1 / 50

Measuring Business Value of IT

Case study presented at Notre Dame

ayeletb
Download Presentation

Measuring Business Value of IT

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Cisco Case StudyEMBA: Measuring Business Value of ITUniversity of Notre DameMarch 19, 2004 Ayelet Baron—aybaron@cisco.com WW Sales Strategy & Planning Cisco Systems, Inc.

  2. Cisco Overview 2 2 2 © 2003 Cisco Systems, Inc. All rights reserved.

  3. Started at Stanford IPO; 192 Employees End-to-End Solutions Provider $18.9 Billion Revenue; 34,000 Employees; IP Telephony, Security, Wireless, Networked Home 1984 1986 1990 1994 1998 2002 2003 Shipped First Router Cisco Routers Power the Internet; LAN/WAN Switching, Remote Access #1 Communications Equipment Supplier History of Cisco Systems

  4. Cisco Worldwide • 33,000+ employees in 68 countries • Average years of service 4.5 • 1/3 Engineering/IT, 1/3 Sales, 1/3 all others • All connected to common Internet tools • All are Cisco shareholders Updated 01/04 4 4

  5. Cisco Products • Industry’s broadest product line • Leadership products in each category • R&D = 16.9% of revenue • Enables end-to-end network services

  6. Networking and the Internet PLAY WORK LIVE LEARN

  7. Key Cisco Frameworks 7 7 7 © 2003 Cisco Systems, Inc. All rights reserved.

  8. Departmental Enterprise Inter-Enterprise • Virtual Supply Chain • Online Collaborative Support • E-Treasury $3B • E-Commerce • E-Procurement • E-Learning • E-HR • Virtual Close $2B $2.1B $1.9B • Communications • Internal Directory • External Web Site • Support Self-Service $1.7B $1B $900M FY ’95 FY ’96 FY ’97 FY ’98 FY ’99 FY ’00 FY ’01 FY ’02 FY ’03 Cisco’s Financial Benefit from IT Financial Impact

  9. MissionCritical Shortfall risks company's operations Required to run the business and fulfill commitments Contributes Directly to Competitive Advantage Non-MissionCritical Core and Context Core Context 9 © 2004 Cisco Systems, Inc. All rights reserved.

  10. A whole function (IT) Manage contract and SLAs Separate IT Systems with reporting Process redesign requires contract renegotiation Elements of a function Real time visibility and active management Shared systems/web services; common data, network standards Allows process redesign andcontinuous innovation Out-Tasking Versus Out-Sourcing 10 © 2004 Cisco Systems, Inc. All rights reserved.

  11. Invest Drive Productivity MissionCritical Strategic Partners (Few, Tightly Coupled) Retain In-house Focused Investment Control Costs Non-MissionCritical Specialist Partners Vendor Management (SLAs Driven) Investment and Partnering Strategy Core Context 11 © 2004 Cisco Systems, Inc. All rights reserved.

  12. Board manufacturing • Final assembly & test • Logistics & delivery • Desktop mgmt • Remote office WAN • E-commerce apps • Level 1 help desk • Order admin • Field logistics & repair • Temp contracting • Benefits admin • Global mobility Customer Service IT • Inside sales • Advertising • Lead qualification • Payroll processing • Travel • Investment Management Relative Cisco Functional Out-Tasking % Out-Tasked Manufacturing HR Finance Sales 8712_09_2003 12 © 2004 Cisco Systems, Inc. All rights reserved.

