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Technology Management and Strategy Report
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Butler Group a Datamonitor Company
Measuring IT Costs and Value Maximising the Effectiveness of IT Investment
September 2005
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Martin Butler William Conner Tim Jennings
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Measuring IT Costs and Value
Measuring IT Costs and Value Contents – September 2005 Section 1: Management Summary
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1.1 Management Summary
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Section 2: Introduction
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2.1 Report Scope
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2.2 Why Measurement is Important
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2.3 What is IT Value?
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2.4 Running IT as a Business
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Section 3: IT Investment Strategy
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3.1 The Effectiveness of IT Spending
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3.2 Understanding IT Capability
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3.3 Portfolio Management
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3.4 Investment Metrics
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Section 4: Identifying IT Value
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4.1 Value Models
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4.2 Using a Business Case
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4.3 Benchmarking
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4.4 IT Value in the Public Sector
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Section 5: Monitoring and IT Governance
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5.1 Using IT Governance as a Framework
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5.2 Monitoring Performance
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5.3 Balanced Scorecard
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5.4 The IT Dashboard
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5.5 IT Governance Solutions
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Measuring IT Costs and Value
Contents – Continued Section 6: Measuring IT Efficiency
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6.1 IT Budget Considerations
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6.2 Asset Management
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6.3 Requirements Management
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6.4 Project Management
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6.5 Effective Software Development
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6.6 IT Lifecycle Management
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6.7 Change Management
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6.8 Monitoring System Usage
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6.9 Service Management
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Section 7: Approaches for Determining IT Cost and Value
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7.1 Methodologies
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7.2 Case Studies
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7.3 IT Cost and Value Framework
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Section 8: Vendor Profiles
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Accenture
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Alinean
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Artemis International Ltd.
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Atlantic Global Plc
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BMC Remedy
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BMC Software
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Borland
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Business Engine
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Computer Associates International Inc. (CA)
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Compuware Ltd.
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CorVu
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EMC Smarts
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eProject
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Hewlett-Packard (HP) Inc.
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HyPerformix
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Measuring IT Costs and Value
Contents – Continued Section 8: Vendor Profiles (continued) IBM Corporation
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Intel
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Managed Objects
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Mercury
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Microsoft Inc.
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Monactive
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Niku Corporation
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OPNET Technologies Ltd.
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Oracle PeopleSoft
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Peregrine Systems Inc.
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PlanView
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Primavera
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ProSight
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SAS
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SeaQuation
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Serena Software
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Solution Matrix Ltd.
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Telelogic
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Touchpaper
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Section 9: Glossary
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Technology Management and Strategy Report
SECTION 1: Management Summary
Butler Group a Datamonitor Company
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Measuring IT Costs and Value
1.1 MANAGEMENT SUMMARY KEY FINDINGS
It is not a question of how much is invested in computer systems but the effectiveness of the spending.
Research indicates that in many organisations less than 8% of the IT budget is actually spent on initiatives that bring value to the enterprise.
Focusing IT investment on an organisation’s value drivers will improve competitiveness.
Organisations have become quite competent at measuring IT costs, but not the value. Return On Investment (ROI)/Total Cost of Ownership (TCO)-type measurements should not be used in isolation because they ignore elements such as risk and IT capability.
IT investment must be measured not only at the inception of initiatives but also throughout the project lifecycle.
The absence of tools and methods is a major contributor to the lack of successful measurement.
In addition to compliance and management capabilities IT governance can provide a useful framework for measurement, making sure that IT and organisation investments are synchronised.
Portfolio Management and value mapping are useful mechanisms to ensure that limited IT resources are channelled to the initiatives that will provide the most value.
Introduction In 2003, Nicholas Carr wrote an article for the Harvard Review that questioned the value of IT, and ever since there has been a far ranging debate into whether IT has a meaningful contribution to make. This interest shows no signs of abating, confirmed by a British Computer Society (BCS) survey of nearly 400 senior IT managers, conducted during March and April 2005, which found ...top of the list of that top of the list of concerns is quantifying the value of IT, closely followed on this occasion by the perennials of security issues and lack of representation concerns is for IT at board level. quantifying the value However, before any value judgements can be made on IT performance it is of IT... imperative that the relevant measurement processes and metrics are put in place. Unfortunately, those IT departments capable of providing this information are in the minority; small wonder then that IT remains isolated, misunderstood, and treated simply as a cost centre by senior management. A contributing factor, although not an excuse, is that this is difficult and costly, requiring ongoing resources and commitment. This absence of measurement means that most organisations have no idea whether investments in IT are providing increased efficiency, added value, or competitive advantage. An inordinate amount of IT executive time seems to be expended on measuring and controlling costs rather than focusing resources on initiatives that will add value to the organisation, probably because costs are easy to identify and quantify. This is unfortunate as there is a strong correlation between the knowledge growth of an enterprise and its market valuation. It is becoming increasingly important for IT management to ensure that measurement mechanisms are put in place to identify intangible assets such as brand, organisation culture, customer loyalty, innovation, knowledge management systems, and the value of staff knowledge.
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Section 1: Management Summary
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Business Issues With the investment in IT generally amounting to around 4% of total income, and sometimes accounting for over half of total capital expenditure within an organisation, there is a growing need for more transparency and formalised control, along with better measurement of the IT environment. The role of IT management is shifting away from being the guardians of technology to focusing more on aspects such as investment planning, budgeting, governance, service quality, and risk The role of IT management.
management is shifting away from being the guardians of technology to focusing more on aspects such as investment planning, budgeting, governance, service quality, and risk management.
In addition, there is increasing prominence being placed on the ability of IT deliverables to match organisation objectives. Unfortunately, there still appears to be a lack of focus by IT management on understanding the organisation’s main value drivers. Without this it is impossible to formulate an IT strategy that will meet the organisation’s needs. IT must improve transparency and visibility, with accountability for performance related to these value drivers. An important aspect in gaining this awareness is to ascertain the level of IT spending that is aimed at keeping the organisation running. The challenge for IT management is to supply services that can support the organisation’s growth requirements, whilst minimising the amount spent. In many instances it is a significant investment, equating to around three-quarters of the total IT budget.
It is important that the proportion of IT investment utilised to maintain the current systems is measured, so that it can be conveyed to senior management and fairly charged out to the rest of the organisation. The IT department must grasp the thorny issue of chargeback: whilst the expectation is that in many instances no cash actually exchanges hands, how can the user perceive value when IT services are provided for ‘free’?
The IT department must grasp the thorny issue of chargeback...
The effectiveness of IT investments is a very significant factor in the ability of IT to provide value. IT management must make a conscious effort to measure and monitor IT spending and, once this is understood, endeavour to increase the proportion of spending on enhancements and new services designed to transform the organisation or grow its overall value. Research indicates that many organisations have a long way to go in redirecting IT spending towards more ‘Change the Organisation’ investments – these currently amount to around 25%, which in many instances equates to less than 8% of the total IT budget, after accounting for mandatory expenses and wastage.
Method Issues Most organisations have very little visibility into IT performance. This needs to change, due in no small part to the growing compliance and regulatory pressures, which entails the IT management having the wherewithal to prove the department is being run effectively and offering value. To provide this transparency and accountability many enterprises are turning to governance as an important mechanism for controlling the organisation. Butler Group recommends the deployment of IT governance, used in conjunction with the corporate governance initiative, and employed not just for compliance and management reasons, but also for providing a framework for measuring IT costs and value. It is important that IT
projects are not viewed in isolation but looked at holistically as one element for improving the effectiveness of the whole organisation.
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It is important that IT projects are not viewed in isolation but looked at holistically as one element for improving the effectiveness of the whole organisation. What has been found to work well is incorporating IT projects as part of organisation-wide initiatives, where the IT element is an enabler rather than the main driver. A good Portfolio Management solution helps an organisation select the right blend and balance of IT investment, as it is critical that those projects are selected that make the best use of both limited financial and human resources, and provide the maximum value.
Section 1: Management Summary
September 2005
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Measuring IT Costs and Value
A value identification and mapping approach has merit when comparing various IT projects, as it will allow the discovery of IT value and also enable the monitoring of the actual value contribution on a continuous basis. Butler Group believes that IT value management is an approach that can bring a new perspective to IT alignment and capability measurement. IT value management When ascertaining initiative value contribution, the use of traditional financial is an approach that measures, such as ROI and TCO, whilst remaining important, should not be can bring a new used exclusively in making investment decisions, as these monetary-based perspective to IT measures tend not to take any cognisance of IT capability and risk.
alignment and
Another significant aspect for IT management to consider is the need to make capability sure that the level of investment being made in IT is delivering value for money measurement. in comparison with industry peers and the wider environment. To meet this requirement benchmarking is increasingly being employed as a way of ensuring that the best possible value is being realised from IT investments. The use of benchmarking can bring a number of benefits, including being a vehicle for better performance and collaboration, along with helping to identify gaps in operational effectiveness. To enable IT management to get their message across to stakeholders and internal staff good communications are paramount. This is where methods such as Enterprise Architecture, business cases, and Balanced Scorecards come into their own. A well-prepared business case is a way of putting forward project details in a standard format, which helps purvey professional competency and makes it easier to compare projects. Balanced Scorecards can provide a mechanism for monitoring and conveying IT performance that simply encapsulates the state of the IT environment. However, it is necessary for IT management to agree a small number of metrics with stakeholders, get buy-in from staff, and instigate a regular review process. In order to provide the required levels of transparency IT management must put in place the foundations of well-managed IT assets, comprising infrastructure, processes, and skills, along with the use of automation, which form very important enablers for successful measurement processes. Ad hoc manual methods based on spreadsheets are no longer acceptable or a practicable solution; especially as data quality for accurate and comprehensive IT reporting is now crucial. In order to reach the required level of consistency the deployment of an integrated toolset and common The implementation repository must be an area of focus, as is the setting up of feedback loops and of a structured dashboards within the IT governance framework. The implementation of a process to manage IT structured process to manage IT investment can provide significant benefits. investment can Accenture has found that savings in the IT budget of 10-15% are possible within one year, whilst better IT decision-making can improve IT productivity provide significant by up to 20%. benefits. For those organisations unsure how to proceed, Intel’s ‘Managing IT for Business Value Capability Maturity Framework’ provides a valuable basis for ascertaining current competence and future direction. Butler Group recommends that organisations look to put in place remedial action to attain Level three as an urgent necessity, bringing definition to the measuring process. The organisation should have plans to reach Levels four and five over the medium term, evolving IT to an optimised state where the IT department is seen as a value centre, works within a sustainable economic model, and provides core competency.
Market Issues The economic climate over the last five years has had an impact on IT investment. Starting in 2000 many organisations were required to pursue cost-reduction strategies across the whole enterprise, which included the IT department. Research indicates that the cuts in IT budgets reached a peak around 2002, and there is now a swing towards investment in growth, with the focus returning to increasing revenue, rather than cost efficiencies. This has enabled IT management to direct more IT spending to programmes that support organisation growth and transformation. This is an opportunity which IT management must not squander by ensuring the new funding is used both efficiently – doing things right, and effectively – doing the right things.
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Section 1: Management Summary
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The diversity of licence and deployment models available in today’s market provides organisations with an opportunity to maximise value and improve flexibility. The IT department must make the most of new technologies and application delivery methods found in the marketplace, such as outsourcing, near-shoring, new architectural and delivery models, infrastructure consolidation, and IT management/governance tools. In addition, the use of a common infrastructure platform and software stack as a foundation for providing value through the benefits of integration, speed The diversity of of deployment, and interoperability, as well as a large developer community, licence and should not be underestimated.
deployment models available in today’s market provides organisations with an opportunity to maximise value and improve flexibility.
It is essential that organisations review existing licence agreements and service provision mechanisms to ensure that they are meeting the needs of the business and providing value. The increasing use of Open Source Software (OSS) in the enterprise environment is also causing vendors to review their licensing and pricing. From a user’s perspective licensing and service delivery should be an integral part of IT strategy, and not dealt with after the event. The need for an effective IT measurement process is again brought into focus by these issues.
The marketplace for overarching IT management and governance suites is still very immature, with the key software vendors still adding new components, sometimes by acquisition. Butler Group believes that this will persist in the short term, particularly since some of the larger purveyors focusing on IT management have yet to fully enter the market with all-encompassing, fully integrated offerings. However some vendors have started to adopt an IT governance marketing angle to their products, which would indicate an increasing interest around the subject.
Measuring IT Costs and Value Framework
Figure 1.1.1: IT Cost and Value Model
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Section 1: Management Summary
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Technology Management and Strategy Report
SECTION 2: Introduction
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Measuring IT Costs and Value
2.1 REPORT SCOPE This Report is intended to provide readers with an informative guide to measuring IT costs and value. Butler Group recognises that not every factor will be relevant to all situations, and that some organisations will already be utilising some of the components that make up an effective solution. This Report has been divided into segments relating to the different guiding principles of measuring IT costs and value, to make it easy for readers to locate the Sections that relate to their particular issues.
Section 2 – Introduction The link between business profitability and IT investment can be difficult to prove. The Introduction looks at the connection between business value and IT investment. IT value can be characterised by three main approaches – cost reduction (data processing), effectiveness (information usage), and value creation (knowledge capital). Information assimilation costs are significantly higher than those of technology overheads. Focusing on the IT value proposition and evolving the IT department into a service provider are other important considerations appraised in this Section.
Section 3 – IT Investment Strategy Despite a growing emphasis on business and IT alignment, there is a difficulty in accurately measuring the business value derived from IT spending. A key step towards achieving this goal is for IT management to determine the level of IT spending that matches business objectives. In addition, timing of investments is often critical to success. Problems with IT investments are invariably due to people and cultural issues rather than with the technology. Maximising investment potential requires a good understanding of IT capability today and in the future, along with balancing outsourcing and build/buy decisions. IT capability must be managed, measured, and governed to be effective, and various investment strategies are reviewed in Section 3.
Section 4 – Identifying IT Value Organisations are struggling to assess the relevance of IT. The business case is a critical component in communicating the value of investment to management, making the justification for change and providing the financial contribution details. This Section also looks at why value is often defined in transactional terms rather than in organisational value, such as user productivity and Key Performance Indicators (KPIs), which management can easily understand. Tools reviewed that can be employed include the IT Contribution Model and IT Business Value Framework, along with benchmarking that offers a means of comparing the value gained from IT.
Section 5 – Monitoring and IT Governance In addition to meeting the regulatory requirements IT governance can provide a framework for monitoring IT performance. There is an element of risk to all IT investments; various strategies must be developed for monitoring and mitigating the risks. Using an Enterprise Architecture approach creates a foundation for standardisation and integration avoiding application silos. Besides the different aspects of IT governance the Section looks at the various performance measures available to the IT manager, such as balanced scorecards, that must be put in place to enable greater control. Spending without the relevant controls in place is no longer acceptable. Performance Management functionality, such as dashboards, Business Intelligence (BI), Business Activity Monitoring (BAM), and Corporate Performance Management (CPM) are important in providing monitoring and measuring capability.
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Section 2: Introduction
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Section 6 – Measuring IT Efficiency This Section considers the increasing need for cost management and control, and optimising the use of IT assets. Charging for services can make them more valued by users, drive innovation and value, and provide alignment with business requirements, although it can be restrictive. The use of management guidelines for best practice, incorporating quality standards and frameworks including TickIT, ITIL, COBIT, and Six Sigma, are reviewed. There are a number of management techniques, reviewed in this Section, to assist with the monitoring of performance in the IT environment, such as Requirements Management, Project Management, IT Lifecycle Management, and Change Management.
Section 7 – Approaches for Determining IT Cost and Value This Section outlines a number of approaches that can be used to measure IT cost and value, along with example methodologies, case studies, and the Butler Group Value Framework.
Section 8 – Vendor Profiles Vendor and product profiles can be found within this Section of the Report. The product and solution overviews are provided as an indication of what is obtainable in the market and should not be used as a comprehensive review of all the available offerings.
Section 9 – Glossary This is a glossary of terms used in the Report.
2.2 WHY MEASUREMENT IS IMPORTANT Not many organisations make the effort to measure the benefits associated with IT investments. There are a number of reasons for this, although the fact that it is difficult and costly, requiring ongoing resources and commitment, are major contributing factors. This lack of measurement means that organisations have no real idea whether they are benefiting from their IT investments or if these investments are in fact having a detrimental effect on the enterprise. However, all organisations monitor the cost of the IT environment because that is the easy part, with no shortage of number crunching done in spreadsheets and accounting systems. Moving forward with IT depends upon a much better understanding of the benefits being delivered. Without this information and transparency senior managers will continue to view IT with distrust and keep back funds they perceive as being poured into a black hole. Measuring the returns from investments in information and computer systems requires a level of rigour that most organisations are wholly unfamiliar with. That this will sooner or later be required is predicated by the fact that information costs continue to rise as a percentage of all costs. Whilst the accounts department may be quite proficient at measuring the cost of every item used by the IT department, the cost of information is usually ignored. Every person using a word processor, a spreadsheet, an Enterprise Resource Planning (ERP) application, or indeed any kind of application is an information cost, which is not being measured. Evidence would suggest that this lack of measurement results in unpredictable returns from IT investments. Paul Strassmann has frequently identified in studies that there is no correlation between levels of IT investment and the returns an organisation can expect. This highlights perhaps that the true costs of such investments are not sufficiently understood and that what is of more importance is where and how the outlay is utilised, rather than the amount.
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Section 2: Introduction
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Measuring IT Costs and Value
Measuring the cost and value of IT investments is a major undertaking that cannot simply be left to the IT or finance function. It needs commitment from the very top of the organisation, as without it things will remain as they are – confusing, opaque, and dogged by political infighting. Those IT departments which continue to use technology purely as a means of cost reduction will be the losers, whilst the more enlightened that also employ IT as a means of value and knowledge creation will ensure continued investment in IT. It is therefore imperative that IT management deploy performance indicators and metrics that identify the benefits that IT delivers in similar terms to those employed by the rest of the organisation.
Measuring the cost and value of IT investments is a major undertaking that cannot simply be left to the IT or finance function.
The Significance of IT Governance IT governance has three fundamental roles, firstly to implement corporate governance and the associated controls in the context of IT systems, secondly, to actively foster the alignment of IT with organisation strategy, and thirdly, to act as an IT management framework. Driven by the needs of compliance it is clearly the first of these that has compelled the increased adoption of a formal IT governance approach, particularly in respect of risk management and system integrity. However, it is the second role that is critical to enable the measurement of IT value. Within the IT function the practice of IT governance often begins, understandably enough, from an IT management perspective, addressing issues such as enterprise architecture, system integrity, resource It is when IT management, project management, service quality, and operational continuity. It is when IT governance is broadened to include an IT value perspective that it governance is broadened to include reaches its full potential, encompassing areas such as strategic alignment, value creation, performance measurement, investment planning, and IT audit.
an IT value perspective that it reaches its full potential...
By adopting this approach the IT function can become more of a strategic partner, capable of developing new solutions that provide the organisation with competitive advantage, and where IT is seen as a core competency that the enterprise can exploit as the basis for competitive differentiation. The one proviso for this advancement is of course that the leadership of the organisation has the inclination to incorporate IT into its vision in the first place. From this perspective IT value could be expressed as: organisation input + organisation metrics + IT capability = organisation value outcome.
The Importance of Controls Before the IT department can start to assess its value to the business it must put in place the foundations of well-managed IT assets, comprising infrastructure, processes, and skills. Indeed, without so doing, measurement of costs and value, and also by extension organisation alignment, are destined to fail. Whilst not a panacea, IT management must adopt a selection of techniques for managing and improving IT execution, including Capability Maturity Model Integration (CMMI), IT Infrastructure Library (ITIL), COBIT framework for IT governance, PRINCE2 project management or similar, and quality methods and standards, such as ISO9002, TickIT, and Six Sigma. The goal is to increase predictability, productivity, quality, and customer satisfaction, and reduce cycle times so that the IT function earns a reputation of delivering IT projects and services that are reliable, costeffective, and of a high quality. The IT department should also be able to demonstrate the use of standard methods and processes for matters such as estimation of development times and resources, financial assessment of projects, staff productivity, and the management of supplier relationships. These controls and methodologies underpin, and provide the discipline that is necessary to measure IT costs and value. Once the IT function becomes process-driven in this way, the only additional capability that is required is that of data collection and analysis, much of which follows on as a natural consequence of the methodologies described. Several of the leading Business Intelligence (BI) vendors now provide solutions that are targeted specifically at analysing data that relates to the IT function.
September 2005
Section 2: Introduction
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By putting in place a formal Portfolio Management solution it is possible to review, budget for, initiate, and track the project through its entire lifecycle from an organisation perspective. When senior executives ask searching questions on IT expenditure, it now becomes possible to provide them with meaningful answers that are backed up by hard data. Furthermore, a Portfolio Management ...the collection and solution can provide multiple business, financial, and technology views of both analysis of IT metrics individual projects and the entire portfolio, assisting the process of optimising the set of IT initiatives being undertaken. From an IT perspective, the creates a feedback collection and analysis of IT metrics creates a feedback loop that supports the loop that supports the learning and innovation that is vital to longer term success, so this must also learning and be incorporated into the measurement process.
innovation that is vital to longer term success...
It is somewhat ironic that in many organisations Return On Investment (ROI) and other financial measures are calculated in the project feasibility and assessment stage, and that project success is gauged either at the point of deployment or very soon thereafter. It is very rare indeed to find an organisation that is still measuring ROI at the end of the payback period (often measured in years). Therefore, it is essential that the metrics continue to be collected and analysed over this period, and that the enterprise continues to assess the value that the project has delivered. Both IT and enterprise executives require an overall measure of the efficiency and value of the IT function. Indeed, in some cases, this may have a significant impact on IT management remuneration. The use of an IT balanced scorecard is one appropriate way to achieve this. Many organisations are now looking at The Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework for internal controls and risk management to ensure the organisation meets profitability objectives, mitigates risks, and achieves its goals. The processes encourage efficiency and help ensure compliance with laws and regulations. Deploying an IT investment planning and control system, and adopting a formal methodology to manage the associated processes, is the single most effective step that an organisation can take to improve the accuracy and validity of its IT investment strategy. The key to measuring IT costs and value is to develop business metrics for all IT initiatives, with data collected and analysed over the entire project lifecycle, which are linked to business objectives and performance metrics.
2.3 WHAT IS IT VALUE? A survey conducted by Accenture consisting of 300 IT executives and business managers in the USA found that business managers are not so persuaded of the direct link between IT investment and business value as their IT counterparts. These line managers are also less likely than IT management to think that ITenabled productivity gains have improved for the enterprise as a whole, and are even less likely to believe that productivity has increased in their division or department. The survey identified a clear mismatch between the perception of IT’s contribution to the organisation and individual areas of responsibility involving business managers and IT executives, although the survey did identify where managers from both backgrounds were in agreement. Organisations’ productivity has increased in the past few years primarily due to four factors: better use of technology, the right amount of investment in technology, cost-cutting measures, and business process re-engineering. The survey highlights the fact that IT managers must be more proactive in communicating the value of IT, but before this is achieved there needs to be a better understanding of the types of contribution IT can provide. Butler Group believes there are three main types of benefits that can be derived from IT systems – these being projects to support running the organisation, changing the enterprise, and initiatives focused on knowledge creation.
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Section 2: Introduction
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Figure 2.3.1: IT Value ‘Run the Organisation’ Metrics ‘Run the Organisation’ usually entails cost efficiencies, in many instances achieved through labour displacement. This has been the dominant use of IT for the last 30 years, and is very much focused on the transactional aspects of the operation and processing data. Examples include, operational systems such as ERP applications, database management, and content management. During the IT boom of the nineties productivity in the USA rose by an average of 2.5% a year, with this being largely attributed to the increasing use of computer systems. However, when the bubble burst in 2000 and IT investment was essentially put on hold, year-on-year productivity gains over the next few years increased to over 4%. This does not match up too well with the suggestion that increased levels of IT investment go hand-in-hand with better productivity, which could possibly indicate that it is getting progressively more difficult to realise benefits through process automation. Despite these statistics, questioning the ability for IT to improve productivity and contribute to organisational efficiency, using computer systems is now a prerequisite for doing business in the 21st century. What is important is that the IT infrastructure and software are flexible enough to meet the demands put upon it and that the services are provided in the most cost efficient and appropriate manner. Often neglected is the measurement of the IT operation in other than pure financial terms, so the correct decisions can be made on future direction and investments. Measuring ‘Change the Organisation’ Investment Using IT to actually change the way the enterprise operates is not really understood by organisations, mainly due to the difficulty in adequately measuring, along with the lack of metrics in this area. Value creation can be achieved through making available IT solutions that improve the effectiveness of the organisation with the provision of enhanced capability such as enabling new channels to market, and enhanced services to stakeholders, along with improved information processing capabilities, such as BI, data warehousing, data mining, and CPM capabilities.
September 2005
Section 2: Introduction
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Butler Group has consistently found that the management in many enterprises have never considered the use of IT for purposes other than achieving cost savings. It appears that using IT to improve effectiveness is far less well understood in the user community than for efficiency purposes. Many senior managers agree to invest large sums of money in ERP applications where returns can be easily quantified, than to spend considerably less on new business intelligence applications that might make the customer service and the sales effort considerably more effective. This inability to think beyond cost efficiencies singles out those who make the most from IT investments from those who do not. There are numerous examples of companies that have used IT to transform the way business is conducted, such as Amazon, Dell, Easyjet, FedEx, eBay, and Walmart. Using IT to provide new capabilities requires a good understanding of the organisation, including its markets and stakeholders. Improving value creation processes within an organisation presupposes that management know how the organisation creates value. In many instances this is simply not the case. IT should be able to support the organisation by facilitating rapid operational integration. Unfortunately, in many cases IT is working to a different agenda, which often happens because enterprise objectives are not clearly communicated to IT. This whole area of matching IT investment with senior management requirements is perhaps the most difficult of all to get right, requiring interaction between individuals that inhabit different worlds. Regrettably, without this understanding organisations will continue to invest in IT that does not meet the needs of the enterprise. Understanding the Organisation’s Value Drivers An assessment of knowledge capital can be represented by the share price of publicly traded stocks. There can be found a strong correlation between the information and knowledge orientation of an organisation and its market valuation. Knowledge can be viewed in terms of collaboration, workflow, ideas management, and the organisation’s knowledge network.
It should be remembered that tangible assets represent only about one-third of the share value found in the average enterprise.
It should be remembered that tangible assets represent only about one-third of the share value found in the average enterprise. Intangible assets include brand, organisation culture, customer loyalty, innovation, knowledge management systems, and not forgetting the value of staff knowledge. This can be calculated by using the Economic Value Add (EVA) formula where the cost of capital is taken into account. Studies in this area conducted by Strassmann have shown a good relationship between this theoretical value and the actual market valuation of companies.
From a Public Sector perspective there are no shareholders, but there are still stakeholders and it is important to identify the main value drivers of the organisation, be that the provision of efficient services, collaboration, or the accessibility of information. The majority of agencies will have objectives that can be translated into value drivers that should be the central focus of IT service providers. Unfortunately, there seems to be a contradiction in IT management focus in that most of the time is spent on ‘Run the Organisation’ issues rather than concentrating resources on projects and systems that can provide the maximum value to the organisation. IT executives must make a conscious effort to understand the organisation value drivers and map IT capability against them.
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Section 2: Introduction
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Measuring IT Costs and Value
Figure 2.3.2: IT Value Paradox The value of information should not be taken too lightly, nor the expense of acquiring it. The cost of information is typically ten times that of IT. For example, at a manufacturing company IT costs are roughly 1.5% of total costs and outlay on information approximately 15% of total costs, whereas in a financial institution IT costs typically equate to 10%, with costs and expenditure on information greater than 90% of total costs. In most organisations no one measures information costs; Butler Group contends that IT management and the CFO should be paying much closer attention to information creation overheads and be measuring them using existing financial data. In addition, a guide to the value of information can be calculated using the calculation: Iv = Tv(+i) – Tv(-i), where Tv(+i) is the average transaction value with information and Tv(-i) the average transaction value without information. The effectiveness of knowledge and information generation is directly associated with the overall performance of the organisation. Key Value Considerations
The IT losers will continue to use the technology purely as a means of displacing labour, while others employ it as a means of amplifying value creation processes and increasing the value of the organisation.
It is quite difficult to understand what most organisations expect to gain from their use of IT if it is not to add value.
The efficiency game is no more than a technology race with the technology suppliers being the major beneficiaries.
