central de serviço e governança de it | encontro de cios ctis e sucesu minas 08/04/2014

This presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the intended Gartner audience or other authorized recipients. This presentation may contain information that is confidential, proprietary or otherwise legally protected, and it may not be further copied, distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates. © 2012 Gartner, Inc. and/or its affiliates. All rights reserved.

Increasing business value of your IT : Value Optimization, Enabling Innovation & Business Restructuring

Aurelio Bastos

Executive Programs Director [email protected]

Jamir Lopes


Gartner Executive Programs Latin America

April 2014

mailto:[email protected]


1

Gartner helps CIOs to Change Focus from Cost Cutting to Generating Value

A cost-focused IT culture is reflected in the obsessive focus on the cost of

IT operations (as opposed to the cost of enterprise operations), a budget-

driven project proposal process, absence of IT in the front office and

deferred maintenance on IT (thus increasing IT debt).

Loss of revenue, market share or reduction in customer satisfaction scores

is common among organizations that focus only on cost.

As front-office operations increasingly depend on technology support,

enterprise culture must shift to recognize IT as a value-generating

function. The alternative is diminishing effectiveness in the front office.

The IT organization must not see itself as a victim that's powerless to

change an externally imposed IT cost focus. The change can, and should,

start from within.

Barriers —There are Many

2

Politics (silos) Poor IT cost transparency

Lack of accountability

Inability to divest Low tolerance

for risk

IT lacks involvement in

“business” strategy

Enable Innovation & Business Restructuring

Joint Business & IT Cost Savings

Implement process improvement, business restructuring and

innovation

Implement cost-savings technologies in conjunction with

the business

IT Procurement

Cost Savings Within IT

Identify opportunities to reduce IT costs

Get the best pricing and terms for your IT purchases

Sig

nific

ant IT

Sa

vin

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T &

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Mo

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avin

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(IT

Cost R

ed

uctio

n)

Size of Potential value of IT Directly Relates to Effort Invested

• Deliver Units Differently - Evaluate changes to service delivery domains

consolidation, streamlining or selective outsourcing

• Reduce Unit Cost -

• Deliver Different Units - Reimagine business service delivery with

technology

• Reduce Number of Units

Reduce application footprint ,

• Evaluate projects

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Four paths that can be taken individually or together for compounding effect

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Questions to Ask About Lever 1 (Procurement)

• Does your organization have consistent processes for IT procurement and contract renegotiation?

• Where is your organization is on Gartner’s IT Score Model for Sourcing and Procurement?

• How confident are you that you are getting the best pricing and terms, and how to you validate your assumptions?

Cost Optimization Opportunities Remain in Every Area of IT

- Best performers are decreasing costs 20% faster than average performers

- The resulting I&O performance gap alone has now increased to 41% over the past three years, even larger within applications.

• There is a pressing need to ensure IT spend drives business value and financial performance, yet cost optimization efforts are frequently poorly framed and implemented

• Maximizing the opportunity requires challenging the conventional wisdom regarding cost optimization among both IT and Business executives.

US$M

Relative spend to deliver same workload

Best Performers vs. Average Infrastructure Costs,

Average Performers Best Performers

41%

Differences Between Average and Best Performers

Overall IT Spend 38% difference in cost

Application Development 53% difference in cost per function point

Application Support: 55% difference in cost per function point

Mainframe 35% difference in cost per installed MIPS

Unix server 62% difference in cost per server

Wintel server 32% difference in cost per server

Storage 44% difference in cost per TB

Desktop 22% difference in cost per device

Help Desk 33% difference in cost per handled

contact

Wide-Area Data Network 43% difference in cost per device

Local-Area Network 51% difference in cost per active port

Wide-Area Voice Network 27% difference in cost per minute

Voice Premise

Technologies

34% difference in cost per active

extension




innovation


the business

IT Procurement




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Mo

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(IT

Cost R

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technology




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Questions to Ask About Lever 2 (Cost Savings Within IT)

• Have you compared your IT costs against Gartner’s IT Key Metrics Data?

• Where is your organization on Gartner’s IT Score Model for Infrastructure and Operations?

• In which areas are you currently working to save costs within IT?

• What are the biggest drivers of unanticipated IT costs in your enterprise?

• Have you implemented Gartner’s “10 Key Actions to Reduce Infrastructure and Operations Costs,” found in G00170304?

Lever 2: Cost Savings Within IT: Identify Opportunities to Reduce Costs

1. Defer non-critical key initiatives

2. Re-examine networking costs

3. Consolidate I&O

4. Virtualize I&O

5. Reduce power and cooling needs

6. Contain storage growth

7. Push down IT support

8. Streamline IT operations

9. Enhance IT asset management

10. Optimize multi-sourcing

Gartner’s Ten Actions to Reduce IT Infrastructure and Operations Costs

These actions reduce

annual I&O costs by

10% within 12 months,

and by 25% or more

over three years.




innovation


the business

IT Procurement




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technology




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Questions to Ask About Lever 3 (Joint Business and IT Cost Savings)

• Are you familiar with Gartner’s research on application Total Cost of Ownership, as described in, “A Framework for the Lifetime Total Cost of Ownership of an Application”?

• Where is your organization on Gartner’s IT Score Model for Applications?

• How do you currently manage your application portfolio?

• How do you work with business’ stakeholder to identify opportunities for IT and the business to work on and leverage IT?

Treat Applications as Assets

• The "E" in TIME (*) is logical, but requires intestinal fortitude.

