it value – making it real shafeen charania director, platforms communications microsoft...
TRANSCRIPT
IT Value – Making “IT” RealIT Value – Making “IT” Real
Shafeen CharaniaShafeen CharaniaDirector, Platforms CommunicationsDirector, Platforms CommunicationsMicrosoft CorporationMicrosoft Corporation
"Getting Past the Hype --Delivering Business Value"
© 2004 Microsoft Corporation. All rights © 2004 Microsoft Corporation. All rights reserved.reserved.
The Value of IT?The Value of IT?
© 2004 Microsoft Corporation. All rights © 2004 Microsoft Corporation. All rights reserved.reserved.
E-Government Hype Cycle E-Government Hype Cycle EvolutionEvolution
Source: Hype Cycle Shows E-Government Overcoming Disillusionment3/17/04 - Gartner
© 2004 Microsoft Corporation. All rights © 2004 Microsoft Corporation. All rights reserved.reserved.
So – What Matters So – What Matters More???More???IT…IT…
……or the or the Business??Business????
Related question – what Related question – what matters more – the people? …matters more – the people? …or HR?or HR?
© 2004 Microsoft Corporation. All rights © 2004 Microsoft Corporation. All rights reserved.reserved.
Revenue growth Return on assets Revenue per employee
BUSINESS UNIT FINANCIAL BVBUSINESS UNIT FINANCIAL BV
Dilutionof Impact
Time to bring new product to mkt. Sales from new products Product or service quality
BUSINESS UNIT OPERATIONAL BV
BUSINESS UNIT OPERATIONAL BV
Dilutionof Impact Time to implement a
new application Cost to implement a
new application InformationTechnology $
BUSINESS UNITIT APPLICATIONS BV
BUSINESS UNITIT APPLICATIONS BV
Dilutionof Impact
Source: P. Weill & M. Broadbent “Leveraging the New Infrastructure: How market leaders capitalize on IT,” Harvard Business School Press, June 1998.
Time
Dilu
tio
n o
f IT
Imp
acts
ITITManagementManagement
Responsibilities
BusinessBusinessManagementManagement
Sample Value MeasuresImpact Sought
Infrastructure availability Cost per transaction Cost per workstation
FIRM-WIDE IT INFRASTRUCTURE BV
FIRM-WIDE IT INFRASTRUCTURE BV
InformationTechnology $
Tracking the Impact of Tracking the Impact of Information Technology Information Technology InvestmentsInvestments
Center for Information Systems Research
BVBV = business = business valuevalue
© 2004 Microsoft Corporation. All rights © 2004 Microsoft Corporation. All rights reserved.reserved.
ContextContextBusiness Business StrategyStrategy
Business Business ProcessesProcesses
IT IT StrategyStrategy
Business Business CapabilitiesCapabilities
IT SolutionsIT Solutions
Approach:Approach:
Cost/Value Cost/Value AnalysisAnalysis
Focus: Focus: Governance Governance Portfolio Portfolio Architecture Architecture SourcingSourcing
Need: Resilience, Need: Resilience, Flexibility, OpportunismFlexibility, Opportunism
Drivers: People, Drivers: People, Process, Information, Process, Information, RelationshipsRelationships
Focus: Focus: “Processized” “Processized” Analysis – Analysis – Vocabulary Vocabulary MetricsMetrics
© 2004 Microsoft Corporation. All rights © 2004 Microsoft Corporation. All rights reserved.reserved.
Agility and the Process of ChangeAgility and the Process of ChangeAgility is “Optimal Sense and Response”Agility is “Optimal Sense and Response”
ActAct: Are you able to follow : Are you able to follow through as efficiently as you can?through as efficiently as you can?
StrategizeStrategize: Are you able to : Are you able to effectively plan to respond to effectively plan to respond to the change?the change?
DecideDecide: Can you : Can you commit to the plans?commit to the plans?
SenseSense: Are you aware of significant : Are you aware of significant changes in your business environment?changes in your business environment?
CommunicateCommunicate: Are you able to : Are you able to get the word out to everyone who get the word out to everyone who needs to know?needs to know?
© 2004 Microsoft Corporation. All rights © 2004 Microsoft Corporation. All rights reserved.reserved.
The AQ AnalysisThe AQ Analysis
AwarenessAwareness
FlexibilityFlexibility
ProductivityProductivity
PeoplePeople
ProcessesProcesses
RelationshipsRelationships
InformationInformation
What key What key technologies technologies
can help?can help?
What can you What can you do to improve do to improve your agility?your agility?
What does your What does your company do that company do that needs to be agile?needs to be agile?