Value creation offers the opportunity to establish real competitive advantage.
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2.4 RUNNING IT AS A BUSINESS With IT expenditure typically accounting for around 4% of total revenues, and accounting for over 50% of total capital expenditure within the average organisation, it is understandable that there is a requirement for more formal management control, methodologies, and particularly measurement within the IT function. As a consequence the focus of IT management is changing, moving away from questions of technology, and concentrating more on issues such as investment planning, budgeting, ...the focus of IT governance, service quality, and risk management. However, faced with questions management is such as ‘what percentage of the IT budget is spent on operations and changing, moving maintenance?’, or ‘what percentage of IT initiatives contribute directly to organisation goals?’, IT management find difficulty in providing accurate answers in away from questions which they, senior executives, and stakeholders can have confidence.
of technology, and concentrating more on issues such as investment planning, budgeting, governance, service quality, and risk management.
The primary reason for this problem is the lack of tools and methods that can be applied to measuring IT costs and value, and presenting them from an organisational perspective. A glance at the IT management environment confirms that there are plenty of tools for managing technology assets, methods for managing IT delivery, and frameworks to address IT and enterprise architecture, but very few that are capable of uniting the technology, enterprise, and financial aspects of IT initiatives.
The consequence of this disparity is that IT continues to be treated as a cost centre within the majority of organisations, rather than as a business unit. Whilst IT can be a key strategic asset and competitive differentiator, this will not be the case until the IT function can demonstrate effective management and the measurement of both costs and value. Research suggests that those organisations capable of allying IT investment with strong governance and value measurement methodologies achieve significantly greater return on their IT investments than the average value provided across all organisations. A survey conducted by the Economist Intelligence Unit for Mercury highlights that trends such as strategic sourcing of IT, compliance, and the complex systems environment are having a significant impact on IT departments. In order to meet these and other challenges in delivering services, IT management needs to have in place the measurement processes and monitoring capability, particularly when considering outsourcing, where 64% of IT managers indicated quality to be a major issue. Visibility is also required to alleviate the other recognised worries of third-party dependency and remote operations. In the study, 39% of IT executives indicated that a lack of funding for governance initiatives was a barrier to successful deployment. IT governance must be seen as an integral part of running IT as a business and a framework for measurement, which means providing the budget and commitment. The survey also found that IT management were concerned about the increasing complexity of the IT environment and were of the opinion that providing value depends on an optimised development process and IT operations. Interestingly 60% of the contributors indicated that testing was an important driver of value, although only 37% had invested in automated testing software, with the remainder utilising manual testing or, more worryingly, no testing at all. A key approach gaining credence to alleviate the problems of a complex IT environment and enable IT to become a service provider is Service-Oriented Architecture (SOA). Existing monolithic core processing applications can be re-engineered and opened up to enable greater componentisation and re-use across multiple systems. Key benefits of SOA are:
No ‘big-bang’ replacement strategy is required, allowing the replacement of specific areas of functionality. Previously the choice was between wholesale replacement with a package or maintaining current systems.
Enabling economies of scale through re-use, both on the IT architecture side and from an organisation perspective.
Removing siloed business unit systems through use of standardised, component-based application logic.
Enhancing flexibility and business agility means that changes can be made to individual components without major ramifications for the rest of the system.
The ability to utilise common components and services from a variety of vendors, or develop new functionality in-house, based on a shared infrastructure platform.
New service delivery models, and reducing IT environment complexity using both SOA and consolidation will enable the IT department to evolve to an IT architecture that will support value creation. However, a critical factor in this migration will depend on the organisation deploying measures that demonstrate the value of IT and on instigating IT governance processes to enable an effective monitoring framework.
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Technology Management and Strategy Report
SECTION 3: IT Investment Strategy
Butler Group a Datamonitor Company
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Measuring IT Costs and Value
3.1 THE EFFECTIVENESS OF IT SPENDING Despite a growing emphasis on business and IT alignment, there is continuing difficulty in accurately measuring the effectiveness of IT spending. A key step towards achieving this goal is for IT management to determine and monitor the level of IT spending that supports business growth. This can be achieved by identifying the percentage of IT spend invested in ‘keeping the lights on’ and money spent on projects that enable significant changes in the way the organisation is able to operate.
Figure 3.1.1: Financial Services Industry (FSI) IT Investment Strategy (Source: Datamonitor – European FSI Technology Survey 2004)
Post-2000 many organisations were forced to purse cost-reduction strategies across the enterprise and also within the IT department. Datamonitor’s European FSI technology survey highlights how the cuts in IT budgets reached a peak in 2002 within the finance community. It appears the focus is now returning to increasing revenue, with IT management intending to direct more IT spending to programmes that generate business growth. Whilst it is vital to continue to invest in the constant improvement of existing services and infrastructure to support growth, it is perhaps more important, from the perspective of adding value, that funds are made available to invest in projects that support new ways of doing business and improving collaboration. Therefore, IT management and senior management must reach an understanding as to the relative merits of each investment strategy and that a balance is achieved between funding for ‘Run the Organisation’ and ‘Change the Organisation’ spending. Despite the stated intention of many IT managers to increase spending on business growth projects, in reality this has been difficult to achieve, as across the financial sector IT budgets remain under pressure and it is by no means an easy feat to improve the situation in a difficult economic climate and very competitive marketplace. Figure 3.1.2 details an analysis of IT spending by the FSI for 2003 and 2004. From this we can see that IT investment targeted at new development projects remains constant or is deteriorating. In the insurance sector the percentage spent on ‘Change the Organisation’ initiatives actually declined year on year, while the Retail Banking and Corporate and Investment Banking sectors remained static, with Group Universals showing a slight increase.
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Figure 3.1.2: FSI Investment Strategy 2003/4
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(Source: Datamonitor)
What is important to recognise is that IT management must make a conscious effort to monitor IT spending, and once expenditure is understood, endeavour to increase the ‘Change the Organisation’ investment over time through the deployment of enhancements and new services designed to meet the objectives of the enterprise. It is very easy to get caught up in the day-to-day fire fighting and maintenance issues, neglecting work on IT strategy and measurement processes that will support the value drivers of the organisation over the next few years.
‘Run the Organisation’ Investment Strategy The challenge for today’s IT management is to deliver functionality and services that enable growth in a cost conscious environment. The continuing growth in the organisation will drive up transaction volumes and the expectation that IT can quickly respond to new business requirements means more pressure will be placed upon the current infrastructure. If it is not robust enough to handle the increase, additional spend will be required to maintain and repair the IT systems to meet new and increasing commitments. However, this spending adds no real value, removes resources from project work, and affects delivery capability. Increasing IT efficiency remains a key issue, especially in an improving market. This makes measurement of existing services even more important, so an understanding can be reached which will enable the proportion of IT investment utilised to maintain the current systems to be explained and adequately communicated to senior management and charged out to the rest of the organisation. Investment in optimising IT infrastructure remains a necessary part of IT spend and essential, for the following reasons:
Historically the majority of the IT spend has been directed towards infrastructure.
The amount of duplication and inefficiency that is present where multiple IT platforms currently exist.
The high support costs that currently exist due to a plethora of platforms and networks being used.
In certain circumstances an IT strategy mainly supporting a ‘Run the Organisation’ approach can be the right objective for an IT department to adopt, either because the enterprise situation demands it, or that it is not always the case that alignment is driven from a top-down standpoint. Whilst it is important that the majority of the initiatives are enterprise driven, this does not have to be the case all of the time. Identification of value is a two-way street, where occasionally disruptive and innovative technologies can influence an organisation’s thinking.
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Before any headway can be made in improving the agility of the existing infrastructure and services, it is vital that there is a thorough understanding of the existing environment, with the use of methodologies, management techniques, and metrics. All of these should be focused on monitoring and costing the key attributes of such a strategy, these being:
Resilience – understanding and mitigation of risks.
Cost effectiveness – low unit cost.
Scalability – accommodate organisation growth.
Agility – a common infrastructure platform optimised to cater for technology and business changes.
Key steps to delivering value from investment in a ‘Run the Organisation’ strategy include:
A centralised IT governance function with control over group infrastructure will allow the implementation of best practices across the enterprise, whilst enabling business and IT alignment and enhancing flexibility.
Centralise and share infrastructure across the organisation and develop common services, which reduces costs and enhances IT capability. Exponentially more can be achieved through common platform than siloed systems in a single business unit or country.
Focus on increasing long-term efficiency. Infrastructure transformation will reduce the unit cost, which will lower the long-run cost base and provide a platform for future business growth.
Consider outsourcing where there is a lack of internal capability, high investment cost is a barrier to transformation, or there are non-performing infrastructure functions.
‘Change the Organisation’ Investment Strategy In the current environment one of the most pertinent issues for IT management is to provide IT services that enables organisation growth and increases competitive advantage. This can be achieved through effective IT spending on services that will transform the way the organisation operates or focuses on knowledge capital growth initiatives. However, as identified in Figure 3.1.2, the last three years have resulted in minimal new IT investment spending by the retail banking sector in this area. This allows little scope for project failure or radical investment plans and makes achieving the growth priority difficult.
Figure 3.1.3: Retail Banking IT Spending by Performance Category 2003-2004
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(Source: Datamonitor)
Section 3: IT Investment Strategy
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An analysis of retail banking IT spending (Figure 3.1.3) appears to show a correlation between a higher percentage IT spend invested in ‘Change the Organisation’ initiatives (Development) and best-in-class and middle business performance, as defined by the efficiency ratio (cost/income). Higher ‘Change the Organisation’ spending tends to indicate that a greater proportion of IT spending is being targeted at new programmes that are aligned with business objectives, which in turn can lead to improved competitive advantage. Research conducted by Accenture into the characteristics of organisations that out perform the market points towards one of the differentiators being not how much is spent on IT but the way the investment is focused on business value. Companies with superior earnings growth tend to invest less than peers on IT but are able to make available more IT spending for new business initiatives. Further indication of the link between ‘Change the Organisation’ and innovation in the UK is found where the most successful insurance companies have been able to dedicate resources to product design, new distribution channels, and innovative solutions to differentiate themselves from the competition. Aviva, which has the largest insurance market share in the UK, has pioneered the use of ‘Pay as You Drive’ insurance, where the charge is levied on mileage rather than on an annual basis. Skandia has invested in componentised product design functionality, which allows remote agents access to on-line calculations. Maximising the level of ‘Change the Organisation’ spending can be seen as one of the main catalysts for business growth. Other key enablers include matching IT spending with business investment cycles and utilising technology to provide knowledge, competitive advantage, and allow growth. The pursuit of IT efficiency must include investments to improve infrastructure agility and service levels. Again, IT governance is critical to service provision success as it helps with, amongst other things, enterprise and IT alignment, which is paramount so that new services can meet the future vision set by the organisation. Making the Most of ‘Change the Organisation’ Investment As well as increasing the amount of IT investment focused on ‘Change the Organisation’ spending it is also important to understand what this outlay is being spent on. It is vital that the best use is made of the limited IT budget and resources ensuring that it is used effectively on initiatives that produce the most business value. Unfortunately, only around 25% of the available funding is typically targeted at ‘Change the Organisation’ initiatives. The investment directed at new and innovative developments is actually significantly less than this, with up to two thirds of this spending more often than not spent on mandatory undertakings and routine projects. This leaves approximately 10% of the total IT investment available to assist in the creation of business value. One may consider this bad enough, but the eventual amount of spend used effectively on creating growth can be further eroded if cognisance is taken of research that has identified that up to 20% of the investment in typical IT projects is in fact wasted, through such things as poor project control or failure. Thus it can be argued that for many IT departments the percentage of the total IT budget being used on projects that could bring competitive advantage or enable business growth is as little as 8% of the total funding available. Key considerations for identifying the best initiatives within the ‘Change the Organisation’ portfolio include:
Define and standardise robust application development processes and monitoring procedures using project planning and other relevant measurements.
Develop an internal/external assessment framework, implement Portfolio Management, and deploy an IT dashboard, along with monitoring tools and software.
Once the correct measures are put in place and an understanding of the internal strengths and weaknesses is achieved, a more informed decision can be made.
Outsourcing is often regarded as a cost reduction solution, utilised more often in a downturn. However, such a strategy can be used with a growth strategy, providing a responsive solution that enables organisations to address areas of weakness and exploit areas of strength.
Where possible focus on and give priority to Business Intelligence (BI), collaboration, and Knowledge Capital generation initiatives.
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Technology Investment Effectiveness Datamonitor plots the effectiveness of IT investment by calculating the IT intensity ratio (IT costs/operating costs) and efficiency ratio (cost/income) to create a quadrant that enables analysis of IT investment. By plotting the median lines of a set of peers, with similar business composition, it is possible to create a quadrant that allows analysis of IT spending levels.
Figure 3.1.4: IT Investment Effectiveness
(Source: Datamonitor)
This model can be used to provide a positioning snapshot of an organisation in relation to its peer group, or to indicate a trend over time. It is important to note that there is no correct position on the chart, it is dependent upon the IT strategy being pursued at the time. For example, those IT departments supporting a business efficiency programme using IT spend to reduce business costs would expect to be located in the ‘Enabling Increased Efficiency’ quadrant. This type of analysis highlights the importance of understanding the alignment of IT spending, and should be performed at the beginning of any IT transformation project. An illustration of benchmarking in the financial services sector using this model and others can be found in Section 4.3. In addition, the timing of investments is often critical to the success; being an early adopter is not always the best approach. There can also be a danger of personal agendas driving IT investment, and the propensity for decisions to be made for the wrong reasons should be guarded against, such as adding the latest technology to the CV. The people aspects are important when considering change and should not be underestimated: problems are Measuring the invariably due to people and cultural issues rather than with the technology. Measuring the effectiveness of IT investments is a major undertaking that cannot simply be left to the IT or finance departments; it requires commitment from the very top of the organisation. Unfortunately, without this support things will remain as they are – ambiguous and coloured by political infighting. There are a number of organisational and functional barriers to fostering a culture where the measurement of IT projects and the IT function as a whole is an accepted and routine approach. Firstly there are a number of issues of poor management practice, of which most senior IT managers are all too aware, but which are problematic to overcome, such as tactical purchasing, poor asset management, lack of change management, and the proliferation of suppliers.
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effectiveness of IT investments is a major undertaking that cannot simply be left to the IT or finance departments; it requires commitment from the very top of the organisation.
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The lack of good practice in asset management is also a major concern, with many organisations failing to undertake the most basic inventory of hardware or software assets.
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Tactical purchasing by individual business units is thankfully less prevalent now, but it is clear that the IT function itself is too often guilty of implementing a solution to meet an immediate business need, without understanding the midto long-term implications. The lack of good practice in asset management is also a major concern, with many organisations failing to undertake the most basic inventory of hardware or software assets. Change management is required not only within the IT function, but must support the communication of business change across the business-IT boundary, and the proliferation of suppliers restricts the ability to create strategic relationships with a core set of technology providers who can understand, and contribute to, the goals of the organisation.
It is all too easy to blame the lack of measurement in the IT environment on the previous management, and there is little incentive, given frequent staff turnover, to take the five-year financial view of a project that might provide a realistic perspective of its longer term value to the business. Even more worryingly, because IT project failure rates are still so high, there is a distinct reluctance to instil measurement at all in case the cold hard facts show up the management failings that were responsible for poor project performance. When postimplementation reviews can be conducted on the basis of subjective impressions it is all too easy to pass off failure for any number of spurious reasons. The challenge therefore is to embed sound programme and project management disciplines into the organisation in a manner that will survive any change of personnel. Suitable approaches will include setting up an IT Programme Management Office, adopting formal and well-documented methods for project management and measurement, and the use of supporting tools such as Portfolio Management solutions. Unfortunately, when the IT budget is under pressure it is these crucial activities that tend to be the first casualties, something IT management must resist. All of these issues are readily acknowledged by IT management, but the objective most often cited is how measurement techniques can be used to demonstrate and present IT value to senior business executives. The answer lies in the enterprise and IT stakeholders developing metrics that relate clearly to the objectives of the organisation, and designing projects in such a way that these metrics are an integral component, from pilot or proof of concept, through live deployment, right up until the solution reaches end of life. Once this becomes ingrained in IT processes, the measurement culture has been set in motion.
Conclusions
Measuring the cost and value of IT investments is an important undertaking that requires buy-in from the IT department and all stakeholders.
With around 8% of the total IT budget being spent on projects that will help added value there is still along way to go before the investment in IT actually matches the real requirements of the enterprise.
The effectiveness of IT investment can be calculated by using the IT intensity ratio (IT/operating costs) and efficiency ratio (cost/income).
3.2 UNDERSTANDING IT CAPABILITY For many IT managers a dichotomy exists between the role that is now demanded for IT within the organisation, and the reality found within IT operations. IT is rapidly maturing as a discipline, and as with any other organisation function its executives are required to demonstrate its value to the organisation, to keep its costs under firm control, to maintain the effective running of its operations, and to ensure that any potential risk to the organisation is assessed and minimised. The focus for IT management is turning away from the detail of technology such as server availability, network performance, and application functionality, towards more strategic issues such as IT budgeting and investment planning, governance, service quality and availability, IT risk management, and offshore development. However, in contrast with other organisation functions, there has been a distinct lack of both tools and methodologies to assist in adopting this strategic view (represented in Figure 3.2.1). Whilst everybody is keen to move the IT department up the organisational value chain, and to increase its contribution to the enterprise, there is still a distinct and substantial separation between the business, financial, and technology views of the IT department.
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Figure 3.2.1: The IT and Business Management Environment
(Source: Artimis)
Given the dependency of modern business on IT, it may seem unnecessary to assert that when deployed astutely IT makes a significant contribution to both the efficiency and the competitive position of an organisation, but for many senior managers the use of IT has been a double-edged sword. They recognise the potential of IT systems in many areas, but believe that this potential comes with a lack of rigour in measurement, and with a substantial risk of failure. It is therefore no surprise that IT investment is treated with a large degree of scepticism, and that the IT manager is often relegated to the role of technology caretaker. It is evident that realising value from IT requires the same degree of planning, visibility, measurement, and control of investment that would be applied in any other area of the organisation, be it product research, asset management, supply chain, or corporate development. Senior executives are now seeking to have these same disciplines applied to the IT function, but it is clear that this will require a substantial cultural change and real progress in bridging the divide between organisation and IT perspectives. It is important that there is an assessment process in place for monitoring IT capability. The perceptions of both stakeholders and internal personnel are invaluable in shaping IT decision-making and identifying if value is being provided. The methods for assessment can take a number of forms including surveys, assessment tools, and measurement models. Assessment techniques such as benchmarking and value mapping are considered in Section 4 of this Report. Regular surveys of IT staff and others are an important feedback mechanism for management, which give an indication of how they feel the IT organisation is performing and ways in which improvements can be made. A useful assessment tool is provided by the Carnegie Mellon Software Engineering Institute (SEI), the People Capability Maturity Model (P-CMM), which is a framework that assists organisations to tackle people issues by employing best practices in the areas of human resources, knowledge management, and organisational development. This results in organisations improving processes for managing and developing workforces. Intel has also developed a streamlined assessment method known as SAM-Lite, based on The Baldrige Award’s organisational performance model and assessment criteria.
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...deploying an IT investment planning and control system, and adopting a formal methodology to manage the associated processes, is one of the single most effective steps that an organisation can take to improve the accuracy and validity of its IT investment strategy.
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Butler Group believes that deploying an IT investment planning and control system, and adopting a formal methodology to manage the associated processes, is one of the single most effective steps that an organisation can take to improve the accuracy and validity of its IT investment strategy. One such example is the Artemis IT Management Solution (ITM), which, amongst an extensive range of IT management features, can be used to support the IT investment planning and control processes. Artemis ITM includes the ability to support IT strategy planning that helps organisations to rapidly capture existing IT projects, assets, and to digitise existing processes. Its IT initiative management and IT portfolio management capabilities work together to capture all forms of IT demand, including strategic projects, work requests, upgrades, and ongoing support, and to allow the organisation to rank and prioritise the investment and resource that is allocated to this requirement.
For many organisations the IT investment cycle has been severely hampered by the lack of any formal approach. The result is that project and asset investments are often prioritised according to the available resource, rather than taking into account the business goals of the organisation. Factors such as immediate demand, internal politics, or even the personal agenda of the individual also contribute to sub-optimal decision-making. The consequences of these failures are several and compound, as the short-term outlook changes, ongoing projects are highly susceptible to time and cost overruns, new projects that might offer greater benefits cannot be started, and the quality of support and maintenance work is blighted by resource conflicts. Even where some formal procedures exist, it is often done using an inflexible spreadsheet, which, whilst listing potential projects, provides no visibility into the availability of resource or the current workload. Artemis addresses these issues by linking business goals to the IT portfolio, and to its delivery. This ensures that the execution of IT initiatives is fully tracked, and the resulting benefits linked back to the strategic objectives. By fully integrating a top-down strategy perspective with a bottom-up execution viewpoint, Artemis is able to provide an all-embracing solution.
Service Provider Value Creation Using Corporate Vision With well-intended attempts to plug the many information gaps, organisations have turned to familiar project management, recording, and reporting solutions, notably Microsoft’s Project and Excel desktop products. Whilst there is nothing fundamentally wrong with these applications, their use tends to spread like wildfire, soon becoming out of control. People spend more and more time recording and duplicating in exhaustive detail when they should really be focused on value-creating activities and project goals. As a direct consequence, any hopes of getting a clear, trusted, and traceable view of overall resource utilisation gets lost in a swamp of micro management. This, unfortunately, is the reality for far too many organisations. Atlantic Global’s Corporate Vision solution encourages service-based organisations to re-examine their fundamental value creation process – in terms of how they allocate and balance human and physical resources against the demands placed upon them, the costs associated with the activities, and the time taken to complete them. Through increased visibility and simplified traceability and management, Corporate Vision is able to foster an altogether more holistic and realistic approach to project management, resource allocation and forecasting, time management, budgeting and planning – in essence the foundations of good business practice. The approach adopted by Atlantic Global differs from other vendors that market solutions in this area. The company aims to deliver a higher level of control and visibility of information, taking the onus away from departmental and project-specific capabilities, to more of an integrated, role-based, business-wide platform. In particular, Corporate Vision provides enterprise resource management functionality, from simple skills management to the real-time visibility of resource supply versus resource demand, thereby allowing potential problems to be flagged early on. In the area of project management, Corporate Vision addresses the challenge from one of milestone tracking rather than the traditional task-based approaches, again with the view of providing better overall visibility and more actionable and relevant information.
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Figure 3.2.2: Corporate Vision (AG-CV) Architecture
(Source: Atlantic Global)
Portfolio Management is a popular term and software sector in its own right. Atlantic Global delivers these features and capabilities within its Corporate Vision solution set. It establishes a clear line of sight from the top-level, pan-initiative view right down to the individual project layer, allowing managers and executives to clearly see and understand how effective their strategies are, and if necessary, which programs or projects to review. At this top level it is also possible to undertake full forecasting and planning activities within the same Corporate Vision environment. For example, various strategies and plans can be simulated using scenario modelling and ‘what if?’ analyses conducted to ascertain the impact of certain decisions. A classic example here is the impact of slipping milestones on other projects. Key performance indicators or warning indicators can easily be surfaced, again giving executives and managers an important window on what is happening today, rather than having to wait until it is too late to be rectified. Part of rectifying problems and ensuring effective portfolio management is the ability to view resource allocation across projects and, if necessary, reallocate people to more critical activities. Again, having this level of visibility whilst retaining the capacity to drill-down into detail is an extremely valuable resource. Corporate Vision is designed to handle automatic resource allocation, facilitated by an underlying skills database. This allows resource plans to be tested for feasibility, matching against skills, competencies, experience, and availability. This gives resource managers the means to match supply and demand, and clearly demonstrate to the rest of the business where potential shortfalls exist. Almost every organisation uses project management software to one degree or another. Service-oriented businesses rely on project management (and hence project managers) extensively; yet tend to struggle when it comes to truly delivering value out of the function. This is not meant as a slight against project managers; it is simply that no-one within the business has an accurate, constantly updated view of exactly where resources are being used, misdirected, or under- or over-worked. Also, lacking this view, projects are often run in isolation of one another, meaning that the knock-on impact of delays or poor resource and time allocation cannot be predicted, leading to the inevitable fire fighting situation. Butler Group feels that Corporate Vision improves this situation, firstly by integrating data, projects, resources, and time management, and then acting as a central facility for describing and instilling best practice project management disciplines right into the heart of the business.
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The key to how this is achieved is through a consistent planning methodology, which is independent of any specific management methodology. All project data is stored in a central databank allowing clear visibility of resources and project-specifics such as tasks, budgets, goals, and milestones. Whilst Atlantic Global can deliver such capability directly through the functional modules of its Business Solutions Set, the added value of Corporate Vision is to deliver this visibility across any number of projects. Using the underlying features of Atlantic Global’s Business Solutions Set, users are asked to record their time and effort expenditure against the tasks they have been assigned within the projects that they are involved. Corporate Vision is designed for immediate repurposing of data and information, meaning that if necessary such time sheet information can be read in real time. Timesheet approval is also built in, allowing supervisors to monitor input. Time management goes further than just recording the time people spend in various activities – although this in itself can be extremely valuable. Atlantic Global ties expense management to the time management function, allowing costing and rates (multi-currency if necessary) to be applied. This instantly allows costs to be analysed (in real-time if required) in a number of ways, for example, by project, by client, by activity, and by department. This gives visibility into cost distribution and has a dramatic impact on billing. Corporate Vision also provides clear visibility of important financial information. This is vital in order to deliver the complete picture of how well the organisation is able to translate its resources and time into cash. At the Corporate Vision level the mandate is very much for tracking and overview of budget, expenses, margin, profits, and general cash flow. In addition, it provides financial modelling and forecasting capabilities, encouraging the business to become ...role-based more proactive. The expense management functional module of Atlantic dashboards display Global’s Business Solutions Set provides the micro-financial control, ensuring key metrics and that information is entered and collated in line with the businesses needs.
reports, and support drill-down to the lowest level of detail.
The way information is accessed and utilised is clearly critical in a solution of this nature. Corporate Vision uses business roles as the primary basis for filtering information. Roles are designated with the required security and administration levels, allowing users to see data pertaining to their function and position within the business. These role-based dashboards display key metrics and reports, and support drill-down to the lowest level of detail. Corporate Vision is Web-based and is highly configurable. Configuring the solution as opposed to customising it ensures that upgrades and enhancements can be performed easily. Any changes made by a user are captured and logged, providing a full audit trail. For example, in order to change a milestone the project manager will have to enter an explanation as to why it needs to be shifted, and this data automatically becomes available to his or her superiors. Corporate Vision directly supports a decent level of reporting, for example, with out-of-the-box trend analysis. However, the underlying database can also be accessed and queried by any enterprise BI solution. Service-based businesses find great difficulty in achieving and maintaining a consistent high-level view that tells them how effective they are at using their key assets – people, time, and cash. Consequently, opportunities are lost and resources wasted as initiatives and projects get delayed and/or delivered over budget. Atlantic Global’s Corporate Vision solution aims to address the situation, providing an abstracted, role-based information layer that allows managers and executives to monitor and manage utilisation across projects, portfolios, and even geographies.
Conclusions
Better decision-making will be achieved if IT management has a good understanding and control of the current environment and a clear appreciation of future requirements.
Total Cost of Ownership (TCO) issues have the potential to either significantly improve or virtually destroy investment returns.
Enterprise and IT management solutions, such as those provided by Atlantic Global and Artemis, can help organisations create a framework conducive to value creation and IT capability assessment.
Aspects such as human and physical resource availability, along with budgets, are important considerations when reviewing an organisation’s portfolio and vision.
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3.3 PORTFOLIO MANAGEMENT There is no doubt that many organisations do not have the metrics in place or defined processes for reviewing project proposals. Recent research implies that only 25% of enterprises use a process framework rather than haphazard planning processes. As a result, organisations attempt more projects than they are able to cope with, and often weak projects take precedence over strong ones. There is a lack of visibility and awareness throughout the organisation of what projects are being undertaken and why. Invariably, IT management have to sell projects to the enterprise, when business managers should be generating and selling the projects throughout the organisation. IT management without control of their IT project portfolios cannot expect to fulfil the requirements of providing value from technology investments. IBM’s Institute of Business Value study of 165 large IT projects at financial services companies identified a number of practices that can assist organisations in improving IT investment performance. The IBM evaluation discovered that the organisations found governance and risk management were two of the main challenges in this area. Even though risk management is considered critical, not many enterprises had procedures in place to evaluate and mitigate risks. To tackle these and other related challenges, the Institute found that many financial organisations were beginning to manage their IT investments as a portfolio instead of individual, unconnected projects. Amalgamating IT projects into one portfolio assists senior executives and IT managers to make better choices and can reduce overall contingency requirements. Portfolio Management is starting to become more widely used in the financial sector, as the market-leading institutions make it an integral part of their IT investment management practices.
