1. Nov-08Confidential1 Finding IT value – getting it right

2. Nov-08 ConfidentialSlide 2/23 Sondage Survey  How many people have Blackberrys?  How many people are pleased with there IT department?  How many people feel that they get better service from IT than Finance and HR? IT Jeopardy  In 6 months 31,000 2,100  40,000  $10 billion ±  $3 billion +

3. Nov-08 ConfidentialSlide 3/23 Topics  IT and its weaker sibling IM, are pervasive and ubiquitous.  Nor does it (IT) always work.  The prospect and promise of Web 2.0, with its progeny - Web 3.0  Is IT a sink hole? a tsunami? or simply a rudderless ship?  How do we measure the value of such a large and critical part of overall operations and the budget?

4. Nov-08 ConfidentialSlide 4/23 Agenda 1.Temperature check  The sorry state  IM is not IT 2.Stratagems  Portfolio Management  Val IT  Voodoo/Holistic accounting 3.Questions and Answers

5. Nov-08 ConfidentialSlide 5/23 Big Questions What is the value of  Class A building  Phones 1 telephone 2 telephones 2 m telephones  A Blackberry  A laptop  An RDIMS repository Frameworks  Value = Benefits  Value = Benefits – Costs  CoBIT Is IT doing the right things Is IT doing them right? Is IT doing them well? Are benefits being realised

6. Nov-08 ConfidentialSlide 6/23 IT Governance Institute  “A 2002 Gartner survey found that 20% of all IT expenditures is wasted  A 2004 IBM survey of Fortune 1000 CIOs reported a believe of 40% of IT Spending brought no return  A 2006 Standish Group survey found 35% of all IT projects succeeded. (the rest either challenged or failed)  Other surveys  20-70% of large scale investments wasted, challenged or fails  8% of IT budget brings value  Of 124 financial executives, 80% did not encourage value creation

7. Nov-08 ConfidentialSlide 7/23 Everyone is doing it (IT) Users 1.Super users (HR, FI) 2.Computer analysts 3.Document managers 4.Record managers 5.Archivists 6.Librarians 7.Web masters Vendors 1.Consultants 2.Contractors 3.Global firms Trickle Down IT 1.Web 2.0 2.convergence

8. Nov-08 ConfidentialSlide 8/23 Moscella’s Curves 1970 198019902000 2010 2020 2030 10 100 1,000 3,000 # of Users ‘000,000 Systems Centric PC Centric Network Centric Content Centric Grosch’s Law Moore’s Law Metcalfe’s Law Gilder’s Law

9. Nov-08 ConfidentialSlide 9/23 IT is never enough  IT has been seen as new infrastructure, similar to water, hydro, trail way and telephone systems. The more people make use of, the more benefits (value) people will gain; Similar to other types of infrastructures, it will be absolute necessary and somehow “hidden” from people’s daily life. It’s more widely and deeply involved in people’s life than any other types of infrastructure It’s more complex than other types of infrastructure and therefore harder to operate and eventually cost more.  Computing and IT/IM and utilities in human civilization history is still in baby ages.

10. Nov-08 ConfidentialSlide 10/23 GOC IT Spend Category 2004-20052005-20062006-2007 $ Million Computing Hardware /Software $939.8$844.8$738.2 Computing Services $187.1$199.0$26.2 Communications Equipment $381.5$419.7$401.3 Communications Services $473.0$488.6$562.1 Professional Services $490.4$538.6$717.7 Maintenance $401.4$394.5$409.2 Total $2,873.2$2,885.2$2,859.4

11. Nov-08 ConfidentialSlide 11/23 Gross Calculation  40,000 FTEs  7,000 single shingles  ≈ 15%-20% of GoC operating Budget SWE $4,000 O&M $1,715 Capital $1,140 Amortisation $1,000 Accommodation $1,000 Misc $500 ∑ $9,355

12. Nov-08 ConfidentialSlide 12/23 Sourcing Strategy 4 Different Options…. Accountability Visibility Risk Smart Buy Cost certainty Cost visibility Accountability Contractual commitment Results based Fixed Cost Variable Cost Build Buy Out Source Systems integration Partner Consulting Contracting Staffing In Source Employees Cheap Buy Best Effort Inputs based Option 1Option 2 Option 3 client shared risk

13. Nov-08 ConfidentialSlide 13/23 The State of the Union The Good Methodologies CoBIT ITIL RUP CMM PMBoK The Bad The Ugly ½ life ≈ 3 years No unified theory # service firms 85% product innovation fails No cost sensitivity No sourcing strategy No metrics Procurement No visibility of it all No benefits harness

14. Nov-08 ConfidentialSlide 14/23 “IT Doesn’t Matter”  IT is done as Nicholas Carr has pointed out in the Harvard Business Review. IT – the raw infrastructure - is no longer a source of competitive advantage and in fact is a commodity.

15. Nov-08 ConfidentialSlide 15/23 Mastering the Three Worlds of IT 3 critical responsibilities wrt IT  choose technologies for the true needs of the business  smooth the adoption of those technologies  encourage their exploitation by leveraging already standardized data and work flows.  Function IT spreadsheet and word- processing applications--that streamline individual tasks.  Network IT capabilities like e-mail, instant messaging, and blogs and helps people communicate with one another.  Enterprise IT customer resource management and supply chain management re-create interactions between groups of workers or with business partners.

