Assets and liabilities for IT
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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
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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. IT: Strategic Liability or Strategic Asset?. - PowerPoint PPT Presentation
Transcript of Assets and liabilities for IT
Assets and liabilities for IT
Professor Georges Ataya, cgeit, cisa, cism, cissp
Academic Director, Solvay Brussels School for Economics and ManagementManaging Partner, ICT Control SAInternational Vice President, ISACA
21st May 2010 2
IT: Strategic Liability or Strategic Asset?
Senior Management do not accept accountability for IT
IT Assets are merely isolated systems wired together to meet the next immediate need.
IT Budget is typically thrown on tactical initiatives with no significant impact on Enterprise capabilities
Georges Ataya
Source: Fujitsu
Can’t kill projects
Leads to..
Too many projects
Quality of execution suffers
Underestimation of risks and costs
Projects not aligned to strategy
Budget overrunsProject delays
Business needs not met
Lack of confidence (in IT)
Results in..
Benefits not receivedIncreased ComplexitySub-optimal use of resourcesFinger pointing
Situation
Reluctance to say no to projects
Lack of Strategic Focus
Projects are “sold” on emotional basis -- not selected
No strong review process
Overemphasis on Financial ROI
No clear strategic criteria for selection
Without Effective Governance
SYMPTOMS
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Liability scenarios
• Fire the CIO• Throw money on the problem• Cut IT budget Drastically• Outsource the IT problem• Implement a major ERP solution
Georges Ataya
21st May 2010 5
Build IT into an Asset
• Fix what is broken• Build a sound IT platform• Exploit the IT Platform
Engineer the Operating model
• Processes • Systems• Information
Georges Ataya
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Operational value
Georges Ataya
Business Outcomes
Business Capability
Operational Capability
Technical Capability
RESO
URCE
S
Dev
elop
ing
the
busi
ness
cas
e
Solu
tion
del
iver
y an
d m
onit
orin
g
PortfolioManagement
ProgrammeManagement
Project Management
Programme – a structured grouping of projects designed to produce clearly identified business value
Project – a structured set of activities concerned with delivering a defined capability based on an agreed schedule and budget
Portfolio – a suite of business programmes managed to optimise overall enterprise value
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Projects, Programs, and Portfolios
Source: ISACA.org
IM - The Business Case
1. Fact Sheet
2. Alignment
3. Financial Benefits
4. Non-fin. Benefits
5. Risks
6. Optimising risk & return
7. Documentation
8. Maintenance
Cost OptimisationPROCESS
Project Portfolio Management (PO10)
Contract/Third-party Service Management (DS2)
Procurement (AI5)
Budgeting and Cost Monitoring (PO5 and DS6)
Asset Management (DS9)
Programme and Project Management (PO10)
Financing Policy (PO5)
Service Desk and Service Delivery (DS8)
Operations and Systems Management (DS13)
PEOPLE
Use of ITContract Staff
Deployment of Human Capital
IT Management and Organisation
IT Recruitment
Staff Retention
Training and Staff Development
INFRASTRUCTURE
HARDWARE SOFTWARE TELECOMS
Asset Management
Warranty and Maintenance
Platform and Product Consolidation
SoftwareLicensing
Capacity and Utilisation
Capacity and Utilisation
• Applications• System software• Databases• Desktop software
• Mainframes• Servers• Desktops• Laptops/PDAs
• Data (LAN)• Data (WAN)• Voice• Internet
Replacement Strategy
In-house and User Development Acceptable Use
Policies
Leverage of New TechnologiesPlatform
Standardisation
Legacy/In-house Application
Support
Opportunities and Strategies for Cost Optimisation
Source: IT Governance Institute 9
21st May 2010 10
Architecture types
Georges Ataya
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Steer the operating model
• Diversification• Integration• Standardisation• Unification
Georges Ataya
Define Integration and standardisation needs
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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
Georges Ataya
21st May 2010 13
IT Budget : Static view
IT Budget
Project exceeding IT budget
Project downsized to accomodate budget
Maintenance eating up IT budget
Budget
time
Implement a new application Mainenance cost
Georges Ataya
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
Georges Ataya
IT position in the Enterprise
IT Department
Business Departments
IT position in the Enterprise
IT Department
Business Departments
Demand for ITservices and products
Deliver ITservices and products
IT position in the Enterprise
IT Department
Business Departments
Demand for ITservices and products
Deliver ITservices and products
services and products
Cost of services and products
IT position in the Enterprise
IT Department
Business Departments
Demand for ITservices and products
Deliver ITservices and products
Other Sourcesfor IT Services and products
IT Sells services to other customers
Business Perspective IT Perspective
+ Value
- Costs
Justification
- Costs
+ Recovery
Viability
Cost of services
Technology Services
Value transfer
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Develop an idea to a commodity
Georges Ataya
VENTURE
GROWTH
NONDISCRETIONARY
CORE
Every investment need not follow: The same level of value analysis The same level of control
Disc
retio
nary
Inve
stm
ents
Non
-Disc
retio
nary
Cos
ts
Transform the Business
DISCRETIONARYENHANCEMENTS
Grow the Business
Run the Business
ValueAssessment
Little Analysis
Impact Analysis
Cost BenefitAnalysis
Degrees of freedom to
allocate funds
Clarity of connection
with desired business
outcomes
Source: META Group
Portfolio Categorisation
Portfolio, program and project management practices
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Developing and monitoring business cases
Source: Fujitsu Consulting, Information Paradox by John Thorp
1. Fact Sheet
2. Alignment
3. Financial Benefits
4. Non-financial Benefits
5. Risks
6. Optimising risk & return
7. Documentation
8. Maintenance
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
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INITIATIVEClear understandingof outcomes
Clear accountabilities
DRAFT
Complete, Comparable andOperational Business Cases
Relevantmeasurement
Source: The Results Chain™, Fujitsu
CONTRIBUTIONASSUMPTION OUTCOMEINITIATIVEINITIATIVE CONTRIBUTIONCONTRIBUTIONASSUMPTIONASSUMPTION OUTCOMEOUTCOMEINITIATIVEINITIATIVEINITIATIVEINITIATIVE
Results- focused
programmes
Full scope of effort— All necessary IT and business initiatives, including change management
ROI as expected in the Business Case
Expected Benefits
€ 114 - € 100 m€ 100 mBudgeted ROI =
Expected Budget
= + 14%
We don’t learn from our past
= - 38%
Actual ROI allowing for typical solution delivery performance
Functionality achieved -16%
Approximately two years delay. so benefits discounted at 12% After
Tax Rate
Budget Overrun +24%
Actual ROI after corrections SDP
ROI= -38%
Expected ROI = 14%
Cumulative cash flow (€)
Time Actual ROI after corrections SDP
ROI= -38%
Expected ROI = 14%
Cumulative cash flow (€)
Time
Actual ROI = €1
1.12€ 100 m x 124 %
2- € 100 m x 124 % 114 m x 84 % x
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€
Georges Ataya
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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
Georges Ataya
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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
Georges Ataya
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
Diversity
Unification
Standardisation
Integration
Georges Ataya
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)
Georges Ataya
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
Georges Ataya
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Global View
• Global picture on assets at any time from:– Accounting value– Market value
• Compare profitability over the globe on a real time basis
Georges Ataya
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