Figure 3.3.1: Key Aspects of Successful IT Investment Management (Source: IBM Institute for Business Value Analysis)
A Portfolio Management approach enables categorisation of all IT assets, including human resources. A good Portfolio Management solution will assist an organisation in selecting the right blend and balance of IT investment, be the emphasis on ‘Run the Organisation’ or ‘Change the Organisation’. This technique can be used to more clearly define the stated IT and enterprise objectives. Additionally, metrics can be assigned to projects that give a much clearer picture of business value contribution. Objectivity, especially in terms of reigning in unsupportable expectations, can create a more structured approach to the deployment of new functionality and infrastructure. This objectivity has to be carried through at the highest level. A project must have not only an individual aim but it must also serve the wider purpose. Whether the objective is increased profitability, greater levels of customer service, or reduction in cost are to a large extent irrelevant, as long as metrics are capable of being assigned. For example, cost reduction may have an impact on customer service. If metrics are simply assigned on the basis of just reduced costs then there is a strong likelihood that ‘success’ as far as a project is concerned could be measured as ‘failure’ by the organisation as a whole. Portfolio Management enables a wider, more important, and relevant view to be taken; IT projects should not be allowed to exist in isolation. In fact there is a school of thought that believes there should be no such thing as a separate technology initiative and they should all be an element of business projects, with justification and comparison of suitability and value being taken at the business project level.
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A Portfolio Management solution should be used to prioritise projects against the backdrop of organisational need. Prioritisation and risk assessment must be added into the equation. This approach provides enterprises with a disciplined framework for management processes, as well as IT investment and deployment. Weak IT governance structures mean that business executives often do not have clear ideas of what they are approving and why they are doing it. It is common for IT management to have to sell projects that should be generated and sold to the enterprise by line-of-business heads, and even if business justifications for IT projects are produced, they are often poor. In mitigation of this problem, a Portfolio Management programme can maximise IT investments and minimise risks. It brings discipline to IT. Portfolio Management can encourage teamwork and improve the communication and alignment between the IT division and the enterprise’s business managers, with the latter taking increased responsibility for the success of IT projects. As a result, resources can be scheduled better and projects can be managed and controlled more effectively. Today’s organisations have to cope with reduced budgets and changing business priorities. Current applications often lead to disjointed systems and business processes that cause organisations to have difficulty in aligning projects, people, and partners with the corporate objectives. Portfolio Management solutions formalise the project justification, approval, and deployment processes. They integrate all the information related to the project within a single, Web-based enterprise solution, so that projects are better managed and aligned to achieve a greater return on their investment. Portfolio Management is an essential element of IT governance, especially as it recognises and addresses the issues of creating an integrated environment from elements that have traditionally operated as individual parts. A strong portfolio management solution can assist an organisation in selecting the right blend and balance of asset investment. The isolation of projects is one of the major reasons why IT failures occur. The measurements of project successes are based upon the expectations of the strategic initiator, and these are time-limited in respect of start of implementation. The needs for a project are inherently tied into the total requirements for each and every project and also the strategic direction of the organisation. The approach takes an holistic view of an organisation’s overall IT strategy. IT and business managers scrutinise project proposals by matching them with the company’s strategic objectives. The IT portfolio is managed in a similar way to a financial portfolio, where riskier strategic investments are balanced with more conservative investments. The portfolio is monitored regularly to determine the projects that are on track, those that need help, and those that should be chopped.
Figure 3.3.2: Portfolio Management Framework
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Collaboration is also an essential element of Portfolio Management. Collaboration across the whole of the portfolio enables the gaining of a broad picture, but also provides for quicker remedial action. A duality of view has to be taken. Collaboration inter-team is a well-established facet of project management, but Portfolio Management creates intra-team collaboration for those members whose responsibility lies at the macro level of an organisation. The remedial aspect enabled by Portfolio Management is powered by utilising an ongoing and dynamic measurement base, with projections that supply proactive capabilities. A strong Portfolio Management solution will give all of the above, but it can do so in a number of ways and with varying degrees of functional implementation.
Collaboration across the whole of the portfolio enables the gaining of a broad picture, but also provides for quicker remedial action.
Portfolio Management Benefits There are a number of benefits that Portfolio Management can bring. Probably of most significance is the ability to include the senior management in the project selection process by providing a framework that is transparent and easily understood. It takes a lot of information and organises it in an easily understood manner. It helps to demonstrate where money is being spent, whether projects are necessary, and what resources are needed. Other benefits include maximising the value that is achieved from investments in IT, and identification of the risks. This is due to the evaluation and priority processes that are part of Portfolio Management. It can also improve the whole environment in which the organisation operates. Communication and alignment between IT and business leaders is promoted by Portfolio Management, along with IT and business management being encouraged to think about team responsibility and success rather than on individual requirements. As there is a recognised measuring Early and constant communication is the process IT projects are selected based on merit and on the benefit to the organisation. No longer is it the projects whose sponsors shout loudest that key to bridging the are selected for development. Project spends are visible to all participants so organisation/IT divide that the value and costs are continually monitored.
and improving perception.
Early and constant communication is the key to bridging the organisation/IT divide and improving perception. Senior managers need to appreciate more about how IT can affect the business, and IT management need to learn to communicate the vision, strategies, and goals of IT in a way that non-IT executives can identify with. The most effective way can be taking the initiative in discussing projects with managers and eventually transferring responsibility and accountability to stakeholders. Both management and users in IT, and also line-of-business divisions, can be educated through their involvement in the Portfolio Management process. Possibly for the first time they are able to fully understand how IT initiatives can have a direct effect on their enterprise. It also means that users can be empowered, as they have a direct stake through participation in all stages of the process. In addition, planners are able to schedule resources more efficiently, the number of redundant projects is reduced, and it is much easier to make the decision to abandon projects as all participants have the facts presented to them by the system. Overall, it can lead to more effective management of IT through the alignment of IT activities and investments with the organisation’s objectives. As a result, there can be a significant effect on IT spending, with PeopleSoft claiming that this can be reduced by up to 30%. There are many different models of Portfolio Management promoted by vendors, consulting companies, and academics. Some organisations also develop their own methodologies, but off-the-shelf software is available from a number of vendors.
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Vendor Portfolio Management Solutions In addition to Atlantic Global mentioned earlier and IT governance solution offerings outlined in Section 5, which include Portfolio Management functionality, there are a number of other vendors providing Portfolio Management products, some of which are described briefly here. Business Engine Corporation’s Project Portfolio Management application integrates all project-related information within a single, Web-based solution. Various methods are used to create and balance the project portfolio, ranging from strategic to tactical. It includes portfolio analysis that aims to provide balance and risk mitigation across strategic or business objectives, compliance or required maintenance, and research and development. PeopleSoft says that a fundamental strategy for organisations adopting a centralised approach to IT governance is Project Portfolio Management. Part of its Enterprise Service Automation for IT, Enterprise Project Portfolio Management is an integrated solution designed for IT managers to align projects with corporate objectives, reduce project delivery costs, and increase resource usage. ProSight Portfolios Project Portfolio Management is designed to handle all facets of Portfolio Management. It ensures collaboration between executives and team members, and prioritises and selects projects based on business need, choosing what organisations will and will not do. It provides effective management of projects through to completion, and it means real-time monitoring of both the on-going priorities and project execution, continually reviewing and adjusting as necessary. Telelogic’s Focal Point solution enables organisations to manage project and product portfolios. The aim is to maximise the value of the portfolio, ensure a good balance between different types of projects, run the right number of projects, to allocate and reallocate resources, and to align project decision-making with organisation strategy.
Conclusions
Portfolio Management provides executives with visibility and the tools to unlock the value of the investments through minimising risks, optimising resources, maximising value, and aligning IT with the objectives of the organisation.
Efficient allocation of limited resources to competing projects and a clearer understanding of where IT resources are being spent are enabled with Portfolio Management.
Effective control of the IT portfolio is an essential part of the IT management discipline and this can be the single most effective step that can be taken to improve alignment.
3.4 INVESTMENT METRICS Much is made about the need to obtain value for money from IT investments, with the focus on using Return On Investment (ROI) for evaluating technology systems having grown in line with increased spending pressures, as the funds available to IT directors are kept in check by difficult external environment conditions. One issue that should always be borne in mind when considering technology investments, and which has the potential to dramatically affect an organisation’s ability to achieve a decent and consistent ROI, is TCO. Deploying systembased solutions is probably the easy part of the job for most IT professionals, but for many, understanding the long-term financial commitments associated with their decisions is more problematic. There are a number of financial metrics that organisations can employ from the well-used ROI to others such as Net Present Value (NPV), Internal Rate of Return (IRR), Discounted Cash Flow (DCF), and Economic Value Added (EVA). Whilst ROI is probably the simplest calculation and is used extensively, Butler Group cautions against using it exclusively as a metric for investment evaluation and comparison. It is important to take cognisance of the contribution the initiative will make to the organisation, as well as other aspects such as the cost of capital. In this respect the EVA is a metric worth consideration. In addition, the appropriate discount rates or weighted cost average should always be employed. The various metrics can be combined into a Cost Benefit Analysis where all the plus measures are compared with the negatives or disadvantages to identify the overall prospects for the initiative.
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Alinean suggests that the first step in managing the value of IT is to perform a ROI analysis of each planned project. Each project needs to be analysed based on the traditional ROI elements, such as project costs and tangible benefits, but in addition to these conventional elements of a ROI cost-benefit analysis, Alinean proposes utilising other criteria in order to better assess IT investments, including intangible benefits and project risks.
Figure 3.4.1: ROI Dashboard Model
(Source: Alinean)
Other Investment Metrics The investment metrics used for comparison and monitoring of IT initiatives is individual to each organisation and the particular areas of focus. It is important to align the metrics with the value drivers of the enterprise. Butler Group recommends that no more than five or six key metrics are utilised and that they are reviewed on a regular basis to ensure they are still relevant. Jerry Harbour originally put forward the use of SMART metrics. The acronym stands for: Specific – make sure the metrics are targeted at the areas requiring evaluation and they are unambiguous. Measurable – the data collected should be able to give an accurate reflection of events and be complete. Actionable – when the metric changes positively or negatively then some corrective action must be possible. Relevant – do not measure things that are unimportant, and when the metric is met or outperformed the organisation gets the benefits envisaged. Timely – the data should be available in a timeframe that enables it to be acted upon. Ideally metrics should meet the ‘SMART’ criteria. There are many different metrics that can be utilised, some of which are listed below. This is by no means an exhaustive list and should only be used as a guide when contemplating those measures that would be suited to an organisation. A Balanced Scorecard approach is frequently used as a tool for communicating measures.
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Alignment
Percentage of projects approved.
Number of projects delivered on time or ahead of schedule.
IT costs as percentage of total costs.
IT costs per employee.
Compliance to strategic plan.
User Orientation
User satisfaction.
Internal Service Level Agreement (SLA) compliance.
Helpdesk response times.
User involvement in new services.
Innovation and Skills
Human Capital Index (Watson Wyatt).
Staff skills development.
New/existing system adoption.
Project expertise capture.
Staff retention.
Operational Quality
System and network availability.
Number of issues resolved per person.
External SLA compliance.
Development effectiveness.
Knowledge Capital
IT training per employee.
Intellectual capital.
Intangible Asset Monitor.
Corporate Reputation Quotient (Harris-Fombrun).
ROI and Licensing Models The diversity of licence models available today create complexity, but also flexibility. New technologies and application delivery methods have led to the diversity, including Web delivery, Application Service Provision (ASP), Software-as-a-service, on-demand, utility computing, and grid computing. The equation tends to reflect the extent to which there is a sharing of risks and rewards. A traditional perpetual licence in the long term is perhaps the lowest cost, but entails greater risk if the software under-performs, or the vendor goes out of business. A monthly subscription or usage-based licence lowers the risk to the user, but is also more expensive over the long term. There are many factors to take into account though, and cost may not be the highest-ranking criterion – for example, what is highly valued in hosted application/service providers is the availability of the latest technology with rapid implementation. The monthly payment models also do away with the big impact on budgets of capital expenditure and can speed up buying decisions. However, the scrutiny of ROI and other measures should not be abandoned, especially given that subscription models cost more in the long run. Companies need to review existing licence agreements to ensure that they are not hampering the needs of the business. For example, in the introduction of new technologies rigid models like per-seat licensing cannot be used to give Internet users open access to the application.
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The increasing introduction of Open Source Software (OSS) into the IT world is also causing vendors to review their licensing and pricing. From a user’s perspective, the whole question of licensing should not be a matter of detail after the buying decision, but should be examined and clarified at the start of any such process.
Conclusions
Achieving a quick and consistent ROI is still extremely important for all organisations especially in today’s difficult and competitive environment.
It is becoming apparent that the simple ROI calculation used in the past is no longer adequate.
Organisations must look to put in place investment measures that encompass not only tangible benefits but also other aspects, such as risk and intangibles.
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Technology Management and Strategy Report
SECTION 4: Identifying IT Value
Butler Group a Datamonitor Company
Measuring IT Costs and Value
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4.1 VALUE MODELS It is important to identify those initiatives that bring the maximum value to the organisation, and as ‘Change the Organisation’ spend is limited it is critical that investment is made in projects that will make the best use of both limited financial and human resources. There are a number of models and frameworks available that allow both the identification of opportunities to provide IT value, and processes to monitor progress in achieving IT value appreciation. Outlined in this Section are a number of concepts gaining recognition in this area, including Value Management and IT Value Management, along with the IT Contribution Model, Intel’s Business Value Matrix, and value mapping, all of which the IT department can exploit either in their entirety, or in part, to create an IT value framework.
Value Management Whilst not directly involved in the technology sector the ideas promoted by the Institute of Value Management in the UK help to gain an interesting perspective on the concept of value. The Institute defines value as the relationship between the meeting of stakeholder requirements with the resources consumed in doing so. The more efficient use of resources and the greater the user satisfaction levels equate to better value. The perception of each type of user means that the value could be different for each stakeholder. The main objective of Value Management is to resolve these differences in the perception and facilitate an organisation meeting its needs using the minimum of resources necessary to deliver them.
What is necessary for a desired user Satisfaction of Needs Value = Use of Resources Everything that is required to satisfy needs
Figure 4.1.1: Value Definition
(Source: The Institute of Value Management)
Value Management has evolved from the Value Analysis (VA) method developed by Lawrence Miles during the 1940s and 50s. To start with, VA was used mainly to identify and eliminate unnecessary costs: over time, the technique widened its appeal and was used for increasing performance and addressing resources other than cost, along with services, projects, and administrative procedures. The Value Management methodology consists of three main principles: 1. An ongoing focus on organisation value, including the establishment of metrics for identifying and controlling value. 2. The definition of the objectives and targets before embarking on solutions. 3. A concentration on functionality as an enabler for maximising innovative and realistic outcomes. Value Management is unlike many management philosophies in that the approach encompasses a number of organisational characteristics at the same time, such as management style, human dynamics, and involvement of both external and internal environments. In addition, the approach includes the effective use of tools and methods. The main benefits from using Value Management include the fact that improved business decisions take place. There is better understanding of the problems and issues due to the embodiment of a common value culture where employees and stakeholders understand the organisation’s objectives, leading to improved output and better competitiveness.
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In 1989, the European Council of Ministers established the SPRINT initiative to strengthen Europe’s innovative capacity and competitiveness; Value Management was a key element of this strategy. One result of SPRINT was that the European National Value Associations worked together to produce:
A common European Value Management Standard, approved and published in April 2000.
A universal European Training and Certification System.
The European standard EN 12973:2000.
Figure 4.1.2: The European Standard EN 12973:2000
(Source: The Institute of Value Management)
The European Standard EN 12973 involved the co-operation of eight European countries, all of which had developed different standards for the use of Value Management. This diversity of implementation was seen as a potential barrier for wider adoption and cross-country usage. The European Union started a number of projects as part of its innovation programme, and this collaboration resulted in a standard that reflected best practice across all countries and industry sectors. The idea is that the standard is not restrictive or applicable to any single commercial sector, nor does it advocate the use of any particular techniques, but promotes the choosing of the most appropriate methods to achieve the objectives of the organisation. The standard aims to document the concepts found in Value Management and provide a framework for its deployment.
IT Value Management IT investments are one of the largest single elements of capital expenditure an organisation has. Unfortunately IT management continues to struggle to articulate the business value of IT to the organisation, with business managers and department heads demanding justification for every penny spent on IT. Currently, very little time and resource is spent on managing IT value as a process, integrated with other management tasks. Ways of improving the situation, in terms of strategy, models, and tools, are available in the marketplace today, such as Alinean’s IT Value Chain Management methodology and SAS’s IT Value Management software.
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IT Value Chain Management To assist IT management in demonstrating and expanding the value of IT, Alinean has developed the IT Value Chain Management framework. This methodology is designed to provide a measurement system for each stage of the budgeting and planning cycle, helping IT executives understand the micro-economic impact of an individual project and the macro-economic effect on overall organisation performance, as well as providing a collaboration framework for all stakeholders who are engaged in IT investment decision-making.
Figure 4.1.3: IT Value Chain Management
(Source: Alinean)
Alinean advocates that four main areas are addressed within a continuous IT Value Chain Management process. In some situations a bottom-up method calculating the Return On Investment (ROI) for a project is the right way to initiate consideration; in other instances a top-down approach starting at Step 4 – competitive peer comparison and then moving to Step 1 will be applicable. The four steps within the framework are: 1. Project ROI – provides the framework for individual project assessment, and the subsequent capability to track the performance of the project against financial goals, risk mitigation, and Key Performance Indicators (KPIs). 2. Project Optimisation and Budgeting – allows the project plans to be modelled to determine the necessary IT budget, and to perform ‘what-if’ analysis to ensure that resources are available to implement the planned projects, risks are minimised, and benefits are maximised. 3. Corporate Financial Impact – various combinations of projects, risks, and benefits can be simulated to best support corporate financial and strategic initiatives, and meet competitive performance goals. 4. Competitive Peer Comparison – consists of performance assessments versus peers with regard to corporate financial performance, KPIs, IT spending, and Total Cost of Ownership (TCO).
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IT Value Management The premise behind SAS IT Value Management is quite simple: enable IT to communicate and manage the tangible costs and resulting business value of every IT service. It sounds like an easy thing to do, yet for so many organisations it is impossible with any significant degree of granularity – and as the saying goes: “What you cannot measure, you cannot manage”. SAS IT Value Management enables the IT management team to clearly present and manage the costs and value of IT in business terms. The platform offers governance and financial transparency, reflecting the need for IT to behave as a business in its own right. The solution uses SAS IT Resource Management to turn timekeeping and associated data into intelligence, by providing business-rich context to this information using related SAS technologies.
Figure 4.1.4: SAS IT Value Management
(Source: SAS)
The SAS view on IT governance is about how executive managers enable IT initiatives align with business goals and deliver value, while at the same time ensuring that IT costs and fully burdened activity costs are allocated according to use. SAS solutions use the raw data collected from IT systems to link IT cost with this business value to yield the business context required for effective IT enterprise operations. All SAS solutions are built on three fundamental technologies: Data Warehousing, Analytical Intelligence, and Business Intelligence (BI). Developed by SAS over many years, these technologies are unified by an open and extensible architecture designed to support SAS solutions across the eclectic mix of platforms and technologies found in most organisations today. Built on the SAS Intelligence Architecture, IT Value Management transforms raw IT data, collected from enterprise systems, into useful, business context-rich, intelligence. At the core of IT Value Management is SAS IT Resource Management – the company’s long established computer performance management and capacity planning offering, which delivers an organised and summarised IT data repository of enterprise-wide IT measurements. From here additional SAS offerings within the SAS arsenal of analytic and BI capabilities are employed to perform context-rich IT governance, activity based cost management, cost recovery, service consumption management, Service Level Management, and IT score-carding. These reporting, analyses, and modelling functions enable IT to provide accurate and defendable costs and their resulting value to each serviced line of business. By providing individual business units with clear, unambiguous statements in a language they understand, business managers have the information they need to effectively manage the consumption of IT resources and so reduce cost, whilst for the IT manager and his team these insights enable more accurate planning and long-range forecasting – essential if IT is to participate in the board room and meet the future demands of the business as a whole.
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SAS solutions are adapted to each individual customer. SAS starts with the ‘ETL’ process before overlaying this on to the desired business process. ETL refers to the Extract, Transform, and Load functions combined into a single programming tool. First, the extract function reads data from a specified source and extracts a desired subset of data. Next, the transform function works with the acquired data – using rules or look-up tables, or creating combinations with other data (context) – to convert it to the desired state. Finally, the load function is used to write the resulting data (either all of the subset or just the changes) to a target database. In Butler Group’s opinion, the functionality afforded by solutions such as SAS’s IT Value Management software, are likely to provide organisations with the tools to manage cost, value, quality, and risk. Additional benefits envisaged include:
Reduced long-term costs – as the alignment between IT consumption, cost, and resulting business value clarifies corporate IT decisions.
Higher quality IT services – through an absolute understanding of the organisation’s processes and drivers, IT consumption, and alignment with corporate objectives and strategy.
More efficient use of IT throughout the enterprise – as unnecessary system usage abates.
Increased awareness and professionalism within IT – as the organisation sees the direct correlation between IT investment and business value.
Service Level Agreements (SLAs) can be used to prioritise IT service provision within the enterprise.
IT Contribution Model The Canada Management Accounting (CMA) Guideline1 – ‘Evaluating Performance in Information Technology’ has been jointly developed between the CMA and the American Institute of Certified Public Accountants (AICPA). The Guideline defines the IT Contribution Model and a selection of metrics for evaluating performance of IT in commercial and public sector organisations, enabling IT management to assess and compare initiatives, along with senior management being able to make better resource allocation decisions. In addition, it contains a method for calculating IT ROI that takes into account the significance of measuring the total costs of an IT project including a number of disruption costs, along with the total benefits, and the associated risks. The IT Contribution Model identifies the main inputs and processes that need to be in place for successful internal and external IT outputs. The Model also ensures that the contribution made by IT in the meeting of organisational objectives is measured, be that in terms of better customer service, profitability, or shareholder value.
Figure 4.1.5: IT Contribution Model 1
(Source: CMA)
Guideline can be found at: www.icaew.co.uk/fmfac
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The performance of IT system delivery is dependent on many different inputs, including organisation strategy, structure, and existing infrastructure, which can be drivers and constraints on projects. Other important inputs such as available resources and the external environment can ...other aspects, such also have a significant impact on the development and deployment of IT strategies. Additionally, other aspects, such as leadership and IT strategy, as leadership and IT structure, and processes, can influence the execution of IT projects. strategy, structure,
and processes, can influence the execution of IT projects.
These inputs and processes impact both internal outputs, such as improvement in productivity, time savings, increased use of capacities, improved quality, and overall cost reduction, and external outputs including channel optimisation, customer acquisition, satisfaction, and loyalty, and overall value capture. The successful deployment of IT initiatives supporting these outputs should produce enhanced organisational outcomes. Using the IT Contribution Model as a framework it is possible for the organisation to establish enterprise specific IT performance goals relating to the inputs, processes, and internal and external outputs. Suitable measurements need to be deployed to keep an eye on the many inter-relationships found in the IT environment. To begin with, all the value drivers needed to meet the goals of the organisation should be identified and have metrics assigned to them, even those which are hard to measure must be included in the performance measurement system. It could be more appropriate to use non-financial metrics in some instances, although preference should be given to monetary values as senior management prefer to be able to calculate ROI and demonstrate IT payback. The selection of the relevant metrics will be different for each organisation and is dictated by the circumstances and the direction of the enterprise. Some performance measures suggested by the CMA that could be used to measure inputs, outputs, process, and outcomes include:
Performance Measures for Inputs
Performance Measures for Processes
Percentage of planned change in annual IT budget.
Percentage of IT management’s bonus linked to IT profitability.
Percentage of employees compensated based on individual or group performance.
Percentage of discretionary spending decisions aligned with corporate and business unit strategy.
Performance Measures for Outputs
Performance Measures for Outcomes
Monetary increase in sales based on productivity improvements.
Percentage change in share value attributable to IT initiatives.
Monetary value accumulated based on time savings.
Earnings growth.
Figure 4.1.6: Some IT Contribution Model Performance Measures
(Source: CMA)
The IT Contribution Model can be tailored to any organisation’s management system and is compatible with most measurement and management frameworks, such as the Balanced Scorecard. The technique is applicable to both small IT projects and large systems, and can be used in the commercial and public sectors. CMA recommends that smaller organisations with less complex inputs, processes, and relationships between them should apply a small number of performance measures to the most critical value drivers.
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Business Value Index Intel IT has developed the Business Value Index (BVI) methodology, an approach to identify and evaluate potential benefits from making investments. BVI appraises aspects outside the traditional investment assessment framework. This methodology enables the discovery of the potential strategic value of a project and conveys this to Intel’s executive management and helps to prioritise investment options, make data-driven decisions, and monitor progress. It encompasses business value, IT efficiency value, and financial criteria. BVI is a composite index of factors that impact the value of an IT investment. It evaluates IT investments along three vectors. Business value measures the impact of a project on business strategy and priorities. IT efficiency value gauges how well the investment will use or enhance existing infrastructure. The financial criterion measures the financial attractiveness of the investment, including time to return investment, cost/benefit ratio, and Net Present Value (NPV) of a project. BVI complements analysis tools that measure ROI. All three factors use a predetermined set of defining criteria that can include:
Customer need.
Revenue potential.
Business and technical risks.
Level of required investment.
Strategic fit.
Amount of innovation and learning generated.
Each factor’s criteria are weighted according to the ongoing business strategy and environment. Changes in business strategy could alter how criteria are weighted for different factors.
Figure 4.1.7: Business Value Index
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(Source: Intel)
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After several projects have been scored, the Business Value Chart is used to graphically depict the three indices for each project. The position of a bubble relative to the horizontal and vertical axes shows each project’s business value and IT efficiency values. The width of a bubble shows each project’s financial attractiveness value. Figure 4.1.8 shows an example of evaluated projects. The chart enables a quick assessment of investments relative to one another. The ‘win-win’ circle shows that projects in the upper right corner of the chart have value both to IT and to Intel’s business. Financial attractiveness is also important when evaluating the relative strength of various investments.
Figure 4.1.8: Business Value Chart
(Source: Intel)
The BVI tool is used in a Strategic Portfolio Management process that continuously manages a team’s investments, ensuring that spending is closely aligned with Intel IT’s business strategies and priorities, and that IT resources are effectively utilised. The process is a closed loop method; starting with understanding IT’s business strategies and then proposing projects to support these objectives. Intel prioritises and ranks proposals by means of the BVI and other metrics. Once the investment decisions are made, Intel commits resources, and the team builds indicators that track success at various stages of the project lifecycle. Intel re-calculates the BVI on a regular basis to monitor the change in business value over time for the investments. Priorities can then be adjusted based on the indicators and the BVI results. Intel also tracks the actual results and benefits of the investment and measures them against the expected results to provide feedback to the management process. One of the model’s strengths is that it enables continuous alignment between the IT investment portfolio and the dynamic business strategies and priorities. The model enables decisions to be made using accurate data that may result in cancelling projects or initiatives that fall short of expectations or no longer map to business priorities. The BVI provides Intel with a common language and framework for discussing IT investments, assessing business value, and IT efficiency contribution based on common criteria, along with prioritising diverse investments based on environment and IT strategy. The BVI process enables continued and proactive alignment of the IT project portfolio with corporate and IT business strategies.
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Mapping IT Value Whilst using financial measures is very important, especially when justifying initiatives to senior management, they should not be used to the exclusion of other methods. There is danger that the sole use of metrics, such as ROI and TCO, will not improve the alignment of IT investments with the enterprise. The aspect that these monetary-based measures do not tackle very well is the one of IT capability. There is a need to identify the value drivers and convey the current IT capability as matched with organisation needs. Value mapping is an approach that can bring a new perspective to IT alignment and capability measurement. Value Mapping Solution The Value Mapping Solution developed by Dr. Andrew Jack goes beyond simple measurement and provides a holistic methodology using Value Maps and supporting assessments such as planning, decision-making, communication, facilitation, and evaluation mechanisms to ensure that management focuses on areas of greatest value to the organisation. Value Mapping is a tool that can assist with the process of identifying improvements and new projects that meet stakeholder needs and achieve organisational objectives.
