IT ASSET MANAGEMENT (From Booz-Allen & Hamilton).
Transcript of IT ASSET MANAGEMENT (From Booz-Allen & Hamilton).
ITASSET
MANAGEMENT
(From Booz-Allen & Hamilton)
PERSPECTIVE ON ASSET MANAGEMENT
• What are the management issues and challenges we see at large multinationals?
• What is an asset management capability?
– What are the best practices?– What benefits have been achieved through improved
asset management capabilities?
• What steps do companies take to implement improved asset management capabilities?
ASSET MANAGEMENT ENCOMPASSES THE PROCESSES OF PLANNING, PROCURING AND
MANAGING HARDWARE, SOFTWARE AND SERVICES
Acquisition Planning
For Hardware,Software and
Services
Supplier and Contract
ManagementProcurement
InventoryManagement
ASSET MANAGEMENT PROCESS
ASSET MANAGEMENT PROVIDES THE FOUNDATION TO OPTIMIZE THE RESOURCES OF THE BUSINESS
• Control over the infrastructure provides the ability to plan ahead– Capacity -- How many assets are installed? How many more do
we need?– Ownership -- Where are the assets located? Can we cascade to
reduce excess capacity?– Capability -- What assets will be required to support the critical
business applications?
• Asset management standards minimize complexity in the infrastructure– Higher service levels due to a controlled number of software
packages and hardware configurations– Reduced inventory of non-standard equipment
• Expertise can be focused on high priority business objectives rather than supporting non-standard applications and configurations
POOR ASSET MANAGEMENT PROCESSES WILL LEAD TO HIGH COSTS IN THE BUSINESS
• Extra Capacity -- especially in distributed computing– Extra desktops: hardware and software– Excess network bandwidth– Server capacity
• Increased fixed costs reduce financial flexibility– Long Contract Terms -- especially in dynamic services
areas, e.g., telecommunication, desktop services
• Insufficient consideration of “total cost of ownership”– Upfront hardware costs are usually key priority– More attention should be given to standards and reduction
of ongoing support costs– Decide the right level of maintenance service required to
support the business
FINALLY, POOR ASSET MANAGEMENT CAN IMPACT AN ORGANIZATION’S ABILITY TO RESPOND EFFECTIVELY TO BUSINESS REQUIREMENTS
• “Just-in-time” Justification: Infrastructure and assets often justified on a project by project basis
– Affects the economics of the project– Slows down the process of acquiring new equipment to
meet a business need– May lead to the lowest-priced hardware solution, even if it
is non-standard
• Planning: Often reactive following ad hoc, last minute capacity and functionality requirements to deliver new solutions
THE NEXT SLIDES WILL DEMONSTRATE THE APPROACH USING PROVEN CASE STUDIES
AND BEST PRACTICES
• Summarize key case studies
• Demonstrate the key economic drivers and models
• Present current Best Practices and capabilities in the marketplace
– Tools– Outsourcing services
BEST PRACTICES FOR EACH OF THE ASSET MANAGEMENT PROCESSES PROVIDE GUIDELINES
FOR BUILDING NEW CAPABILITIES
Acquisition Planning
For Hardware,Software and
Services
Supplier and Contract
ManagementProcurement
InventoryManagement
ASSET MANAGEMENT PROCESSBEST PRACTICES
• Minimized ad-hoc requests
• Managed IS user demand
• Standardized hardware and software configurations
• Forecasts of user demand
• Requirements base planning
• Business driven requirements only
• Minimized number of suppliers
• Maximized service component for products and services
• Purchase only “right” hardware/ software
• Achieve economies of scale through consolidation
• Minimize purchasing admini- strative costs
