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Welcome to the 2009 Executive CIO Roundtable

Welcome to the 2009 Executive CIO Roundtable. Key Points: Overall. Technology spending has collided with current economic conditions as IT organizations have failed to enact agile IT economics. The pressure is on to cut IT.

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Welcome to the 2009 Executive CIO Roundtable

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  1. Welcome to the 2009 Executive CIO Roundtable

  2. Key Points: Overall • Technology spending has collided with current economic conditions as IT organizations have failed to enact agile IT economics. The pressure is on to cut IT. • In 2008, the U.S. Fortune 500 for example will have perhaps $9.4T of Operating Expense and $511B of Tech Expense. Operating Expense dwarfs the cost of IT. • The single biggest opportunity for organizations is to reduce Operating Expense is through targeted technology investment. If IT was “free” it would barely provide the needed lift for the global economy. • Business consolidation driven by current economic conditions is resulting in a new scale of business. Companies that can attain the new scale economics of IT will gain insurmountable competitive advantage.

  3. Key Points: New Scale Economics • The current global economic environment has driven significant merger/consolidation activities in the financial services sector. As a consequence, enterprises of new scale are being created. • The largest of these organizations will have access to information technology (and business process) economies of scale that have never been experienced in the industry. • The scale gap between firms will become a competitive lever for those that can harness such benefits. • Current analyses indicate that scale-economic cost reduction by 2010 for IT infrastructure may be as much as 40%-60% overall (relative to 2007 baseline costs). • Those firms that do not have access to such economics will inherently be non-competitive unless they can develop ways to access the economics of their largest competitors. • The impact of scale economics will be further amplified with effective demand management and heightened virtualization which will enable new levels of IT infrastructure efficiency (supporting even larger enterprises with less physical resources.

  4. Key Points: Management Mandate • The new mandate for IT in the context of the new economic situation is to • Optimize, resize, reclaim, reinvest, and target investments for maximum ROI • Rebalance the IT portfolio to Protect Revenue, Reduce Costs, Manage Risk, with minority investments for Growing Revenue and Avoiding Future Costs • Seek economies of scale beyond the companies boundaries – consider the “Commons” for IT and business process; Focus on economics of lowest common denominator services – and do not pollute mass services with highest common denominator service levels. • Leverage the IT Supply Chain • Attain as close to “Zero Population Growth” in servers and other resources as possible • Target discretionary funds for maximum ROIT • Invest where others cant to create competitive gaps • Trade fixed costs for variable costs – engineer this carefully to enable agility.

  5. The Economic Climate • Global economy • Predictions of global recession • Revenue pressure on all sectors/geographies • GDP growth projections being revised downward IMF: World economy to slow sharply, led by US World Bank Forecast 2.7%

  6. Recessional Economic Principles • Companies that have had superior performance through recessions have: • Cut the right costs • Migrated to variable costs • Increased automation • Identified and focused on key customers • Marketed to growth areas • Invested when competitors didn’t Source: Study of 400 companies during the last recession by Diamond Management and Technology Consultants Plus: Realize you have new scale economics to deal with

  7. Technology and The Economy • Information technologies, by improving our real-time understanding of production processes and of the vagaries of consumer demand, are reducing the degree of uncertainty and, hence, risk. In short, information technology raises output per hour in the total economy principally by reducing hours worked on activities… • Not all technologies, information or otherwise, however, increase productivity--that is, output per hour--by reducing the inputs necessary to produce existing products. Some new technologies bring about new goods and services with above average value added per workhour… • At the end of the day, however, the newer technologies obviously can increase outputs or reduce inputs and, hence, increase productivity only if they are embodied in capital investment. Capital investment here is defined in the broadest sense as any outlay that enhances future productive capabilities… Remarks by Chairman Alan GreenspanTechnology and the economyBefore the Economic Club of New York, New York, New York

  8. The Technology Economic Climate • Technology economy • Current high fixed cost of IT in most companies is preventing required economic agility to respond to business revenue volatility • Current high fixed capacity IT in most companies is preventing required “plant” agility to respond to business volume volatility • Current IT spending is viewed as high an in most companies and is in the process of being cut • With fears of the collapse of revenue in many sectors and the lack of IT economic agility, IT costs appear high (relative to revenue) and hence are the target of reductions --- which drives executive management’s reflexive actions to cut IT spending. • Current consolidations are creating new scale economies – the formerly tactical task of infrastructure consolidation is now strategic!