Figure 4.1.9: Value Mapping Solution
(Source: Dr. Andrew Jack – Business Excellence International Ltd)
The Value Mapping process also includes a Value Outcome Assessment. Through an evaluation of the impact of initiatives and activities the value created is measured. The findings from this process can form part of the information used in reporting value, which can be used in the organisation’s strategic review where precedence can be given to outcomes that match with stakeholder and organisation needs. The relationship between stakeholders requirements, strategic objectives, value outcomes, value drivers, and targeting of effort is shown in Figure 4.1.9 representing the Value Mapping solution.
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IT Value Mapping In Sourabh Hajela’s White Paper – ‘IT Value Mapping – A Quantitative Approach to Maximise Returns on IT Investments’ a framework for using value mapping in the enterprise and IT environment is put forward. The belief is that to improve IT decisions requires a new approach, which while being business focused should be specially developed for IT and contain the following key features:
Practical – The deliverables from the framework should be able to be utilised.
Quantitative – Where possible financial metrics should be used in the framework enabling progress to be understood, explained, and monitored in terms that the business understands.
Integrated – Ideally one framework connecting all the elements of business and IT capability is required, allowing the entire effect of a decision to be understood.
Iterative – Many performance-related initiatives tend to be one-off in nature, usually instigated to solve a particular problem. It is important that the framework is part of an ongoing process, where the lessons learned are fed back.
Ease-of-Use – Complexity can prevent a framework from being fully adopted. The interface, data collection, and reporting should be user-friendly.
Based upon Sourabh Hajela’s experience with IT alignment and value, the IT Value Mapping framework has been developed, which quantifies and visually depicts the IT capability of an organisation. Value maps are created that identify the status of important business and IT components at a particular instance, along with the effect of each component on business value. IT Value Mapping takes a portfolio-based approach to IT spending, meaning expenditure on an IT project is not carried out in isolation but as part of a portfolio of IT investments. Improving IT’s performance requires stopping both current and planned projects that do not match business needs, whilst at the same time managing the remaining investments to ensure they add value.
Figure 4.1.10: Business and IT Value Maps
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The business and IT footprint value maps are used to determine if investments are meeting business objectives. The business-related value map identifies the capability of an organisation, showing the competitive positioning. This footprint can be obtained from the business model of the organisation and provides a foundation for all decision-making, including those of IT. Ideally, each area of the business should correspond as closely as possible with this footprint, with investment focused on reducing the gap in the capability. The IT footprint shows the IT capability of the organisation. Since the purpose of IT is to enable business value, the dimensions of the IT footprint are the same as that of its business counterpart. By comparing the business and IT footprints it is possible to discover the current state of alignment. The framework provides a mechanism for continuously monitoring IT alignment and value creation and its future evolution through key targets.
Conclusions
Whilst Butler Group does not want to be prescriptive in the use of a particular approach against another, what is becoming vital is that an organisation employs a method of identifying and comparing value and uses a portfolio approach to IT investment selection.
The IT department should look to design and use processes for calculating the various different ways of articulating IT value and develop an IT Value Management capability.
The use of IT management software and tools to automate the collection and storage of data can greatly reduce the amount of effort required to enable effective value decision-making.
A value mapping approach appears to have merit in identifying IT investment misalignment with organisation objectives.
4.2 USING A BUSINESS CASE If IT management are to be taken seriously then proposals for IT investment must be presented professionally. A common approach is to use a business case where a comprehensive review of the proposed initiative is documented, along with the financial justification and other important information. The business case is a way of putting forward the details in a standard format, which also assists comparisons with a number of projects. When done well and on a continuous basis a business case will be able to give stakeholders both a high level view, which can then be drilled down into where required, and a good understanding of the issues and benefits. It is important that this is an ongoing process where previous business cases feed into the current formulation and the process is continually refined, all too frequently business cases are built from scratch. In addition, there must be a feedback loop built into the process where the actual improvements realised are compared with the documented justifications in the business case. This not only adds to the continual learning process, but also helps to ensure that predicted benefits put in the document are realistic. The contents of a typical business case include:
Management Summary.
Problem Statement.
Methods and Assumptions.
Solution Description/Alternatives.
Costs/Benefits Analysis.
Business Impacts.
Risk Assessment.
Conclusions and Recommendations.
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The Business Case Solution Solution Matrix’s ‘The Business Case Solution’ is an eight-step process with two main goals. Firstly, to develop an accurate knowledgebase of the financial aspects and other business outcomes of management activities, and secondly to enable the information to be used for decision support, planning, and improving the quality of the next business case to be prepared. Solution Matrix consultants work with the client as project leaders and coaches to deliver a business case that is credible, accurate, and meets the needs of decision makers and planners in the shortest possible time. 1. Build a Core Team and Set Objectives.
Solution Matrix works with the client to build a cross-functional core team of key individuals in the organisation to provide input in finance, operations, sales, IT/communications, and other areas. When the focus is alliance building, or sales support, the core team may also include key stakeholders from partner or customer organisations.Consultants launch the project with the core team by describing the business objectives behind the proposed action or plan and the information needs of decision makers and others who will use the results. Here and throughout the case-building project, the core team helps extend business case ownership and involvement more widely, which are key factors in building credibility.
2. Describe the Environment.
Working with the core team, the current environment is surveyed and a financial profile of the operation is created as it is today and as it would be in the near future under usual business trading conditions. This becomes the basis for measuring impacts of the proposed action or acquisition against proposed alternatives.The financial profile is developed from an understanding of the business objectives and business plans, as well as the activities, processes, cost drivers, and resource requirements.
3. Understand the Impacts.
The likely impacts of the proposed action or acquisition are analysed. With technology acquisitions, for instance, this begins by understanding the new functionality and how it can impact business operations, workflow, and processes. For proposed alliances, this means developing the business model for each alliance partner, each partner’s contributions, and the projected market response to alliance products or services. In sales support, this means understanding how the proposed solution helps customers meet their own business objectives.Important impacts, be they positive or negative, are measured in concrete, operational terms. The analysis also considers carefully all requirements and contingencies involved.
4. Design the Case and Collect Data.
The business case design is advanced by creating practical cost and benefit models, an appropriate benefits rationale, and clearly defined rules for determining what belongs in the case and what does not. The cost model defines which cost items belong in the case, and which do not. The benefits rationale provides a solid basis for giving value to the full range of positive impacts, including those that are not easily measured in financial terms.When these design elements are in place the key individuals in the organisation are interviewed for input and all other required data and information is gathered.
5. Analyse the Financial Model.
Using the data from Step 4, a cash flow model of the expected cost and benefit impacts in the case are built. Cash flow projections are evaluated with standard financial criteria such as discounted cash flow, payback period, and internal rate of return.Consultants also work with the core team to assess the relative importance of major cost and benefit impacts that cannot be quantified in financial terms. continued on next page...
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...continued from previous page
6. Measure the Risks.
A business case by definition deals with future events and uncertainties. In order to make informed business decisions confidently, senior management will need answers to questions such as:
How likely are the projected results?
What other outcomes are possible?
Where are the major risks?
Consultants perform a sensitivity analysis on the financial model to determine which drivers, contingencies, and other factors control results and by how much. They also perform an in-depth Monte Carlo simulation of the business case scenario in order to help gain a full understanding of the likelihood of different business case results. 7. Report the Results.
Solution Matrix prepares a management summary report of the financial analysis, risk analysis, and other findings, along with an interpretation and evaluation of all results. The consultants will present this to senior management. A complete record of the data and other information developed during the project, and an electronic copy of the financial model, is also provided.
8. Validate and Manage.
Consultants and core team develop an implementation plan for measuring the accuracy of the business case over time and for adjusting the financial model as necessary. The plan also recommends specific ways to use the case for real-time control of technology costs and benefit. Figure 4.2.1: The Business Case Solution – An 8-Step-Approach (Source: Solution Matrix Ltd – www.solutionmatrix.com)
Conclusions
Management can use business cases to convey and justify initiatives to stakeholders.
A comprehensive business case can provide information for effective decision making, which can assist stakeholders to understand how projects impact on their area.
A business case can be a useful tool for promoting projects and correcting mistaken perceptions about initiatives.
4.3 BENCHMARKING IT management are continually having to ask probing questions about the IT portfolio, to establish whether the level of investment that is being made in IT is delivering value for money and truly supporting existing and emerging business services. Technology plays a pivotal role in the running and evolution of most organisations, with IT systems an integral part of the environment. Benchmarking is increasingly being used as a method to ensure the best possible value is being achieved from IT investments. Benchmarking is the term used when comparing the performance of an individual organisation against standards of performance set in the enterprise’s sector, other divisions in the same organisation, or by accepted leaders in the particular area being benchmarked. This is achieved by using standard measurements to compare with other organisations in order to gain a better perspective on organisational performance. Benchmarking is a good way to identify problem areas within the enterprise, discover gaps in performance, or to find where performance is below that of an organisation’s peers. Whilst it is important to identify areas for improvement, it is also valuable to learn how the better performing enterprises achieve improved effectiveness.
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Within the European Union, benchmarking is being deployed as a mechanism for bringing about improvements in performance in all types of organisations, plus a way of improving the competitiveness of the entire European economy. The European Commission has organised a programme of benchmarking initiatives where member countries start projects that will allow the sharing of experiences and good practice. The Enterprise Directorate General (DG) benchmarking initiatives are focused on enhancing the competitiveness of organisations, which operate at three levels: 1. Framework Conditions Benchmarking concentrates on improving the external environment in which firms operate. 2. Enterprise Benchmarking looks at advancing the internal environment within organisations and promotes the adoption of benchmarking, especially among Small to Medium-sized Enterprises (SMEs). 3. Sectored Benchmarking centres on the competitive challenges that organisations come across within particular areas and entails working with partners from the individual sectors concerned. Benchmarking can provide a number of benefits. Most notably it can be a catalyst for improved organisational performance and deliverable quality. By identifying gaps in operational effectiveness, as compared with peers or leaders, more innovative ways of working can be enabled. Benchmarking can lead to a marked change for the better in the capability to collect and analyse IT performance data, as before comparisons can be made a good understanding of an organisation’s internal operation is required. This has the knock-on effect of raising the profile of in-house metric collection, as there is now another reason for using the performance measures, other than for management purposes that in many cases amounts to blame attachment or finger pointing. If employed correctly benchmarking can also lead to better collaboration between both internal personnel and other stakeholders.
Benchmarking in the Financial Sector The importance of technology within financial services has risen rapidly, although in recent times life has been tough for IT departments, as budgets have been under pressure in the face of challenging performance targets. IT strategy and spending has come under the spotlight and the necessity to get IT right is now critical. The need to understand IT best practice and the most effective spending has been one of the key drivers of technology research at Datamonitor. The company has been running its study on ‘Benchmarking IT in Financial Services’ since 2000, and this has helped build up a wealth of data from clients on IT spending patterns. The annual study entails data being collated from the IT operations of many major financial services institutions in Europe and the US, and involves analysing data at the group level and line-ofbusiness level, covering key operational and IT spending metrics and other financial data. Face-to-face interviews with senior IT budget holders and IT strategists are conducted to support the data and validate the findings. This has provided some considerable insight into current and future IT spending and strategy trends that can help IT management decide on a variety of pressing issues, such as:
Has the corner been turned from an overriding emphasis on cost reduction to one of investment?
What metrics should be used to judge the ‘right’ level of IT spending?
How should IT spending and investment requests be justified?
How robust are the measures used for value creation across the institution?
What are the IT spending attributes/patterns that best enable an institution to stay ahead of the game?
Measuring the Effectiveness of Financial Sector IT Spending There are two key points to consider when an institution is trying to better understand the effectiveness of its IT spending. One concerns the issue of IT intensity, or the proportion of total expenditure that is directed at IT. The second is the efficiency ratio, a measure of cost against income. An interesting picture of IT effectiveness emerges when these two metrics are weighted against each other. A way to determine if an institution’s IT spending level is too high or too low is to compare these metrics against peers, competitors, and industry averages. IT management can then begin to understand the position relative to others and start to appreciate the standing of the organisation.
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Figure 4.3.1: Example IT Investment Effectiveness Comparison
(Source: Datamonitor)
The example matrix shown in Figure 4.3.1 shows how organisations fall into one of four effectiveness categories. The category boundaries are determined by the average or median performance of other benchmarked institutions. An organisation placed in the lower left quadrant will have a worse than median efficiency ratio, whilst one positioned in the top segments of the picture have a higher intensity ratio than the median performer.
Figure 4.3.2: IT Investment Effectiveness by Performance Category
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(Source: Datamonitor)
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Research reveals that many market leaders actually spend less on IT than their competitors, positioning themselves in the efficient IT quadrant (Figure 4.3.2). This indicates that the matrix is useful in measuring how well money is spent on IT, but it does not reveal how those funds are invested in order to achieve the most effectiveness for the strategy being pursued. It is commonly assumed that IT intensity is a critical barometer of success. However, research (outlined in Section 3.1) indicates that the level of IT intensity is not always the best measure of how well an institution’s IT is performing. The main conclusion drawn from this is that the amount invested in IT is not the significant factor, but key to effectiveness is where the money is spent. IT spending can be split into two categories: ‘Run the Organisation’ where funding is required just to keep the status quo, dedicated to the maintenance of applications and infrastructure; and ‘Change the Organisation’ investment which is focused on evolving the organisation, with money dedicated to new applications development. The research consistently indicates that the important measure is how much of the IT budget is spent on ‘Change the Organisation’ investments. Enterprises with successful and effective IT appear to spend a greater proportion on ‘Change the Organisation’ than other institutions. To measure the IT effectiveness and efficiency the Investment Cycle Matrix is used (Figure 4.3.3), which contrasts the IT intensity ratio against the ‘Change the Organisation’ as a proportion of total IT cost, and in this example plots the position of the performance groupings.
Figure 4.3.3: Investment Cycle Matrix
(Source: Datamonitor)
Using the average or median performance levels of a group of financial services institutions, an organisation can measure its own position relative to the competition and understand its comparative ‘over-’ or ‘underinvestment’ in IT and the proportion of IT spending that is used for ‘Change the Organisation’ projects. The segment in the matrix that an organisation occupies suggests certain aspects regarding current and past investments and IT projects. Research indicates that sound IT investment by financial institutions moves companies into the efficient infrastructure and applications quadrant of the matrix. In the example matrix the best-in-class organisations have the lowest IT intensity ratio, as would be expected, but apparently a lower spend on ‘Change the Organisation’ projects as a proportion of total IT costs than the middle group. However, this is indicative of best-in-class organisations spending less on IT in total, as identified in Figure 4.3.2, where infrastructure spending is lower than peers when compared to total costs but not when contrasted with only IT costs.
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Further analysis of these institutions reveals that the market leading companies tend to spend much more on new applications and much less on infrastructure than their peers. From time to time, depending on individual and market circumstances, organisations will have strategies and goals that require different spending patterns, as it is important that investment and the relevant measures always match the current value drivers of the organisation.
Conclusions
Benchmarking enables the frequent comparing of performance measures with peers, enabling the discovery of gaps in operations.
Using the technique it is possible to identify new approaches that can enable better performance and allows the monitoring of progress relative to peers.
Benchmarking in the financial sector would seem to indicate that market-leading organisations have a low IT intensity ratio combined with more investment focused on transforming the enterprise.
4.4 IT VALUE IN THE PUBLIC SECTOR Shareholder value and some financial investment measures are not really appropriate to public sector organisations, as from a stakeholder perspective the concentration is on responsibility rather than profitability. Therefore, other measures of value are required relevant to the stakeholder. The heavy focus of both central and local government on cost suggests that a demonstration of ROI can be an important factor in IT investment selection. With local government increasingly restricting its expenditure, technologies that reduce costs will certainly prove attractive. Solutions should always demonstrate productivity improvements and better efficiencies, as well as a reduction in the technology’s TCO. In particular, the focus within the public sector is on modernisation of processes, and the reduction in transaction costs and maintenance. In short, solutions should take cost out of the system over time. ...the focus within the In terms of developing the ROI calculation, the public sector tends to be reliant on consulting expertise. Unlike in the private sector, where technology can be easily tied to revenue generation, ROI calculations often risk focusing too heavily on intangible costs. Technology in local government can generate a number of soft returns, which are often difficult to measure, such as improving responsiveness to citizens through front-end solutions. Where possible, organisations should always try to attach monetary values to any cost savings and identify hard returns.
public sector is on modernisation of processes, and the reduction in transaction costs and maintenance.
Most public sector organisations attach importance to ROI models, however theoretical they are, although any discussion relating to people is normally highly sensitive. Despite recent announcements concerning central government lay-offs, local government institutions tend not to be keen to sign up for redundancies, which can cause difficulties in positioning Most public sector technology-driven process change.
organisations attach importance to ROI models, however theoretical they are...
Innovation in terms of ROI modelling is certainly recommended, as is using ROI in conjunction with other metrics such as NPV and other measures that take into account the discounting of costs and benefits over time. Demonstrating cost savings through new means of service delivery is one approach that can prove relatively successful. A typical example of a technology with a clear ROI is IP telephony, with converged voice and data networking reducing communication costs. Modernised accounting and payroll systems have also been deployed successfully with a strong ROI. Although these technologies can clearly demonstrate ROI, others cannot. If it simply proves too difficult, organisations possibly need to look at metrics other than just ROI and should not be discouraged if they cannot demonstrate a clear return.
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Accenture’s Public Sector Value Model Through its Government Executive Leadership Series, Accenture has been researching effectiveness and value creation in the public sector. The programme has produced a collection of frameworks and case examples that acknowledge the two main measurement characteristics in the public sector – the meaning of value, and the capabilities that provide the most value for different agency types. The hard work done by many public sector bodies to define metrics of performance have highlighted the complexity of the topic. There can be confusion between inputs and outputs, with the metrics that are frequently omitted being those focused on outcomes, whilst metrics that do concentrate on outcomes often miss a cost-effectiveness element. At least in the private sector there are standard ways of measuring value that are in theory calculated in the same way regardless of industry, such as revenue, profit, and shareholder value. Unfortunately stakeholder value is different dependent on the type of service being delivered.
Figure 4.4.1: Public Sector Value Model
(Source: Accenture)
The Accenture Public Sector Value Model adapts shareholder value analysis to a stakeholder viewpoint, enabling all areas of not-for-profit organisations to measure how efficiently resources provide value for the client. The model takes into account the two dimensions of value – outcomes and cost-effectiveness, by identifying a number of citizen-focused outcomes against which cost-effective delivery of services can be measured. The objective of the model is to assist public sector bodies to get the right balance in improving outcomes or performance levels and reducing costs.
Conclusions
IT value in the public sector should be monitored using metrics relevant to stakeholders.
ROI calculations in the public sector should avoid relying too heavily on intangible costs.
Despite the focus of cost efficiencies and ROI by the public sector, measures encompassing discounting costs and benefits over time should also be utilised.
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Technology Management and Strategy Report
SECTION 5: Monitoring and IT Governance
Butler Group a Datamonitor Company
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5.1 USING IT GOVERNANCE AS A FRAMEWORK Most executives today have no more visibility into their IT performance and cost structure than they did five years ago, but the ability to prove IT is being run effectively and supplying value is critical, especially now that compliance and regulatory pressures demand it. Improving IT value and performance requires balancing the supply of IT products and services with demand. The governance process forces senior executives to carefully consider how IT is performing. However, governance is not simply about compliance or an IT management model, it should also encompass how an organisation gets value from IT. For many IT managers governance is simply a matter of making sure that the IT environment is in order. To this end a variety of checklists have been created that cover the minutiae of managing an IT environment. For example, Control Objectives for Information and related Technology (COBIT) framework, with its large number of main processes, which are then subdivided into many further items, must be maintained. Much of this is concerned with the internal administrative processes that need to be fulfilled if IT is to run smoothly. Capacity planning, security, and performance are typical of the issues that are tackled. These clearly need some attention, but do nothing to increase the value of IT to the organisation. When senior management thinks of IT governance it certainly does not dwell on the operational details that must be attended to. What is usually foremost in executive minds is the alignment of IT investments with the needs of the organisation. Unfortunately, there is little evidence that IT management have got to grips with this issue. A lack of regular, meaningful IT management communication between the organisation and IT management is perhaps the should not neglect the most common reason, as is the lack of transparency. A great deal of work taking place in the IT governance arena is focused on areas such as technical architecture, management of IT assets, operational procedure, and other internally focused activities. There is a tendency for many IT managers to focus on these issues and ignore the broader remit. This results in other senior managers dealing with the wider problems, further sidelining the IT department from the key decision-making. IT management should not neglect the cultural and political aspects of the role, something that no amount of investment in frameworks and technology can assist with.
cultural and political aspects of the role, something that no amount of investment in frameworks and technology can assist with.
In addition, the issues surrounding the governance of information, such as security, accuracy, availability, transparency, cost, and value, are becoming increasingly significant. This is certainly where legislation and regulation is aimed and organisations need to ensure these concerns are addressed. If they are not, the implications could have serious consequences for senior management and the organisation. IT governance represents the management, policies, and procedures necessary to ensure that an organisation’s information systems support the enterprise’s objectives, are used responsibly, and that IT related risk is minimised. Whilst the concept is not difficult to understand, implementing an effective IT governance programme is a multifaceted project. There is no single out-of-the box solution that can be deployed to provide all the answers. It requires careful planning, an ongoing programme to implement the necessary controls, measurement of the results, and above all, the buy-in of both the IT staff to support the initiative and of the organisation as a whole, to understand and gain value from the benefits. Within the IT function, the practice of IT governance often begins from an IT management perspective, addressing issues such as enterprise architecture, system integrity, resource management, project management, service quality, and operational continuity. However, it is when IT governance is broadened to include an IT value perspective that it reaches its full potential, encompassing areas such as strategic alignment, value creation, performance measurement, investment planning, and IT audit.
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Figure 5.1.1: IT Governance Model There will be an overall cost in establishing and maintaining an IT governance programme. Whilst, in comparative terms, the cost will not be particularly large, the very fact of establishing such a programme will have a high-profile within an organisation. It is recommended that the implications of IT governance be made clear from the outset. When IT governance is driven by compliance requirements, establishing a formal Return On Investment (ROI) case may not be seen as a pressing issue. It is perceived more as an obligation, and as a necessary, if often begrudged, cost of doing business. However, it is worth identifying the potential benefits of IT governance, and to do so it requires an understanding of the bigger picture of IT costs. IT governance focuses on the efficient running of the IT function, the alignment of that function with organisation objectives, the development of an IT strategy, and the introduction of the necessary controls and monitoring to provide visibility and feedback. The ROI of an IT governance programme will therefore be derived from a better-organised and more effective IT function, and the ability for senior management to understand and address these areas of internal spend. It may not be possible from the outset to predict an overall cost benefit from IT governance, and that is why it should be introduced in incremental steps. Find the obvious pain points within the IT function and address these first, where results will be quick and demonstrable. This will provide the impetus for further development of the programme. Whilst at the same time, developing a strategic plan that provides the toplevel guidance, and begins to define a target enterprise architecture that will act as a blueprint for future development. Whilst there will be additional upfront costs incurred for IT governance, both in terms of resource and in supporting tools, these will be substantially outweighed by the potential savings in improved IT efficiency and reduced internal costs. In particular, attention should be paid to the strategic planning and IT service management processes. This is where clear definition and communication of IT strategy, and the introduction of effective management controls will have a positive impact on the project execution and IT service delivery. The focus on IT governance may initially be driven by compliance, but its benefits will go considerably further.
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Importance of Controls Programmers, designers, architects, and other members of the IT department can often be driven by agendas different to those of the IT management team. It is not unusual to see technology appear by stealth and be acquired with the simple aim of strengthening CVs. Some organisations find themselves wholly dependent on just a few technicians, with all the problems that this can bring about. Once again it is for the IT management to put the controls in place to ensure that the whole IT effort is aligned from top to bottom. To be successful, organisations must do the right things in the right way at the right time. Imprecise business objectives and requirements early in the project lifecycle can stall forward progress. Problems at the end of a project are often caused by a failure to change the behaviour of the people whose work is affected. These failures can be prevented with proven, predictable methods. Approaches include, pilots to test new processes, analytical techniques to ensure that roles and responsibilities are clearly understood, and the deployment of walkthroughs to ensure that site-specific needs are met. Project execution addresses the development, acquisition, and integration of IT systems. This includes the ongoing management of new projects, establishing requirements in line with corporate objectives, product and supplier selection, development of software, and the integration of applications into the existing infrastructure. Strong governance is key in this phase: firstly, a more rigorous approach is needed to IT investment, project selection, project initiation, and systems integration. Costs will be incurred both in management time and in supporting tools for project management. Secondly, compliance demands will have a significant impact on the software development process, since additional controls will be needed as part of the system functionality and further testing will be necessary to verify that the software does indeed comply with the relevant regulations. Control and security of enterprise information, and the IT systems used to process it, should form an inherent part of any organisation’s management procedures, particularly in terms of assessing and mitigating any potential risk that might ensue. Of late, Governments and industry bodies have drafted a wide range of legislation and regulations that relate to information, and Control and security compliance with these has become a major issue, particularly for large organisations. There are now available a number of frameworks to assist of enterprise organisations in remaining compliant, including ITIL, Six Sigma, eTOM, and information, and the The Committee of Sponsoring Organizations of the Treadway Commission IT systems used to (COSO) Internal Control – Integrated Framework. As well as COBIT a reference process it, should framework for IT governance and information control and security, issued by an industry body, the IT Governance Institute. It comprises a process model form an inherent part and 34 high-level control objectives, spanning all areas of IT management. of any organisation’s Whilst it is recognised that COBIT is a useful framework for IT governance, it is important to understand that it does not in itself provide a complete solution, and must be used in conjunction with other elements, including effective Portfolio Management, and programme and project management, as well as the degree of cultural adaptation that is typically required to achieve strong IT governance.
management procedures, particularly in terms of assessing and mitigating any potential risk that might ensue.
The COBIT process model considers the IT function to consist of four domains, planning and organisation, acquisition and implementation, delivery and support, and monitoring. The process model takes the organisation’s objectives as its input and forms a feedback loop that draws upon the available IT resources. Within each domain there are high-level control objectives that can be further subdivided into detailed tasks. The framework draws on existing best practices in many areas of IT management. COBIT also identifies key goals for IT governance, and provides examples of Key Performance Indicators (KPIs) that can be used to monitor progress. IT organisations implementing COBIT often start from the bottom up, as the most detailed level deals in familiar concepts, some of which will already be addressed by management controls. More difficult to define is the organisational structures and processes that will be used to determine IT decision-making within the organisation, and it is here that the lack of a methodology for tying business objectives to IT initiatives, and gaining visibility into available resource, can hamper efforts.
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Ensuring IT Strategic Alignment Many managers often see the IT department’s role purely as supporting the organisation, and not something that is at the heart of the enterprise. This can create a lack of communication that results in poor alignment. Alignment is clearly an issue of communication and is not addressed through the use of frameworks, or indeed more technology. A goal of IT governance must be to ensure that investments are made in the best interest of the organisation and not its management, and that these same investments add measurable value. Most organisations have no framework for measurement and without this the results of governance will never be known. Alignment happens when everyone understands the value creation mechanism in an organisation and on the face of it this should be a simple process, senior management communicate their plans for the organisation and IT delivers systems that support those plans. However, if alignment is going to be a reality, it needs both senior management and IT management to form an effective dialogue. The starting place for alignment is quite simple, there needs to be broad agreement on how an organisation creates value. Enterprise Architecture (EA) is the discipline of defining an overall set of architectural goals, logical configurations, and detailed technical standards, which guide the progressive development of the IT infrastructure. The primary benefits of an EA programme are providing a stable yet flexible platform for deploying business applications, helping to consolidate the number of technologies and suppliers that must be supported, easing the problems of integrating disparate technologies, supporting the integrity of IT systems, and acting as an aid to mapping business objectives onto a technical infrastructure. Without an EA perspective organisations tend to suffer from tactical IT purchasing, a dislocation between business requirements and IT deliverables, outdated and inflexible infrastructure, conflicts between IT suppliers, and potential exposure to failures of regulatory compliance. A clear indication of the impact of an architectural view comes during the planning initiation of new IT projects. A strong EA programme offers significant reductions in deployment times, more predictable project costs, and economies of scale from standardisation. The contrasting story without EA is a struggle to carry out infrastructure upgrades, integration work, and complex data modelling just to get a project off the ground. Effective strategic
planning must take into account the aggregate demand on the IT function, including new projects, maintenance and upgrades, IT operations, and support.