  13. Cisco IT 13 13 13 © 2003 Cisco Systems, Inc. All rights reserved.

  14. Cisco IT Employees—1999 • 1900+ employees • 2500+ vendors • ~2.5% of total employee base • ~4.5% of expense • 65% in US, 25% in EMEA, 10% in AsiaPac / Japan • ~$1B in spend

  15. Cisco’s IT Evolution IT Supports Business Strategy IT Enables New Capabilities and Roles • IT worksindependentlyof business • Seeing as nonvalue adding • IT seen as “high” cost • Focus on technical performance Trusted Business Partner Value Creation Outcome Defined Proactive BusinessValue • Enables business strategy and integral part of the business • Effective use and leverage of technology and “virtual” resources • Focus on Shareholder value Internet Enabler • Supports andenhancesbusiness strategy • IT seen as a critical process • Focus on cycle time, cost reduction, service quality Reactive CFP& ERP IT as Cost Center • Supports businessstrategy • IT seen as a support process • Focus on Returnon Investment 1991 1993-95 1997 2000

  16. High Strategic Impact Low Cisco IT’s Historical “Shifts” LEVEL 5 Cross-functional Productivity Experts 2003 Key IT Success Factors • Organization Model • Exceptional Staff • Receptive Company LEVEL 4 Consultative Proactive Leadership 1999 LEVEL 3 1997 Use of Internet, CCO LEVEL 2 Repl of all key apps(ERP) 1995 LEVEL 1 1993 CFP model LEVEL 0 1991 IT as cost center Time

  17. IT Mission IT drives the Business in Internet Leadership Capabilities, integrated across Cisco Globally, resulting in: • Meeting Productivity Goals • Increasing shareholder value • Increased Customer Success • Cost Avoidance • Improved Decision Making

  18. Guiding Principles • Create close IT/business alignment • The business determines value tradeoffs for investments providing the “best-value” return • Deliver near-term business results • Drive constant improvements with serious and accountable metrics • Utilize an enterprise wide common and scalable infrastructure • Productivity!!!

  19. Cisco’s “Hybrid” IT Organization Manufacturing Finance Sales Marketing IT Organization IT Organization IT Organization IT Organization Centralized Infrastructure Data Center, Hosting, Transport, Client Services, Theatre Service Delivery, Infrastructure Applications, VMO, Technical Architecture, Administration CIO • Advantages • Business executives involved with IT project success more than CIO • Good alignment of business and IT objectives • Promotes the right business decisions • Higher degree of client satisfaction • Still strict centralized control over standards, architectures to ensure low-cost, high-quality, and rapid cycle times

  20. IT Business Model to Get It All Done Objective Efforts Status • Core vs Context • Strategic Use of Outside Services and Outsourcing • Vendor Management Effective Use of IT Resources • End to End Portfolio Mgmt (emPOWER) • World Ready Apps • Collaboration Effective IT Processes Measurement and Accountability • Management Metrics • Expectations of Leadership team • Early Results • CA TS and GCT Context 75% outsourced • emPOWER Proof of Concept completed • World Ready Road Show complete in India and EMEA

  21. Investment Approach And Impact On Cisco’s IT Investment Cisco’s philosophy and financial approach to IT spend has allowed IT investment to grow as fast or faster than revenue (as “return” is accounted for on “business side)

  22. Project Guidance and Planning “In 1998, there were no guidelines, no rules of the road as far as how to do CFP planning and execution. ” Today… • Project Tracking using a central repository • Project Reporting on a quarterly basis • Tracking of Budget vs. Actuals during the project • Compliance to Architecture & Standards • Execute Commitment for funding of project execution and delivery • Readiness Reviews before Go Live • Client Satisfaction measurements after delivery

  23. Enterprise IT Portfolio Management Goals Maximize the Value of Cisco’s IT Investments • Make the correct tradeoff, prioritization decision • Ensure business capabilities are created in the right sequence • Identify and resolve key barriers • Hold key projects accountable for delivery of business value within budget

  24. Insuring the maximum value for Cisco’s IT investment Strategic Partner IT Business Alignment CULTURE Funding Mechanisms Process Oversight Client Centric Organization IT Performance Mgt Standards Approach Metrics Business Mindset Principles IT Governance Model

