ISM101 Discussion, 10.21.04 Notes from the Field Adam Seligman Platform Strategy Advisor Microsoft...
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ISM101 Discussion, ISM101 Discussion, 10.21.0410.21.04
Notes from the FieldNotes from the Field
Adam SeligmanAdam SeligmanPlatform Strategy AdvisorPlatform Strategy AdvisorMicrosoft CorporationMicrosoft Corporation
AgendaAgenda
The Business – Technology GapThe Business – Technology Gap
The Web Services RevolutionThe Web Services Revolution
Thoughts on selling technologyThoughts on selling technology
Thoughts on MicrosoftThoughts on Microsoft
A bit about meA bit about me
AgendaAgenda
The Business – Technology GapThe Business – Technology Gap
The Web Services RevolutionThe Web Services Revolution
Thoughts on selling technologyThoughts on selling technology
Thoughts on MicrosoftThoughts on Microsoft
Business Value & Business Value & TechnologyTechnology
or, why executives don’t care or, why executives don’t care about developer productivityabout developer productivity
Adam Seligman, .NET AgitatorAdam Seligman, .NET Agitator
2 Minute MBA2 Minute MBA
$1 tomorrow is not the same as $1 $1 tomorrow is not the same as $1 todaytoday
Difference is called “discount rate”Difference is called “discount rate”
10% annual discount rate means:10% annual discount rate means:
““$1.10 in a year == $1 today”$1.10 in a year == $1 today”
Discounted Cash FlowDiscounted Cash FlowWrite down your cash inputs and Write down your cash inputs and outputsoutputs
Discount each oneDiscount each one
Sum themSum them
year 1 2 3 4
cash flows $ (100) $1,000 $1,000 $1,000
discount factor 1.00 0.85 0.72 0.61
discounted dollars $ (100) $ 850 $ 723 $ 614
NPV @ 15% $2,087
Advanced ManagementAdvanced Management
Business Case DevelopmentBusiness Case Development
Guesstimate cash flows for Guesstimate cash flows for projectsprojects
Portfolio analysis and managementPortfolio analysis and management
Pick projects with positive NPVPick projects with positive NPV
Don’t drop the ballDon’t drop the ball
Don’t drop the ballDon’t drop the ball
ISM101 Fall 2004
MBA
Graduation!Graduation!
How do Business Execs How do Business Execs think about projects?think about projects?
Invest some cash up frontInvest some cash up front
Get a big inflow of cash laterGet a big inflow of cash later
Positive NPVPositive NPV
year 1 2 3 4
cash flows $ (100) $1,000 $1,000 $1,000
discount factor 1.00 0.85 0.72 0.61
discounted dollars $ (100) $ 850 $ 723 $ 614
NPV @ 15% $2,087
Cut Development Cost by Cut Development Cost by 50%50%
year 1 2 3 4
cash flows $ (50) $1,000 $1,000 $1,000
discount factor 1.00 0.85 0.72 0.61
discounted dollars $ (50) $ 850 $ 723 $ 614
NPV @ 15% $2,137
Add Some Project DelayAdd Some Project Delay
year 1 2 3 4 5
cash flows $ (50) $ - $1,000 $1,000 $1,000
discount factor 1.00 0.85 0.72 0.61 0.52
discounted dollars $ (50) $ - $ 723 $ 614 $ 522
NPV @ 15% $1,809
Three ScenariosThree Scenarios
Old technology NPV = $2,087
New technology50% dev cost savings
NPV= $2,137(+$50)
New technology with delay
NPV = $1,809(-$278)
ObservationsObservations
Fat tail end of projects determine Fat tail end of projects determine returnsreturns
Developer productivity is low priorityDeveloper productivity is low priority
Project risk = Delay of returnProject risk = Delay of return
New technology has a lot more New technology has a lot more downside than uspidedownside than uspide
What do technical people What do technical people think of business people?think of business people?
What do business people What do business people think of technical people?think of technical people?
