1. advising on IT-business alignment The challenges of IT-business alignment A presentation for Microsofts TechNet IT Directors Strategy Day Neil Macehiter, Partner

2. © Macehiter Ward-Dutton 2005www.mwdadvisors.com2 Agenda A brief introduction to MWD Aligning IT and business Understanding business processes Understanding managed IT services Summary

3. © Macehiter Ward-Dutton 2005www.mwdadvisors.com3 A brief introduction to MWD Strategic advice and consulting Focus on issues concerning IT-business alignment –Driving more business value out of enterprise IT –Not about the nuts and bolts of individual technologies Core: two highly experienced industry analysts / practitioners –Sun, Oracle, Sybase, Ovum, Deloitte Consulting, etc Based in UK, Europe-wide capability

4. © Macehiter Ward-Dutton 2005www.mwdadvisors.com4 advising on IT-business alignment Aligning IT and business

5. © Macehiter Ward-Dutton 2005www.mwdadvisors.com5 IT-business alignment: multiple angles IT Business Change implications Change capabilities, limitations Investment in capability Delivery of value Its not just about building stuff that the business will use

6. © Macehiter Ward-Dutton 2005www.mwdadvisors.com6 Why now? Globalisation –Customers, partners, suppliers – and competition –Connectedness driving sophisticated value chains Transparency –Industry regulations, consumer pressure and competition driving openness Service focus –Differentiation and shareholder value increasingly derived from service experience

7. © Macehiter Ward-Dutton 2005www.mwdadvisors.com7 From a UK perspective A healthy economy – albeit growing at a low rate –Spurred by public sector investment –With a knock-on effect on the IT market Globalisation –>4000 (+400/year) UK-Sino joint ventures –Vonage launches UK VoIP service (01/05) –Tesco enters mortgage market with First Active (11/04) Transparency –Corporate Responsibility (CORE) coalition –Government initiatives e.g. Extractive Industries Transparency Initiative –International Financial Reporting Standards (IFRS) Service Focus –BT launches mobile music service with UBC Media and Virgin Mobile (06/05) –Amazon Services Europe to underpin M&S e-commerce systems (04/05)

8. © Macehiter Ward-Dutton 2005www.mwdadvisors.com8 The real world FromTowards Build, or buy vs. build Application implementation Buy AND build AND integrate Back office Business area investment focus Front office and beyond Personal productivity desktop IT access environment Productivity desktop + global access to resources Data processing Technology innovation focus Communication, collaboration, integration Older approaches fail to capture reality re: integration, communication, collaboration, supply complexity Outsourcing vs. in-house delivery Capability supply Multi-sourcing

9. © Macehiter Ward-Dutton 2005www.mwdadvisors.com9 A common language is the essential starting point IT Business ? Investment prioritised in terms of business need Systems that deliver value to the business Clear direction from the business about focus, strategy Collaborative approach to implementing business change A common, agreed representation of business activity, goals + A common, agreed view of how current and future IT provides structured support to the business in this context

10. © Macehiter Ward-Dutton 2005www.mwdadvisors.com10 Reflecting the environment in IT-business alignment Business IT Business process Managed IT service Managed IT service Managed IT service Managed IT service Managed IT service A P P L I C A T I O N S & I N F O R M A T I O N I N F R A S T R U C T U R E B U S I N E S S S T R A T E G Y Business processes form the foundation of a common language IT defines and delivers business level services which support the right processes, the right way

11. © Macehiter Ward-Dutton 2005www.mwdadvisors.com11 advising on IT-business alignment Understanding business processes

12. © Macehiter Ward-Dutton 2005www.mwdadvisors.com12 Business process Applications Data The challenge Activities, processes The business The real world doesnt decompose nicely – and IT isnt just about things you build in-house

13. © Macehiter Ward-Dutton 2005www.mwdadvisors.com13 Providing structured support for business processes means understanding scope & scale of interactions From Data design tightly coupled to application design, and application design to user requirements – very restricted view of process needs B u s i n e s s p r o c e s s Towards B u s i n e s s p r o c e s s Loosely-coupled resources provide services which are designed to support the interactions that take place within a business process