Strategic planning entails defining the IT strategy that will deliver on the agreed business objectives, including the policies and management structures that will be necessary to meet these goals. A study of corporate management in Europe, carried out by European IT consultancy Acadys, showed that only half of the organisations surveyed had a documented IT strategy, and that in only 17% of cases was the senior management team involved in creating such a plan. This indicates that good IT governance will require additional effort in strategic planning, particularly in areas such as Portfolio Management and EA.
Effective strategic planning must take into account the aggregate demand on the IT function, including new projects, maintenance and upgrades, IT operations, and support. This must be factored to the total resource available and the current programme of work. The process begins with formal portfolio management, as discussed in Section 3.3, which allows the impartial consideration of all IT project initiatives within the context of an organisation’s strategic objectives. Collecting project information into a structured portfolio provides a single source of information that then forms the basis for assessing the relative benefits, risks, and payback of projects, prioritising initiatives, gaining investment approval, and understanding, allocating, and optimising the available resource. It is important to note that there is no such thing as an optimum portfolio, because this cannot be a static process, as the goals, requirements, and environment of the organisation change the IT project portfolio must be updated to reflect this. It is clearly necessary to strike a balance between this dynamic approach and the need for forward stability. Butler Group recommends that the portfolio should be recalculated and reviewed on a quarterly basis.
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Value Creation Another important element of IT governance is to exert control over information costs and information value, as the influence that IT has in an organisation is an impact on these costs above all else. If they are not falling as a percentage of overall costs then IT is not creating efficiencies, and IT investments are not giving the returns they should do. The difference between the market capitalisation of a company and the value of its tangible assets is largely associated with the value of information and knowledge. It is no coincidence that companies in pharmaceuticals and software have high valuations because of the knowledge capital involved. It should also be borne in mind that many Chief Executive Officers (CEOs) have their bonuses linked with share price – the better it does the larger their bonus. Creation of knowledge capital is one way of increasing share price. Once again IT has a key role to play in the creation of this value, and since many senior executives’ remuneration depends on share price investments to achieve these ends these types of project should receive a fair hearing.
Assessing Risk Another consideration of IT governance is with risk. Many IT managers understand the implication of events such as a security breach, data loss, or system downtime more than general management, and are much less willing to take risks. However, of more significance is the risk associated with the availability, security, and accuracy of information, along with conformance with legislation such as Data Protection, Freedom of Information, Sarbanes-Oxley, and Basel II. They all require that information is protected, available, transparent, and accurate. Many IT executives have now realised that the risk of non-compliance is an IT issue, since all new legislation involves the use of information and information technology. IT investments are risky. Various surveys show that three out of four delivered systems are barely useable if not at all. The continuing occurrence of high-profile IT project failures underlines the potentially serious consequences that such problems can have, not only on the organisation’s IT systems, but also on the organisation initiatives that depend on them. Recurring themes in these situations include poor project initiation and alignment with enterprise objectives, a lack of ongoing project assessment, and resource shortages and conflicts. Risk must be addressed at all levels of the IT function. An assessment must be made both of the overall risk that is represented by the IT portfolio, and also of the risk associated with individual initiatives and projects. Clearly, making these assessments depends on the availability of high quality information and metrics, but in many cases organisations find that either they lack this basic data, or are unable to achieve visibility into the interdependencies between projects. This situation is exacerbated because as the status and priority of projects change, the As with all sources of associated risk is not re-evaluated. The assessment and management of risk is a fundamental capability for any organisation. With an increased reliance on information systems, IT related risk is now a significant element of this process. The overall responsibility for reviewing this danger must reside with the board of directors, which in larger organisations will take advice from a risk advisory committee. As with all sources of risk, IT risk should be subject to a formal risk assessment exercise, which compares both the probability of project failure, and the consequences for the organisation should such failure ensue. Figure 5.1.2 (on the next page) shows an example of a risk assessment matrix. This process must be dynamic, ensuring that each risk is assigned to an owner and reviewed on a regular basis.
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risk, IT risk should be subject to a formal risk assessment exercise, which compares both the probability of project failure, and the consequences for the organisation should such failure ensue.
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Figure 5.1.2: Risk Assessment Best practice is therefore to provide a formal framework for assessing IT projects, which allows an objective measurement of all factors that contribute to the overall risk, including financial, business, and technical issues. Collating low-level data from individual projects allows a very accurate and dynamic picture of potential risk to be presented. Many organisations now use a gateway review process to ensure that a project must pass a series of checks at each stage of its lifecycle before further resource and funds are committed. At the detailed project level the key is early warning of potential risk. Setting thresholds for time and cost can successfully enable this, with progress metrics used to trigger alerts to the individuals responsible when they go beyond the stipulated boundaries. Once potential problems have been identified, the mitigation of risk requires responsibility to be assigned to specific teams or individuals who are empowered to resolve relevant issues, and who use detailed project information to recommend remedial action.
Optimising Resources Balancing supply and demand for services requires a transparent view into what people are working on (time and skills tracking), how much services cost (project and cost accounting), and the service level needed (performance measurement). With the right decision support tools and governance in place, companies improve throughput, reduce wasted productivity, and increase quality. Executives that focus on high priorities, rather than trying to push more through the pipeline, are more likely to achieve their goals. They understand that the way to get more value out of a project pipeline is to put less into it, so projects execute faster and with better results. The fundamentals of managing technology are similar to those for managing other fixed assets, minimise asset diversity and optimise asset utilisation. Failure to do so results in too many point solutions on mismatched platforms that do not integrate. Each new application adds to the fixed operating budget, which for many companies now exceeds 70% of annual IT expenses. Effective platform management has as much to do with managing organisational behaviour as with managing technology. IT service delivery is concerned with the operational aspects of the IT function, providing an efficient, continuous service that meets the requirements of the organisation. This involves aspects such as systems availability, systems integrity, network security, identity and access management, business continuity, and the interface to third-party services. It is a key area for compliance, as organisations must ensure that operational processes follow the defined policies, that any changes to processes do not have a detrimental impact on performance, and that unauthorised changes are avoided. Expenditure on IT governance in this area will include improved infrastructure and applications management tools to monitor the status of the IT function, and enterprise change management tools to provide effective control of process and configuration change.
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IT Service Management provides the essential feedback loop for the IT governance process. This improves quality, supplying visibility into IT operations, and helps to demonstrate the value of IT to the organisation. Furthermore, closing this loop has beneficial effects on the other phases of the IT function. For example, understanding the impact of a project should enable improved quality of strategic planning for future initiatives and drive the efficiency of IT service delivery. IT Service The IT function requires continuous monitoring, and IT service management Management provides should include the necessary controls to achieve this, but again this is an area the essential feedback that is typically not well supported in most organisations. Additional loop for the IT investment will be required in management time and in supporting tools such governance process. as Business Service Management (BSM). Compliance adds an extra dimension of audit and traceability, which may be open to independent external assessment, with best practice in IT governance supporting the compliance effort. It is also worth considering that effective internal IT controls will provide the reassurance to the business that the IT function is subject to the same type of checks and balances that apply to other areas of the enterprise.
Conclusions
Governance is vital both from IT and organisation perspectives.
There is a growing need to align business, technology, and financial perspectives of IT.
Some strategic thinking will go a long way to reducing risks.
IT governance provides a framework not only to address compliance and management issues, but also for measuring IT cost and value.
5.2 MONITORING PERFORMANCE In a recent survey, more than two thirds of IT management reported that they had no process for auditing the performance of their IT projects (McKinsey on IT, 2004). This is no longer acceptable. IT management must put in place a performance monitoring process. Although, no improvement in the situation will happen without support from IT management and senior executives, some organisations may find a third party to be useful to assist with the design and implementation of a performance measurement. Understanding the decision-making process is an important starting point for evaluating performance. It allows the IT department to establish roles, responsibilities, and milestones for the various steps within the overall process. There should be some attempt by management to isolate changes so that effects can be measured. However, not all decisions are large-scale in nature. There is a need to differentiate between these ‘macro decisions’ that require significant time The role of the performance model or and have strategic impact on the whole department, and the ‘micro decisions’ that employees are required to make all the time.
methodology is to minimise risk and maximise the value of the decision by arriving at the most appropriate solution.
The role of the performance model or methodology is to minimise risk and maximise the value of the decision by arriving at the most appropriate solution. In some respects the impact of a formalised decision-making approach is to limit the effect of subjectivity or political bias within the equation. However, decisions are rarely purely quantitative or purely qualitative, but tend to be a combination of the two. Therefore, a combination of methods and measurement types are required to reach a balanced view.
Macro decision-making needs to sustain the overall IT strategy, which in turn supports Corporate Performance Management (CPM) and the vision of the organisation. It requires close involvement with stakeholders and the Board to determine alignment and the appropriate macro measures. In many instances the logic that underpins a macro decision can be abstracted from human control and systemised by way of a threshold or alert, with the data held in a central repository. Achieving increased levels of automation in this manner should be seen as one of the long-term goals. Macro measures are the high-level metrics that consider general performance and are external in nature, linked to outputs, stakeholder requirements, and organisation objectives.
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Figure 5.2.1: Measurement Architecture Micro decision-making is typically an individual process. It relates to the series of smaller decisions that the average employee makes during the course of a day. These decisions will naturally vary in importance, frequency, and predictability. For example, an employee might have to make a decision at the start of each working day dependent on the previous day’s help desk call figures. Whilst the outcome or decision will differ, the process will largely be the same. What characterises micro decisions is that they are smaller in scope and are made by an individual as opposed to a group. Micro decisions should not be seen as trivial, collectively, the sum of all micro decisions made across an organisation during a typical day are essential to supporting the strategy and meeting the goals of the IT department as a whole. Micro measures typically monitor internal processes, and are likely to be focused on organisational procedures, inputs, and outputs.
Conclusions
Performance monitoring solutions should be very flexible – on the one hand supporting the large, strategic macro decisions that govern the overall IT department direction, yet also encompassing the short-term, tactical micro decisions made by staff.
IT needs to automate the performance process (and governance) using systems that embrace both macro and micro measures.
A trap many organisations fall into is to give priority to micro measures evaluating internal IT operations, rather than letting an external focus, namely the stakeholder and macro measures, drive the process.
5.3 BALANCED SCORECARD The Kaplan and Norton concept of Balanced Scorecards for implementing performance management first appeared in the Harvard Business Review in 1992, and was expanded on in subsequent papers. Scorecards were in common use before Balanced Scorecards, but they focused on the financials for measuring enterprise performance. Typically these comprised valuation ratios such as price to earnings, cash flow, sales, profit margins, growth percentages, financial strength ratios, and asset figures, along with share capital ratios such as dividend per share and dividend yields. Kaplan and Norton argued that while the financials represented dependent, historical indicators, what was needed was a picture of the independent variables showing current and future performance, these being metrics more aligned with operational effectiveness.
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Whilst the use of operational KPIs was prevalent before Balanced Scorecards, Kaplan and Norton categorised them into a further three distinct groups and balanced them with the financials to provide a more complete picture of performance. The way the Balanced Scorecard works is that in each category a set of goals are defined, and with each goal a corresponding metric that measures how well the goal is achieved. The Organisation Balanced Scorecard views an enterprise from four distinct but inter-relating aspects: financial, internal business processes, customer, and innovation. This can be modified for an IT Balanced Scorecard with the suggested four categories from an IT perspective, being: Operational Quality – examines how well the IT function is delivering high quality, cost-effective IT projects and processes, minimising defects, and maximising availability. This is the measure of internal efficiency, IT capability, and control of IT costs. User Orientation – looks at how well the IT department is meeting the needs of its clients (whether internal or external) in terms of service delivery, service support, and training. This is the measure of external efficiency and the perception of the service consumer or customer. Business Alignment – examines how successful the IT function has been in alignment with business strategy, and the extent to which it contributes measurable value and financial returns. This is the direct measure of IT value. Innovation and Skills – considers how well the IT function is innovating and building capabilities to support future business requirements. This is the measure of whether an effective feedback loop exists to optimise the value contribution.
User Orientation
Business Alignment
User satisfaction.
% of projects approved.
Internal SLA compliance.
Projects delivered on time.
Helpdesk response times.
IT costs as % of revenue.
User involvement in new apps.
Compliance to strategic plan.
Operational Quality
Innovation and Skills
System and network availability.
Staff skills development.
No. of issues resolved per person.
New/existing system adoption.
External SLA compliance.
Project expertise capture.
Development effectiveness.
Staff retention.
Figure 5.3.1: IT Balanced Scorecard Metrics The synergy between the categories provides a further means of measuring performance. For example, improvements in operational quality that did not translate into subsequent positive business alignment would indicate a problem. The balance between the categories attempts to tackle the vexing difficulty of getting at the root of non-performance. An important aspect of Balanced Scorecards for Kaplan and Norton is that the metrics are to be devised from the top down, thereby incorporating organisation strategy. The Balanced Scorecard can be the practical embodiment of the enterprise vision. It is recommended that organisations use an hierarchical approach to IT Balanced Scorecards, breaking down this top level view, which can be looked upon as the overall efficiency of converting investment in IT assets into business value, into more detailed scorecards for successive levels of the IT organisation. It is important to ensure Get the metrics right that scorecards do not become overloaded with too many KPIs, and that there is and the Balanced a clear understanding from IT staff of why each KPI exists. Balanced Scorecards also solve the problem of devising a continuous performance management system for day-to-day supervision. Constant tracking of performance using Balanced Scorecards gives executives and managers throughout the organisation an instant picture of how well they are doing.
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Scorecards feedback system works in guiding the organisation forward.
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For senior management the scorecard provides all the essential information available at a glance for strategically controlling a complex entity. The emphasis on encapsulating the key metrics is also a means of cutting through the abundance of metrics that can overwhelm some organisations. Get the metrics right and the Balanced Scorecards feedback system works in guiding the organisation forward. If care is not taken during deployment then problems can become evident in the method. The top down approach works at the very highest levels of the organisation, where metrics are more easily related to strategy, further down the management chain they are more difficult to define. In practice the middle managers are asked to create their own metrics, set the benchmarks, and feed the results back up the chain. This should be avoided because it is a well-known phenomenon that when middle managers are asked to produce reports that are used by others to reflect on their performance, then a tainted version of the truth can be produced. For better, or for worse, reward schemes exist which can distort Balanced Scorecards if no corrective action is taken. There are a number of suggestions that can be offered that can help the situation, ensuring that the metrics and goal thresholds are in keeping with the organisational value drivers. These include a highlevel management process of carefully creating Balanced Scorecard metrics to be used by all areas of the organisation and the automation of Balanced Scorecard completion taking it out of reach of manipulation. At least then the Balanced Scorecard should provide an accurate source of performance statistics. According to Arthur Schneiderman, there are other issues with Balanced Scorecards, for example, there can be a lag between the operational and financial metrics that prevents timely material being available for decision-making. However, Schneiderman’s main contention is that there is a lack of formal process in Balanced Scorecards, for example, no closed loop process for analysing results and modifying the Balanced Scorecards metrics accordingly. Schneiderman finds that many organisations end up with the wrong workflow and set of metrics, instead Schneiderman advocates Quality Function Deployment (QFD). Despite its limitations Balanced Scorecards can still play an important role in monitoring IT performance, possibly in conjunction with other operational metric methodologies. However, it is incumbent on management to prevent a false picture of the state of the organisation to be communicated, undermining potential benefits. The key question to ask is whether you can trust the figures presented by the Balanced Scorecard. To this end it is crucial that IT management agrees metrics with organisation stakeholders and management, avoids overload, communicates the metrics, and gets buy-in from staff, and establishes regular review and updates on progress. CoVu’s CorStrategy is an example of management software that supports Balanced Scorecards, along with a number of other management frameworks and methodologies, such as Six Sigma, Total Quality Management (TQM), Economic Value Add (EVA), and European Foundation of Quality Management (EFQM). Other methods made provision for include strategy maps, objective management (with automatic monitoring of performance against objectives), initiative management, and cause-and-effect diagrams, which can be used for predictive modelling.
Conclusions
Balanced Scorecard reflects real-time measurement and analysis – acting as an early warning system highlighting problem areas.
For employees a Balanced Scorecard can translate strategy into operational objectives, measures, and targets.
Balanced Scorecards are recommended as a method for monitoring IT performance, as long as steps are taken to mitigate the known limitations.
Through the Balanced Scorecard an organisation is able to achieve two-way communication.
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5.4 THE IT DASHBOARD Dashboards are attracting a significant amount of interest, with many software vendors providing their own dashboard tools. The key reasons for this attention is that dashboards appeal directly to the senior management within organisations, and the concepts of performance management, activity monitoring, and KPIs, are getting a lot of traction as executives strive for access to reliable and timely information. With so many tools and solutions being branded as a dashboard, a consistent description is required. At a basic level the dashboard takes its lead from the consumer Web portal, such as those provided by MSN and Yahoo!, which allow individuals to customise an interface in order to see only information that is relevant to their interests. A basic publish-and-subscribe model is used, allowing users to subscribe to channels such as news, weather, and sports with varying levels of granularity. The dashboard used by the IT senior management will have a different look and feel to that used by the operations manager. It has to be able to satisfy the information needs of a range of users. Therefore, rather than referring to a dashboard in a singular sense, it is more appropriate and meaningful to think of a dashboard strategy, as various users within the IT department may have dashboards that appear completely different yet are bound by the same framework. A key point to remember is that the information displayed on a dashboard should not just be a ‘free-for-all’, it needs be reflective of the organisation’s IT strategy, along with the user’s role within the department. This means that the information displayed has to be specific, relevant, and analysable. It needs to be underpinned by a robust security model and act as a springboard to a full portfolio of information through analysis, and enterprise reporting. Sadly, the vast majority of solutions fall short in being able to adequately reflect the strategy, some kind of link or integration is required between the objectives and measures. Without this connection there is little way to know whether the information and indicators being displayed are the most appropriate. In order to be an effective management tool, a dashboard’s content has to be guided by the organisation’s value drivers, along with providing support for customisation, multiple levels of granularity, and be able to respond to changes in the IT and enterprise environment. It needs to be deployed as part of a greater IT management initiative within a well-governed framework and implementation methodology. The physical implementation of the dashboard is nothing more than the tip of the iceberg – the point at which metrics surface. Below the surface, the mechanics of measurement collection will need to be in place to ensure that the rules that underpin the dashboard remain in step with the organisation value drivers. KPI design is critical to a successful dashboard deployment. Indicators and KPI design is critical alerts can take many forms, from the classic dials and traffic lights, to maps/geographic information systems and charts. They should be designed to to a successful take the form that makes most sense to users and renders them easy to dashboard interpret. Most importantly, a KPI should not be thought of as an isolated deployment. binary field or piece of data. It needs to be connected to underlying data, with rules governing exactly when and how it should change status, and what action to take. KPIs do not just re-purpose data, they provide the context against which the importance of data can be judged. For example, a KPI stating the number of help desk calls answered yesterday is useless without the context of what a typical number of calls in a day are. This highlights the difference between discrete and continuous measures. Discrete measures are taken at a particular instance in time and therefore tend to be connected to a particular event. Continuous measures, on the other hand, are usually an average or aggregation of some sort. It is the latter that are best suited to KPIs. In order to control KPIs, the business needs to focus on:
Rules – the data fields, calculations, and logic underpinning the KPI.
Thresholds – the parameters, logic, and update frequency.
Event management – what to do when the KPI changes state or a threshold is breached.
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Wizards and drag-and-drop interfaces can simplify KPI design and, once defined, KPIs should be published to an easily accessible and secure repository, allowing users to understand the context of the KPI and the rules that underpin the indicator. Appropriate detail is a key concept in dashboard design, the level of granularity needs to reflect the requirements, goals, and responsibilities of the user. Furthermore, users may wish to drill-down into lower levels of detail in order to analyse changes. The dashboard therefore needs to display information in the form and level of detail that best suits the individual recipients. The goal is to facilitate a clear line of sight through the organisational levels, from strategy through to execution. An example of a dashboard is shown in Figure 5.4.1.
Figure 5.4.1: IT Dashboard
(Source: Compuware)
Organisations and IT departments can utilise a structured scorecard-style methodology to help with their dashboard deployment. However, care should be taken so that the desired control over the IT department’s activity is achieved. Without a suitable level of integration and synchronisation the solution runs the risk of stepping out of phase with the organisation. Whilst the dashboard will continue to be used as the basis for setting strategy and managing performance against goals, the control mechanisms will no longer bring about the desired results, further widening the gap between what is being measured and the operational reality.
Conclusions
The dashboard is a useful tool for ensuring that the IT strategy execution can be constantly monitored.
Key individuals have to be made responsible for their own portfolio of KPIs: updating, deleting, and creating them as and when necessary, in order to stay in sync with the organisations value drivers.
The IT department needs to put in place the necessary structure and management controls for ensuring that the strategy and execution are constantly inline.
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5.5 IT GOVERNANCE SOLUTIONS Whilst IT governance is at or near the top of every IT manager’s agenda, the market for IT governance tools has some way to progress before it matures. As is often the case with hot topics, many vendors are adopting an IT governance marketing angle, yet they come from very different backgrounds, including Portfolio Management, professional services, and investment planning. Much of this activity has occurred through acquisition, and the belief is that this is set to continue, particularly since some of the larger software vendors focusing on management have not yet entered the market. Two aspects of these products are particularly important as they evolve, firstly, the integration of a top-level IT governance perspective with other IT management tools, and secondly the inclusion of strong process and best practice templates. In this market it will be difficult to differentiate on Portfolio Management capabilities alone, and it is the integration to other IT management tools that will become the defining characteristic of the outperforming solutions.
Figure 5.5.1: Ad hoc IT Governance Tools
(Source: Compuware)
The situation highlighted in Figure 5.5.1 is far from uncommon. A survey of 400 European IT senior managers, commissioned by Compuware, identified that 84% of IT departments are relying on ad hoc methods to keep up-to-date with the status of IT projects. This included more than half of the respondents who said that they still rely on manual methods, such as paperwork and meetings, and that the capability to supply information about the progress of IT projects to stakeholders could be improved. Only 16% of organisations indicated they are able to aggregate information about IT projects into a single view, enabling real-time visibility on the status of projects and to make decisions based on accurate data. Many IT departments struggle with a mismatch of manual and system tools, which rarely easily integrate with one another. There is a proliferation of spreadsheets, Microsoft Project files, interspersed with Word documents, paper reports, and post-it notes. The IT environment becomes very difficult to control, as there is no central point of reference or common mechanism. An IT governance solution with integrated applications and a central repository can greatly assist in bringing understanding to the IT environment.
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In order to provide effective visibility into the entire IT function, it is vital that information relating both to IT operations and application development is included in the analysis, requiring integration with helpdesk management, change management, project management, application lifecycle management, and application deployment tools. Ultimately there will be a need for standards for exchanging this type of information, in the same way that this has progressed in the infrastructure management space, but this is still some way off.
Figure 5.5.2: IT Governance Solution
(Source: Compuware)
Important considerations when evaluating an IT governance solution include:
Can the governance solution map to your organisational structure and existing systems?
Does planning cover both new initiatives, and ongoing maintenance and support work?
Does the solution capture all demands on IT?
Can the solution provide a multi-year view of projects?
Will the solution allow the management of IT processes?
IT Governance Solution Providers IT governance solutions is an emerging space. With its close alignment to project management – which forms part of the total solution – and also having foundations in the Professional Services Automation (PSA), it is easy to dismiss these expanded IT governance solutions as little more than Project or Portfolio Management re-branded. However, offerings do exist that are more closely aligned to some superset of Project or Portfolio Management. Products from vendors, such as Artemis, Compuware, Mercury, and Niku, provide the ability to control and manage across strategic processes, projects, and operational activities.
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Artemis Artemis IT Management (ITM) solution helps to bridge the gap between the strategic and operational views of the IT department, by mapping strategic IT objectives into operational plans and providing strong programme, and project management. It links together the disciplines of IT strategic planning, IT Portfolio Management, IT budgeting, IT operational planning, and performance measurement into a seamless process that forms the backbone of sound IT governance. By supporting the measurement of IT project performance and benefits it helps to communicate the status of the portfolio to all stakeholders, including senior management, in a meaningful business context, enabling them to evaluate progress, and to dynamically adjust the project priorities to optimise the attainment of objectives and the use of resources. Artemis supports a common approach to IT investments by the organisation and IT functions – one of the biggest challenges of IT governance. It introduces a clear process, supported by formal metrics, to the communication of IT strategy and objectives, which demonstrates the planned, actual, and forecast value that the IT function is creating for the organisation. Artemis ITM supports the relevant parts of the COBIT framework, and also complements it by providing the resource visibility that is a crucial part of planning and executing IT initiatives. Artemis ITM can be used as a tool for gauging IT project risk. It provides a methodology for formal project initiation, which is configurable to capture any aspects of risk that an organisation believes to be significant. Most importantly, it facilitates an ongoing cross-functional view of all IT initiatives, so that risk can be considered on a continuous basis, rather than solely at the beginning of a project, as is often the case. These features assist an organisation to gauge the overall risks of its project portfolio. Compuware Since its acquisition of IT governance specialist Changepoint in May 2004, Compuware, a provider of IT management tools, has been working to integrate the Changepoint product with its existing lifecycle management solutions, and the results of this are now emerging with the release of Changepoint 10. Compuware believes that to capture all types of IT demand the Portfolio Management process must encompass to the project portfolio (new initiatives), the application portfolio (the existing set of deployed solutions), and the infrastructure portfolio (the platform which supports the first two), enabling an all inclusive view for strategic IT decision making. Compuware’s first two integration points are to its CARS quality assurance solution for application deployment, and to its application service management tools, VantageView, Fault Manager, and STROBE. The CARS integration will allow quality metrics to be assessed within the IT project portfolio, providing a better measurement of risk, and the likelihood of delivering projects on time and to budget, both on a discrete project-by-project basis, and as a continuous trend over time. The integration with application service management tools will enable performance and metrics to be viewed within the context of the application portfolio in Changepoint IT governance (including viewing Vantage portlets), and application faults to be passed through as a source of demand into the IT governance process. Future plans for Changepoint will also see the integration of Compuware’s application development management tools, which will further strengthen its proposition. Mercury Mercury’s IT Governance Center is designed to help meet the three main components of IT governance identified by Mercury, that of control, compliance, and alignment. The solution suite is aimed at delivering governance for part or all of the IT value delivery processes from demand capture to measuring return of deployed assets. In particular, Mercury has recognised that a significant amount of IT budgets and resources are invested in maintaining and deploying ERP and existing applications. An integral part of the IT governance suite is aimed at delivering application change management. It is seen as a key area of use for Mercury’s IT Governance Center, with special emphasis on creating greater visibility and utilisation of Enterprise Applications such as SAP R/3, PeopleSoft, Siebel’s CRM solution, and Oracle Applications. Given the cost and complexity of these types of applications, any solution that can reduce costs and free up resources (to be refocused on strategic projects and therefore more closely align their operation with the strategic requirements of an organisation) should be seen as beneficial.
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The software is intended for those organisations that recognise they need to gain a better understanding of their IT operations and the effect that it has on the strategic effort. For too long IT has appeared to exist separated from the rest of the organisation, and this solution rectifies the balance creating a better transparency and understanding. Visibility is the key to this, and IT Governance Center supplies this in a manner that is easy to use, with the provision of information on organisational assets allied to strong workflow supporting the governance process. Niku Clarity from Niku (Computer Associates) is an IT Management and Governance solution, which has evolved from a project management background, as has many of the offerings found in the IT governance space. The suite is a fully integrated product set that provides visibility and control allied to an intuitive methodology for customisation and personalisation. The solution enables top-down portfolio planning and analysis with bottom-up project, program, financial, and process management, which provide IT management with a real time view of investments, initiatives, and resources. The Clarity solution answers the needs of organisations that require greater control and visibility across the whole enterprise. Based on Web services architecture, the system is made up of 9 modules. This modular structure enables phased implementations that can be a small number of users focusing on portfolio management or by many users utilising all aspects of the system. The IT governance space is undergoing rapid changes as more entrants join the race for market share. Niku is well placed to take early advantage of a growing market, as its background has allowed it to organically extend its earlier products. That it has managed to create an enterprise-class system is a testimony to the strength of the underlying architecture and the understanding of the development team.