• Minimized excess assets
• Manage equipment effectively
• Maximized life of assets
• Includes installation and disposition
THESE BEST PRACTICES ARE USED TO IDENTIFY GAPS IN CURRENT CAPABILITIES
EXAMPLES OF CAPABI LI TY GAPS
PROCESSBEST PRACTI CE
OBJ ECTI VERECOMMENDED CAPABI LI TY
I MPROVEMENT
Eliminate unnecessary work(minimize ad-hoc requests)
Develop f orecasts f or userdemand
Acquisition Planning Optimize asset utilization among
business units
Standardize hardware and sof twareconfi gurations across business units
Define strategy to cascadeequipment to optimize capacityutilization
Supplier and ContractManagement
Achieve lowest total cost ofownership, best service levels,and simplified asset acquisition
Rationalize the number of suppliers
Enforce standards
Leverage buying through scaleeconomies
Establish contracts that deliverongoing improvement
Procurement Optimize capacity Align to an acquisition planningprogram to reduce excess capacity
Achieve physical control of assets I mplement a single inventory
management tool-managed regionallyor locally
I nventory Management
Achieve f ullest utilization andsharing of assets
Maximize the lif e of assets throughthe ref resh program
Define process to re-deploy assets
See Overhead Slide
INFRASTRUCTURE STANDARDIZATION REDUCES “TOTAL COSTS” BY ENABLING HIGHER SUPPORT
RATIOS
STANDARDIZATION IMPACT ON SUPPORT RATIO(Greater Than 2000 Users)
40% ABC (at 40%standard)
41 - 69% 70%
% Standardization
I/SProductivi
ty(AverageSupportRatio*)
Low Standardization leads to low
productivity
Note: Support Ratio = (No. of I/S Users) / (No. of I/S FTE’s)Source: Interviews, Surveys, BA&H Analysis
EXAMPLE
INFRASTRUCTURE STANDARDIZATION IS KEY TO DELIVERING I/T SERVICES MORE ECONOMICALLY
PRODUCTIVITY(Greater Than 2000 Users)
SERVICE COSTS(Greater Than 2000 Users)
I/SPRODUCTIVITY
(AverageSupportRatio)
40% 41-69% 70%
AVERAGEI/S
SUPPORTCOST
17% 18-25 26-33 34
% STANDARDIZED SUPPORT RATIO
A “Common”Standard
InfrastructureImproves Service
Productivity
HigherProductivity
Results in LowerService Costs
Note: Support Ratio = (No. of I/S Users) / (No. of I/S FTE’s)Source: Interviews, Surveys, BA&H Analysis
Note: Support Ratio = (No. of I/S Users) / (No. of I/S FTE’s)Source: Interviews, Surveys, BA&H Analysis
CASESTUDY
STRATEGIC SOURCING PROVIDES OPPORTUNITIES FOR COST SAVINGS BY MINIMIZNG THE NUMBER OF SUPPLIERS
PURCHASI NGCATEGORI ES
I SSUESI MPROVEMENTOPPORTUNI TES
Desktops
Multiple desktop confi gurations andmultiple vendors lead to
– Lost opportunities to capture volumediscounts
– I ncreased desktop complexity and thereforehigher support costs
Defi ne desktop standardconfi gurations (limited number ofmodels)
Rationalize desktop supplier base
– Start with regional suppliers
– Migrate towards global suppliers onlywhen it provides lower costs
Servers
Multiple server confi gurations andmultiple vendors lead to
– Lost opportunities to capture volumediscounts
– I ncreased network complexity
At large campuses, divisionsindependently manage their networks andservers – leading to excess servercapacity
Defi ne standard serverconfi gurations
Rationalize server supplier base
Transfer control and managementof servers to desktop supportorganization to enforce standardsand to reduce server over capacity
Sof tware
Diffi culty in enforcing sof twarestandards – e.g., sof tware purchases canbe submitted using expense accounts
Sof tware suppliers may exist butfurther leverage is possible bycoordinating purchases and f rompurchasing sof tware in “bundles”
Defi ne a set of standard sof twarepackages
Purchase these packages insof tware “bundles” f rom globalsuppliers
