1. THE CMX GROUP, INC 65 BROADWAY SUITE 1806 NEW YORK CITY NY 10006 (212) 346-7560 Performance Management Meets IT Strategic Planning Sidney Finehirsh www.cmxgroup.com KCCMG April 29, 2003

2. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. Agenda The State of IT The State of IT IT Information Architecture IT Information Architecture New Emphasis on IT Strategy New Emphasis on IT Strategy Balanced Business Scorecard Balanced Business Scorecard Applying the Scorecard to IT Applying the Scorecard to IT

3. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. The State of IT The Business Climate Uncertain economy Uncertain economy Trend in investment spending still negative Trend in investment spending still negative Marketplace more competitive Marketplace more competitive Criticism from analysts, shareholders, and customers Criticism from analysts, shareholders, and customers New pressures on CEOs New pressures on CEOs

4. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. The State of IT Economic Uncertainty and IT Budget The IT Spending Trend* 0 1 2 4 5 3 6 7 8 Growth * Gartner Inc,. & SoundView Technology Group Inc.

5. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. What is our IT Strategy? What is our IT Strategy? How does IT advance company strategy and objectives? How does IT advance company strategy and objectives? Is IT working as a partner to business units? Is IT working as a partner to business units? What is the measure of successful execution of our IT strategy? What is the measure of successful execution of our IT strategy? The State of IT The CEO’s Questions to the CIO

6. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. There is so much data; so little information There is so much data; so little information Are we measuring the right things or the right way? Are we measuring the right things or the right way? Cost does matter Cost does matter We need better information now We need better information now How do we demonstrate value? How do we demonstrate value? The State of IT The CIO’s Challenge* * Based on CMX survey of CIOs 2001

7. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. The State of IT Evolution of IT Back Office Operations 70’s Glass House 80’s Utility 90’s Venture Partner 00’s

8. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. Collection Infrastructure Measurement Database Analysis Tactical Reporting Measurement Data Structures & Topologies IT Information Architecture Strategy

9. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. Measurement Data Structures & Topologies IT Information Architecture UNIX NT Linux AS400 OS/390 Z/OS Help Desk Network Web IT Finance Business Transactions

10. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. Collection InfrastructureMeasurement Data Structures & Topologies IT Information Architecture

11. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. Collection Infrastructure IT Information Architecture UNIX NT Linux AS400 OS/390 Z/OS Help Desk Network Web IT Finance Business Transactions

12. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. Collection Infrastructure Measurement Database Measurement Data Structures & Topologies IT Information Architecture

13. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. Requirements Open Interface to various formats Open Interface to various formats Single Access Method Single Access Method Central Location(s) Central Location(s) Summary by time periods Summary by time periods Relational Characteristic Relational Characteristic Measurement Database

14. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. Collection Infrastructure Measurement Database Analysis Measurement Data Structures & Topologies IT Information Architecture

15. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. Analysis Supply Utilization Growth Capacity Limits Optimization Demand Costs Resources Transaction User Charge ABC/M Service Availability Responsiveness Turnaround Incidents Closed Systems and Applications Management

16. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. Collection Infrastructure Measurement Database Analysis Tactical Reporting Measurement Data Structures & Topologies IT Information Architecture

17. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. Requirements Decision Oriented Immediately Understood Easy to Access Web Enabled Types Exceptions Trends Recommendations Quarterly Summary Tactical Reporting The Operations Dashboard Metrics Required for Daily Operational Excellence

18. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. Collection Infrastructure Measurement Database Analysis Tactical Reporting Measurement Data Structures & Topologies IT Information Architecture Strategy

19. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. New Emphasis on IT Strategy Always desirable now indispensable Always desirable now indispensable Drive looking through the windshield instead of the rearview mirror Drive looking through the windshield instead of the rearview mirror Balance cost reduction with service demands and business initiatives Balance cost reduction with service demands and business initiatives Focus on Return on Capital Expended (ROCE) Focus on Return on Capital Expended (ROCE) Provide leadership to the IT organization Provide leadership to the IT organization Communicate with the business organization Communicate with the business organization

20. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. The Need for IT Strategy: Communicate IT’s view of the Enterprise Perception IT’s quality is high and costs are low IT’s quality is high and costs are low End users are never satisfied End users are never satisfied Enterprise creates strategy without us Enterprise creates strategy without us We’re going to be outsourced We’re going to be outsourced The enterprises view of IT Perception Slow and unresponsive Slow and unresponsive Unreliable Unreliable Expensive Expensive Out of touch with business needs Out of touch with business needs Disconnect Source: R.Gold, BSCOL

21. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. New Emphasis on IT Strategy Communicate Expectations Contain cost Aligned with business Flawless service Competitive cost Source of productivity Competitive advantage The Enterprise’s view of IT IT’s View of the Enterprise

22. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. Balanced Scorecard* What Is It? A balanced scorecard is a management process that: synchronizes strategic measurement to operational success allows organizations to align corporate strategy with strategy in operational and tactical units facilitates communications within organizations Is the process of processes that oversees other management tools * orignially developed by Robert Kaplan and David Norton

23. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. Balanced Scorecard What Is It? While traditional methodologies utilize a vertical structure, Balanced Scorecard examines the organization horizontally Includes analysis of both tangible and intangible assets Measurement in support of strategy Leading as well as lagging indicators Drivers as well as milestones Effectiveness as well as efficiency

24. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. Balanced Scorecard The Four Perspectives The balanced scorecard helps measure the impact of strategic decisions on the enterprise by factoring metrics from four key areas: PerspectiveDescription FinancialRepresents the financial outcomes (profits, revenue, etc.) CustomerDrives financial results. Includes service, image, price, quality, etc. Internal Process Measures internal actions that provide the greatest value to customers: includes delivery, production, quality, distribution, etc. HumanIncludes people, systems, and organizations that enable internal business process. Ultimate Measures Drivers

25. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. Applying the Scorecard to IT Strategic Themes and Metrics Develop IT strategic themes Define the Customer perspective to include both business units and corporation customers Identify unique metrics in support of IT strategic themes Seek IT  Business crossover measures Seek IT  Business crossover measures

26. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. Applying the Scorecard to IT Developing IT Strategic Themes Strategic themes are driven by: Strategic themes are driven by: External business drivers External business drivers Business climate Business climate New technologies New technologies Regulation Regulation Corporate strategic plan Corporate strategic plan Market development Market development Products and service innovation Products and service innovation Infrastructure requirements Infrastructure requirements Profit targets Profit targets Tactical business initiatives Tactical business initiatives

27. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. Applying the Scorecard to IT IT Strategic Themes Current strategic themes Current strategic themes Lower growth of IT expense with equal service Lower growth of IT expense with equal service Protect business units from fraud and intrusion Protect business units from fraud and intrusion Achieve operational excellence Achieve operational excellence Improve customer relations Improve customer relations Enhance business unit revenue Enhance business unit revenue Increase profitability through IT innovation Increase profitability through IT innovation Leverage technology for competitive advantage Leverage technology for competitive advantage

28. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. Applying the Scorecard to IT Strategic Measurement IT Metrics Business Metrics IT Scorecard

29. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. Applying the Scorecard to IT Example Strategic themes Strategic themes Lower growth of IT expense with equal service Lower growth of IT expense with equal service Strategic measures Strategic measures Efficiency and effectiveness Efficiency and effectiveness

30. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. Applying the Scorecard to IT Theme: Lower growth of IT expense with equal service Measures for the Human Perspective Efficiency %Turnover of knowledge workers Average tenure of knowledge workers Effectiveness %IT hours in maintenance / %IT hours in development %Improvement in cross training index

31. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. Applying the Scorecard to IT Theme: Lower growth of IT expense with equal service Measures in Internal Process Perspective Efficiency % Average utilization increase across servers % Average utilization increase across storage % Change in Cost per CPU hours / IT FTE % Change in Cost per gigabyte-month / IT FTE Effectiveness Application failure rate % of severity 1 defects / development hour

32. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. Applying the Scorecard to IT Theme: Lower growth of IT expense with equal service Measures in Customer Perspective Efficiency End-to-end response time Effectiveness % of SLAs met

33. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. Applying the Scorecard to IT Theme: Lower growth of IT expense with equal service Measures in Financial Perspective Efficiency % Reduction in cost per CPU hour % Reduction in cost per gigabyte-month Effectiveness Business unit revenue per transaction / IT cost per business unit transaction

34. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. Perspective Efficiency Effectiveness Financial Customer Internal Process Human Balanced Business Scorecard The Strategy Map Ultimate Measures Drivers CPU $ Reduced % TurnoverAvg. Tenure %Server Util CPU$/FTE % Maint/ Dev Train Index Disk$ reduced BU Margin Disk$/FTE %Fail Defect rate % Disk Util SLA’sService Shows linkage of driver through perspectives Shows linkage of driver through perspectives

35. This document contains unpublished confidential and proprietary information of The CMX Group. No disclosure or use of any portion of these materials may be made without the express written consent of The CMX Group. © 2003 The CMX Group. Evolution of IT Back Office Operations 70’s Glass House 80’s Utility 90’s Venture Partner 00’s