Business DriversBusiness Drivers Agility EnablersAgility Enablers Key Agility technologiesKey Agility technologies
Those you haveThose you have
Those you needThose you need
RecommendationRecommendation PrioritizationPrioritization Assessment & Assessment & Gap AnalysisGap Analysis
Current vs. Desired StateCurrent vs. Desired State
You vs. IndustryYou vs. Industry
PrioritizedPrioritizedInitiativesInitiatives
Top IssuesTop Issues
OverallOverall
© 2004 Microsoft Corporation. All rights © 2004 Microsoft Corporation. All rights reserved.reserved.
AQ Executive SummaryAQ Executive Summary
P W
A F
P W
A F
P W
A F
P W
A F
P W
A F
A: AwarenessF: FlexibilityP: ProductivityW: Willingness
CUSTOMERCUSTOMER wants to be sense environmental changes quickly and respond efficiently and effectively to wants to be sense environmental changes quickly and respond efficiently and effectively to those changes. It wants to be agile not only to survive but to maintain its leadership in the industry.those changes. It wants to be agile not only to survive but to maintain its leadership in the industry.
Agility is the ability to sense, strategize, decide, communicate and act throughout the organization at the Agility is the ability to sense, strategize, decide, communicate and act throughout the organization at the right time with the right economics.right time with the right economics.
CUSTOMERCUSTOMER does a fairly good job in strategizing and communicating with appropriate support from IT does a fairly good job in strategizing and communicating with appropriate support from IT infrastructure and services. The effectiveness of good strategy is tampered by lack of timely awareness infrastructure and services. The effectiveness of good strategy is tampered by lack of timely awareness and flexibility and speed in taking actions.and flexibility and speed in taking actions.
Based on the response to the agility questionnaire and the agility analysis tool developed by Gartner and Microsoft.
Poor
Moderate
Good
Agility State
SenseSense: Awareness is a prerequisite for sense and respond. : Awareness is a prerequisite for sense and respond. CUSTOMERCUSTOMER must ensure that the right information is made must ensure that the right information is made available to the right people at the right time. available to the right people at the right time.
StrategizeStrategize: The organization is reasonably good at : The organization is reasonably good at planning in response to changes in the environment it can planning in response to changes in the environment it can detect.detect.
DecideDecide: In order to evaluate and execute the plans, : In order to evaluate and execute the plans, CUSTOMERCUSTOMER needs the flexibility of re-wiring processes and needs the flexibility of re-wiring processes and integrating information across application and integrating information across application and organizational boundaries.organizational boundaries.
CommunicateCommunicate: The organization has various : The organization has various communication channels and culture to communicate communication channels and culture to communicate information and decisions at all levels and across groups.information and decisions at all levels and across groups.
ActAct: Due to limited flexibility to connect and consolidate : Due to limited flexibility to connect and consolidate information and processes, business activities and people information and processes, business activities and people are not very efficient and effective in executing strategies.are not very efficient and effective in executing strategies.
Enterprise ArchitectureEnterprise Architecture: Develop set of principles and : Develop set of principles and guidelines to direct the process of acquiring, building, modifying, guidelines to direct the process of acquiring, building, modifying, interfacing and managing IT services and resources.interfacing and managing IT services and resources.
Role-based Information DashboardsRole-based Information Dashboards: Provide consolidated : Provide consolidated view of information and business processes for individual groups.view of information and business processes for individual groups.
Firm-wide infrastructure and applicationsFirm-wide infrastructure and applications: standard (utility) : standard (utility) desktop and server infrastructure (email, office tools, directory, desktop and server infrastructure (email, office tools, directory, OS); Collaboration (Web Ex, net meeting); SAPOS); Collaboration (Web Ex, net meeting); SAP
Architecture and governanceArchitecture and governance: Primarily application-based; : Primarily application-based; Insufficient architecture for application and data integration.Insufficient architecture for application and data integration.
IT Environment
Recommendations
Sense
Strategize
DecideCommunicate
Act
Actual
Desired
© 2004 Microsoft Corporation. All rights © 2004 Microsoft Corporation. All rights reserved.reserved.
What is IT Governance?What is IT Governance?Decision rights and accountability framework to encourage Decision rights and accountability framework to encourage desirable behavior in the use of ITdesirable behavior in the use of IT
Who has decision rights and input to key IT Who has decision rights and input to key IT decisions.decisions.
IT Principles—role for ITIT Principles—role for ITIT Infrastructure—what is shared and put in firstIT Infrastructure—what is shared and put in firstIT Architecture—integration & compatibilityIT Architecture—integration & compatibilityBusiness application needs—what is requiredBusiness application needs—what is requiredIT Investment & Prioritization—how much and whenIT Investment & Prioritization—how much and when
What is desirable behavior in the enterprise.What is desirable behavior in the enterprise.Sharing, reuse, cost savings, innovation, growthSharing, reuse, cost savings, innovation, growth
What mechanisms are used to implement What mechanisms are used to implement governance.governance.
