KGS – CIO Advisory IT Operating Model

1 © 2014 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Contents Technology Strategy Consulting IT Operating Model Definition Key Components & Examples Key drivers of IT Operating Model Changes Key Trends in IT Operating Model KPMG Methodology

2 © 2014 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Technology Strategy Consultant I am a Technology Strategy Consultant What do you do?

Technology Strategy Consulting

4 © 2014 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. IT Strategy Corporate Strategy Which Business I should get into? How to create value across different business? Business Strategy How shall we compete in the business? A business strategy is the means by which it sets out to achieve its desired ends (objectives). It can simply be described as a long-term business planning. IT Strategy Formulation and implementation of IT objectives. IT objectives are defined based on how technology should be utilized to as part of organization’s overall corporate strategy and business strategy

5 © 2014 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. CIOs Challenges I have recently joined the organization what will be my days strategy My organization wants me to review IT strategy to enable global expansion I have given a mandate to reduce IT operations cost what should I do? Everyone is talking about cloud, Does my organization require it? There is a huge emphasis on using analytics to improve customer conversion We need to enable employees with mobility. How should I go about it? How IT can help organization in regulatory compliance What do I need to do for future readiness?

6 © 2014 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Technology Strategy Consulting Technology strategy consultant helps CEOs and CIOs in Transforming their businesses using technology and information Developing the strategies and implement the systems that build business value and drive performance. From system replacement to a full IT transformation Help in practical solutions tailored to address their most crucial technology challenges

7 © 2014 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Technology Strategy Consulting - Offerings Each organization defines there technology strategy consulting offering based on the market/client they want to focus and capabilities available to them. Name of these offering also differs depending on the organizations. The offerings can be as broad as IT Strategy and can be as narrow as Application Rationalization IT StrategyIT Operating ModelIT M&A IT Service Management Application Portfolio Strategy IT SourcingCloud Advisory Technology Business Management IT Performance IT Capability Assessment Data Center and Infrastructure Transformation

IT Operating Model

9 © 2014 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.  What business should we be in?  How should IT support the delivery of the business strategy?  How do we configure our resources to deliver?  Where should we compete (markets, segments, products etc.)?  IT operating model is the manifestation of the strategy – explicit choices about the best approach to achieve the business goals  It describes how IT operates across process, organisation & technology domains in order to deliver value defined by the strategy  It is a key delivery vehicle for the business strategy CORPORATE STRATEGY BUSINESS STRATEGYIT STRATEGY IT Operating Model Definition:...delivered through operating model IT Operating Model Operating Model Describes How to Deliver on Strategy

10 © 2014 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Services, Functions & Processes Organisation & Governance Sourcing & Location Performance Management Technology People & Skills Measurement framework KPIs & dashboard Measurement processes People management & supporting processes Skills & capability planning & development Organisation development Sourcing model Location strategy Preferred suppliers Technology infrastructure Application landscape Supporting tools Architectural framework Organisational structure & sizing Governance structure including RACI Escalation paths Roles and responsibilities IT capabilities and structure Process framework and specifications Interaction between functions IT Operating Model Key Components & Examples

11 © 2014 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. What are the business challenges and trends for IT operating models? Drivers for IT Operating Model Change Bold growth targets Mergers, de-mergers & acquisitions Business challenge  Need to radically improve customer service while keeping costs flat  Significant issues with customer service  Step change in quality of customer service while keeping costs to serve flat  Flexible operations capable of absorbing variability in customer demand  Two entities need to be integrated  A line of business needs to be carved out from the rest of the group  Rapid definition of a common IT vision for integrated / disintegrated business  Realised merger synergies through a comprehensive redesign of IT function Benefits of a new operating model  Growth in the most profitable way  Ensured high level of co-ordination; IT is set up to deliver the growth strategy  Existing operating model is not scalable enough to deliver bold growth targets  A high level of co-ordination is needed between all parts of the business, including IT  Entry into new segments, markets or launch of new products and services  New competitive threats; when incremental changes are not enough to protect market share  Identification of critical IT capabilities and gaps required for new markets, segments, products and services  A new “modus operandi” to respond to competitive threats – innovation, agility, speed to market  Need to radically reduce costs; a structural change is needed  Sourcing model needs to be changed (contract renewal, changes to sourcing strategy)  Radical cost savings through comprehensive redesign  Sustainable cost reduction through structural change  Support for new sourcing arrangements  Unsustainable level of complexity caused by too many moving parts in IT function  Co-ordinated and radical simplification of operating model  Faster speed to market, increased responsiveness and agility  Increased legislation from national and international bodies e.g. financial, reporting  Structural changes required e.g. Chinese walls  Ability to adhere to regulations  Able to report to relevant body information required Change in strategic focus or positioning Cost reduction & sourcing Service improvement Simplification Regulation

