1. IT as a Strategic Capability of the Business Thomas Koedding Director Customer & Partner Experience Society for Information Management June 16, 2003

2. Copyright © 2003 Page 2 CIO Agenda Providing IT guidance to senior corporate executives Demonstrating the business value of IT Improving the internal governance of IT operations Taking steps to reduce total IT costs Developing or enhancing corporate IT architectures Top IT Management Priorities for CIOs Base: 620 CIOs and other IT executives worldwide, surveyed in the fourth quarter, 2002 Source: Gartner Inc., Stamford, Conn. Keeping costs down, innovating faster and managing business risk.

3. Copyright © 2003 Page 3 IT Spend Source: McKinsey Need to shift $s from support to development

4. Copyright © 2003 Page 4 IT a Strategic Capability Enterprise Systems Support for Efficiency, Standardization Low High Support for Innovation, Experimentation, Flexibility Low High Legacy Systems Legacy Systems Flexible IT Architecture Source: Dr. Prahalad, MIT Sloan Management Review, Summer 2002

5. Copyright © 2003 Page 5 Life Cycles Service Value/Cost Time Business Value Cost of Change Operating Cost Life Cycle Band Selection based on Role of IT Optimal Cycle

6. ©MIT Sloan Center for Information Systems Research 2003—Ross Center for Information Systems Research Jeanne W. Ross Center for Information Systems Research (CISR) MIT Sloan School of Management Phone: (617) 253-2348, Fax: (617) 253-4424 jross@mit.edu http://web.mit.edu/cisr/www Pursuing Alignment and Agility: Architecture and Governance This research was made possible by the support of CISR sponsors and, in particular, CISR patrons Microsoft and Accenture.

7. ©MIT Sloan Center for Information Systems Research 2003—Ross Center for Information Systems Research Agility is… nthe set of business initiatives an enterprise can readily implement nEnterprises must choose the manner in which they want to be agile—they cannot be universally agile.

8. ©MIT Sloan Center for Information Systems Research 2003—Ross Center for Information Systems Research Two Things IT and Business Must Get Right nEnterprise Architecture –The organizing logic for IT applications, data, and infrastructure captured in policies and technology choices to achieve the standardization and integration requirements of the enterprise. nIT Governance –The decision rights and accountability framework to encourage desirable behavior in the management and use of IT.

9. ©MIT Sloan Center for Information Systems Research 2003—Ross Center for Information Systems Research Traditional IT Architecture Corporate Data Corporate Networks & Infrastructure Services Corporate Networks & Infrastructure Services TECHNOLOGY PLATFORM APPLICATIONS DATA

10. ©MIT Sloan Center for Information Systems Research 2003—Ross Center for Information Systems Research Creating a Flexible IT Architecture Applications Data Application Silo Modular Rationalized Data Standardized Technology Architecture Maturity Data Center Data Warehouses Shared Product &/or Customer Data Bases Accessible Core Data Objects Specific Business Needs Local Knowledge Worker Support Non-core Business Needs Local Customization Technology Standardization Core Process Integration Wired Business Core Infrastructure

11. ©MIT Sloan Center for Information Systems Research 2003—Ross Center for Information Systems Research DELTA WIRED ERMBusiness Reflexes Delta Nervous System Scanners Desktops FIDS Laptops RIDS GIDS Gate Readers Voice Video Cell Phones PDA's Kiosks ProfIleProfIle EventsEvents Electronic Events Electronic Ticket Hand Helds Pagers LocationMaint.Equip.ScheduleFlightEmployeeAircraftCustomerTicket OAG CRS WiredWorkforce Job Related Communications Personal ProductivityDigitalDashboard Network Management Schedules Pricing / Rev. Management Forecasting. Operations Management IROPS Connection Management Operational Measures ERP Financial Management Procurement Human Resources Operational Pipeline Crew Catering Cargo TowerGateTOCOCC Terminal TABCDE Clean/ Service Aircraft Unload Aircraft Flight Arrival and Closeout Monitor Flight Departure and Closeout Load Aircraft Prepare for Flight Departure Allocate Resources Core Products Customer Experience BaggageInflightBoarding Crown Room Ticket Counter Skycap Travel Agent Reservations SkymilesSkylinks PersonalizationDigital RelationshipsLoyalty Programs Core Services Value Added Services Rationalized Data Stage

12. ©MIT Sloan Center for Information Systems Research 2003—Ross Center for Information Systems Research Strategy-Architecture Relationship Applications Data Application SiloModular Rationalized Data Standardized Technology Architecture Maturity Strategic Implications of IT Local/Functional Optimization Strategic Agility Process Optimization IT Efficiency Data Center Data Warehouses Shared Product &/or Customer Data Bases Accessible Core Data Objects Specific Business Needs Local Knowledge Worker Support Non-core Business Needs Local Customization Technology Standardization Core Process Integration Wired Business Core Infrastructure