  9. The “IT Bailout” (of Business) • Targeted investment in IT can have a major impact during current economic conditions • Fact: Overall IT costs are only 5.9% of Operating Expense which means that 94.1% of Operating Expense is the greater opportunity area. • Fact: Each $1 of new investment in IT between 2003 and 2005 had helped drive $1.47 of Gross Profit in 2006

  10. Internet/Pervasive Computing Distributed Computing Mainframe Computing Technology and the Economy: Technology Eras and the GDP • Historically ( a short history ), there appears to be a linkage between technology eras and GDP trends.

  11. Technology and the Economy: Tech Spend and GDP • There appears to be a linkage between technology spending and market trends. Internet/Pervasive Computing Distributed Computing Mainframe Computing

  12. 3.00 2.50 2.00 1.50 1.00 0.50 - 2 R = 0.9835 Technology Economics: Historical Perspective National productivity has accelerated through the “technology era” US Non Farm Business Productivity Change Percent Change Over Period 1991-2000 The PC/Emerging Internet Era 2001-Current The Pervasive Computing/Pervasive Access Era 1960-1980 The Mainframe Era 1981-1990 The Client Server/Distributed Era Correlation Between Non Farm Productivity Change and IT Investment Change 3.00 2.50 Non Farm ProductivityChange 2.00 y = 0.6633x + 0.337 1.50 1.00 0.50 - - 1.00 2.00 3.00 4.00 I T I n v e s t m e n t C h a n g e

  13. Pre Tax Margin Vs Technology Intensity (Banking) Pre Tax Margin Vs. Technology Intensity – Top 10 Investment Banks 41% Top 10 Investment Banks 39% 37% 35% 33% P r e T a x M a r g I n 31% Technology Intensity IT as % of OpEx 29% 27% IT as % of Revenue 25% 1.25 1.35 1.45 1.55 1.65 1.75 1.85 1.95 2.05 T e c h n o l o g y I n t e n s I t y Technology Economics: Historical Performance Superior technology investment strategies have enabled superior business results. Top performers have driven higher pre tax margin for a given level of technology investment.

  14. Technology Economics: Historical Perspective • By 2006, a 26% increase in cumulative absolute Tech Spend in the U.S. had helped drive a 114% in absolute Gross Profit; The 13% increase in relative Tech Spend had helped drive a 60% increase in relative Gross Profit • Each $1 of new investment in IT between 2003 and 2005 had helped drive $1.47 of Gross Profit in 2006 • The opportunity to continue this trend and increase IT business value through IT cost optimization (economies of scale and focus via sourcing) is still apparent….

  15. Technology Economics: Historical Perspective • At the same time the IT Cost of Goods has continued to rise as all sectors have become more technology intense.

  16. Technology Economics: Current State • Technology Spend has collided with current economic conditions as IT organizations have failed to enact agile IT economics and make their value proposition transparent. • For 2008, the F500 will have perhaps $9.4T of Operating Expense (exclusive of IT) and $511B of Tech Expense. The BIG opportunity is to reduce Operating Expense through targeted technology investment.

  17. Technology Economics: Current State • By the end of 2007 the majority of F500 sectors were experiencing revenue pressure, expense pressure, and major changes in profitability and unmanaged technology economics. For 2008 and 2009 the outlook is far worse and there is an across the board focus on IT cost reduction.

  18. Technology Economics: Current State • Technology Intensity varies across sectors

  19. Cross Industry Overview: Current State • Computing needs in support of revenue vary widely by industry

  20. Cross Industry Overview: Current State • Cost of Mainframe and Server resources per $1M revenue

  21. Technology Economics: Key Sector View • Financial Services • Catastrophic collapse of revenue • Unable to shed and reallocate IT costs • Increased regulation and risk management requires more automation • Energy • Mixed impact of global economic downturn (exploration versus refining versus distribution • Major impact on materials and transportation costs because of oil costs • Seeking operating leverage with IT • Manufacturing • Mixed impact of global economic downturn (market growth is regionally dependent and dependent of markets served) • Major impact on materials and transportation costs because of oil costs • Seeking operating leverage with IT • Media • Major margin issues with decline of the economy • Need to transform radically with technology with digital products and customer driven content • Convergence pressures • Need both operating leverage with IT but must transform with IT investments; IT and business technology is a blur