Conclusions
Tools help to integrate the business, financial, and technical views of the IT function.
There is now a range of integrated software available to support all aspects of IT governance, as well as Portfolio Management.
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Technology Management and Strategy Report
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6.1 IT BUDGET CONSIDERATIONS Common Budget Problems and Perceptions The classic, traditional way of attempting to keep the spending of a division or department broadly in line with the financial constraints set by the enterprise has been to monitor expenditure against the annual budget. This has become increasingly painful for CIOs and IT Directors in recent times as IT budgets have been squeezed, and the demands for improved and expanded services have increased; they have been expected to produce more from less. When budgets have been cut or constrained, there has been no reduction in service levels allowed, the number or scale of projects to be completed, and the number of resource-hungry applications. Of course, the budget constraints are set by the enterprise, and the type of business that the enterprise pursues often determines the scale of budgets. An example of this is that companies in the Financial Services industry spend relatively much more on IT than do organisations, say, in the Manufacturing sector. Unfortunately, the majority of enterprises view the IT function as a cost centre, with only a minority of organisations recognising IT as a profit centre that can create value and competitive advantage. IT spend alone does not guarantee better returns. Enterprises that spend more on average on IT are not necessarily more likely to achieve more than those that spend less than average. More important is what it is spent on and how well it is managed. This is highlighted by research carried out by the Hackett Group among almost 2,000 of the world’s largest companies, which emphasised IT spend alone does that IT investment alone was not necessarily a recipe for success. It showed that those organisations that were in the top 25% for efficiency and not guarantee better effectiveness spend on average 23% less on technology infrastructure process returns. costs, and have 58% fewer staff involved in infrastructure management. According to the Hackett survey, the most effective companies spend on infrastructure was €1,312 per employee compared to an average of €1,698. The effective organisations spent 18% less on IT than their competitors, and employed 28% fewer IT staff. The conclusions to be taken from this study are that the most efficient enterprises keep a tight rein on IT spending, and ensure that investments are concentrated on application and software management rather than physical IT infrastructure resources. It seems that this can be put down to a lack of innovation by IT, which leads to the scenario where the majority of the annual budget is increasingly consumed by maintenance of the status quo. Indeed, some organisations spend up to 95% of their IT budget on maintenance. Enterprises need to pursue cost savings and efficiencies aggressively through innovation to avoid this situation. The overall message is that no longer can CIOs and IT managers merely spend Many instances of their budgets as they previously did, but instead they must manage them. poor alignment of IT Many instances of poor alignment of IT with business stem from a weak with business stem budgeting process.
from a weak budgeting process.
One factor that they will have to wrestle with is whether they have a centralised or a distributed IT function. The centralised IT function has clear economies of scale, it avoids the duplication of effort, provides improved governance and compliance, and clear reporting. However, it can be unresponsive. A distributed IT model provides closer alignment with business units, is responsive to tactical needs, and reduces competition between the organisation’s divisions. However, the disadvantages are that it can be difficult to get an enterprise-wide view, and it can significantly increase costs.
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Setting Budgets ...enterprises invariably finish up with a proposed budget that bears very little relationship to the requirements of the business.
The setting of IT budgets is often a basically unstructured exercise, with a lack of recognised methodology, and no link to the strategic goals of the organisation. As a result, enterprises invariably finish up with a proposed budget that bears very little relationship to the requirements of the business. Extensive uses of spreadsheets as a primary budgeting tool exacerbates the situation and encourages the approach of merely applying a percentage uplift or decrease to the previous year’s version of the budget.
Unfortunately, often a typical approach to setting the budget is that it is drawn up from an IT perspective by adding up the perceived requirements for projects, maintenance, support, and infrastructure. This results in the budget being wholly unaligned with the goals of the organisation, and means that it is very difficult to demonstrate the value from IT investments. A much more desirable approach is to map the Unfortunately, often a budget to expected value, and draw it up based on IT initiatives funded by typical approach to business units. The IT resources are taken into account before the scaling and setting the budget is freezing of the budget, there is a smooth transition between the budget and that it is drawn up the IT operational plan, and the budgeted investment can be compared to the subsequent business value achieved. from an IT
perspective... Butler Group research has shown that over 60% of budget proposals have no project-related breakdown, and at best are only split by department or by technology category. This lack of fitness for purpose has two profound consequences. Firstly, the IT function loses its commitment to the budget, and perceives it as a hindrance rather than as a useful management tool. Secondly, the board becomes frustrated by the lack of forward visibility and is forced into a cautious approach to avoid budget overruns. At an operational level, there is a lack of sophistication in the review of cumulative expenditure against budget (which is often static), and it is often difficult to make adjustments to project funding part way through the budget cycle, or to understand the impact of change. There is also scant attention given to the capacity of the IT function to deliver the initiatives that are budgeted for, again creating a mismatch between strategy, portfolio, and execution.
Effective Budgeting Effective IT budgeting must relate the available funds to the expected returns...
Effective IT budgeting must relate the available funds to the expected returns, and should take into account not only the investment and resource requirements of all IT initiatives on a project-by-project basis, but also the capacity of the organisation to undertake that work. This process can be described as performance-based budgeting.
In large organisations, where funding from IT projects may come from different business units, and be sponsored by different project or programme offices, it is essential that there is the capability to be able to collect budget cost and resource data from all these constituents, and compose it into cross-departmental and cross-functional views. Once basic assumptions are defined, the initial step is to construct a model of the desired budget to meet the strategic objectives. This can then be married to the total capacity of the IT function so that the preliminary budget can then be scaled accordingly (a process that can be iterative if fine tuning is required). Both business and IT functions should approve the agreed budget, which can then be viewed from any desired perspective, including by business unit, by project, or by strategic goal.
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There are many actions that IT management can take – both tactical and strategic – to better manage and control the IT budget:
More intense scrutiny of IT spending can lead to better IT procurement and planning.
IT Asset Management applications can drastically reduce the cost of managing individual assets by up to 30% in first year.
By reducing the number of suppliers that an organisation has dealings with, administration costs can be reduced and better discounts can be negotiated.
Software vendors generally charge what they think the market or individual user will stand. By better management, IT can negotiate from strength.
Outsourcing should be considered where appropriate as this can contribute to price competitiveness. It is expected that external service providers will increase their performance significantly over the next few years, and as a result there will be an increasing demand for their services.
Infrastructure costs should be scalable, either up or down dependent on business volumes etc.
Software charges can be linked to business volumes.
IT spend alone does not guarantee better returns.
A solution from Artemis ITM offers a highly customisable, guided process for constructing a performancebased budget, which can be as simple or as sophisticated as required, to fit the needs of the organisation. The required budget can be built up on a project and asset basis, and then funds can be allocated from different departments or other funding sources. Following this the proposed portfolio can be scaled to reflect the budget available, and go through an arbitration phase prior to final publication. The budget plan can be transformed into an IT operational plan, and achievement and expenditure against budget can be reviewed on a continuous basis, with budgets being dynamically reallocated if required, to meet changing priorities. Artemis ITM also maintains a perspective over the life of multi-year projects, so that any changes are reflected into future periods. The considerable benefit to the organisation of this methodology is that it can now align its IT investments to the expected return, and provide visibility into the IT budget in business terms. Combined with the flexibility of the solution, this is the key to making the link between strategy and execution. In order to measure the efficiency of IT in an organisation against similar organisations or competitors, benchmarking can provide a valuable guide. By utilising such a method, organisations can benefit from:
Information on which to base their budget development.
Comparison with the budgets of competitors.
The justification of staff, hardware, software, and management budget allocations through identifying industry norms.
Budgets can depend significantly on how assets are acquired, and the decision whether to buy or lease such assets. This largely depends on how they will be treated for tax purposes, the enterprise’s policy, and the expected life of the assets. For example, major hardware and software purchases can be depreciated as can other major capital items, and this will depend on the accounting policy of the enterprise. IT capital investment accounts for a major share of the overall expenditure on assets of organisations. It is important to use metrics that adequately take into account future events.
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Budgets can depend significantly on how assets are acquired, and the decision whether to buy or lease such assets.
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Discounted Cash Flow (DCF) represents what an organisation is prepared to pay up front in order to receive anticipated cash flow in future. Cash flows expected in the future must be discounted so that their value can be expressed in today’s terms. The DCF for investment in an asset is calculated by estimation of the money to be paid out versus the money to be received, and the time or times when this will be received. Each transaction should be discounted by the opportunity cost of capital from the start of the project to when cash will be paid or received. By understanding Net Present Value (NPV), IT management can improve their presentation of the case for getting approval for expenditures. NPV is the relationship between a project’s expected cash flow and the cost of capital, which is what has to be paid or sacrificed by the organisation for buying assets associated with the project. By speaking the same language as the finance function, IT management can be more successful in advocating IT investment.
Conclusions
Lack of innovation leads to an increasing proportion of the budget being spent on maintenance.
More than 60% of budget proposals do not have a project-related breakdown, which leads to lack of commitment and a cautious approach.
Benchmarking against similar organisations and competitors can provide a valuable guide.
A larger IT budget does not necessarily achieve more; it is the nature of the spend and how well it is managed.
IT management must be more business oriented.
6.2 ASSET MANAGEMENT There are unprecedented challenges for the IT departments of today. In the current business climate there is constant change, leading to new requirements from IT services. Enterprises are increasingly under pressure to deal with compliance issues, disaster recovery requirements, impact analyses, and problem resolution. Invariably, these issues are dealt with by autonomous groups of people that use manual processes. Consequently, high costs are incurred, actions are often duplicated, and ...IT has been opportunities are missed.
associated with the bad practices that store up later problems of tactical purchasing and poor asset management.
So there are increasing pressures on organisations to get more from their IT assets, and to comply with the increasing regulations that are being inflicted on organisations in both public and private sectors. Historically, IT has been associated with the bad practices that store up later problems of tactical purchasing and poor asset management. There have been a number of reasons for these practices, possibly the major one being the high movement of people that led to short-term thinking along the lines that the instigator would not be around to be responsible for clearing up the mess if things went wrong.
In order to achieve high performance levels, enterprises must have accurate information about their assets. They must understand their IT environment and their IT infrastructure. Unless organisations know what IT components they have, how can they successfully manage change? To illustrate the challenges that they face, there is the growth in the purchase of ...unless enterprises PCs with pre-installed software that has occurred in recent times. There is also know the anatomy the buying of software by departmental users, which often has led to the bypassing of normal controls. A further example is that an organisation with a and relationships of 3-year replacement policy for PCs, with a PC population of 600, means that their IT environments, they are changing one PC every working day.
they are working in
It is obvious that unless enterprises know the anatomy and relationships of the dark... their IT environments, they are working in the dark when they plan additions or changes to their technology or business entities. The critical relationships between components can be easily overlooked, leading to unexpected downtime. The complexities now built into IT infrastructures mean that powerful tools are required to assist in monitoring and controlling the whole environment. IT divisions need to be agile in scaling up or down effectively dependent upon business requirements and this cannot be achieved without managing their IT assets.
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So what are these IT assets that we refer to? They come in a number of forms including mainframes and servers that are bought on an occasional basis but they have high value. On the other hand, PCs are small, frequent acquisitions with a relatively low value, storage demands and requirements can vary weekly, and networking components are different again. Software is an entirely different type of purchase but is still an asset that requires regular monitoring in terms of validity and usage. Application software ‘purchased’ remains the property of vendor (Intellectual Property Rights, or IPR). It is unlike most other products in that the purchaser buys the right to use the software, and some enterprises play safe and oversubscribe to licences when they do not have detailed information on numbers and application requirements. IT asset management should enable organisations to forecast and monitor the usage of their assets effectively, identify under-utilised assets, to negotiate from strength with hardware and software vendors, plan for the obsolescence of IT components, and to deploy a chargeback system based on credible information to provide incentive for all to avoid the redundancy of assets.
Software Asset Management (SAM) Solutions Software Asset Management (SAM) is an increasingly popular solution that can provide significant benefits to both medium and large enterprises. In a nutshell, SAM aims to ensure the provision of the right IT applications to the correct people, at the right time and at the right cost. It includes all the processes and infrastructure that are required for the effective ...SAM aims to ensure management and protection of software assets within an organisation, through the provision of the all the phases of their lifecycle.
right IT applications
A SAM solution also needs to manage the risks associated with software to the correct people, usage, such as licensing breaches and incorrect versions of products. Software at the right time and vendors and trade associations are increasingly likely to demand an audit of at the right cost. an organisation’s software and its usage with little notice. Non-compliance with software licences can result in heavy penalties for an enterprise and its officers. SAM has been wrongly regarded by some enterprises as merely ensuring compliance with software licences; however, it is much more than this, including all matters relating to software assets, which can provide major benefits. Software assets are increasingly important for all organisations. They now represent a much larger proportion of the total spend on IT, and this will continue to grow, as hardware becomes increasingly a commodity purchase. However, to get the most out of their software, organisations must manage it properly. Many companies still treat software assets differently to the other valuable assets that are vital to their business. Poor software management can cost Poor software management can cost organisations in terms of efficiency and productivity, as well as financially. The statutory and legal issues are often well understood but businesses are still organisations in terms unaware of the business benefits software asset management offers. So what of efficiency and can SAM do for enterprises, and not just for their IT managers and administrators? productivity, as well
as financially.
The cost of software can be a major driver in organisations that are looking for tools to better manage their software assets. Traditional software purchases have involved large, upfront payments, regardless of whether the product is used or not. These costs can then escalate when training, support, patches, and upgrades are added. However, some of the most expensive software can be unused or lightly used. One corporate practice that can lead to this eventuality is the use of a standard image build on all user desktops, regardless of whether each user has a need for all the installed applications. The growth in the direct purchasing of PCs with pre-installed software, and the buying of new software by departmental users, has led to the bypassing of the normal controls that IT utilises. As a result of this, there is a lack of central control of what software is being used, and whether correct software licences are in place. Today, there is a high turnover in PC hardware which means that both hardware and software configurations are changing frequently. An example of this is that if a company has about 600 PCs, and has a three yearly replacement policy, it equates to changing one PC every day.
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It can be common practice in many organisations to play safe and oversubscribe licences when they do not have detailed information on the actual numbers and type of application requirements. There is also often a lack of monitoring of users who leave the company or are deployed to different locations, and this leads to licences being unused. It can be common
practice in many organisations to play safe and oversubscribe licences...
There is also the problem of under-licensing, which can result in an organisation having insufficient licences for the number of users that are deploying the software. Pirated software downloaded by users is also a potential threat to a company. If these violations are discovered, costs are incurred through penalties and through possible expensive court litigation. The need for compliance is further propelled by new regulatory initiatives, but the threat of a random audit is the most alarming prospect. The major software vendors and industry watchdogs such as the Business Software Alliance (BSA), the Federation Against Software Theft (FAST), and The Software & Information Industry Association’s Anti-Piracy Division (SIIA/APD) are increasingly instigating audits of organisations’ software licences and their use of software products. This is due to the costs to vendors of pirated software, which in 2003 was estimated to be US$29 billion. The cost of being found out is rising. In addition to the negative publicity that an errant enterprise can suffer, regulatory authorities can invoke proceedings for copyright infringement, software theft, and software piracy. Organisations have responsibility for their employees’ actions, and civil and criminal penalties, as well as jail terms, can be levied. Whilst these violations may sound like wilful attempts at fraud, in practice they often occur through bad management, as the majority of businesses wish to comply with licence terms. Good governance is an important driver in spreading the use of SAM. SAM can be deployed with local or remote inventory tracking. In the remote method, a central server performs scanning of client machines one at a time, or in parallel. This approach places a high burden of processing on the server. There is also a limitation in that the information gathered is accurate only to the time of the last scan. With local methods, the processing is evened out across client machines and the central server, reducing the use of scarce network bandwidth to just the downloading of application signatures and delivering information to the central server. Local methods are also far more accurate when agents are used to track actual usage, overcoming the weakness of scanning. Tools that can identify an installed software suite, and not just the individual component applications, provide a superior inventory. SAM can carry out the proactive control of software, including tasks such as denying use, blocking installation of unauthorised software, and blocking modification of applications. This guarantees compliance with corporate policies, since it is often the case that unauthorised installations lack a purchased licence. Web-downloads and self-installations by users can result in overheads to IT support, not least due to related problems such as viruses and worms inadvertently introduced in these activities. Another area where SAM can be used is in contract management, with the recording of details such as product name, version, vendor details, the department/location owning the software, type of licence, expiration date, cost, annual support fees, renewal dates, and description of software. IT administrators have a difficult job, and the paperwork burden of keeping track of all the different application contracts and contacts, ensuring licences are up-to-date and compliant, makes their task much harder and distracts from other activities.
...the benefits from SAM are not just for IT management but can offer immediate corporate savings that will appeal to finance directors and SAM tools are not just software products. They are part of an informationprocurement based process that utilises a range of tools to automate processes and support managers. decision-making. SAM tools can be part of a wider IT governance initiative as organisations try to ensure compliance with regulations, such as SarbanesOxley. These new standards cover the maintenance of software licences. Management can be kept up-todate with reports detailing execution and usage trends, and can ensure that the number of licences purchased match the needs of the organisation. However, the benefits from SAM are not just for IT management but can offer immediate corporate savings that will appeal to finance directors and procurement managers.
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There are significant opportunities for organisations to optimise their software licences and application infrastructures through the use of SAM. These include the support and maintenance of contract renewals where the enterprise must understand what options are available to it, what it currently has and what it actually needs. When software vendors introduce new licence agreements, the organisation needs to have information available about usage and licences in order that it can negotiate the best deal. SAM can identify abandoned licences and relocate them, trade them in, or use them to bargain in a competitive upgrade. The availability of information can help management make best use of given resources, and reports on usage can also help to standardise the organisation around a given set of applications. SAM can detect whether users are hoarding applications, and the patterns of such hoarding behaviour. It can identify the users responsible, and allows administrators to investigate the matter so that management can enforce the efficient use of software assets. When critical applications are in short supply throughout an organisation’s infrastructure, users will open them up at the start of the day and keep them open simply to ensure that they have access later on. This creates a greater shortage than there need be, with the result that administrators have to buy too many licences. Administrators can also be informed by SAM of those applications that have been left open for long periods unused, and e-mail alerts can be sent to remind users to log-out; for applications in short supply this is an effective, low-cost management option. Identifying the peak hours for usage can help managers schedule the use by time shifting, making better use of a given number of assets. The SAM has much more whole issue of managing peak demand can only be performed properly if knowledge about the peak demand is accurate. to offer than merely
tracking software SAM has much more to offer than merely tracking software assets. SAM assets. enables enterprises to use the software licences that they already have, and to acquire only those that they need. By providing the number of licences held for each software product, software can be redeployed by another department rather than buying more licences. It encourages central control and management so that savings can be achieved through volume licensing. Both finance directors and IT managers are able to take control of their own processes for managing the efficient deployment and use of IT, and are provided with powerful information to use in their relationships with suppliers.
Configuration Management Solutions The complexities now present within IT infrastructures emphasise the need for automated configuration management to assist in the creation and maintenance of the map of the infrastructure. In many organisations, it is impossible to even consider carrying out this task manually, and those that do attempt it will find that it is labour-intensive, expensive, and the resulting output persistently out of date. Of course, out-of-date information can be more dangerous and damaging than no Increasingly, proactive information, and it can cause severe problems when decisions are made on false, incorrect configuration data.
tools are coming to market that provide solutions in this space incorporating autodiscovery.
Increasingly, proactive tools are coming to market that provide solutions in this space incorporating auto-discovery. Organisations implementing best practice frameworks, such as ITIL or Control Objectives for Information and related Technology (COBIT), need a quick way to establish configuration management databases and these management products can provide the solution. The reasoning behind ITIL is that certain functions are imperative in managing high-quality IT services. It provides guidelines on change management, problem resolution, service levels, capacity and contingency planning, and configuration management. Some enterprises try to do Configuration Management manually when they believe that it is needed. However, this highlights the problems associated with the lack of service management information. Change planning to assess the risks and impact of proposed changes can involve large teams of people and many meetings. Costs of services cannot be determined, and getting to the root causes of problems is complex and time consuming.
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Figure 6.2.1: Active Configuration Engine
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(Source: Tideway Systems Ltd)
The management of assets in the IT infrastructure is not possible without knowing what the components are and to what function they are connected. Configuration management involves the identification and definition of the assets within the IT infrastructure such as switches, servers, and software, and the relationships between the various components. When the information is stored in a centralised database, such as the ITIL Configuration Management Configuration Database (CMDB), and updated to reflect changes, up-to-date information is management involves available so that the impact and risks of proposed changes to the the identification and infrastructure can be accurately assessed.
definition of the assets within the IT infrastructure such as switches, servers, and software, and the relationships between the various components.
Automatic updating of a CMDB means that the current status of the infrastructure is always available, and contributes to the effective delivery of IT services. Compliance with legal obligations on software is aided by the maintenance of details of all software in use by the organisation. Contingency planning can draw upon the database for the restoration of IT services in the event of a disaster by providing the list of elements and their location. Security is improved by the control exercised over configuration items so that it is difficult for them to be changed without proper approval. Problem management can draw upon trends in performance data to identify offending products and suppliers, negotiate with vendors, and to improve services.
IT Asset Management Solutions Asset Management solutions can align resources with business objectives through the management of physical, financial, and contractual aspects of every asset through the entire lifecycle. They enable IT departments to gain greater visibility and control of their IT environment through the lifecycle management of IT assets. In a climate where IT management is under increasing pressure to align resources to demonstrate a significant value contribution and Return on Investment (ROI) to the business, these requirements are becoming more pressing for all organisations. They enable organisations to control their costs, and remove complexity through lifecycle asset management.
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They enable organisations to control their costs, and remove complexity through lifecycle asset management.
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Solutions usually include the proactive management of hardware, network devices, software inventory information, and software usage information. Features include asset-tracking capabilities through automated discovery, hardware inventory, network inventory, software inventory, configuration management, software usage monitoring, and licence management. Vendors with products in this market space include those with service management solutions such as IBM Tivoli, Computer Associates (CA), Hewlett-Packard (HP) with OpenView, BMC Remedy, and Peregrine. AssetCenter from Peregrine tracks and reconciles assets in a central repository, manages software licence compliance and entitlement, controls expenses and provides cost transparency through charge-back programmes, and request fulfilment. It can be modularly deployed to meet specific business needs, and its components include:
Asset Tracking with automated discovery and a consolidated asset portfolio.
Expense Control incorporates financial and contractual information.
Process Automation automates the end-to-end request and fulfilment process.
Asset Portfolio Management combines with Protiviti for helping enterprises to meet compliance and audit requirements.
Asset Optimisation delivers business intelligence.
Outsourcing for the evaluation of options, and management and measurement of relationships.
Conclusions
Change cannot be successfully managed unless organisations know what IT components they possess.
Software assets represent an increasingly larger proportion of IT spend.
Because of the complexities of the IT infrastructure, it is imperative to have automated configuration management.
Asset management enables the lifecycle management of IT for greater visibility and control.
6.3 REQUIREMENTS MANAGEMENT The Need for Requirements Management After more recent publicity about failed projects and uncontrolled project costs, it really is time that we got to grips with the problems that cause these expensive failures. The pressure is on IT to deliver. It is not unusual for line-of-business executives to expect the IT executive to be able to continue to deliver ever better improvements, while they cope with frozen or reduced IT budgets. With the seemingly continual bad news that the media seem to delight in of high-profile software projects that bite the dust with the consequent waste of millions of pounds/dollars/euros etc., it is high time that the IT community presented a more professional image to the general public. According to Standish
Group, over 40% of According to Standish Group, over 40% of projects fail. The problems are not projects fail. new; they just continue to frustrate us. An article entitled ‘Software’s Chronic Crisis’ appeared in the September 1994 issue of Scientific American. This stated that 25% of large systems development efforts would be cancelled after they had been started. It also said that 75% of those developments delivered would have operating failures, meaning that they would not function as they were intended, and some would not be used at all. The article also said that, on average, software development projects take 50% longer than planned, and that larger projects are worse than average.
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Figure 6.3.1: The Relative Cost to Correct a Requirement Defect Depending on When it is Discovered (Source: Serena Software Inc.)
An IBM survey of leading software companies showed that ‘55% of projects cost more than expected, 68% overran their schedules, and 88% required substantial revisions’. The reasons for failure were due to the following risks:
Projects are started with poor requirement specifications.
Requirements are changed during the project term.
Requirements are added without conducting a risk analysis to determine the impact on the project plans.
Requirements are added and changed without the project costs being re-estimated.
The lack of requirements configuration management.
Software problems are caused by the way in which requirements for a product are acquired, documented, agreed, and modified. Without a formal process, information is gathered informally, functionality is implied, requirements are not defined, and the change process is casual. Re-work can account for 30% to 50% of total development costs. The cost of correcting a Software problems are caused by the way defect increases the later it is tackled in the development phase after requirements through the design, code, test, and operation phases.
in which requirements for a product are acquired, documented, agreed, and modified.
There can be no doubt that focusing on the wrong requirements delivers disasters. IT Requirements Management is the translation of business requirements into an operational IT system. The traditional document-based approach to Requirements Management is limited. It is difficult to keep documents current, and manually communicating with affected team members to keep them up-to-date is impossible. The storing of the attributes and logical links between requirements of different types is also extremely difficult, and tracking the status of requirements, the concurrent management of sets of requirements, and the modification by multiple participants are all too complicated to be carried out successfully without a suitable solution. Without a Requirements Management process, all stages of a software project can suffer, not just the early stages.
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Benefits of a Requirements Management Solution Requirements Management enables the delivery of quality products on time and on budget that meet the needs of the customer, thereby meeting both the needs of cost control and value generation. By developing clear requirements before the design and coding stages of a project, and practising good requirements management, the following benefits can accrue:
Mutual understanding can be achieved between users/customers and project teams about the requirements of the software.
The stakeholders approve software requirement specifications.
Requirements management provides a smooth flow into the software design activities.
During the coding phase, increased functionality and integrity is achieved. This also applies to system performance when it is developed.
Testability, interfaces, and maintainability are improved.
Overall project management is improved.
Communication between the customer and project managers is better.
Improved customer satisfaction and overall quality of software product.
Cost savings.
Requirements Management Process There are a number of initiatives taking place that aim to make application development more amenable to established business management practice, a process of bridging the cultural divide between the technical developers and the project owners, of making IT more transparent to business executives. It is only through transparency and availability of information that business can improve the alignment of its IT operation. Vendors at the forefront of this approach include Borland, Compuware, IBM, Microsoft, Serena, and Telelogic. Tools are being released that open up the seemingly arcane world of coding. If business can understand IT then it can be used much more effectively.
It is only through transparency and availability of information that business can improve the alignment of its IT operation.
Requirements are the foundation for all subsequent project management and software development activities, and a good requirements process accelerates development. A requirements process includes the development of requirements including the eliciting, analysing, specifying, and validating of requirements. It also incorporates facilities to deal with the requirements when they have been initially captured. At the requirements gathering and specification stage, business analysts now have tools that document requirements and provide traceability with end-product functionality. Traceability ensures that the software product will satisfy all requirements and does not have inappropriate functionality that is not required. The system can be audited during development and has maintainability after it becomes operational. Through the use of these tools, a business executive can now easily see whether or not the application meets the user requirements. Requirements Management is an often-underutilised discipline, which has developed from Requirements Engineering, which is a mature practice in the defence and aerospace industries. It is key to successfully developing applications that do the job that management requires so that the highprofile IT failures are consigned to the past. In Requirements Management the first step is to build a business case for a proposed application, then gather the requirements. This process must identify all the stakeholders in the application; all too often an application is built and only then is it discovered that a class of user has been overlooked. The stakeholders will include end-users, customers acquiring the project, requirements analysts, project managers, developers, testers, regulators and auditors, manufacturing staff, sales and marketing, and field support or help desk staff.
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Modern tools keep the requirements traced to code development – this ensures that the correct application is being built. However, the power of modern tools is to keep requirements in a central repository, so that any change in requirements is instantly broadcast to all the project team, and crucially, the developers and testers. Managing change is often where projects fall down: project schedules seldom cater for change, whereas in practice change is the norm, not the exception. Requirements Modern tools keep Management manages changes; for example, it ensures that testers are the requirements testing against the very latest requirements.
traced to code development...