How we hear, think How we hear, think differently, examples of differently, examples of problems this causesproblems this causes
Market ChallengesMarket Challenges
Earnings Earnings pressurepressure
Lowering costsLowering costs
Rising Consumerism Rising Consumerism
CompetitionCompetition
Security issuesSecurity issues
New technologiesNew technologies
Regulatory PressureRegulatory Pressure
Growth is DifficultGrowth is Difficult• Research 130 businessesResearch 130 businesses• H&R Block, Lowe’s, Johnson Controls, H&R Block, Lowe’s, Johnson Controls,
Medtronic, Mohawk Industries, Wal-Mart, Medtronic, Mohawk Industries, Wal-Mart, Harley-Davidson, Dell, etc., Harley-Davidson, Dell, etc.,
• FindingsFindings• 1997-2002 the thirty companies that make up 1997-2002 the thirty companies that make up
the Dow Jones Industrial Average grew at a the Dow Jones Industrial Average grew at a collective rate of 4.9% in revenue, 4% in gross collective rate of 4.9% in revenue, 4% in gross profit and 0.5% in after-tax profitprofit and 0.5% in after-tax profit
• If you take out the top five performers the If you take out the top five performers the remaining 25 companies grew revenues at remaining 25 companies grew revenues at 2.3% - about the rate of inflation2.3% - about the rate of inflation
• Root causes – management systems, Root causes – management systems, management tools and techniques have not management tools and techniques have not kept pacekept pace
Source: Michael Treacy’s Source: Michael Treacy’s Double-Digit Growth, 2003Double-Digit Growth, 2003
Advances in Management Advances in Management ToolsTools
““The major differentiator between The major differentiator between companies now is their agility – their companies now is their agility – their ability to create value quicker than ability to create value quicker than their competitors. This may be the their competitors. This may be the only differentiator in the future, as only differentiator in the future, as every other innovation can be every other innovation can be copied.”copied.”
--Rolf JesterRolf Jester
Chief Analyst – IT Services Market Asia/PacificChief Analyst – IT Services Market Asia/Pacific
GartnerGartner
The Debate About ITThe Debate About IT
Fundamental Fundamental BusinessBusiness QuestionsQuestions
What is the “basis of competition” in What is the “basis of competition” in the market(s) where my company the market(s) where my company competes?competes?
How will we know when the this basis How will we know when the this basis of competition shifts ? of competition shifts ?
How do the velocity of information How do the velocity of information and the agility of my organization and the agility of my organization impact my company’s ability to impact my company’s ability to compete ?compete ?
How does the Microsoft platform help How does the Microsoft platform help me realize strategic competitive me realize strategic competitive advantage ?advantage ?
AgendaAgenda
The Business – Technology GapThe Business – Technology Gap
The Web Services RevolutionThe Web Services Revolution
Thoughts on selling technologyThoughts on selling technology
Thoughts on MicrosoftThoughts on Microsoft
What’s all this WS stuff What’s all this WS stuff about?about?
Business IT todayBusiness IT today
If You Invest …Then If You Invest …Then TomorrowTomorrow
10 Years Later10 Years LaterWhat Actually HappenedWhat Actually Happened
Internet Internet BankingBanking
WirelessWireless
AggregatiAggregationon
Branch BankingBranch Banking
CRMCRM
Core Core BankingBanking
Wealth Wealth ManagementManagement
Treasury / Treasury / ForexForex
Trading / Back Trading / Back office office
Payment Systems and Card Payment Systems and Card MgmtMgmt 3D Secure3D Secure
Business Business IntelligenceIntelligence
EAIEAI
Straight through Straight through ProcessingProcessing
ATM / POSATM / POS
No Application Is An IslandNo Application Is An Island
No Company Is An IslandNo Company Is An Island
CustomerCustomerss
SuppliersSuppliers EmployeeEmployeess
PartnersPartners
SuppliersSuppliers
SuppliersSuppliers
EmployeeEmployeess
CustomerCustomerss
PartnersPartners PartnersPartners
What are XML Web What are XML Web Services?Services?
Industry standards for applications to Industry standards for applications to talk to each othertalk to each other
Extend basic web concepts… (HTTP, Extend basic web concepts… (HTTP, HTML)HTML)
To applications (SOAP, XML, WSDL, To applications (SOAP, XML, WSDL, UDDI)UDDI)
Designed to work across platforms & Designed to work across platforms & languageslanguages
Coexist well with firewalls and Coexist well with firewalls and networksnetworks
Standards body defining the specs:Standards body defining the specs:Participation by all the major playersParticipation by all the major players
What is .NET?What is .NET?