16. Nov-08 ConfidentialSlide 16/23 Six IT Decisions Your IT People Shouldn't Make  Managers complain that they don't see much business value from the high-priced systems they install, but they don't understand the technology well enough to manage it in detail. So they often leave IT people to make, by default, choices that affect the company's business strategy. six key IT decisions.  Strategy How much should we spend on IT? Which business processes should receive our IT dollars? Which IT capabilities need to be companywide?  Execution How good do our IT services really need to be? Which security and privacy risks will we accept? Whom do we blame if an IT initiative fails?

17. Nov-08 ConfidentialSlide 17/23 Overall Situation  Resources Not enough money  New projects  Capital Not enough people  IT is increasingly complex  No difference Discretionary vs. non Stop or go  90-100% of budget for ongoing  Can’t develop capacity or capability for new technologies

18. Nov-08 ConfidentialSlide 18/23 Portfolio Management 1.What are we doing? 2.How much does it all cost? 3.What should we stop? Continue? 4.What is the resource gap - ±? 1.Does the proposed activity make sense? 2.Does the portfolio of activities make sense? 3.Can we be successful? 1.Assign priorities 2.Plan activities ± gap Project/Support proposals stop continue Prioritized Recommendations Stage 1 Stage 2Stage 3

19. Nov-08 ConfidentialSlide 19/23 Portfolio Management

20. Nov-08 ConfidentialSlide 20/23 Portfolio Management RunEnhanceTransform Nature View Analogy Break & Fix Repairs “911” + ”411” Operational Fix Old Paradigm Change light bulb Improve current process/ functionality Incremental change in systems Wholesale change Change both Systems & People TacticalStrategic New Paradigm Change the lighting system Improve Old Paradigm Change light fixture Non Discretionary Discretionary

21. Nov-08 ConfidentialSlide 21/23 Portfolio Management Timeframe Action Proxy Service Immediate action < 1 month Patch and/or workarounds No new programming No training required Corrective Must fix it, now Business Model short run 1- 6 months long run > 6 months Adaptive Should do it, soon Need to evaluate when to make the change Perfective Need to evaluate how to make the change Small process/programming changes Minimal training may be required New design/ technology/ service New infrastructure Training required No Change Some change in business process New Governance/ Organization Model RunEnhanceTransform

22. Nov-08 ConfidentialSlide 22/23 22 Val IT ™  Proven practices and techniques for evaluating and managing investment in business change and innovation  Val IT helps executives: Increase the probability of picking winners Increase the likelihood of IT investment success Reduce surprises from IT cost and delivery date overruns Reduce costs due to inefficient investments

23. Nov-08 ConfidentialSlide 23/23 23 Why Val IT™?  An organisation needs stronger governance over IT investments if: IT investments are not supporting the business strategy or providing expected value There are too many projects, resulting in inefficient use of resources Projects often are delayed, run over budget, and/or do not provide the needed benefits There is an inability to cancel projects when necessary It needs to ensure compliance to industry or governmental regulations

24. Nov-08 ConfidentialSlide 24/23 24 A Comprehensive Approach  Many organisations practice elements of Val IT ™ already  Val IT ™ provides a consistent, repeatable and comprehensive approach  IT and business become equal shareholders because Val IT ™ helps management to answer these key questions:* The strategic question The architecture question The value question The delivery question * Based on the ‘Four Ares” as described by John Thorp in his book The Information Paradox, written jointly with Fujitsu, first published in 1998 and revised in 2003

25. Nov-08 ConfidentialSlide 25/23 25 The Seven Principles of Val IT ™ IT-enabled investments will: 1.Be managed as a portfolio of investments 2.Include the full scope of activities required to achieve business value 3.Be managed through their full economic life cycle Value delivery practices will: 1.Recognise different categories of investments to be evaluated and managed differently 2.Define and monitor key metrics and respond quickly to any changes or deviations 3.Engage all stakeholders and assign appropriate accountability for delivery of capabilities and realisation of business benefits 4.Be continually monitored, evaluated and improved

26. Nov-08 ConfidentialSlide 26/23 26 How Val IT ™ Works Establish informed and committed leadership. Align and integrate value management with enterprise financial planning. Define and implement processes. Establish effective governance monitoring. Define portfolio characteristics. Continuously improve value management practices. Establish strategic direction and target investment mix. Evaluate and select programmes to fund. Determine the availability and sources of funds. Monitor and report on investment portfolio performance. Manage the availability of human resources. Optimise investment portfolio performance. Understand the candidate programme and implementation options. Develop the detailed candidate programme business case. Develop the programme plan. Launch and manage the programme. Develop full life cycle costs and benefits. Update operational IT portfolios. Develop and evaluate the initial programme concept business case. Update the business case. Monitor and report on the programme. Retire the programme. Value Governance (VG) Portfolio Management (PM) Investment Management (IM)

27. Nov-08 ConfidentialSlide 27/23 Voodoo/Holistic Accounting Recognition  IT (and IM) enables transformation who pays?  Can costs and benefits be measured and realised? 1.Make costs fully visible Portfolio Management 2.Recognise elements R&D IP creation 3.Charge program for new stuff 4.Charge IT infrastructure costs utility

28. Nov-08 ConfidentialSlide 28/23 Creating IT Value Decrease costs  Sourcing strategy Some buy, some build Smart buy vs. cheap buy  Fix procurement mess Delays Incumbency Internet dating Etc. Increase benefits  Governance CoBIT Val IT Make program accountable  More judicious use of IT  Centralisation is not the answer

29. Nov-08 ConfidentialSlide 29/23 Questions ?  Alex Beraskow aberaskow@itnet.ca 613.234. 8638  If everyone is doing, can it be wrong?  Beraskow’s Law 1/3 – platform 1/3 – project 1/3 – recurring 1/3 – transformation