12 © 2014 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. What are the business challenges and trends for IT operating models? Trends in IT Operating Model Centralised IT Services Evolution of Sourcing IT as a Business Partner Description Key IT functions are shared by business units that receive standardised services Impact on Operating Model  Increased emphasis on remaining flexible  Requires reduced reaction time  Improvement in employee adaptability  Quicker decisions from key stakeholders  Capability to govern and select new technology Increased focus on utilization of emerging technologies (SMAC) to renew business models (new products / services), improve operational efficiency and customer experience. Organisations becoming increasingly mature in how IT services are sourced  move towards multisource model partnering with multiple third parties to improve service and manage risk  Integrating and governing multi sourced services  Building the appropriate retained organisation to manage multiple vendors  Greater emphasis on IT flexibility and retaining critical IT knowledge in-house  Retaining service management and integration functions  Requires shared financial accountability  Common reporting and monitoring channels  Requires synergy between IT capabilities  Move to a single global IS organisation and governance  Standardised ways of working driven through governance IT working in partnership with the business to ensure that technology enabled change initiatives are collaboratively identified and commissioned  Establishing two way communication and processes rather than one directional  Requires processes to efficiently and effectively identify, consolidate and prioritise demand  Empowers IT to influence business strategy and recommend IT centric services Emerging Technologies

IT Operating Model Implementation Methodology

14 © 2014 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. IT Operating Model Draft Framework Approach Assess the “As Is” operating model Understand the Business Strategy and Objectives Design the “Target Operating Model” Develop business case, roadmap & implementation plan Implementation support & review  Review and validation of business strategy and vision  Understand market context  Conduct executive interviews  Confirm problem statement  Confirm programme rationale, constraints & objectives including key success factors  Define TOM design specifications  Assess executive alignment Problem statement/purpose  Market & business context  OM design specifications including hard targets (financial, operational, customer, employee)  Generic OM concepts to focus on  Key questions to answer (initial list of design challenges) Reach a joint understanding with client on problem statement, business needs; agree on OM design specifications & generic OM concepts Objectives: Activities: Deliverables: Design client specific OM concepts and take current capabilities and issues into consideration  Data gathering and analysis of:  Services & processes  Organisational structure and governance  Systems & technology  Sourcing & location  Performance management (KPIs)  People & skills  Costs  A high level operating model  Impact of existing change portfolio on baseline & gaps  Key interfaces with IT  Current IT service usage statistics  High level financial baseline  Assess capabilities of current model & identify key issues and gaps  Develop model evaluation matrix Select the best OM concept that meets design specifications & engineer future state of operating model  Operating model selection  Business case development  Road map development  Detailed transition & implementation plan for the following workstreams:  Change management & communications  Organisation & people  Sourcing (if applicable)  Process, governance & tools  Funding model  Prioritisation of change initiatives  IT Operating model options  Future state operating principles  High level financial baseline  Transition scenarios  Creation of OM Options:  High level OM  Internal versus External  Business versus Centralised  Local versus Regional  Regional versus Global  Pros and Cons  Estimates of benefits  Develop transition scenarios  Develop prototype economics Develop a program of initiatives to move to the future state with a clear path forward including governance and change approach  TOM business case  TOM roadmap  TOM implementation plan  Change and governance plan To support implementation of the new operating model and assess whether the objectives set out during the lifecycle have been achieved  Support implementation of the new model as per agreed plans  Provide programme management and reporting of implementation  Review the implemented operating model against the business case  Establish KPI monitoring elements  New operating model in place  Gap analysis against business case  KPI framework for ongoing monitoring

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The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. © 2014 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.