14. © Macehiter Ward-Dutton 2005www.mwdadvisors.com14 IT approaches must consider business process support more broadly B u s i n e s s p r o c e s s Transactional services Information services Communication & collaboration services Support scenario: a mesh of interactions We have to model more than just transactional applications

15. © Macehiter Ward-Dutton 2005www.mwdadvisors.com15 A universe of business processes [1] EEEEE MMM S Execution processes – instances handle particular units of work within business activities Management processes – instances oversee instances of execution processes Strategy processes – instances oversee instances of management processes A hierarchy of business processes

16. © Macehiter Ward-Dutton 2005www.mwdadvisors.com16 A universe of business processes [2] E E E M M S Contribution to competitive differentiation E E E M M S Non-differentiating (focus should be on efficiency) Differentiating (focus should be on flexibility)

17. © Macehiter Ward-Dutton 2005www.mwdadvisors.com17 Observations on the nature of business processes E E E M M S E E E M M S Increased structure, predictability Increased collaboration, ad-hoc nature Non-differentiating (focus should be on efficiency) Differentiating (focus should be on flexibility)

18. © Macehiter Ward-Dutton 2005www.mwdadvisors.com18 A resulting (wider) view of technical architecture Level of process abstraction Low High Non-differentiatingDifferentiating Strategy business processes Management business processes Execution business processes Business functions Pure BPMS Traditional app. Development tools & frameworks Collaboration tools Simple portal Business intelligence tools Workflow Composite service-based application development & integration

19. © Macehiter Ward-Dutton 2005www.mwdadvisors.com19 advising on IT-business alignment Understanding managed IT services

20. © Macehiter Ward-Dutton 2005www.mwdadvisors.com20 So what is an IT service? CRM database Provide automated support for my sales force Update customer details Line of business perspective IT operations perspective Developer perspective

21. © Macehiter Ward-Dutton 2005www.mwdadvisors.com21 Managed IT services – aligned with business processes Lifecycle services Managing the lifecycles of business functions and infrastructure Business function services Automating business functions Infrastructure services Providing the platform Users experiences of managed IT service

22. © Macehiter Ward-Dutton 2005www.mwdadvisors.com22 Contracts bring obligations for suppliers and consumers Message Format Message Sequence Functions Security Response Time Throughput Usage Cost Liability Clauses Trust Functional Terms QoS Terms Commercial Terms

23. © Macehiter Ward-Dutton 2005www.mwdadvisors.com23 An organising model for service-oriented IT in the context of IT-business alignment How can we align flexibility / reusability requirements for business software functions, to business needs? How can we trade-off flexibility / reusability of business function services with efficiency / openness requirements? How can we ensure that the right consumers get the right kind of experience from these services, and do so cost-effectively? How should infrastructure elements provide their services to different business functions? How should infrastructure be optimally managed? How can QoS responsibility be delegated to infrastructure in a way that is easily flexed in response to changing requirements? How can we minimise the cost and risk of overall process support while creating an business support environment with more moving parts? How should we differentiate lifecycle service levels for different kinds of business function, infrastructure? How should we define and enforce development, fault- fix and change-request priorities? How can we demonstrate the overall value of the services that the IT organisation and its resources provide to the business? Functional contract aspects Quality-of-Service contract aspects Commercial contract aspects Business function services Infrastructure services Lifecycle services

24. © Macehiter Ward-Dutton 2005www.mwdadvisors.com24 An example – business function service design Level of process abstraction Low High Non-differentiating (focus should be on efficiency) Differentiating (focus should be on flexibility) Business activity role Strategy business processes Management business processes Execution business processes Activity functions Technical functions Reusability importance increases Openness, flexibility demands increase Efficiency demand increases

25. © Macehiter Ward-Dutton 2005www.mwdadvisors.com25 advising on IT-business alignment Summary

26. © Macehiter Ward-Dutton 2005www.mwdadvisors.com26 Summary Todays business environment brings IT-business alignment to the fore –In terms of investment, delivery and change Business processes provide a common language –But the organisational context of real-world business processes is complex Managed IT services must align with business process priorities –Its about more than business function services Services and their contracts provide an organising model for service-oriented IT