  22. Technology Economics: Key Sector View • Telecommunications • Technology is the “product” • Convergence requires technology investment • Commoditization is minimizing margins • Consolidation of IT across businesses (broadband, wireless, “dial tone” • Massive capital investment needed at the same time • Transportation • Margins destroyed by fuel costs • Shifting transportation options due to relative efficiencies (rail, air, trucking, shipping) • Need for operating leverage • Need to reduce costs

  23. Technology Economics: Key Issues Today • Need to reduce costs – 2008 exit rate is big issue • Need to raise capital – about 50% of firms are in a “crunch” • Need to deal with space – both too little and too much • Need to manage risk – all understand this; IT risk spend increasing • Need to be agile – economics and capacity • Need to transform/innovate computing – shift balance to build the business • Need to be “greener” – power consumption issue looms large • Need to deal with leadership changes – across the C-suite

  24. Technology Economics: Observed IT Strategies/Tactics • Reduce headcount/freeze hiring • Curtail data center expansion/“Virtualize”/Sell assets and lease them back • Renegotiate with vendors • Consolidate functions to drive economies of scale • Outsource commodity services – shift to variable cost basis where possible • Leverage offshore resources • Investment reclamation (shut down any investments not aligned with current business strategy) • Investment prioritization (realign investments with current business strategy) • “Mothball” businesses/products • Change leadership/New IT management structure and power base: CIO vs. COO vs. CAO vs. CFO

  25. Technology Economics: Inability to Cope with Current Needs • Strategies and tactics are hitting a wall. Headcount reductions and vendor renegotiation and postponing projects don’t do the job.

  26. Technology Economics: The New Mandate The new technology economic mandate is to: • Optimize, Resize, and “Give it up” • Leverage the marketplace and take advantage of the rapid commoditization IT services of non strategic core business functions; “Give it up” if a provider can do it better/more efficiently; Engage in transformation sourcing (virtualization, re-hosting; virtual desktop; “cloud”) • Remove “poison pill” service levels that undermine your mass cost structure • Own less; build less • Zero population growth – Servers/People/Other resources • Consider “The Commons”.. Internal and with external firms to provide new scale economies • Realign, reclaim, and reinvest – rethink the RTB/CTB model and portfolio strategy – while managing risk • Enable agility -- fixed versus variable costs and capacity; • Leverage the supply chain -shift costs to vendors with new supply chain management models • Fund IT forward and “follow the money” – the business money that is. • Strategically engage the business and become an IT Savvy enterprise

  27. $1,800.00 $4,100.00 $4,000.00 $1,600.00 $3,900.00 $1,400.00 $3,800.00 $1,200.00 $3,700.00 $1,000.00 $3,600.00 $800.00 $3,500.00 $600.00 $3,400.00 $400.00 $3,300.00 $200.00 $3,200.00 $- $3,100.00 Technology Economics: Create Competitive Advantage • “Low cost/cheap IT” is not necessarily good IT economics. • The cost of “catch up” is 2x the cost of doing the investment the right way at the right time. Projected Tech Spending Required to Close Competitive Gap Client Total Tech Spend Vs Best In Class Benchmark Investment Levels $1,800.000 $4,000.00 $1,200.00 $3,700.00 $ M $ M $600.00 $3,400.00 $3,400.00 $300.00 $300.00 2006 2007 2006 2007 2008 Client Total Tech Spend Gap to Best In Class Spend Level within Year Benchmark Best In Class Total Tech Spend (OpEx Basis) Projected Spend to Catch Up Best in Class = Top quartile business performance as measured by 3 year pre tax margin

  28. Model Company Tech Spend $M Total Tech Spend $ 5,000 Compensation $ 1,800 Contractors $ 500 Hardware Depreciation $ 600 Hardware Maintenance $ 400 Software Expense $ 500 Software Capitalization $ 500 Telecommunications $ 300 T&E $ 50 Recruiting $ 50 Facilities/Rent $ 300 EPS PreTax Margin Current State $ 4.29 30% If "IT was free" $ 5.71 40% If "IT labor was free" $ 4.94 35% Take down Tech Spend 10% $ 4.43 31% Take down Tech Spend 20% $ 4.57 32% Take down Tech Spend 20% and OpEx 10% $ 5.57 39% Add $500M Tech Spend to reduce OpEx 15% $ 5.64 40% $ 7.07 43% Add $1,000M Tech spend to reduce OpEx 20% Technology Economics: Spend into the Skid • What are the options to “squeeze” IT? • What if IT was free? • What if IT labor was free? • What are the options to invest in IT to lower Operating Expense? S P E N D I N T O T H E S K I D