  25. Development Methods Management Accountability Continuous Improvement Business Alignment Standards Management Fiscal Controls End User Technology Procurement Approach: Cisco IT Governance“How We Ensure Value” SDLC Model Balance “Risk Vs Innovation” Project Mgr Education Operations Reviews Performance Metrics Mbo’s and Plans Operations Metrics Root Cause Analysis Global Vs Local Decisions Strategic “Instinct” Co-location CFP Model Adherence Selection Process Emerging Vs Sun-setting Standards Budget Management Productivity Analysis Business Justification Mindset ASP System Integrators Web Portals

  26. Change ManagementFramework 26 26 26 © 2003 Cisco Systems, Inc. All rights reserved.

  27. Change Management Framework SYNERGISTICRELATIONSHIP TRANSITION RISK AREAS SPONSORCOMMITMENT REMEDY PAIN DESIREDSTATE SKILLS RESISTANCE PRESENTSTATE Frame of Reference COMMITMENT CULTURALALIGNMENT PLAN TIME

  28. C A B Understand the Current State Implement Transitional State Define Future State Strategic Direction Framework Transition State ∆ Current State Tactical Future State Strategic

  29. Communications FrameworkBehavior Change Leadership—60% Systems—30% Vehicles—10% • Announcements/ Broadcasts • Websites/portals • Meetings • VODs • Email • Voice mail • Executive Sponsorship—Global and Regional • Behaviors—Say & Do • Messages • Briefings • Meetings • Structure • Compensation • Policies • Resource allocation • Communication with customer administrators

  30. Behavior Change Framework Internalization Commitment Translation Understanding Awareness

  31. Proposed Approach Where are we now? How will we get there? Who must do what? Where do we want to be? How are we doing? • Situation analysis/Change Readiness Assessment • Gap analysis • Global team • Identify quick wins • Deliver plan • Identify new needs • Monitor results • Assess business results • Integrate and leverage • Leadership buy-in • Define sponsor roles • Strategic direction • Benefit analysis • Best practice sharing—integrate • Change management &communication plan • Establish metrics • Get buy-in • Set up teams Sponsorship & Communication

  32. SponsorshipGuiding Principles • Executives are held accountable for the success or failure of the process and results • Sponsorship cannot be delegated • Keep communicating throughout the whole process • Be honest and address people’s real concerns directly • Don’t engage in more change than you can adequately support • Weak sponsors must be educated or replaced; if not, failure is inevitable—the ultimate success or failure falls on the sponsor • Encourage in-depth dialogue, even when leaders are initially uncomfortable • Success depends on a systemic approach, not the “patchwork quilt” of initiatives, programs, etc

  33. Sponsorship Role Vision: a clear definition of what change must occur Public Role: demonstrates public support & commitment to change A Private Role:meets privately with individuals or groups to convey strong personal support for the change Consequence Management Techniques:prepared to reward supporters of change & express displeasure with those who inhibit it A Willingness to Sacrifice: the commitment to pursue the transition, knowing that there is a price Persistence: the capability to demonstrate consistent support for the change and reject any short-term action that is inconsistent with long-term change goals Power:the sanctioning power to legitimize the change Pain:a level of discomfort with the status quo that makes change attractive Resources: a thorough understanding of resources necessary for successful implementation and the ability/willingness/ influence to get the right people The Long View: an in-depth understanding of the impact the change will have on the organization Sensitivity: the capacity to fully appreciate and empathize with the personal issues major change raises Scope: the capacity to understand thoroughly the size of the group to be affected by the change

  34. Sponsor EvaluationTo Be Used by CPR Leader to Assess Sponsorship

  35. Change ManagementAcross IT 35 35 35 © 2003 Cisco Systems, Inc. All rights reserved.

  36. Business Challenge From: A service delivery organization… To: A Consultative Business Partner offering: • Strategic Solutions • A Catalyst for Change • Technology Leadership • Breakthrough Productivity

  37. Focus & Investment Strategic Plan 2002 • Taking Partnerships to New Heights • The Way We Work Transform • Leading Internet Capabilities • Ongoing Assessments • Cascading Workshops • Ongoing Engagement Implement 2000 • Internal Communication Capability • Cross-functional Team: IT & Business • Online solutions: IT & Cisco • Ongoing Communication Plan & Engage • IT Senior Staff • Internal Clients • IT: 75 Interviews Worldwide • Strategic Off-site Assess 1999 Stages