However, once the application is released the user experience needs to be fed back and Requirements Management provides that feedback mechanism. New releases therefore carry the changed requirements from the production environment, as advised by all the stakeholders. A further aspect to Requirements Management is the increasing use of offshore development, with distributed teams separated by time zones. Keeping requirements synchronised is another function that these tools can offer, as well as assisting collaboration with comments attached to requirements, and easy retrieval, thus helping ensure that fewer assumptions are made by developers and testers.
Conclusions
The dismal record of delivery of IT projects can be identified as due to the lack of requirements management.
Translating business requirements into operational IT requirements requires a suitable Requirements Management solution.
Requirements Management aids collaboration and mutual understanding of users and project teams.
Engineering disciplines such as traceability are being incorporated into Requirements Management solutions.
6.4 PROJECT MANAGEMENT As IT projects proliferate, prioritising and managing them is becoming increasingly important. However, despite the impressive savings that flow from better project management, until recently little attention has been paid to improving techniques and tools for project managers. High-profile project failures are still with us and are seized on by the media. There can be many reasons for the problems including the expectations of IT to deliver incremental improvements ...some elements of IT with static or decreasing budgets. However, some elements of IT are still are still regarded and regarded and approached as more of an art than a science. approached as more
of an art than a Take the current practices for assessing project costs. The traditional process typically encompasses estimating the size of project (perhaps in the number science. of lines of code, or now more commonly in function points), estimating the time resource required in terms of person days or weeks, factoring in resource availability to arrive at a calendar schedule, and then deriving a cost for the project according to the nature of the resources consumed. However, there are two distinct problems with this approach. It generally takes place at the very beginning of the application lifecycle, sometimes even before any detailed requirements capture has been carried out, and secondly, it is rarely iterative, with perhaps the worst case being when a dreaded ‘fixed price’ model is used. In this scenario, development managers are in a dilemma. Should they over-estimate to make sure that there is less chance of an overrun, or should they risk the project being canned, or subcontracted to an external provider? Another alternative is to make a realistic estimate based on the limited available information, and join the long list of projects that are over budget and fail to meet requirements. Historically, managers have tended to make do with spreadsheets and ‘back of an envelope’ calculations about the timing and execution of critical IT projects. Now ideas such as setting up a project office to supervise and co-ordinate projects in a systematic fashion, the introduction of methodologies for running projects, and the deployment of project tools are catching on.
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Project management methodologies are no panacea. Methodologies, such as PRINCE (Projects In Controlled Environments), are often similar in concept, and the basic controls they advocate are frankly common sense – deciding what you want to achieve, how you are going to do it, what you need to achieve your objective, what risks may affect the project, how to control the changes in requirements, etc. However, in practice rather than theory, no one-size-fits-all. When the pyramids and Stonehenge were built, the same key elements applied – how long, how much, how many resources, all without PRINCE. Leading and motivating a team is one side of the equation. Before any project starts, it is crucial that the project manager takes the time to ensure that the customer has fully bought into and is committed to the project, together with a complete understanding of what is to be achieved. The good project manager asks questions from the outset, because posing the really fundamental query is the only way of extracting the vital information necessary to proceed. Project managers must get under the customer’s skin and avoid dodging the obvious issues. They also need the ability to work with the customer’s resources and to negotiate around and resolve conflict.
People are key in any project and their education and training must be fully covered as part of the Organisational projects do not exist as separate entities; there are always going project... There are certain common sense principles that should be followed on all projects such as the apportioning of large projects into small, manageable steps, or tasks that are measurable. People are key in any project and their education and training must be fully covered as part of the project, and business resources and costs should be included as well as those from IT.
to be more projects up for implementation than there are people available to work on them. So, it is imperative not only that projects are prioritised, but that prioritisation is conducted on an iterative basis with the availability of human resources included as an important – if not the most important – metric. Managing the resources for each individual project has to be linked to a larger view of current and proposed projects within an organisation, and this has to be a continuous, and wherever possible, dynamic process.
...individual projects never exist in isolation...
Once organisations accept that individual projects never exist in isolation, it then becomes vital that they implement an integrated project management solution. Individual project management software can still be used to aid individual project managers, but these systems need to be linked to a central repository for resource handling and other aspects of overall management.
This means that many applications that are currently used for micro-project management such as the ubiquitous spreadsheet have to be scrapped, and replaced with dedicated applications. There should only ever be one view of the truth in project management and this cannot be established without relevant software. The human element of any project is the most important factor; getting the right people on the right job at the right time. Central management addresses this issue in two respects. Firstly, a central repository of skills and availability allows individual projects to be resourced most effectively. Secondly, the same central repository can be used to manage time allocation based on the larger strategic view of every ongoing and proposed project. Without this central repository approach, projects will take on the individuality that most organisations should be trying to avoid. An integrated project management solution can also take much of the strain from the mathematics involved in project-change management. In this instance, it has to be an integrated solution as, again, an isolated or individual view will not contain all the possible impact points. With any mathematical analysis the prime requirement is to ensure that all the detail is available otherwise the ‘answer’ will be incorrect. Although, from a strategic viewpoint, holistic project management is vitally important, it does bring with it the added overhead of increasing change management calculations that need to be carried across all projects. If isolationism is allowed then any change in project scope or specification will require only one re-calculation. With an holistic approach there is the likelihood that change to one project will impact other projects, requiring multiple calculations to be carried out. There is an additional issue that needs to be considered: if a change to a single project scope or specification affects other projects then impact analysis has to be carried out iteratively and projects have to be prioritised. Without iteration of impact analysis, without prioritisation, and without clearly defined acceptable end-points for projects, all the software in the world will not enable dynamic project management – the calculations will form an endless loop.
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Implementing a total project management solution brings real and measurable value to any organisation. Benefits can be measured across a variety of areas. But those that create true competitive advantage include employee satisfaction and decreased employee turnover, financial savings, client satisfaction (including internal clients), and meeting project completion deadlines. The savings to be made will, of course, vary from organisation to organisation and depend on the level of project management that an organisation has currently implemented, but research indicates that improvements in project completion can be in excess of 50%, and financial savings can also match this improvement. No tool, no matter
how well designed, will work to its maximum potential without an effective methodology.
In addition to implementing an holistic project management solution, project managers can gain improvements by introducing a project office and a project management methodology. Those organisations that have taken the step of introducing these two key elements have, without exception, seen big improvements in cost savings, employee satisfaction, and customer service.
Despite the important role that project management tools have to play within the grand scheme of things, their implementation needs to be backed up by the introduction of a project management methodology. No tool, no matter how well designed, will work to its maximum potential without an effective methodology. Organisations can follow their own established best-practice procedures, or they can purchase a pre-defined methodology from a variety of sources. Many of the latter will be focused on best practice within a vertical market, and should be customisable to take into account any organisational-specific requirements.
Step
Aim
Project Definition
Understand and get cross-department agreement on the scope and purpose of the project.
Create Plan
Create delivery dates – this has to be an iterative process in conjunction with the Project Definition step other wise a disjoin will occur before the project has even properly commenced.
Update Plan
The plan has to be considered as an ongoing entity – within holistic project management all plans have to be constantly updated for proper change management control.
Problem Solving
Any problems that occur have to be solved immediately – there should be no placing of problems on the ‘back burner’ for resolution at a later time.
Maintain Boundaries
Any project has defined boundaries or scope – these should be adhered to. Altering the scope of a project is a sure way of creating problems. Project enhancements and extensions should be treated as future projects.
Reporting
All projects should include continuous reporting available to all members of a project team.
Risk Management
No project comes without some risk – the ability to manage and minimise the risk is central to the successful culmination of a project.
Document Management
Project documentation is as important as creating code documentation. The ability to store and retrieve this documentation is an important part of any methodology.
Quality Management
This is an ongoing process that ensures that the project sponsor is happy with the quality of the work being undertaken.
Measurement
All projects should be definable in terms of cost, effort, and resource useage. The taking of measurements within any project can be utilised to understand ‘pain points’, alowing future projects to be adjusted to remove these. Figure 6.4.1: Key Elements of a Project Management Methodology
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Implementing a methodology from perceived internal best practice, whilst having the benefit of being cheap, is not always cost-effective in the long term. Buying-in a methodology, especially one with a vertical market focus, has the advantage of allowing perceived best practices within an organisation to be checked against other proven best practices. To gain true Implementing a competitive advantage any methodology has to be adjustable to fit into methodology from organisational requirements. Aside from a viable project methodology, the other most important element of strong project management is the setting up of a project office; this provides the high-level strategic control required for multi-project management. Implementation of a project office not only shifts the focus away from the dayto-day managing of individual projects, but also provides the infrastructure framework in which all elements of the implemented methodology can run.
perceived internal best practice, whilst having the benefit of being cheap, is not always cost-effective in the long term.
The project office can define and manage the expectations of individual projects – and help maintain focus on what the primary reasons are for commencing any individual project in the first instance. For those not involved with project management, it may appear to be an irrelevance to have to maintain focus, but this is not the case.
...the project office can manage the interdependency of projects.
The benefits detailed earlier in terms of improvement in completion rates and financial savings can, in a large part, be as a direct result of maintaining focus, and this can be best achieved with the implementation of a project office. The project office understands the primary purpose of any given project and how it fits with the purpose of other projects.
Furthermore the project office can manage the inter-dependency of projects. Often, realising the purpose of any given project is dependent upon the successful implementation of other projects. A project office can manage this inter-dependency, with the added benefit of ensuring that projects stay within their original scope. One of the major reasons why projects fail to deliver on time is the extension of scope. It is very common to add extra requirements to projects; often these additional pieces are unnecessary as their implementation or purpose is within the scope of another project. The problem is that without the holistic view, no individual project owner, sponsor, or manager will be aware of this crossover. Implementing a project office demands a radical shift in the way that projects are viewed, and this is not always an easy task to achieve. Any such implementation will demand changes in people’s attitudes, the processes involved, and quite possibly the tools used within individual project management environments. Implementation of a project office should follow a phased approach; attempting to alter process and tools at the same time as modifying people’s attitudes to project management is likely to lead to confusion and failure. The greatest value can be obtained by creating an understanding of what a project office can achieve, and the changes that will be required, then modifying the processes involved – using a methodology, and finally implementing a toolset that will bring all the elements together. Project management is too important an element in the strategic well-being of any organisation to leave to chance or under the control of ill-purposed tools. Recognition that holistic project management is a primary requirement is only the first stage in gathering the savings available. The vision has to be implemented with method and tools. Once this has been completed, any organisation will find itself running projects more efficiently and producing meaningful end results.
Conclusions
Methodologies are no panacea.
Managing resources on a project must link to the organisational view and the process must be dynamic.
The human element of a project is the most important factor.
Holistic project management is a prime requirement to achieve success.
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6.5 EFFECTIVE SOFTWARE DEVELOPMENT With the pressures on organisations to be agile and responsive now greater than ever before, they need to be able to produce software better, faster, and cheaper. According to Business Week, the rate of productivity in producing software in the five years to 2003 went down by 1%, whereas, in contrast, the productivity in the manufacture of chips rose by 19%. There ...the rate of have been recent high profile failures in major software projects such as the productivity in write-off in Sainsbury’s Business Transformation Programme and HP’s failed producing software in SAP consolidation that cost US$400million. Indeed, experience is now being the five years to 2003 reflected in contract negotiations such as the Ministry of Defence imposition of a failure clause on EDS before it would let the company continue its bid for went down by 1%... the UK£4 billion Defence Information Infrastructure contract. There are a number of logical ways in which software development can be effective by utilising assets that are already owned by the organisation such as existing software assets, and leveraging the strengths of existing systems in new developments. The appointment of a strong project manager is important, as is the leadership of development teams that fosters a spirit of common ownership of work. Large teams should be made to work in a manner similar to small teams by the division of a large project into small, manageable modules. There are a number of initiatives taking place that aim to make application development more amenable to established business management practice, a process of bridging the cultural divide between the technical developers and the project owners, of making IT more transparent to business executives. It is only through transparency and availability of information that business can improve the alignment of its IT operation. Portfolio management can encourage teamwork, and improve the communication and alignment between the IT division and the enterprise’s business managers, with the latter taking increased responsibility for the success of IT projects. As a result, resources can be scheduled better, and projects can be managed and controlled more effectively.
Model Driven Architecture The Object Management Group (OMG) launched model Driven Architecture (MDA) in 2001. It is a methodology and set of standards that aims to abstract the development of software from the technical details of the underlying deployment platform. Despite widespread interest in this concept, and increased support from development tools vendors, real world adoption has been relatively slow. Nonetheless, if the software development process is to meet the demands for greater complexity, faster time to market, and particularly for stronger alignment with business goals, Butler Group believes that the wider acceptance of MDA and of Model Driven Development (MDD) in general is critical. In a nutshell, the key concepts of MDA are the use of the OMG’s modelling standards, including Unified Modelling Language (UML), the MetaObject Facility (MOF), and eXtensible Markup Language Metadata Interchange (XMI), to support the creation of a Platform Independent Model (PIM) of a software application, which can subsequently be implemented for a particular target environment (such as Java 2 Enterprise Edition (J2EE), .NET, or CORBA) by mapping it to a Platform Specific Model (PSM). A study in mid-2004 by BZ Research indicated that only 16% of development managers were either using, or planned to use, MDA-based development, with a particularly high number of 45% indicating no interest at all in the standard. This survey makes depressing reading for those promoting MDA and its associated tools and services, but perhaps the key to understanding the outcome lies in the role of those responding to the survey. The major benefit of MDA is its ability to provide a formal way of translating business need into a deployed application, but it will require the business to agree to this approach, and to ensure that there is better communication between the development function and the rest of the organisation. A similar survey to a business audience would undoubtedly show an even lower level of awareness and understanding of MDA, and therein lies part of the problem, since MDA can get caught between these two stools.
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For the developer community, some aspects of MDA make perfect sense:
The abstraction of the development process to higher level constructs is a common theme.
There is an increasing acceptance that environments such as J2EE and .NET will coexist.
Most development managers would agree that using UML improves communication within a project team.
However, none of these factors alone mandate the use of MDA, and most developers would claim that they can embrace these general principles without being tied to a formal methodology, which they perceive as running counter to some of the more creative aspects of their craft. This, however, misses the point: in software development, just as in all other areas of IT, there is a new realism that requires greater measurement and accountability, visibility for the business into the IT function, audit and traceability for reasons of compliance, and formal methods for ...there is a new aligning IT initiatives with business goals.
realism that requires
This is where MDA has a role to play, in bridging the gap between these greater measurement requirements and the practice of developing high-quality applications. OMG’s and accountability... statement of the goals of MDA emphasises portability, cross-platform interoperability, platform independence, domain specificity, and productivity, and these should all be viewed within the context of this role. In terms of portability, the emphasis is on the ability to preserve the intellectual assets of the business (its applications) in a form that is not constrained by impenetrable code, but which can easily be understood, communicated, evolved, and maintained.
Capability Maturity Model (CMM) The Software Capability Maturity Model (CMM) was defined by Carnegie Mellon University’s Software Engineering Institute to help the IT organisation to assess and improve the quality of its software development processes. The model identifies five levels that indicate increasing levels of process maturity. In 2000, CMM was incorporated into a new initiative, the CMM Integration project (CMMI), which whilst still using these five levels, applies them to a broader set of software and IT-related disciplines, including systems engineering, product development, and software acquisition. Application development continues to evolve to meet demands for greater complexity, lower cost and shorter time to market, whilst at the same time, new pressures such as compliance and internal governance have put an increased emphasis on the management of the whole application development lifecycle. New applications must also be aligned to the objectives and constraints of the business as a whole, but typically the development process has often proceeded in an isolated manner, with little in the way of formal management methodologies. In addition to the perennial problems of time and cost overruns, some of the indications of poor management of the application development process include insufficient business requirements capture, lack of testing, complex and costly application maintenance, inadequate documentation, and shifting project scope. These factors result in the delivery of poor quality software that does not meet the needs of the business, and a situation where the development function has gained little retained experience that can be applied to future projects.
Level
Focus
Key Process Area
5 – Optimising
Continuous improvement
Process Change Management; Technology Change Management; Defect Prevention
4 – Managed
Product & process quality
Software Quality Management; Quantitative Process Management
3 – Defined
Engineering process
Organisation process focus; peer review; raining; software product engineering;...
2 – Repeatable
Project Management
Requirements Management; Software project planning, tracking; QA; Sub-contractor Mng.; CCM
1 – Initial
Heroes
No KPAs
Figure 6.5.1: Software Capability Maturity Model (CMM) (Source: Carnegie Mellon Software Engineering Institute)
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CMM defines specific processes that should be targeted for improvement at each level, and are required for progression to the next level. The majority of organisations operate at Levels 1-3, with only a small percentage of organisations worldwide being certified for Levels 4 and 5. Each level forms a necessary step for the next level, and having achieved recognition for a level without having invested in the infrastructure and staff training to sustain it may easily result in slipping back, particularly in ‘under fire’ situations. In the early stages of implementation of CMM, much of the focus is on putting in place strong programme and project management disciplines, and providing a framework to document the related processes. This then provides the basis for the process quality improvement that lies at the heart of CMM. Progressing through the successive maturity levels requires standardisation and institutionalisation of these processes. One theme running
throughout the CMM levels is the visibility of the project to higher management...
One theme running throughout the CMM levels is the visibility of the project to higher management, so that the higher the level, the greater visibility is available to management not directly working at the coalface. CMM is not a paper-based exercise; it is concerned with instituting a culture change in management control focused on quality, and this requires bringing on board staff throughout the organisation. The higher the level, the greater the spread of the culture upwards through the management layers, as well as across departments that impinge on the project. The benefits of adopting the CMM methodology include a reduction in software defects, reduced cycle times and predictability in project delivery, and an overall reduction in software development costs.
Agile Software Development (ASD) Agile Software Development (ASD) is a complex area: first of all there is no single Agile way, but a multitude of methodologies that do not necessarily coincide on all matters; and secondly the various ASD methodologies sit within a spectrum of approaches to software development, and one cannot say that there is a single right or wrong way in any given project scenario. It is possible to achieve project success using quite contrary approaches, despite the pronouncements of the ‘gurus’ leading their particular camps. The best approach for an organisation is to ask when and how the organisation or team can benefit from adopting ASD, and where alternatives are better suited.
Figure 6.5.2: The Agile Manifesto
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ASD first gained widespread attention in 2001, when the Agile Alliance was formed by a number of software practitioners who recognised that they shared a similar vision and set of principles. Some of their methodologies go back to the early 1990s – so there has been much experience gained and refinement carried out. The alliance published a statement of its shared values in what is known as the Agile Manifesto, which stated that through its work in uncovering better ways of developing software, it had come to value:
Individuals and interactions over processes and tools.
Working software over comprehensive documentation.
Customer collaboration over contract negotiation.
Responding to change-over following a plan.
This does not tell us much about the actual practice of ASD, and to understand ASD, it is necessary to look at the detail of methodologies under the Agile banner. Much depends on the unique circumstances of any given project, and there is also the issue of the number of people on a project. Anecdotal evidence suggests that, given the Agile emphasis on interaction between team members, having larger project teams than, say ten to 15 people, can overwhelm ASD. Certainly, if it is possible to divide a large project into smaller, self-contained sub-projects, then ASD can be Butler Group’s practised in the sub-units. There is no reason why a business management recommendation is layer with Application Lifecycle Management tools and metrics cannot sit for project managers above an ASD project. More disciplined approaches to software development have ownership of the design in a hierarchical structure, with architects and analysts at the top, whereas a number of Agile ways follow a more flexible team ownership of code and design.
to assess the type of project to be undertaken and to be flexible in the choice of management methodology...
The Agile way is an encapsulation of practices that work in real projects – and reflects some of the more chaotic aspects of software development. For instance, having team members in close proximity, so they talk casually over coffee breaks or lunch and gain the real understanding that is best communicated face-to-face, what Agilists call tacit knowledge, cannot be imparted in a dry document. Butler Group’s recommendation is for project managers to assess the type of project to be undertaken and to be flexible in the choice of management methodology, rather than to assume there is only one correct way of software development.
Measuring Software Development Costs The estimation and measurement of software projects continues to be ever more important and challenging, proper cost control of software projects is not possible without these metrics. There are many pitfalls in carrying out software project estimation. There is the need to better integrate the stages of the application lifecycle to provide an end-to-end view, with portfolio management, increased use of modelling, agile methods, and application performance management all helping to bridge the gap between business objectives and the software applications created to support them. Current practices for assessing project costs can create barriers. For example, the traditional process typically encompasses estimating the size of the project, perhaps based on the number of lines of code, or now more commonly on function points, estimating the time resource required in person days or weeks, factoring in the resource availability to arrive at a calendar schedule, and then deriving a cost for the project according to the nature of the resources consumed. However there are two distinct problems with this approach: firstly, it generally takes place at the very beginning of the application lifecycle, sometimes even before any detailed requirements capture has been carried out; secondly, it is rarely iterative, with perhaps the worst case being when a dreaded ‘fixed price’ model is used. In this scenario, development managers are caught in a cleft stick: does one over-estimate to make sure that there is less chance of an overrun, and risk the project being canned, or sub-contracted to an external provider; or does one make a realistic estimate based on the limited available information, and join the long list of projects that are over budget and fail to meet requirements.
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...in other comparative scenarios such as an engineering team designing a new vehicle for an automotive company, it would never be expected to work that way.
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Of course, in other comparative scenarios such as an engineering team designing a new vehicle for an automotive company, it would never be expected to work that way. A detailed investigation, requirements capture, test marketing, and prototyping process would be undertaken, to help progressively refine the estimated project cost. As those in the IT industry will understand, undertaking a major software development project can be every bit as complex, so the paradigm needs to be changed to reflect this. The requirements capture phase, creation of models, and building of prototypes must be undertaken, all the time using the information gathered to improve the estimated resource requirements and overall cost of the project.
From a portfolio management perspective, this process would be reflected in the degree of risk that is attached to a project at any particular time – at the outset, the estimated range of costs is quite wide, and there is a higher degree of risk; as the project proceeds, the estimated range narrows, and the risk and uncertainty decrease. There should be a specific gateway review associated with the point where the cost estimate cannot be sensibly refined further, and a go/no-go decision made for the project to continue. Sceptics will say that this all adds up to additional cost and potentially wasted effort, but one has only to look at those oft-quoted project failure rates to see that overall it makes sound economic sense.
Conclusions
Existing software assets must be utilised.
Transparency and availability are vital to improve business and IT alignment.
MDA can translate business needs into deployed applications.
CMM can bring about a culture change focused on quality.
6.6 IT LIFECYCLE MANAGEMENT From the very beginnings of IT there have been silos of one kind or another in the technology infrastructure, and also in the functions and people aspects of the organisation. As computing became involved in business processes, it was necessary to segment functions and tasks in order to build in controls that guarded against fraud and unauthorised access to the ...over the years these production systems that were beginning to be the lifeblood of business. silo functions of Unfortunately, over the years these silo functions of development and development and operations became increasingly separated so that often they appeared to be operations became pulling in opposite directions. There has been a wall – whether virtual or real increasingly – between development and operations, where development took a system through its phases to testing and then passed (or threw) it over the wall to separated... operations. There was little or no linkage between the processes. IT has become such a major and crucial part of the business world that its optimisation throughout all its silos is essential for enterprises to retain competitive advantage. Due to its current and future importance, IT must be run like a business. In today’s environment, IT processes are business processes. There must be accountability and control throughout all phases of the IT processes to ensure that IT is aligned with the business. IT must be responsible for delivering a continuing improvement in ROI across cost, quality, and time. By implication this proves the requirement for top-level corporate involvement in the development of a clear IT strategy incorporating goals, principles, functions, relationships, and processes.
Due to its current and future importance, IT must be run like a business.
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Figure 6.6.1: Conquering The IT Silos
(Source: IBM Software Group)
The better harmonisation of the application development and deployment areas of an organisation can help companies become much more agile by providing crucial information in real time and having the ability to respond. Historically, there has been difficulty for development and IT operations teams to share information. This has led to the reliance on time-consuming processes to pinpoint and repair problems.
Historically, there has been difficulty for development and IT operations teams to share information.
According to IBM, the reasons for better alignment of IT development and operations to support business objectives come from the sometimes depressing statistics that we read, such as:
60-80% of the average company’s IT budget is spent on maintaining existing applications.
On average, enterprises suffer 501 hours of network downtime per year.
51% of projects in 2004 were delayed or over budget, and another 15% of projects failed altogether.
50% of applications that are put into production are later rolled back.
There is a need to re-engineer the processes and interfaces to better manage the whole IT lifecycle. This is due to the increasing rate of technology development and adoption, the increasing rate of change, which manifests itself in application updates, and the growing emergence of complex, composite applications. The introduction of enabling technologies like J2EE and .NET, have provided a comprehensive toolkit in order that new, complex applications can be created. These enable the more rapid development of new applications, and importantly, they simplify connecting applications. The power of these applications enables businesses to transform existing processes without the need to rewrite large numbers of existing applications. However, they tend to link the development and IT operation processes, and as such applications link many existing applications together in a complex way, problems do not necessarily show themselves until the application is run in a live production environment.
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End-users want better quality and cheaper applications available in less time.
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From a business viewpoint, it does not matter whether there is a divide between development and operations. End-users want better quality and cheaper applications available in less time. Both IT development and operations share the goals of better alignment with the business, ongoing quality improvement, and improved agility. These can be achieved through:
The delivery of a common process for IT governance, portfolio management, and IT investment planning.
The improvement in the functional quality of applications and the time to application acceptance in production.
The improvement in application performance and the reduction in the re-engineering of applications.
The acceleration and auditability of component deployment into development, test, and operations environments.
Figure 6.6.2: Complete IT Lifecycle Approach
(Source: IBM Software Group)
Solutions in the IT Lifecycle space from vendors such as IBM, Compuware, and Mercury include:
IT Governance and aligning IT investments with business goals with Project and Portfolio Management, and Process and Asset Management solutions.
Functional Quality achieved by Requirements Management, Process Modelling/ Data Modelling/ Architecture Modelling, Development, Unit/Functional Testing, and Change Management solutions.
System Performance through Requirements Management, Development, Load Testing, and Change Management.
Accelerate Deployment by configuration and provisioning Management utilising Version Control/Build Management, and Change Management solutions.
Conclusions
Development and Operations have become increasingly separated to the detriment of all.
Due to its importance, IT must be run as a business.
IT processes and interfaces need to be re-engineered to better manage the IT lifecycle.
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6.7 CHANGE MANAGEMENT Increasing external and internal influences have led to the increased requirement for change that impacts on IT. With this growing requirement is the need to align high level and operational change. Change is always hard work and requires the necessary attention to detail, which is why change must be managed. The requirement for change management has increased over the last decade and this requirement will go on increasing at an accelerated rate over the coming decade. The reasons for this are complex and multifarious, but if one wanted to select a single overriding reason, then it would be the increasing external influences that affect organisations. Again, if one were to select a single one of these, it would be the increasing influence that legislation will have on IT in the coming years. Whilst experienced business leaders would always favour a proactive rather than reactive response to change requirements, this is not always possible. A proactive approach presupposes only minor influence exerted by external elements. Clearly this is not the case, and in many Change management instances the only approach possible is reactive. This does not remove either the possibility of or the need for creating an environment in which the reactive affects all parts of the response can be as painless as possible, almost approaching proactivity in organisational many instances.
ecosystem...
Change management affects all parts of the organisational ecosystem, not least of which is the political/power aspect that exists. Even though it is largely external factors that are forcing the change in this ecosystem that does not remove the need to manage the change as effectively as possible. In one way, the forces applied are of ...effective change benefit as they form a ready-made definition for the end-point of any change. management is It can be defined in a number of different ways, but we regard the essential for management of change in this case in order to support the further successful IT development of the organisation.
governance.
There is no end of theory surrounding the subject of change management – it is something that all organisations know they need to do, but it can be very difficult to get right. IT governance continues to have a big impact on the area of change management, to the point at which effective change management is essential for successful IT governance.
Figure 6.7.1: Change Management Hierarchy
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Change management is required for all organisational changes, ranging from a major operational change in the way a company does business, for example, down to a one-line change to code for a stand-alone reporting system in the IT department. A top-down approach will help facilitate a continuous process of improvement within the organisation – if there is no one at the top of the organisation who is an advocate of change management or has overall sponsorship responsibility for a project, successful implementation throughout the organisation is unlikely to be achieved. The overall objective of change management has to be the improvement of the organisation as a whole. The driver of IT governance will also help to achieve an improvement of the organisation as a whole. Compliance is not only about changing processes, procedures, and systems in order to comply with relevant legislation and regulations – it can also have the positive impact of improving the way in which an organisation operates, and thus its cost-effectiveness. It is good for ‘auditability’ – in terms of change one can understand what the change was, when it took place, how the change Strong change was effected, and by whom.
management... gives an organisation the opportunity to be confident in compliance within the organisation...