  29. Technology Economics: Fixed Vs Variable Cost Conversion • Enabling “Agility”: Using a “model” company today only 36% of IT expense is variable (can be “shed” within 90 days). By changing the IT operating model, perhaps up to 60% can be made truly variable (though there may be some premium to pay for this conversion). Category Captains It is commonplace for one particular supplier into a category to be nominated by the retailer as a Category Captain. The Category Captain will be expected to have the closest and most regular contact with the retailer and will also be expected to invest time, effort, and often financial investment into the strategic development of the category within the retailer. In return for this, the supplier will gain a more influential voice with the retailer but must be careful never to abuse this or fall foul of any antitrust laws. The Category Captain is often - but not always! - the supplier with the largest turnover in the category. Traditionally the job of Category Captain is given to a brand supplier but in recent times the role has also gone to particularly switched-on Private label suppliers.[13] % Variable % Variable Future Model Company Tech Spend $M Today State Model Total Tech Spend $5,000 36% 60% 50% 70% Compensation $1,800 100% 100% Contractors and Sourcing $500 Hardware Depreciation $600 0% 33% 25% 50% Hardware Maintenance $400 25% 50% Software Expense $500 0% 50% Software Capitalization $500 25% 60% Telecommunications $300 50% 50% T&E $50 100% 100% Recruiting $50 10% 33% Facilities/Rent $300 Soft Vs. Hard Landing Controls

  30. Technology Economics: Commoditize • Leverage the marketplace for scale economics and service quality. • The typical enterprise of scale exhibits year over year unit cost reductions of 7% to 18% in key areas – the marketplace “does it better”

  31. Technology Economics: The New Scale of Business • Example: Financial Services 2009 “Size of Plant” Trends: • Scale is increasing as a result on industry consolidation • By the end of 2009 there will likely be 3-4 companies with scale of over 100,000 MIPS and 55,000 servers; there will be at least 1 with over 200,000 MIPS and over 80,000 servers.

  32. Technology Economics: The New Scale of Business • Example: Financial Services 2009 Scale Economics Trends: • As a consequence of increased scale as a result of consolidation, the largest firms will have access to never-before-experienced scale economies • Being an average performer at “scale” or best in class at “scale” will not be competitive X Y X X Y Y X Y X X Y X X X X Y Y X X Y X Y Y X Y X Y X X = 2007 Competitors and Y = 2009 Competitors in terms of placement on the scale economics curve and do not represent actual competitor unit costs

  33. Technology Economics: Create a “Commons” • Attain new economies of scale by removing poison pill service levels and consolidating resources internally and hopefully externally. Collaborate for specialized Commons where a common Commons can’t do the job (create bMail from Gmail) • Infrastructure Commons of scale can reduce participant costs by an average of 31% or more • Applications Commons of scale can reduce participant costs by an average of 22% or more • Business Process/Operations of scale can reduce participant costs by an average of 18% or more

  34. Technology Economics: Create a “Commons” • Attain new economies of scale by removing poison pill service levels – use a service level “refractory” column and “distill the relevant service levels” Line of Business Based Highly Specialized Niche Services Lowest Common Denominator “Mass Services” Commons Based

  35. Technology Economics: Rethink the Portfolio • There are 5 identified key technology levers that can “bend” the performance curve and drive ROIT. • Grow RevenueBends the revenue line up faster than your competitor – includes innovation • Protect RevenueHolds the revenue line at its current growth rate • Reduce CostShort term impact to drive costs down through automation and process improvement • Avoid CostAvoidance of future costs that would bend the expense line up – includes innovation on the expense side/process side • Manage RiskEnables risk management from a firm and regulatory perspective Technology Investment and Business Performance $ Increase the spread to increase margin >> Year >> Net Revenue Operating Expense