.NET is our brand for our XML and WS .NET is our brand for our XML and WS stacksstacks
Microsoft is delivering XML and Web Microsoft is delivering XML and Web Services capability across our product Services capability across our product lineline
Windows OS, BizTalk, SharePoint, etc.Windows OS, BizTalk, SharePoint, etc.
New applications use the .NET New applications use the .NET framework, which includes WS and framework, which includes WS and XML toolsXML tools
Use Visual Studio to develop Use Visual Studio to develop applications on the .NET framework applications on the .NET framework from a variety of languagesfrom a variety of languages
C#, C++, J#, VB.NET, (and many others)C#, C++, J#, VB.NET, (and many others)
Service-Oriented Service-Oriented ArchitectureArchitecture
An approach to take existing IT An approach to take existing IT assetsassets
Think of these assets as technical Think of these assets as technical capabilities: “services”capabilities: “services”
Use these services, along with new Use these services, along with new services, to support business services, to support business processesprocesses
Reconfigure these services flexibly to Reconfigure these services flexibly to support changes in business processsupport changes in business process
AgendaAgenda
The Business – Technology GapThe Business – Technology Gap
The Web Services RevolutionThe Web Services Revolution
Thoughts on selling technologyThoughts on selling technology
Thoughts on MicrosoftThoughts on Microsoft
What does a customer What does a customer think of a vendor?think of a vendor?
What does a vendor think What does a vendor think of a customer?of a customer?
1. Writing a Business Case1. Writing a Business Case
Start with your core business objectivesStart with your core business objectivesTop line: growth, new customers, expand Top line: growth, new customers, expand marketmarket
Cost savings: simplify, consolidate, shutdown Cost savings: simplify, consolidate, shutdown old systemsold systems
Build a business case with champions from Build a business case with champions from both IT and businessboth IT and business
4 sections:4 sections:1 background & strategic need1 background & strategic need
2 what you want to do2 what you want to do
3 benefits to your firm3 benefits to your firm
4 economics (cost & benefit)4 economics (cost & benefit)
2. Pitching Technology to 2. Pitching Technology to MgmtMgmt
Get a clear “GO” or “NO-GO” from Get a clear “GO” or “NO-GO” from managementmanagement
Force the pointForce the point
Make a pitchMake a pitch
Make a clear “ask” for funding and Make a clear “ask” for funding and sponsorshipsponsorship
Use a core team of both business and Use a core team of both business and IT staff to map out the projectIT staff to map out the project
Build a real project plan – don’t just pitch Build a real project plan – don’t just pitch for $for $
Program manage project aggressivelyProgram manage project aggressively
Enforce phase-gates/milestones and Enforce phase-gates/milestones and reviewsreviews
Getting “unstuck”Getting “unstuck”
Strategies for “NO-GO” or on the Strategies for “NO-GO” or on the fence…fence…
Wrap an existing system as a service Wrap an existing system as a service and deliver value to a business process and deliver value to a business process where there’s a clear painwhere there’s a clear pain
Use case studies from Use case studies from http://www.microsoft.comhttp://www.microsoft.com to to demonstrate value of .NET Architecture demonstrate value of .NET Architecture in your industryin your industry
Take a “challenge” – a hard problem that Take a “challenge” – a hard problem that nobody else has a good solution to, and nobody else has a good solution to, and deliver past expectationsdeliver past expectations
Still stuck?Still stuck?
Is this a company that is using Is this a company that is using technology to its strategic technology to its strategic
advantage?advantage?
AgendaAgenda
The Business – Technology GapThe Business – Technology Gap
The Web Services RevolutionThe Web Services Revolution
Thoughts on selling technologyThoughts on selling technology
Thoughts on MicrosoftThoughts on Microsoft
Microsoft cheerleadingMicrosoft cheerleading
R&D spend, financialsR&D spend, financials
What we’re good at, what we’re bad What we’re good at, what we’re bad atat
Roles & OrgRoles & Org
A day in my lifeA day in my life