MaintenanceServices
Multiple hardware maintenance vendors –lost opportunities to rationalize andreduce maintenance costs
Rationalize number of maintenancevendors
LAPTOP COST COMPARISONPurchase vs. Lease
DESKTOP COST COMPARISONPurchase vs. Lease
Leasing ismore costeffective
Leasing is morecost effective forrefresh periods
lessthan 4 years
COST(NPV)
COST(NPV)
2 Years 3 Years 2 Years 3 Years 4 Years 5 Years
REFRESH PERIOD REFRESH PERIOD
Lease
Purchase
PROCUREMENT BEST PRACTICES PROVIDE THE OPPORTUNITY TO SELECT THE “RIGHT” HARDWARE AND
SOFTWARE TO SUPPORT BUSINESS REQUIREMENTS
DESKTOP LAPTOP
CostPerSeat
$2,800
$3,800
0% 20% 40% 60% 80% 100%
Total Cost(per 1000
users)
% Laptop
Desktop/Laptop Cost Comparison
Total Cost Impact of Laptop Mix
CASESTUDY
PURCHASE VERSUS LEASE ALTERNATIVES MAY PROVIDE FINANCIAL OR OTHER BENEFITS
PROCUREMENTALTERNATIVE
BENEFITS RISKS
Purchase
May be lower cost alternative f orlonger ref resh cycles (over 3 or 4years)
Minimizes incremental f ees f orextending the ref resh cycle
Risk of asset ownership associatedwith obsolescence of equipment
Lease
Provides financial incentives toimprove the asset managementprocess through visibility to:
– Monthly payments
– Lease extension and termination fees
Balances the cash flow impact ofprocuring new equipment
Fees will be assessed if ref resh cyclechanges
– Lease extension fees apply whenlengthening ref resh cycles
– Lease termination fees apply whenshortening the ref resh cycles
A SHARED SERVICES ORGANIZATION LEVERAGES IMPROVED PROCESSES, STANDARDS, AND
ORGANIZATIONAL CHANGES TO ACHIEVE ECONOMIES OF SCALE
SCALE CURVE FOR I/S COSTS
Cumulative Company A
Group B
Group A
Group C
Group DI/S cost-curve
100 1,000 10,000 100,000
No. of I/S Users (Log Scale)
Source: Interviews, surveys, BA&H analysis
I/S
Cost/
User
Economies of scale areachieved through a
shared serviceorganization
A STRUCTURED APPROACH CAN BE USED TO IMPROVE ASSET MANAGEMENT CAPABILITIES
I. What is the Business Case?
II. What are the Asset Management Capabilities?
III. How to Implement These Capabilities?
FinancialTools and
Models
ProcessModel and
Tools
Organizational Model
• Internal
• External Partners
TechnicalTools
• Baseline current “total” cost structure
• Define Business Unit service requirements
• High-level benchmarking
• Identify gaps and benefit opportunities
- Service
- Cost
- Capability
• Architecture
• Standards
• Best Practices
• Leveraging Price - Performance
ASSET MANAGEMENT APPROACH
HIGH-LEVEL BENCHMARKS
I MPROVEMENTAREA
TYPI CAL I SSUES
Support Costs
Duplicate and sub-scale organizations exist
Little eff ort is made to share practices across desktop organizations
Control and coordination of discretionary activities is limited
Desktop standards are not adequately enforced
Desktop EquipmentAsset Ratio
Excessive number of desktops
– People of ten have both laptops and desktops when they only need one
– Some locations have more desktops than employees
Desktop Ref reshRate
Desktops are replaced too f requently; ref resh rate is higher thannecessary
Replacement rate may be driven by technical and not business needs
Procurement I nsuffi ciently leveraging purchasing scale
– Lack of (HW/ SW) standards
– Lack of coordination of desktop purchases
Automation –Managed ComputerEnvironment
No standard computer environment exists, limited opportunities toautomate desktop services
Many technical support activities can be automated/ done remotely
DESKTOPEXAMPLE
THE BUSINESS CASE DEFINITION VALIDATES IMPROVEMENT OPPORTUNITY AREAS IN ASSET
MANAGEMENT
• Develop a baseline of the “total” cost for asset management