  36. $15B IB $20B IB $12B IB Technology Economics: Resize and “Variable-ize” • If your business volumes and demand change, should your infrastructure sizing be in step? The “average” diversified financial services company has ~1 MIPS and .47 physical servers per $1M Net Revenue. Investment Bank Infrastructure Sizing Curve Key Issues: • How to manage fixed versus variable capacity and costs? • How to manage demand? • How to optimize and resize the applications portfolio? • How to optimize capacity and unit cost simultaneously • Overall, identifying key drivers 35000 30000 25000 Physical Servers 20000 15000 10000 5000 0 0 5000 10000 15000 20000 Mainframe MIPS

  37. Technology Economics: Market to Market - Commercialize • Trends and forces • Capacity growth fueled by demand (business volumes and product evolution/introduction • Mainframe was 17% per year; now 10% per year • Servers was 28% per year; now 8 to 15% • Storage was 45% per year; now 37% • Infrastructure and Unit Cost Trends (50,000 MIPS; 25,000 Servers; 150,000 Desktops; 5000 Market Data Users) Infrastructure Market Basket $2,000 $1,834 -16% $1,800 $1,541 $1,600 $1,400 $1,200 $ M Annual $1,000 $800 $600 $400 $200 $- 2005 2006 2007 2008 Mainframe MIPS Distributed/Servers Desktop/End User Communications/Network Market Data

  38. Technology Economics: The Rate of Change is Changing • “New Math” of Infrastructure Cost: • With the new economics of consolidation scale and Moore’s Law at work, the same set of infrastructure services that cost ~$500M+ in 2007 will likely be delivered by the most efficient companies for ~$200M in 2010. Note: See last panel the DataCenter SuperCenter and the IT Value Meal

  39. Technology Economics: IT Expense Management • Creating an IT expense management strategy requires an exploration of all dimensions of expense and its drivers to attain an effective balance: Product 1 Unit Cost x Volume Product 2 Unit Cost x Volume Product 3 Unit Cost x Volume …………………………………. Product n Unit Cost x Volume Total Expense = Sum of • Reductions in volume and/or reductions in unit cost will result in cost take outs (assuming also that service quality is managed). • But unit cost and volume are related so their interactions must be considered concurrently. • Volume is driven by demand. • Unit cost is driven by cost components related to personnel costs, support ratios, hardware and software expense (and accounting policies), administrative costs, occupancy, and other factors. • Nothing is off limits in developing a cost take out strategy. • And Benchmarking is simply a tool that identifies known bounds of experience. • Being at the best benchmark levels in the context of unit cost does not imply that cost drivers can’t be tweaked or volumes/demand cant be adjusted.

  40. Technology Economics: Invest When Others Can’t • How does it work? Business and IT stakeholders will work together to: • Step 1: Understand the business strategy (at the segment or within segment levels) • What are the firm’s plans for growing and protecting revenue and profitability? • Step 2: Assess the IT criticality or “pressure” points that enable this strategy • Perform an overlay on the key strategic areas (revenue growth, closing competitive gaps, entering new markets, etc.). • Step 3: Determine competitive technology levers • For each “pressure point,” determine the competitive IT levers that are the enablers such as operational efficiency (e.g., lower operational costs, enhanced scalability); information effectiveness (e.g., customer information/intimacy, ability to use lower skilled workforce); and strategic differentiation (e.g., product leadership or uniqueness). • Step 4: Assess contribution of the IT levers • For each competitive IT lever, determine its relative contribution to the strategic goals in business terms, such as growing revenue, protecting revenue, reducing cost, avoiding cost, managing risk, retaining staff, etc. Make this determination by assessing the differential contribution of IT over base organic growth.

  41. Technology Economics: Invest When Others Can’t • How does it work? Business and IT stakeholders will work together to: • Step 5: Determine ROIT • Compute ROIT by contribution category by computing Contribution versus IT investment • Overlay risk profile – IT and business – with regard to outcomes • Consider ROIT at business and firm level • Step 6: Determine optimum IT investment mix (at the segment or within segment level) • Perform scenario analyses • Step 7: Implement investment strategy, track, integrate with new strategies, refine (essentially go to Step 1); Test competitiveness via benchmarking • Is ROIT used for projects? • No. The ROIT method is intended to be applied to segment investments and within-segment initiatives to assist in guiding the optimization of IT investments across and within lines of business.

