Finding IT value – getting it right

1. Finding IT value – getting it right Confidential

2. 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 + Sondage Confidential

3. 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? Topics Confidential

4. Agenda • Temperature check • The sorry state • IM is not IT • Stratagems • Portfolio Management • Val IT • Voodoo/Holistic accounting • Questions and Answers Confidential

5. 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 Big Questions Confidential

6. “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 IT Governance Institute Confidential

7. Users Super users (HR, FI) Computer analysts Document managers Record managers Archivists Librarians Web masters Vendors Consultants Contractors Global firms Trickle Down IT Web 2.0 convergence Everyone is doing it (IT) Confidential

8. 3,000 # of Users ‘000,000 1,000 Content Centric Network Centric 100 Systems Centric PC Centric 10 2010 2030 1980 1990 2000 1970 2020 Metcalfe’s Law Moore’s Law Grosch’s Law Gilder’s Law Moscella’s Curves Confidential

9. IT 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. Confidential

10. GOC IT Spend Confidential

11. Gross Calculation • 40,000 FTEs • 7,000 single shingles • ≈ 15%-20% of GoC operating Budget Confidential

12. Sourcing Strategy 4 Different Options…. Option 1 Option 2 Buy • Smart Buy • Cost certainty • Cost visibility • Accountability • Contractual • commitment • Results based shared • Out Source • Systems integration • Partner • Consulting • Accountability • Visibility • Risk Option 3 risk • Cheap Buy • Best Effort • Inputs based • Contracting • Staffing • In Source • Employees client Build Variable Cost Fixed Cost Confidential

13. The State of the Union The Good 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 • Methodologies • CoBIT • ITIL • RUP • CMM • PMBoK Confidential

14. “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. Confidential

15. 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. Mastering the Three Worlds of IT Confidential

16. 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? Six IT Decisions Your IT People Shouldn't Make Confidential

17. 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 Overall Situation Confidential

18. Portfolio Management Stage 1 Stage 2 Stage 3 stop • What are we doing? • How much does it all cost? • What should we stop? Continue? • What is the resource gap - ±? continue ± gap • Does the proposed activity make sense? • Does the portfolio of activities make sense? • Can we be successful? Prioritized Recommendations • Assign priorities • Plan activities Project/Support proposals Confidential

19. Portfolio Management Confidential

20. Portfolio Management Run Enhance Transform • Break & Fix • Repairs • “911” + ”411” • Improve current process/ functionality • Incremental change in systems • Wholesale change • Change both Systems & People Nature Operational Tactical Strategic View Fix Old Paradigm Change light bulb Improve Old Paradigm Change light fixture New Paradigm Change the lighting system Analogy • Non Discretionary • Discretionary • Discretionary Confidential

21. Portfolio Management Run Enhance Transform • Immediate action • < 1 month • short run • 1- 6 months • long run • > 6 months Timeframe • Patch and/or workarounds • No new programming • No training required • Small process/programming changes • Minimal training may be required • New design/ technology/ service • New infrastructure • Training required Action • Corrective • Must fix it, now • Adaptive • Should do it, soon • Need to evaluate when to make the change • Perfective • Need to evaluate how to make the change Proxy Service Business Model • Some change in business process • New Governance/ Organization Model • No Change Confidential

22. Val 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 Confidential 22

23. 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 Confidential 23

24. A Comprehensive Approach The strategic question The value question The architecture 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 • 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:* Confidential 24

25. The 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: Recognise different categories of investments to be evaluated and managed differently Define andmonitor key metrics and respond quickly to any changes or deviations Engage all stakeholders and assign appropriate accountabilityfor delivery of capabilities and realisation of business benefits Becontinually monitored, evaluated and improved Confidential 25

26. How Val IT™ Works Establish informed and committed leadership. Define and implement processes. Define portfolio characteristics. Value Governance(VG) Align and integrate value management with enterprise financial planning. Establish effective governance monitoring. Continuously improve value management practices. Establish strategic direction and target investment mix. Determine the availability and sources of funds. Manage the availability of human resources. Portfolio Management(PM) Evaluate and select programmes to fund. Monitor and report on investment portfolio performance. Optimise investment portfolio performance. Develop and evaluate the initial programme concept business case. Understand the candidate programme and implementation options. Develop the programme plan. Develop full life cycle costs and benefits. Develop the detailed candidate programme business case. Launch and manage the programme. Update operational IT portfolios. Investment Management(IM) Update the business case. Monitor and report on the programme. Retire the programme. Confidential 26

27. Recognition IT (and IM) enables transformation who pays? Can costs and benefits be measured and realised? Make costs fully visible Portfolio Management Recognise elements R&D IP creation Charge program for new stuff Charge IT infrastructure costs utility Voodoo/Holistic Accounting Confidential

28. Decrease costs Sourcing strategy Some buy, some build Smart buy vs. cheap buy Fix procurement mess Delays Incumbency Internet dating Etc. Increase benefits Governance CoBIT Val IT Make program accountable More judicious use of IT Centralisation is not the answer Creating IT Value Confidential

29. Questions ? Alex Beraskow aberaskow@itnet.ca 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 Confidential