• Most of the time, things stay around until they pose an obviously huge risk, or break and cannot be fixed.

• Unless there is a life-threatening moment… (*) TIME = Tolerate, Invest, Migrate or Eliminate Methodology

Value

Cost

Value/Business Benefit

Time Project

Expense

Project Capital Depreciation Upgrade

Expense Ops Cost App Maint.

… …

Capital Planning and Portfolio Management

• Whenever someone wants something new, the CFO (or CEO, COO) asks, "What will go away?"

• Business cases include financials for full life cycles — from creation through retirement (including decommissioning).

• Retirement and reuse lists exist, and execution is tracked.

Base Base

Project

A

Project

B New

Project

New

Project

Current

Year

Next

Year …

Base

Several

Years

Bu

dg

et

…

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Take away for Lever 3 (Joint Business and IT Cost Savings)

• Application Rationalization; Identifying and retiring business applications

• Business Process Optimization.

• Demand Governance: How do you ensure business projects support business objectives

• Shared Services: How can business support be rationalized ?

• Sourcing strategy: Can processes be delivered in a different way?




innovation


the business

IT Procurement




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technology




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Questions to Ask About Lever 4 (Innovation and Business Transformation)

• Is the enterprise using information technology to support new business models and/or new sources of revenue as described in Gartner’s research on “In Emerging Markets, CIOs Must Partner With the Business to Leverage Innovation ?”

• Is the enterprise using information technology to create a competitive advantage?

• How confident are you that the business is investing in the right things?

• Where are your best opportunities to drive business process improvement with information technology?

16

Measure as a Business Partner Use business performance to determine IT success

Contribution of IT

Dramatically

reduce

inventories

Identify redundant

assets

Reduce

process

inefficiencies

Dynamic pricing

Increase reach

Improve service/

cost value

proposition

(Illustrative)

Technology (Illustrative)

Asset tracking

systems

Inventory

management systems

Process automation

Real time market

analysis and price files

Virtual channels,

Web and so on

Customer self-

service/ delivery

tracking

Note: (1) Return on capital employed

(2) Profit before interest and tax

(3) Cost of goods sold

Business Objectives

Increase ROCE (1)

Increase Market Share

Increase Market Size

Increase Sales

Decrease Costs

Increase PBIT (2)

Reduce Current Assets

Reduce Fixed Assets

Decrease Capital Employed

Reduce Other Costs

Reduce COGS (3)

Increase Volume

Increase Price

Source: Adapted from www.investopedia.com

Lever 4: Business Innovation and Transformation

• "Seizing Competitive Advantage" special report highlights how enterprises

use IT to win.

• Hype Cycles and Emerging Technologies research helps

identify game- changing technologies.

• The Internet of Everything research explores how IT is

often becoming the business.

• Research around mobile, hybrid thinking, social

computing, idea management, R&D

approaches and innovation labs.

• Toolkits add rigor and discipline to innovation

processes.

• Webinars, best practices and case studies on business and IT innovation in key

industries.

• Vertical industry research and analysts

• The Gartner IT Market Clock™ and Gartner ITScore help identify modernization targets, and build actionable

road maps.

• Deep expertise in business process and risk management

to drive operational excellence.

• "Business value of IT" Key Initiative translates IT benefits

into business value.

Shift the focus from the cost of IT to

value of IT

Innovate

Seize Competitive Advantage Transform the Business

Today, a competitive advantage from IT is

rarely about implementing a

single “killer app”

C-Level Executives view information

technology as the engine of growth

STREET: Process for Innovation

Transfer Evaluate Track

Scope Evangelize Innovation

Candidates

Rank

Give yourself a star:

We don't do this, or we don't do this well

We have activities but could do it better

We don't have too many problems here

19

Next Steps: Developing the Go-Forward Plan

• Build into your team meetings in the next 30 days to

address insights from this workshop.

• Identify accounts to proactively take our Cost

Optimization capabilities.

• Build into service kick offs and ongoing value Reviews.

• Think about establishing an innovation process, such

as STREET.

Recommended Reading

20

In Emerging Markets, CIOs Must Partner With the Business to Leverage Innovation

Published: 18 April 2013 ID:G00250677

Analyst(s): Cassio Dreyfuss

10 Key Actions to Reduce IT Infrastructure and Operations Cost Structure

Published: 6 October 2009 ID:G00170304

Analyst(s): Jay E. Pultz

A Framework for the Lifetime Total Cost of Ownership of an Application

Published: 30 March 2010 ID:G00174275

Analyst(s): Andy Kyte

Use the Pace-Layered Application Strategy to Understand Your Applications Portfolio

Published: 16 August 2012 ID:G00232225

Analyst(s): Darryl Carlton | Jim Duggan | Luis Claudio Mangi

Driving the STREET Process for Emerging Technology and Innovation Adoption

Published: 30 March 2010 ID:G00174060

Analyst(s): Jackie Fenn

http://my.gartner.com/portal/server.pt?open=512&objID=256&mode=2&PageID=2350941&authorId=12342













This presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the intended Gartner audience or other authorized recipients. This presentation may contain information that is confidential, proprietary or otherwise legally protected, and it may not be further copied, distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates. © 2012 Gartner, Inc. and/or its affiliates. All rights reserved.

Increasing business value of your IT : Value Optimization, Enabling Innovation & Business Restructuring

Aurelio Bastos


Jamir Lopes


Executive Programs Latin America

April 2014