E.g., IT council, process teams, architecture office, SLAsE.g., IT council, process teams, architecture office, SLAs
How much business value.How much business value.Responsibilities, accountabilities, measurement and Responsibilities, accountabilities, measurement and metricsmetrics
Source: Don’t Just Lead, Govern!: Empowering Effective Enterprise Use of Information Technology, P. Weill & J. Ross, Harvard Business School Press: Boston, Forthcoming
© 2004 Microsoft Corporation. All rights © 2004 Microsoft Corporation. All rights reserved.reserved.
How do enterprises How do enterprises govern?govern?
Most commonpatterns
The numbers in each cell are percentages of the 256 enterprises studied in 23 countries. The columns add to 100%.
Decision Domain
IT Principles
IT Infrastructure
Strategies
IT Architecture
Business Application
Needs IT Investment
Input Decision Input Decision Input Decision Input Decision Input Decision
Business Monarchy 0 27 0 7 0 6 1 12 1 30
IT Monarchy 1 18 10 59 20 73 0 8 0 9
Feudal 0 3 1 2 0 0 1 18 0 3
Federal 83 14 59 6 46 4 81 30 93 27
Duopoly 15 36 30 23 34 15 17 27 6 30
Anarchy 0 0 0 1 0 1 0 3 0 1 Go
ve
rna
nc
e A
rch
ety
pe
No Data or Don’t K now
1 2 0 2 0 1 0 2 0 0
©MIT Sloan Center for Information Systems Research 2002 – Weill This framework is adapted from Weill & Woodham's work originally published and copyrighted by the MIT Sloan CISR as Working Paper No. 326, "Don't Just Lead, Govern: Implementing Effective IT Governance," April 2002.
© 2004 Microsoft Corporation. All rights © 2004 Microsoft Corporation. All rights reserved.reserved.
( ) = public sector
Source: Weill & Broadbent “Leveraging the New Infrastructure: How market leaders capitalize on IT,” Harvard Business School Press, 1998.
© 1994-2003 Weill
Increased salesCompetitive advantageCompetitive necessityMarket positioning
Business integrationBusiness flexibilityReduced marginal cost of BU’s ITReduced IT costsStandardization
Increased controlBetter informationBetter integrationImproved quality
Cut costsIncrease throughput
(Innovation)(Major Change)(Facilitation)(High Value Added)(Interact with customers)
Rethinking IT as an Investment Rethinking IT as an Investment PortfolioPortfolio- asset class, risk and return, strategy- asset class, risk and return, strategy
INFORMATIONAL STRATEGICINFORMATIONAL STRATEGIC
TRANSACTIONALTRANSACTIONAL
INFRASTRUCTUREINFRASTRUCTURE
Center for Information Systems Research
© 2004 Microsoft Corporation. All rights © 2004 Microsoft Corporation. All rights reserved.reserved.
IT Portfolios In Different IndustriesIT Portfolios In Different Industries
Center for Information Systems Research
4 Source: Leveraging the New Infrastructure: How Market Leaders Capitalize on Information Technology, Peter Weill & Marianne Broadbent, HBS Press, 1988.
5 Services include Professional, Scientific and Technical Services, Heath Care Services, Social Assistance, Accommodation and Food Services
1 Net Sales = Interest Income plus Fees2 Total Expenses = Net Sales – (Net Sales * Net Margin)3 Discretionary Expenses = Net Sales – (Net Sales * Operating
Margin before Depreciation)
NSF Grant Number IIS-0085725
IT Investment 2001/02
18% 13%
54%
15%
22% 11%
56%
11%
12% 20%
14%
26% 11%
45%
18%
20% 13%
54%
13%
54%
Firm-wide $IT as a Percentof Net Sales
(Three year averages)
Nonmetal Manufacturing,
Utilities, Construction
19
1.4
Metal Manu-facturing
86
2.3
Finance, Insurance1
7
3.5
Information&
Services5
14
2.0
All147
2.1
No. of firms
Firm-wide $IT as a Percentof Discretionary Expense3
(Three year averages)
1.7 2.65.2 2.0 2.5
17% 17%
52%
14%
WholesaleRetail,
Transport21
1.3
1.4
15
IT Investment 1993–974
(54 businesses over 5 years)
22% 14%
52%
12%
13% 13%
13%
16% 14%
57%
13%
61%
22% 14%
12%
52%
Information (15)
Strategic (5)
Transactional (40)
Infrastructure (40)
© 2004 Microsoft Corporation. All rights © 2004 Microsoft Corporation. All rights reserved.reserved.
