Assets and liabilities for IT

1. Assets and liabilities for IT Professor Georges Ataya, cgeit, cisa, cism, cissp Academic Director, Solvay Brussels School for Economics and Management Managing Partner, ICT Control SA International Vice President, ISACA

2. IT: Strategic Liability or Strategic Asset? Senior Management do not accept accountability for IT IT Budget is typically thrown on tactical initiatives with no significant impact on Enterprise capabilities • IT Assets are merely isolated systems wired together to meet the next immediate need. 21st May 2010

3. Situation Leads to.. Results in.. Overemphasis on Financial ROI Underestimation of risks and costs Can’t kill projects Projects not aligned to strategy Reluctance to say no to projects Quality of execution suffers Too many projects Project delays Budget overruns Business needs not met Lack of Strategic Focus Benefits not received Increased Complexity Sub-optimal use of resources Finger pointing SYMPTOMS Projects are “sold” on emotional basis -- not selected Lack of confidence (in IT) No strong review process No clear strategic criteria for selection Without Effective Governance Source: Fujitsu

4. Liability scenarios • Fire the CIO • Throw money on the problem • Cut IT budget Drastically • Outsource the IT problem • Implement a major ERP solution 21st May 2010

5. Engineer the Operating model • Processes • Systems • Information Build IT into an Asset • Fix what is broken • Build a sound IT platform • Exploit the IT Platform 21st May 2010

6. RESOURCES Business Outcomes Business Capability Solution delivery and monitoring Developing the business case Operational Capability Technical Capability Operational value 21st May 2010

7. Programme – a structured grouping of projects designed to produce clearly identified business value Portfolio – a suite of business programmes managed to optimise overall enterprise value Project – a structured set of activities concerned with delivering a defined capability based on an agreed schedule and budget Projects, Programs, and Portfolios Portfolio Management Programme Management Project Management Source: ISACA.org

8. 2. Alignment 7. Documentation 3. Financial Benefits 6. Optimising risk & return 1. Fact Sheet 4. Non-fin. Benefits 8. Maintenance 5. Risks IM - The Business Case

9. Cost Optimisation Opportunities and Strategies for Cost Optimisation PEOPLE INFRASTRUCTURE PROCESS HARDWARE SOFTWARE TELECOMS Procurement (AI5) IT Management and Organisation • Mainframes • Servers • Desktops • Laptops/PDAs • Applications • System software • Databases • Desktop software • Data (LAN) • Data (WAN) • Voice • Internet Financing Policy (PO5) Deployment of Human Capital Budgeting and Cost Monitoring (PO5 and DS6) Asset Management Warranty and Maintenance IT Recruitment Project Portfolio Management (PO10) Platform and Product Consolidation Programme and Project Management (PO10) Staff Retention Capacity and Utilisation Software Licensing Capacity and Utilisation Contract/Third-party Service Management (DS2) Use of ITContract Staff Asset Management (DS9) Replacement Strategy In-house and User Development Acceptable Use Policies Operations and Systems Management (DS13) Training and Staff Development Platform Standardisation Legacy/In-house Application Support Leverage of New Technologies Service Desk and Service Delivery (DS8) Source: IT Governance Institute

10. Architecture types 21st May 2010

11. Steer the operating model Define Integration and standardisation needs • Diversification • Integration • Standardisation • Unification 21st May 2010

12. The way ahead Do • Specify one operating model for each profit centre • Drive the choice of the operating model • Consistently align your decision making • Align IT management • Identify champions for the IT platform to build • Don’t • Avoid rocking the boat • Ignore real differences • Underestimate the tasks • Make a wrong operating model decision • Limit the exercise to IT 21st May 2010

13. IT Budget : Static view Budget IT Budget time Implement a new application Mainenancecost Project exceeding IT budget Project downsized to accomodate budget Maintenance eating up IT budget 21st May 2010

14. IT Budget: Dynamic view • IT is the internal supplier of services • Service catalogue is based on systems assets • Pricing model for standard Products and services, including necessary overhead : continuity, security, help desk, etc. • Pricing model for specific work including : • Development of analysis, design, implementation of new systems and services • Assistance in selecting external systems and services • Advisory and feasibility studies 21st May 2010

15. IT Department IT position in the Enterprise Business Departments

16. IT Department IT position in the Enterprise Demand for IT services and products Deliver IT services and products Business Departments