  38. Example 0.8 0.9 0.7 1.1 0.8 1.0 Client Feedback IT Performance vs. Business Need

  39. Example Change Readiness AssessmentKey Risk Areas Strong belief that IT senior staff supports the changes we need to make Some concern about IT senior staff sharing common goal around Business Partnership Caution around leadership by example - walking the talk Management has a history of losing focus on important projects when other problems or issues compete for its attention Failure to involve middle managers in planning change has resulted in their indifference and opposition to initiatives Managers in past changes said they supported a change but their behavior often suggested the opposite Employees understanding of how Cisco’s business goals translate into specific things they can do in their jobs In deciding to support a change, people do what they think will please their boss rather than what is best for Cisco There will be some difficulty in explaining BP to employees Communication in IT is open and candid IT’s usage of rewards, measurement and other processes to communicate its seriousness and signal a change A compelling reason to change has not been clearly communicated Employees will not easily understand the costs associated with not implementing BP Employees expect change to happen at Cisco Employees will not be motivated to achieve Business Partnership Employees will need to be invested in the new way of operating Employees will not feel a sense of control in implementing Business Partnership BP will be regarded as requiring employees to make substantial changes to their own day-to-day activities Employees do not have the assimilation capacity for Business Partnership IT Senior Staff has the skills and abilities to execute and deliver Business Partnership Managers already possess Business Partnership skills Employees already possess Business Partnership skills Employees have the skills and abilities they need to accomplish this change COMMUNICAT ION S P O N S O R S H I P RESISI TANCE SKI LLS

  40. Example Internal AssessmentRisk Area: Sponsorship IT Senior Staff ... IT Senior Staff Supports This Change...

  41. GAP 43% GAP 31% GAP 36% Example Leadership Say/Do Gap Analysis

  42. Change Communication Plan LEADERSHIP SYSTEMS/PROCESSES MEDIA • Training for Sr. Staff • Delivery of BP Workshops • Quarterly IT All-Hands/IPTV • Sr. Staff Meetings • Management Staff Meetings • Chats with CIO • CIO Corner • IT Connection • Sr. Staff Forums • BP Team • Client Feedback • MBO Alignment • Quarterly IT Business Partnership Award IT Champion Award • Performance Reviews • CAP Awards • Training Program • IT Communication Function Centralized company-wide • IT Connection • IT e-Communities • IT Client Portal • Best Practice Website • Meetings & Off-sites • Chats with CIO • Manager Weekly e-alert • Meeting-in-a-Box

  43. Mean 4.0 Mean 2.8 Windows 2000 Customer Feedback It is very important to me that my individual settings are transferred to my Windows 2000 environment Business events may interfere with my conversion to Windows 2000

  44. To convert my computer to Windows 2000, I would prefer to …

  45. To learn What's New in Windows 2000, I would prefer to …

  46. Customer / Shareholder Value Process Policy Systems Implementation* Measurement Enforcement Implementing Process to Deliver Value Clear Understanding of Value to Be Delivered Standard, Consistent, End-to-End Definitive, Global, Mandate Scalable, Integrated, Flexible Value and Process Metrics Adoption, No-Opt Out *Systems implementation not always required

  47. Mean 3.8 Mean 4.2 Client Satisfaction

  48. Value BusinessPartnership Low Total Cost of Ownership Customerand ClientSatisfaction Architecture& Standards Governance Metrics Process Portfolio Managementand End-to-End Delivery Speed and Agility Exploiting NewTechnology Evolve to an Integrated IT Business Model ITBusiness Model

  49. Q and A 49 49 49 © 2003 Cisco Systems, Inc. All rights reserved.

  50. Presentation_ID 50 50 50 © 2003 Cisco Systems, Inc. All rights reserved.

More Related