IT PortfolioMix of
Investments
IT PortfolioMix of
Investments
$IT compared to industry avg. as %
of expenses or revenues
IT is 10-20% lower than industry average
IT is around industry average
Average % of Revenues & Expenses
IT is 10-25% higher than industry average
20% 15%20% 13%
13% 5%
14% 17%
Cost Focus Balance Cost & AgilityAverage Firm Agility Focused
Business Strategy
Synchronize Information Synchronize Information Technology Portfolios to StrategyTechnology Portfolios to Strategy
42%40%
50%
15%58%
11%
54%
13%
Center for Information Systems Research
Source: P. Weill & M. Broadbent “Leveraging the New Infrastructure: How market leaders capitalize on IT,” Harvard Business School Press, June 1998. (Based on a study of 54 businesses in 7 countries over five years and 117 firms studied in 2001/02.)
© 2004 Microsoft Corporation. All rights © 2004 Microsoft Corporation. All rights reserved.reserved.
© 2004 Microsoft Corporation. All rights © 2004 Microsoft Corporation. All rights reserved.reserved.
Value ToolsValue ToolsTotal Value of OpportunityTotal Value of Opportunity
Measures both costs and Measures both costs and benefitsbenefits
Standard business measuresStandard business measures
TCO AnalystTCO AnalystFocus = costFocus = cost
Reference database Reference database
REJ (Rapid Economic REJ (Rapid Economic Justification)Justification)
Alignment, Quantification, Alignment, Quantification, AccountabilityAccountability
Framework independent of toolsFramework independent of tools
© 2004 Microsoft Corporation. All rights © 2004 Microsoft Corporation. All rights reserved.reserved.
Business Value InventoryBusiness Value InventoryStudyStudy FocusFocus DeliverablDeliverabl
eeDurationDuration
Microsoft REJ BDM Relationship Building Cost/Benefit Analysis ROI Analysis
Business Case 4 to 6 Weeks
Gartner TVO Cost/Benefit Analysis ROI Analysis Gartner Credibility
Business Case 2 to 4 Weeks
Microsoft RPA BDM Relationship Building Application Portfolio
Analysis Microsoft/Customer Action
Items
Customer/MS Account Plan
2 Weeks
Microsoft AQ BDM/TDM Relationship Building IT Alignment to Business
Agility Gaps Uses Gartner IT Agility
Impact Model
Prioritized Technology InitiativesSustained xDM Engagement
2 Days
Navigant Office Value
Industry and process orientation Value analysis (productivity
focused) ROI Analysis
Vertically-aligned business case focused on KW productivity
1-2 Days
Microsoft BVA Product Feature Mapping Cost/Benefit Analysis ROI Analysis
Collateral for Business Case
1 Day
Gartner TCO Analyst
Limited to Infrastructure ROI Analysis Gartner Credibility
Cost Analysis Document 1 Week
3rd Party TCO Tools
High Level TCO Estimate Product Specific TCO ROI Analysis
Limited Cost Analysis Document
2 Hours
NerveWire Deployment Cost Tool
Desktop Deployment Costs For MS, Partners &
Customers Predictive Modeling from
RDP Data
Deployment Cost Estimate
1 Hour
Bu
siness V
alue
To
tal C
ost
Co
st
© 2004 Microsoft Corporation. All rights © 2004 Microsoft Corporation. All rights reserved.reserved.
AQStrategy
Assessment Spectrum Assessment Spectrum
TCO Analyst1-2 weeks
Cost Oriented
Value Oriented
Comprehensive/LongBV Consultants required
Simple/Fast
Mini – REJ4-6 weeks
TVO2-4 weeks
Office System BV Model
1 day - 1 week
REJ8 – 12 weeks
TCO Manager4-8 weeks
Deployment Cost Tool1-2 hours
ROI (VS03) Calculator30min - 1 hour
BVA1 day
© 2004 Microsoft Corporation. All rights © 2004 Microsoft Corporation. All rights reserved.reserved.
FedEx “Smart Tags” for MS Office FedEx “Smart Tags” for MS Office XPXP
© 2004 Microsoft Corporation. All rights © 2004 Microsoft Corporation. All rights reserved.reserved.
Level and Effectiveness Level and Effectiveness of Senior Management in Governanceof Senior Management in Governance
More senior management is better…More senior management is better…
1.1. CEO (4.4)CEO (4.4)
2.2. COO (3.0)COO (3.0)
3.3. Business Unit Leader (2.7)Business Unit Leader (2.7)
4.4. Business Unit CIO (1.7)Business Unit CIO (1.7)
5.5. CFO (1.5)CFO (1.5)
6.6. CIO (1)CIO (1)
Rank/(Scale) of Effectiveness When Involved*
* Statistically significant relationship with governance performance – scale estimated by strength of coefficient.
CIO must be involved for effectiveness
© 2002 MIT Sloan Center for Information Systems Research (Weill).
© 2004 Microsoft Corporation. All rights reserved.© 2004 Microsoft Corporation. All rights reserved.This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.