17. services and products IT Department Cost of services and products IT position in the Enterprise Demand for IT services and products Deliver IT services and products Business Departments

18. IT Department Other Sources for IT Services and products IT Sells services to other customers IT position in the Enterprise Demand for IT services and products Deliver IT services and products Business Departments

19. Business Perspective IT Perspective Technology Services - Costs + Value Cost of services + Recovery - Costs Justification Viability Value transfer

20. Develop an idea to a commodity 21st May 2010

21. Portfolio, program and project management practices • Every investment need not follow: • The same level of value analysis • The same level of control Portfolio Categorisation VENTURE Transform the Business Value Assessment Discretionary Investments GROWTH Degrees of freedom to allocate funds Cost Benefit Analysis Grow the Business DISCRETIONARY ENHANCEMENTS Impact Analysis NON DISCRETIONARY Clarity of connection with desired business outcomes Run the Business Non-Discretionary Costs Little Analysis CORE Source: META Group

22. 2. Alignment 7. Documentation 3. Financial Benefits 6. Optimising risk & return 1. Fact Sheet 4. Non-financial Benefits 8. Maintenance 5. Risks Developing and monitoring business cases • Why the business case? • Understanding of what you plan to achieve; how you are going to manage it and who is accountable • Basis for comparison and choice • Recording all that needs to be tracked (cost, risks, benefits, etc.) • Maintain clarity on what you are doing Source: Fujitsu Consulting, Information Paradox by John Thorp

23. Clear understanding of outcomes Full scope of effort— All necessary IT and business initiatives, including change management INITIATIVE Clear accountabilities Relevant measurement Source: The Results Chain™, Fujitsu Complete, Comparable and Operational Business Cases Results- focused programmes DRAFT 23

24. Approximately two years delay. so benefits discounted at 12% After Tax Rate Functionality achieved -16% 2 1 € - 100 m x 124 % 114 m x 84 % x 1.12 € Actual ROI = € 100 m x 124 % Budget Overrun +24% We don’t learn from our past ROI as expected in the Business Case Expected Benefits = + 14% € 114 - € 100 m Budgeted ROI = € 100 m Expected Budget Actual ROI allowing for typical solution delivery performance = - 38%

25. Questions Contact: Georges Ataya georges@ataya.net Ataya.eu Solvay.edu/itgov Ictcontrol.eu 21st May 2010

26. Running IT as a business Case study: Solvay SA • 400+ sales and production • More than 50 countries • 29,000 employees • CIO: Stefan Vanhelleputte • 300 people, hosted in 17 Solvay Solvay subsidiaries • Consolidated budget, own P & L • Annual billing : more than 100 M€ 21st May 2010

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30. Shared services supporting independent business • Case study: Procter & Gamble • 170 year-old consumer prodcts company • 180 countries • 250 brands • 5 000 000 000 consumers • Three global units • Beauty and health • Household care • Gilette 21st May 2010

31. Global Business Services • Headed by the CIO • « Provide building blocks to the marketing units to reduce their time to market globally» • Two categories of services: • Employee services and solutions • Business services and solutions • Catalogue of services listing • Costs • Mandatory or optional 21st May 2010

32. Way to go • Create new services by adding new layers to the platform of standard services • Encourage use of shared solution: • Garantee 10%-30% cost reduction when adopting new shared solution • Annual reduction of unit price • Supported by sophisticated IT financial management and governance • Create a synergy among autonomous businesses Unification Standardisation Diversity Integration 21st May 2010

33. Harmonising Process and Data • Case Study: Swiss Reinsurance Company • Founded in 1863 • Largest and most diversified reinsurance company: Property, casualty, life and health • 30 countries and 10,000 employees • Distributed client base : variations on core operations (contract admin and asset management) 21st May 2010

34. Global model • New operating model to meeting the needs of global customers with three components • Core business processes • Twenty high level core processes • Common business systems • Standardised 80% of processes and related applications • Integrated information capabilities • Shared and globally defined data 21st May 2010

35. Global View • Global picture on assets at any time from: • Accounting value • Market value • Compare profitability over the globe on a real time basis 21st May 2010

36. Questions Contact: Georges Ataya georges@ataya.net Ataya.eu Solvay.edu/itgov Ictcontrol.eu 21st May 2010