– Quantify “total” costs -- hardware, software, maintenance, procurement, help desk/support, installation, and other asset management costs
– Include business unit and geographic specific costs– Identify key levers -- asset ratios, refresh rates, etc…
• Utilize high-level benchmarks to identify the opportunities
– Define and utilize analytics to be used to evaluate the current processes
– Compare the baseline with the benchmarks to identify the gaps with best practices
• Identify and quantify the benefits that can be obtained through an improved asset management capacity
• Define key levers and controls that can be used to manage the process improvement
NEW ASSET MANAGEMENT CAPABILITIES MUST BE ALIGNED WITH BUSINESS IMPERATIVES,
ARCHITECTURE AND STANDARDS, AND BEST PRACTICES
BusinessObjectives and
Priorities
Architectureand
Standards
BestPractices
NewAsset Management
Capabilities
• Identify new capabilities required by the business
• Prioritize initiatives based on business priorities
• Quantify capacity and functionality requirements
• Align architecture and standards with business objectives
• Define new capacity targets
• Design new architectural changes
• Review list of standards
• Apply best practice to improve the process
• Define standards and measures to control compliance and process improvement
BUILDING NEW ASSETMANAGEMENT CAPABILITIES
CAPABILITY GAPS CAN BE IDENTIFIED USINGTOOLS AND MODELS
CATEGORY EXAMPLES
Financial Tools Financial Models
– Purchase vs. lease
– Key drivers: ref resh cycles, asset ratios, capacity curves
Technical Tools
Architecture and standards
Capacity, f unctionality and project plans
Technical specification f rameworks
– Desktop vs. laptop hardware
– “Power” user vs. average/ standard user
Process Models
Outsourcing criteria f or internally supported vs. outsourced
Scorecard to measure and monitor the process improvements
Procurement practices
– Clear asset ownership
– Selecting key products as standards
– Strategic sourcing
– I nventory management tools
Organizational Models Organizational roles and responsibilities
Approach … Implementing Capabilities ...
ONCE THE CAPABILITY GAPS ARE IDENTIFIED, AN EVALUATION CAN BE COMPLETED TO DETERMINE WHETHER TO OUTSOURCE OR INTERNALLY
SUPPORT THE SERVICES
SAMPLE CRITERI A DESCRIPTI ONS
Total Cost Comparison
Compare internal costs vs. outsourcing total costs (retained costs +outsourcing f ees)
– Project these cost comparisons over the term of the contract to determinewhich service alternative is lower cost
– Make sure that the “net” transition costs will be amortized by thesecommitments
Unit Cost Comparison
Quantif y and compare the unit costs f or each of the desktop servicecategories
– Ensure the unit costs reflect the “true” costs – not allocations – associated withdiff erentiated service levels
– Verif y that the pricing structure provides the granularity without being toocumbersome to manage service and demand
Scaleability and PriceSensitivity
Test pricing structures against varying workload assumptions
– I ncreases and decreases in the number of seats and technical support callvolume
– Change in mix (e.g., laptop vs. desktop)
Clarif y conditions to invoke scaleability and quantif y any applicablecosts
Cancellation Terms Quantif y one-time costs and ensure flexibility without paying highpenalties f or cancellation or termination of the agreement
Contract Duration Commitment to the preferred contract term
Geographic Scope Quantif y and evaluate which locations will participate in the deal
A SCORECARD PROVIDES THE ABILITY TO CONTROL AND ENSURE THE ONGOING IMPROVEMENT
Approach … Ongoing Improvement ...