  42. Technology Economics: Invest When Others Can’t • Interestingly enough, the financial services sector shows the highest average return historically for technology investment when considered in the context of support for revenue generation – as a consequence of product leadership, differentiation, and innovation -- operating efficiency, and informational effectiveness. ROIT by Sector (Average) Banking & Financial Services $1.60 Insurance $1.39 Media $1.35 Info Tech $1.32 Pharma $1.31 Consumer Products $1.28 Manufacturing $1.26 Proff Svcs $1.25 Telcos $1.25 Health Care $1.24 X Industry $1.22 Hospitality & Travel $1.18 Chemicals $1.18 Energy $1.14 Utilities $1.14 Retail $1.10 Transportation $1.10 Metals & Nat Resources $1.09 Electronics $1.07 Food & Beverage Processing $1.04 Construction & Engineering $1.04 $- $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 $1.60 $1.80 ROIT - 3 Year Pre Tax Profit per $1 Technology Investment

  43. Technology Economics: Basic Principles • Technology is a competitive lever – a driver of operating efficiency, product leadership and differentiation, effective customer/market intimacy and information, and agility • Manage technology actively to create business value (follow the levers)– optimize the technology cost to “run the business” and maximize the yield of technology investments to “change the business” concurrently. • Engineer your technology economy – your mix of fixed and variable costs -- to create agility (and avoid “hard landings”) • Measure technology on the basis on business outcomes and not technology resource inputs and assets The most opportunistic time for technology investment is during a technology recession (or depression) – doing so effectively can create an insurmountable competitive gap. Bad IT economics will put you on the wrong side of this gap and may even be creating advantage for your competitors.

  44. Technology Economics: Synthesis • Technology Economics is about creating IT value in the form of enterprise operating leverage. It is not about IT cost – there is little to no business value in IT cost reduction alone. With the average financial services company spending 13% of Operating Expense on IT… The big expense leverage is on the Non-IT side where 87% of costs “live” • Technology Economics is about managing and dynamically balancing a portfolio of IT investments --- and hedging them in distribution and cost structure – in a business facing/business meaning manner. It is about holding the line on revenue or bending it up; it is about bending the expense curve down; it is about increasing the spread; it is about managing risk. It is not about Run the Business/Change the Business –It is about Growing Revenue, Protecting Revenue, Reducing Cost, Avoiding Cost, and Managing Risk. It is about investing at the right time on the right things and avoiding the “cost of catch up” which can be 2x the cost of start up. • Benchmarks can be a powerful tool. Perform competitive calibration using stable metrics – watch the right and meaningful numbers. It is not about being the “lowest”… it is about being “best”; knowing what best means; it may be about redefining best! Comparing IT Spend to Revenue and Operating Expense may be risky in current market conditions. In essence the GPS has been turning off; longitude and latitude are gone. Your challenge is to establish new navigational measures and waypoints and develop a strategy to “fund it forward”.

  45. Technology Economics: Synthesis • Making technology competitiveness “happen” will require commitment, critical thinking, cross tower/cross business cooperation, surgically precise investment management, continuous and high-bandwidth internal/external communication + precise messaging, and innovation to “blow past” the limits defined by current models. • Technology is likely to offer the greatest promise to reduce costs and to create extreme value in absolute alignment with the needs of the financial services industry today and in the foreseeable future • Use the Basic Principles as your guide and be prepared to Spend into the Skid

  46. Summary on a Page • Technology spending has collided with current economic conditions as IT organizations have failed to enact agile IT economics and make their value proposition transparent. The pressure is on to cut IT • In 2008, the U.S. Fortune 500 for example will have perhaps $9.4T of Operating Expense and $511B of Tech Expense. Operating Expense dwarfs the cost of IT. • The single biggest opportunity for organizations is to reduce Operating Expense is through targeted technology investment. If IT was “free” it would barely provide the needed lift for the global economy. • The new mandate for IT in the context of the new economic situation is to • Optimize, resize, reclaim, reinvest, and target investments for maximum ROI • Rebalance the IT portfolio to Protect Revenue, Reduce Costs, Manage Risk, with minority investments for Growing Revenue and Avoiding Future Costs • Seek economies of scale beyond the companies boundaries – consider the “Commons” for IT and business process; Focus on economics of lowest common denominator services – and do not pollute mass services with highest common denominator service levels. • Leverage the IT Supply Chain • Attain as close to “Zero Population Growth” in servers and other resources as possible • Target discretionary funds for maximum ROIT • Invest where others cant to create competitive gaps • Trade fixed costs for variable costs – engineer this carefully to enable agility. There is a New IT “Value Meal” for the New Economy

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