13. ©MIT Sloan Center for Information Systems Research 2003—Ross Center for Information Systems Research Learning in Stages Application Silo Standardized Technology Rationalized Data Modular IT Capability IT applications serve isolated business needs Firm-wide technology standards IT focused on wiring core process Modules enable business model extensions Key Management Innovation Technology- enabled change management Standardization and exception management, refresh Recognizing essence of the business Practices facilitating reusability Business Case for IT ROI of applications Reduced IT costs; interoperability Improved business performance; integration Speed to market; Strategic agility Locus of Control Local controlSenior management support of CIO Senior management, IT, and process leadership Senior mgmt, IT, process, and local leadership Key Governance Issues Estimate, measure, communicate value Establish (local/ regional/ global) standard setting, exception & funding processes Determine core processes and funding priorities Define boundaries for business experiments

14. ©MIT Sloan Center for Information Systems Research 2003—Ross Center for Information Systems Research Designing an Agile Architecture nRecognize the dominant stage of the firm’s existing architecture. nSqueeze the benefits from the current stage. Identify any aspects of technology, strategic thinking, and architecture governance that are “out of synch,” and assign ownership for implementing needed adjustments. nAvoid skipping stages. Look ahead but recognize the learning necessary to benefit from each stage. nRecognize that agility requires a base to build on. Know what is core.

15. Copyright © 2003 Page 15 Management Framework Business-centric  IT services  Planning and road mapping based on business needs Portfolio management  Services  Projects Guiding principles  Social ecosystem  Life cycle Domain architectures  Firm-wide platforms Value management  Value assessment and measurement

16. Copyright © 2003 Page 16 Approach IT Services Vision and Portfolio Planning Enterprise Architecture Definition and Roadmap Initiative / Projects Portfolio Execution Strategic plan and governance framework  Evaluation of current IT services, technologies and practices  Vision and guiding principles for IT services portfolio  Roadmap and lifecycle planning Enterprise-level blueprint and operating plan  Planning and design for domain architectures, for example, e-services, Portal, Security, Directory and Client Specific solution design, development and deployment  Solution-specific architecture design  Value measurement

17. Copyright © 2003 Page 17 Approach IT Services Vision and Portfolio Planning Enterprise Architecture Definition and Roadmap Initiative / Projects Portfolio Execution Approach to managing IT services portfolio for effective business-IT alignment, ROI, prioritization of projects, and lifecycle management of technologies.

18. Copyright © 2003 Page 18 IT Services and Value Linkage IT Services BusinessPerformanceDrivers Technologies Profit Speed Flexibility Process Standardization & Integration Digitization (e-enablement) Transparency of Information Strategies Initiatives / Projects Portal ERP CRM BI Mobility Next Idea Authentication Scheduling Notification VPN Calendaring Identity Indexing Search Object Location Review Data Interchange Software Distribution Computing Platform Directory and Security Development Environment Data Integration Application Integration DatabaseMessagingApplicationsStorageNetworkingManagement

19. Copyright © 2003 Page 19 Guiding Principles Universal Guiding Principles 1.Four Cs: A technology or solution must not compromise the ability to connect, communicate, collaborate and consolidate information and transactions between people and processes. 2.Utility and Sharedness: IT services that provide the foundation for four Cs should be maintained as a firm-wide utility with the broadest reach in people and locations. Communicate Connect Collaborate Internal and external technologies, solutions and services Consolidate People and Processes Information and Transactions Utility Sharedness

20. Copyright © 2003 Page 20 IT Services IT is all about providing services to the business OperationsServices ApplicationServices ManagementServices InfrastructureServicesInfrastructureServices

21. Copyright © 2003 Page 21 IT Services IT is all about providing services to the business

22. Copyright © 2003 Page 22 IT Services IT is all about providing services to the business Applications Services

23. Copyright © 2003 Page 23 IT Services IT is all about providing services to the business Infrastructure Services

24. Copyright © 2003 Page 24 IT Services Evaluation Evaluate IT services for redundancy, complexity, quality or scope Technology Use Governance Service quality/scope

25. Copyright © 2003 Page 25 IT Services Evaluation (Example) Evaluate IT services for redundancy, complexity, quality or scope Governance

26. Copyright © 2003 Page 26 IT Services: Today (example) Evaluate IT services for redundancy, complexity, quality or scope Technology Use Governance Service quality/scope

27. Copyright © 2003 Page 27 IT Services: Vision (example) Based on the business capabilities needed and opportunities to reduce redundancy and complexity in the current environment

28. Copyright © 2003 Page 28 IT Services: Roadmap (example) Include vendor and technology lifecycles Delivering services to the Business

29. Copyright © 2003 Page 29 Governance Business Strategy Assessment and Alignment IT Services Architecture and Life Cycle Management EnvisioningManaging Value Management IT Initiative Solution & Product Support Operations Readiness Trustworthy Environment IT Initiative Enterprise Program Management Current IT Services Architecture Assessment Current IT Operations Assessment Strategic Vision and Roadmap Value Statements Operating Plan for Next Steps IT Services Vision and Portfolio Strategy Services

30. Copyright © 2003 Page 30 © 2002 Microsoft Corporation. All rights reserved. This presentation is for informational purposes only. MICROSOFT MAKES NO WARRANTIES, EXPRESS OR IMPLIED, IN THIS SUMMARY.