting Group LLC Hchapman@baconsulting.net (415) 971-5746

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  1. Intel’s Business Value Index Harry Chapman CMC, Principal Bay Area Consulting Group LLC Hchapman@baconsulting.net (415) 971-5746 12

  2. A Common Problem Facing IT • 70% of companies consider IT a cost center(source - the Gartner Group) • IT Departments are continually asked to “cut costs” - especially in uncertain economic times • IT Departments are still expected to deliver long-term competitive advantage

  3. What the CFO Tells the CIO • “You always want more money” • “It is technology for technology’s sake” • “I need flawless execution and operation” • “You need to be a key source of business innovation” • “Why do you use your own language?” • “IT is too slow!”

  4. Help Enable Growth Help Reduce Costs Help Improve Margins Demand for IT Services Firm Revenue IT Budget Positive Growth Flat Growth Negative Growth Can You Relate to This? The “IT Paradox”

  5. Some History • Intel’s IT Staff was challenged in 2001 to measure the bottom-line impact – the business value – of their IT solutions • As a result, the IT department developed the “IT Business Value Program” (ITBV) to include: • “Business Dials” – a standard set of financial measurements • A Standard Measurement Methodology • A Common Valuation Process – Finance acts as an independent auditor • A Business-Value portfolio – Value determined by customer-generated critical success factors • A Set of Ground Rules – Defines the programs operation and accountability Source: “Measuring the Business Value of Information Technology” by David Sword from the Intel Press

  6. What is “Business Value”? • “Business Value” is the benefit for business units represented in dollar terms that result from IT solutions; • Direct contribution to the corporation’s market position or revenue • Deliverables and results that support solving customer business needs and challenges • Customer cost savings or financial benefits • Examples of technology investment that advance the industry

  7. Results from ITBV Program

  8. So How Does ITBV Work? • It is based on: • And can be expressed in “IT Capability Maturity Frameworks” Feedback Mechanism for Maximizing Value Managing IT “Like a Business” Managing the IT Budget Managing the IT Capability Managing IT for Business Value The Budget Drives IT Capability IT Capability Enables IT Business Value

  9. IT Capability Maturity Framework Managing the IT Budget Managing the IT Capability Managing IT for Business Value Managing IT “Like a Business” Level 5 Level 4 Maturity Level 3 Level 2 Level 1

  10. Defining Value • What is of Value to the End Users? • Bottom Line Impact? • Top Line Growth? • Using IT to Open New Markets? • The Starting Point is a Common Definition • Intel’s are: • “Business Dials” – a standard set of financial measurements • A Standard Measurement Methodology • A Common Valuation Process – Finance acts as an independent auditor • A Business-Value portfolio – Value determined by customer-generated critical success factors • A Set of Ground Rules – Defines the programs operation and accountability

  11. Consider the Approach • Based on User Needs (not Technology) • Uses Common Terms • Is an Overall, Repeatable Process • Have Finance act as an auditor to give credence to the financial results

  12. What is “Business Value”? Business Value is “the contribution IT makes to helping a firm or other organization achieve it’s objectives” Revenue (Growth) Costs/Efficiency Assets (Productivity) Risks (Continuity) Increased Shareholder Value = F(Growth, Efficiency, Productivity, Continuity)

  13. Dial Business Value “Dials” • ….are Intel’s Standardized Indicators of Business Value • The Goal is to have the Change Positively Influence the Business Value Dials • Financial Value Dials • Days of inventory • Headcount productivity • Hardware and software cost avoidance • Capital equipment cost avoidance • Time to market • Direct revenue • Other cost avoidance • Non-Financial Value Dials • Customer satisfaction • Intellectual property risk reduction • Product development agility • Regulatory compliance

  14. Need to Also Consider the Intangibles • Enhanced customer loyalty • New business opportunities • Intellectual property protection • Product development agility • Regulatory compliance

  15. To Summarize • The Value of BVI…. • Process based on what is important to IT’s customers • Common language between IT and its customers • Assess projects on consistent bases • Reports $$$ value delivered by IT • Changes the dynamic & perception that IT is a cost center

  16. Business Value – Corporate-wide

  17. Business Value – Corporate-wide

  18. IT Efficiency

  19. IT Efficiency

  20. Finance

  21. Let’s Try Four Projects

  22. Results

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