Strong change management, when improving IT governance, gives an organisation the opportunity to be confident in compliance within the organisation, which is something that few organisations have. Large and distributed organisations in particular can find IT governance a challenge (indeed many have not yet overcome that challenge), and thus need to be on top of change management in order for IT governance to be effective organisation-wide.
When change is demanded by an organisation for whatever reason, the projects that are created to effect that change should not be viewed in isolation, and these projects need to be seen as part of achieving the organisation’s aims and objectives. Change is not a point solution, and any ROI case will have to be built by focusing on the overall benefits to the organisation, looking at the wider picture. Any decision to purchase, develop, or customise a new IT solution will have been made with the overall objectives of the organisation in mind. When the decision to purchase is made, the management of any associated change should already have been considered. Of course, it can be expected that the project manager and project sponsor is aware of the overall objectives of the change, but it can also be extremely beneficial for the entire project team involved in developing and implementing the change to be aware of these objectives, alongside everyone that will be affected. Communication is key to ensuring the success of individual projects. By their very nature all projects have a beginning and an end, but by keeping all involved focused on the ultimate objectives of the change – the improvement of the organisation – then the project will have an increased chance of success in the way that it was envisaged in the first place. ITIL was developed in the UK by the Office of Government Commerce (OGC). Its aim is to provide a framework for IT Service Management for both public and private sector organisations, giving best practice guidance, and one of the sub-sections of the guidelines covers Change Management, under the Service Support section of IT Service Management. The main thrust behind the use of ITIL for change management is that the framework recommends that change is undertaken in the same way for all parts of an organisation, and for all projects, irrespective of location, size of change, and so on. The benefits of this include that when required, the organisation can react quickly to changes that are forced upon it, and also that when proactive changes are required, the full impact of the changes can be fully and accurately assessed before they take place. Although ITIL is not a specific methodology, rather a guideline, such guidelines can be very useful for companies looking for a way of supporting effective change throughout the organisation. Very few organisations have single platform IT systems across the board – it is virtually unheard of, and most organisations have heterogeneous IT systems. Add to this the fact that multi-dimensional change is common, with organisations needing to address, for example, changes to IT systems, changes to business processes, implementing additional training programmes, and so on – very few changes have no knock-on effect to other parts of the organisation – and it becomes clear that change management is a massive hurdle to overcome. However, as with many experiences throughout our working and non-working lives, it is vital to learn lessons from previous change management and apply those lessons to the procedures that are in place within the organisation.
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If, for example, one uses the ITIL guidelines for change management, and these work satisfactorily the first time, but the second time there is a problem, then the problem should be analysed and a change made to the relevant procedure to ensure that the problem would not occur were the project to run again. Another example might be the level of training required on any changes – this is something that could be assessed during the design phase of any IT change, with the training planned to take place before the change goes into the live environment. From an IT perspective it is vital to plan for and record all proposed changes to any and every IT system. Once the change has been made it should be monitored in order to decide whether it has been successful and achieved the desired effect (determined at the planning stage) or if it should be backed out because the required aims and objectives have not been achieved.
...it is vital to plan for and record all proposed changes to any and every IT system.
This monitoring must include the so-called ‘one-line’ changes to code in all IT systems. Every developer knows that without change management IT systems would be up and running much more quickly, with very small changes capable of being live within an hour of being requested. However, the need to document all change has been around for many years, and developers will also recognise the situation of picking up someone else’s work where changes have not been fully documented (if at all), and spending twice as much time as anticipated on the change because there was a need to work out what was going on in the first place. The need for change management can be highlighted by the case of Cahoot’s on-line banking system, when towards the end of 2004, changes were made to Cahoot’s on-line systems, which caused a security breach. This breach remained unnoticed for 12 days before it was reported by the BBC, and subsequently corrected by Cahoot. This only serves to highlight the requirement that all change should be recorded, and the impact of that change assessed. As Cahoot operates in the private sector we would all have remained blissfully unaware of the breach in the company’s on-line security, were it not for a customer of the bank highlighting the problem to a BBC reporter – at the time of the breach Cahoot did not e-mail its customers about the situation, nor did it mention the incident on its Web site. The public sector, however, is not quite so ‘lucky’, with many of its IT changes being subject to public scrutiny, as they are using taxpayers’ money. There is a great deal of IT activity in the public sector at the moment, and there is a great opportunity for the public sector to lead the way in further developing change management best practice. Indeed, the CIO Council, which comprises a number of CIOs from central and local government in the UK, plus others from the wider public sector, wants 2005 to be the year in which the perceived number of IT project failures in the public sector are reduced significantly. The UK Government’s CIO, Ian Whatmore, heads the CIO Council and has stated that his team can be used by the UK public sector to assess projects, encouraging those in charge to only implement a solution when it was ready, and not before, even if there was political pressure to do so. This sounds very promising, but it will take an extremely strong individual to resist the implementation of IT change when political pressure is being brought to bear. Change management is always going to be hard work – it requires meticulous attention to detail in order to be successful, and must be applied throughout the organisation and at all levels. However, when done properly, the rewards are excellent, with change being applied with the overall objectives of the organisation in the minds of all involved. The use of ITIL should be investigated by all organisations looking to improve their change management procedures, as this will also assist with successful IT governance – strong and effective change management underpins IT governance. Vendors with solutions in this market space include CA, IBM Rational, Mercury, and Serena Software.
Conclusions
The need for change management will grow due to external influences.
ITIL recommends that change is carried out in a uniform way throughout the organisation.
All IT changes must be meticulously planned, even single-line code changes.
Change management is not easy – it requires attention to detail.
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6.8 MONITORING SYSTEM USAGE Charging For IT Services The one common denominator that is universally understood across the world is money, whether the currency is the pound, dollar, Euro or any other that represents cost and value. Therefore, when we consider the monitoring and control of system usage, it is logical that we should be talking about chargeback schemes. However, even though such methods have been in use throughout the evolvement of IT over the past 30 years to the business critical role that it occupies today, the subject still remains contentious.
The pressure on IT budgets over the past few years has led to an increased focus on chargeback...
The pressure on IT budgets over the past few years has led to an increased focus on chargeback, so that IT costs are charged to the user departments on whose behalf they were incurred. As a result, the IT budget cannot be used with profligacy in expanding the IT infrastructure without checks on the hardware, software, and networking, as it is the user department, division, or group that pays the bill. It can also help IT management to justify their budgets, as they are being paid for by their users.
A further benefit can be that users become much more disciplined in their usage of IT resources when they are being directly charged for them. It is also maintained by many people that unless a charge is made for a product or service, that item will not be valued by the user. It provides alignment with the requirements of the business, as it is unlikely that a user will be willing to pay for a service ...unless a charge is that does not contribute to its capability and/or efficiency. When IT expenses are retained within the overall IT budget, rather than charged back to made for a product or departmental cost centres, enterprises do not have a measure of the real costs service, that item will of applications.
not be valued by the
Alternatively, charging can be restrictive in that it can inhibit innovation user. because users may be less willing to go ahead with a new application if they are to be charged for its development and implementation. However, it can be argued that this is a benefit to the enterprise in that if the users are not committed to a project, it will not be successful. Of course one argument against chargeback is that IT systems, like people, do not consume resources evenly. Data held in databases is accessed by multiple functions and multiple people it is difficult to apportion costs. There is no panacea for controlling an enterprise’s IT spending, and there is no perfect chargeback system. Today’s IT costs spread far beyond the data centre with devices such as BlackBerrys and PDAs. If all that chargeback achieves is to reshuffle costs within the organisation, then it will not be worthwhile, but if it results in better decision-making through charging then it can prove its value.
Activity Based Costing Activity Based Costing (ABC) and Activity Based Management (ABM) concepts have been around for some considerable time, but have failed in their attempts to achieve mainstream adoption, and one reason is that ABC and ABM tend to be used interchangeably. In broad terms, ABC represents a class of accounting technique that has been developed for the ...activity-related benefit of managers rather than accountants, giving them the ability to costs can vary ascertain the true costs associated with providing a particular product or dramatically service. The appeal to the business is that by using ABC, such costs can be determined by the determined, monitored, and managed with much more fidelity than was volume of previously available. It is very relevant to IT costs and their charging in that activity-related costs can vary dramatically determined by the volume of transactions. transactions.
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The basic premise is that each and every activity undertaken by a business, its personnel, or indeed its partners, has a cost associated with it. Therefore, the products or services created by the business also have costs associated with them. ABC is used by the business to capture and comprehend these costs. Traditional accounting techniques capture costs, such as raw materials or labour, but do not incorporate activity-related costs – the basic transaction costs involved. ABC can actually be applied to any costconsuming object, including customers. ABC is therefore used to help the business identify and attribute costs to certain core activities and resources, thus assisting with product or service pricing strategies, customer profitability studies, etc. The software will then allow users to analyse cost distribution, assessing the origin of the costs of a given output, in terms of the previously quantified activities and resources.
ABC can expose the
There can be no doubting the value and attractiveness of this vision. ABC can true costs associated expose the true costs associated with products, as it incorporates more with products... meaningful data than that typically used in accounting. For example, as mentioned above, costs are normally allocated according to factors such as labour costs, raw material costs, etc. This overlooks or downplays the economies of scale that come from high volume manufacturing, leading to skewed costing profiles. ABC is more flexible, viewing each process as a system with inputs and outputs, which can include all manner of variables or activities. Easier to deploy means reducing the costs and time involved with deployment, placing less of an onus on set-up costs and the time taken to get the solution live. In this respect, vendors need to provide customers with open architectures and pre-built costing models, which they can use for rapid proof-of-concept or as a starting point for subsequent fine-tuning. ABC is an iterative process, and in many ways an inexact science, as organisations should continually refine and hone the solution, making it more and more accurate and representative of the ‘true state’.
IT Performance Optimisation Once an application is in live production the facility to track its performance and behaviour is still relatively new territory. An analysis of costs in manufacturing, from which one can draw parallels with software production, show that the highest costs are incurred once a product is deployed in the live environment – incurred in general maintenance, update, and support, but also in extracting the best performance from the application and delivering the highest service ...the highest costs quality. Reducing costs in this phase can bring considerable benefits to the are incurred once a Total Cost of Ownership (TCO), and also feed useful information back to product is deployed in development so that mistakes are not repeated, reducing future lock-in of live the live production costs.
environment...
An ‘application’ means any program running on a computer, including all the infrastructure software, including the operating system(s), legacy software running on mainframes, a Web service, out-of-the-box software, or custom code developed in-house. Tools to monitor and optimise applications are now appearing from new and established vendors in what is an early adopter market. At the other end of the spectrum of the live production environment lie the infrastructure and processes placed to handle deployment, maintenance, problems, issues and so forth, i.e., the Help Desk and IT Support. Collectively this range of tasks comes under the heading of IT Services Management (ITSM). Digging deeper into the infrastructure, the Network Services Management (NSM) team look after the Local Area Network, Wide Area Network, and related areas, such as storage, back-up, replication, failsafe, server allocation, and hardware support. The market for supplying tools in both ITSM and NSM is fairly mature, and quite distinct from code development and testing. However, we can see that in the post-deployment phase of an application, all three areas conjoin. IT Performance Optimisation (ITPO) is the concern of that overlap, where developers deliver their application to the live environment and where IT Support takes over. Both parties retain an interest in what takes places, and of course the end-user is now an integral player in the process.
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With an increasing emphasis on service level delivery, there is a need to prioritise application traffic...
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With an increasing emphasis on service level delivery, there is a need to prioritise application traffic, and with it the need for traffic management tools that provide the necessary information: application discovery and classification, usage profiles over time, and which applications are heavy bandwidth users.
The first step in ITPO is to monitor the application activity; the choice here is whether to build-in monitoring functionality in the application during development, or install third-party tools that monitor the live production environment. The main advantage of a built-in solution is that it provides a custom-made problem resolution capability that can locate source code at the root of a failure or performance issue. In order that the instrumentation does not grab resources and add to any potential performance degradation, it should be possible for the functionality to be switched on only when needed.
Figure 6.8.1: Application Lifecycle Costs (Source: David M. Anderson, Design for Manufacturability, 2nd Ed., CIM Press 2001)
Instrumentation can provide distinct advantages where, for example, application software development has been outsourced, perhaps to a third-world country. Tracking problems back to the developers can be problematical, whereas tools that can help communication during problem escalation between IT Help Desk, IT Support, and the developers can reduce post-deployment costs. Identify Software is one company that provides this type of functionality, logging application performance and ensuring that relevant information is speedily passed on to the right people at each stage of the problem resolution. Instrumentation is an option available for the software producer, but also for users with applications that have no in-built logging, which is the case for most off-the-shelf software today, ITPO tools provide the best solution. The application management tools on the market fall into three types: polling, agent-based, and non-agent listening. Each has its distinct advantages and disadvantages. The polling approach may miss important traffic events that fall between the polls, so it is the least rigorous of the three methods; however, the resource demand of the tool on the network is light. Agent-based systems install an active agent at various points in the infrastructure: on the client, on the network, and on the servers. These agents are designed to have small footprints; however, they will use up resources on their host machines, so this needs to be taken into consideration. Agent-based systems can be installed in distributed systems without changes to the network. The agents monitor activity on their host and report back to a central repository. Agents on the client side can provide valuable information on which applications are used and also monitor the actual experience of the end-user. Agent-less systems install hub servers that application clients must connect through to reach the network, so the system can continually listen-in to traffic activity. This type of system may require some network re-design at the local client-end.
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Whichever monitoring system is installed, the data feeds into the next stage of the process, which is to alert the administrator of problems. Alarms can be raised against thresholds set on baseline activity. However, the significant benefit of ITPO is in automatically managing performance problems, in being proactive, and also anticipating problems and taking pre-emptive action. In this instance the monitoring triggers application traffic software that detects and identifies individual packets of data on the network, rerouting this data if necessary to overcome bottlenecks and enhance performance. Applications can be assigned priorities and given maximum resources during bandwidth capacity shortages. The essential emphasis of optimisation of applications in the post-deployment phase is to automate tasks that ensure their peak performance in the IT environment. An important part of the ITPO system is the reporting element. Graphical displays and Key Performance Indicators (KPIs) are used to provide intelligence on current and historical activity and can also show trends. Information on actual performance against pre-defined service levels is vital feedback for Service Level Agreement (SLA) monitoring. Mapping bandwidth usage against end-users, applications, and protocols provides essential visibility into the network. Charting the type of data crossing the network is another important statistic that helps build a picture of the In order to best network performance. Reports should be customised to target either analyse application management with key summaries or technicians to be able to drill down for performance, tools detailed analysis.
should provide endIn order to best analyse application performance, tools should provide end-toto-end monitoring... end monitoring, from the end-user to the transaction sent to a remote database. With this degree of tracking it becomes possible to tune application transactions, delving directly into source SQL that may be causing bottlenecks. ITPO can uncover deficiencies in not just the ‘usual suspects’ of network bandwidth and server power, but also end-user practice, SQL tuning, badly designed ‘chatty’ applications, and mistakes in the configuration of complex applications and network components, such as servers, routers, and switches. An example of the power of end-to-end monitoring is illustrated by OPNET’s Application Characterisation Environment module for IT Guru, which enables enterprises to identify the root-cause of application performance problems. Consider the case of users calling help desk to say a new application is running slowly. Neither the network department nor the developers see any problem and a stand-off ensues. The lack of visibility into the network hampers resolution. IT Guru can display the core segments responsible for an application’s performance, comprising: Tier Processing, and Network Effects, which cover Latency, Bandwidth, and Protocol/Congestion. The Tier Processing segment sums the total processing time taken by the application at each tier (i.e., application delay) – so if this segment dominates the chart, the developers need to re-examine their code. Latency is the sum total of propagation delay across the network, an effect of the speed of communication signals and device latencies. However, assuming these are adequate, the delay will also be affected by the application’s number of ‘turns’ – a point where the application sends a message. So high latency can indicate an application issue. Bandwidth is affected by the transmission delay along the slowest link between two tiers, so a problem here would indicate a network issue. Protocol/Congestion monitors the effect of queuing in the network between tiers, as well as the effects of packet loss, and network protocols like TCP/IP, so again this segment would indicate a network department responsibility. Resolving these types of problems by providing direct views into the network shows the benefit of products like IT Guru. Application traffic management addressing Layer 7 of the TCP/IP protocol stack, which deals with applications, provides a number of benefits. Advanced tools, like Zeus Extensible Traffic Manager, can buffer traffic from slow connections to a Web server, so the server’s CPU cycles are not wasted in ‘wait’ states and are available for dealing with a fast stream of traffic. Traffic management tools inspect the headers in data packets, and also with some tools the full content of XML application data being transmitted, thereby identifying the application and able to take decisions based on business rules. The facility to write custom scripts gives administrators a high degree of control on how to route specific application traffic. Problem diagnosis and resolution requires a collaborative process and this is where the use of a knowledge base and an expert system can retain past solutions and offer suggestions when new problems arise. For example, Quest Software offers Spotlight on Active Directory and Spotlight on Windows; tools that alert administrators of problems and provide suggestions to help resolve them.
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Deployment testing, modelling, and simulation are another facet of Application Performance Optimisation. Vendors like Compuware, HyPerformix, and OPNET offer tools to simulate a network and model how an application would perform on it, running what-if scenarios, facilitating troubleshooting and performance tuning, and also predicting growth and assisting capacity planning. ITPO can help reduce the burden in the IT department through greater automation, letting key IT support staff devote their time to essential tasks. These tools can also mitigate the problems of high staff turnover by ensuring best practices are retained in reports, a knowledge base, and in expert systems. As mentioned, the vendors in the NSM and ITSM space are entrenched in a mature market and generally do not have a history in development. NSM tools focus on gathering data from infrastructure ‘sniffers’ that monitor network traffic in switches, hubs, and routers, helping to manage and optimise network resources. For example, load balancing helps to keep servers running at peak performance.
Conclusions
Charging for IT services can bring alignment between business and IT.
Activity-based costing can identify the true costs.
The highest costs are usually incurred once an application is in production.
The reporting elements of ITPO systems are key.
Problem diagnosis and resolution requires a collaborative process.
6.9 SERVICE MANAGEMENT The IT infrastructure and environment is increasingly complex due to the driving requirements for ever-greater levels of service by enterprises and ever faster developments in technology to enable these needs to be met. As the role of technology within organisations has grown, so have expectations over performance and service levels. Like other business functions, IT departments increasingly have to demonstrate how they deliver value to their organisation. As a result, customer satisfaction surveys, KPIs and operational-level ...IT departments agreements are now commonplace, especially in ...the only way that IT increasingly have to services can be areas where IT underpins mission-critical services demonstrate how successfully managed and contributes to competitive advantage.
they deliver value to their organisation.
is through the Meeting these service levels, however, requires a deployment of massive commitment of funds and resources by the IT department, which flies in the face of the proactive and drive to reduce costs. As a result IT departments are locked in a constant intelligent solutions balancing act between cost and performance. As a consequence, the only way and tools. that IT services can be successfully managed is through the deployment of proactive and intelligent solutions and tools. The complexities are such that managers and administrators cannot cope with the volume of possible alternatives and corrective actions without service management solutions. For many years, IT has been providing facilities to enable enterprises to conduct their operations. Now it is IT’s turn to benefit from the improved performance and assistance that technology can provide to run IT operations.
Service Management Frameworks Although achieving the right balance is by no means easy, there are a number of options available to IT decisionmakers that can help them control – and even reduce – IT costs without impacting the service to the business. The ITSM and ITIL frameworks have been developed to help organisations address the many challenges associated with effective IT service delivery. ITIL, which is an initiative of the Office of Government Commerce, provides a range of best practice guidelines for areas, such as service support and service delivery.
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Effective ITSM can deliver a variety of benefits, such as helping to increase customer and employee satisfaction, enhancing the value and stability of IT, and perhaps most importantly, reducing costs. Industry experts believe that adopting ITSM can help businesses halve their annual TCO. ITIL defines a best practice framework for the management and delivery of IT services. In many organisations, close attention is often paid to new IT initiatives, at the expense of what is often described as ‘keep-the-lights-on’ work: ongoing operations and maintenance. With up to 80% of IT budgets being spent on this latter area, it is clear that controlling costs and improving efficiency must focus on this area. Over the years, a much wider audience than UK government departments has adopted ITIL, and it has become popular in the US. There is still a long way to go for the adoption of ITIL in organisations throughout the world, but increasingly vendors are incorporating ITIL terminology and best practices in infrastructure management tools.
...increasingly vendors are incorporating ITIL terminology and best practices in infrastructure It is generally accepted by organisations that their processes are critical in running their business. The re-design of business processes has been adopted management tools. as a strategy to achieve cost reduction, shortened cycle times, improved quality, and customer satisfaction. With the increasing complexity of IT infrastructures, caused by the advances and developments of technology, leading to the consequent greater demands by organisations from their IT services in order to remain By defining and competitive and responsive to their customers, processes have become improving the increasingly important in delivering IT services. By defining and improving the processes that form processes that form the IT service to a customer or an internal division or the IT service to a department of an organisation, significant benefits can be achieved.
customer or an internal division or department of an organisation, significant benefits can be achieved.
One of the common problems with planning IT operational work is that precise requirements and priorities are difficult to predict: there are often significant peaks and troughs in demand associated with business cycles or the introduction of new systems; issues may require immediate priority action to keep critical business systems up and running; and there may be periodic requirements for ...70% of companies additional specialists in particular disciplines. using ITIL reported Because of this unpredictability, it is particularly challenging to integrate operational and maintenance work into the overall IT that they had derived portfolio, with the consequence that the resource available for new initiatives tangible and is often estimated conservatively to provide additional leeway.
measurable benefits...
Adopting a formal, process-driven methodology to IT services has proved highly beneficial for many organisations. In a recent survey by The IT Service Management Forum (itSMF), 70% of companies using ITIL reported that they had derived tangible and measurable benefits from the programme. ITIL covers IT service support processes:
Incident Management with an objective to restore the normal service as speedily as possible, and to minimise the adverse effects on business operations.
Problem Management for the diagnosis of the underlying causes of identified incidents. The correction of errors in the IT infrastructure is arranged and proactive problem prevention is also carried out.
Change Management ensures that standardised procedures are used to minimise the impact of changes on service quality.
Configuration Management identifies, controls, maintains, and verifies the elements of the infrastructure or of a service.
Release Management provides a holistic view for the incorporation of changed services, and their orderly release, including technical and non-technical aspects.
The five key elements of service delivery are:
Service Level Management to maintain and improve the quality of service. The processes to achieve this are a constant cycle of agreeing, monitoring, and reporting the IT service achieved. Remedial actions to eradicate poor service are instigated. By implication, this can assist in the development of stronger relationships between an IT division and its customers.
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Financial Management for IT Services to support the organisation in the areas of budgeting, IT accounting, and charging mechanisms.
Capacity Management so that an organisation can manage resources at times of crisis and accurately plan ahead for additional capacity.
Availability Management to achieve maximum capability from the IT infrastructure, the services that it provides, and the supporting organisation. The aim is to achieve a cost effective, reliable level of service to enable the business to meet its objectives.
IT Service Continuity Management is the harnessing of an organisation’s ability to continue the provision of a pre-determined level of IT service following an interruption. The break in service can range from that caused by an application or system failure up to a major disaster.
ITIL provides a framework for IT service management that includes process templates, the definition of roles and activities within the IT function, and the communication between them. A common way to begin ITIL implementation is to map out these existing elements within the IT function, and to create a plan for evolving to this way of working. The standardised ITIL guides contain process flows, models, and best practice that can be customised to the requirements of the individual organisation. ITIL requires a degree of cultural change and education, but Butler Group has found that many IT staff welcome its introduction, because it provides a clearer definition of their roles and responsibilities, and improved organisation of their work processes. One of the common outcomes of this approach to IT service management, is the establishment of SLAs for the IT function, used internally and sometimes also externally to monitor its performance across a range of indicators. Once this is in place, it provides an excellent benchmark for subsequent service quality improvement initiatives. For IT service delivery, it is necessary to define and capture the metrics that gauge the performance of both internal and third-party services. In Capacity Management, a broad view of all operational and project requirements is the foundation for optimising the IT infrastructure. There can be confusion over the respective merits and features of ITIL, CoBIT, and ISO and BS standards such as ISO 9000, ISO 17799, and BS 15000. CoBIT is issued by the IT Governance Institute, and is an IT governance framework that can be applied to the entire IT environment and its processes. It is a generally applicable and accepted standard for good IT security and control practices. It provides a reference framework for management, users, and Information Systems audit, control and security practitioners. ITIL is a library of best practices for the provision of quality IT services, and is one of the global standards on which CoBIT is based. ITIL describes the service management processes and recommends security and control practices but does not have a standard for them, whereas CoBIT provides a great framework to perform audits on ITIL processes. ISO 9000 is a generic management system standard, which is concerned with the way an enterprise goes about its work. ISO 9000 can be applied to all types of organisation, both large and small, irrespective of its industry sector and its product or service, whether public or private. The standard does not specifically address IT processes, but it can be applied to achieve high levels of quality in software applications and hardware configurations. ISO 17799 is strong in security controls but does not The OGC is currently say how to carry them out with processes. BS 15000 documents an integrated collection of management processes for the effective delivery of IT working on the services, and was aligned with the best practices defined by ITIL. publication strategy
for ITIL, with new publications expected to be available by the end of 2006.
In May 2005, the OGC announced its future plans for ITIL’s next stage of evolution following a wide-ranging survey on suggested improvements. It forms part of a major update of the ITIL best practice methodology, which has not been refreshed since 1997. The project began in November 2004 with contributions sought input from public sector, vendors and managed service providers, and trainers and qualification bodies in 30 countries. According to the OGC, the participants agreed that ITIL needs to include best practice for service management in multisourced environments. The next version will probably be restructured with more consistency across the volumes of guidance. It will also concentrate on value, benefits, and ROI with case studies, and templates for implementation. The OGC is currently working on the publication strategy for ITIL, with new publications expected to be available by the end of 2006.
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ITIL terminology is being increasingly incorporated in infrastructure management products, which will speed the adoption of ITIL. The benefits to be gained by enterprises that adopt an ITIL strategy are numerous. It provides for the future proofing of their IT infrastructures as more and more vendors comply with ITIL standards, thereby ensuring that best-of-breed integration will be available in the future. It can also help in achieving the alignment of IT operations with business strategy. Conducting IT on business value is achieving more credibility, although unfortunately many are still driven by cost. ITIL processes can help prevent problems and reduce expensive service incidents. Even a small reduction in incidents that result in impaired services can achieve significant, major savings. The growth in ITIL compliance by vendors with products that increase standards is to be welcomed. This leads to more open and easier interfacing between software tools so that customers can adopt products from various vendors, with the confidence that those products will provide common information sets. These moves should make it easier for organisations to adopt tools that help them manage the IT service that drives their business in the future. These tools will provide them with solutions so that they can contend with the ever-changing pressures from business, and the greater complexities of the IT infrastructure.
Conclusions
IT needs to utilise advanced proactive automated products for improved performance.
ITIL provides a suitable framework for IT service management.
Metrics to gauge performance should be defined and captured.
The adoption of ITIL is growing quickly.
ITIL can provide future proofing for IT management.
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SECTION 7: Approaches for Determining IT Cost and Value
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7.1 METHODOLOGIES Accenture SITE Accenture’s research into the qualities of businesses that out perform the market seems to indicate that one of the differentiators in a company’s financial performance is not how much is spent on IT but the way the investment is focused on business value. Companies with superior earnings growth:
Spend less than their industry peers on IT but are able to free up more IT investment on new business initiatives.
Justify their IT investments with a rigorous, analytical process that enables them to discover exactly where business performance improvement opportunities lie.
Continually monitor efforts to ensure that their investments generate the expected value.
Foster a culture in which the IT function and the rest of the business are aligned on business objectives and priorities, and work toward the optimisation of IT resources globally for higher performance of the organisation overall.
Accenture has found that the deployment of a structured process to manage IT spending can provide significant benefits. Direct savings of 10% to 15% in the IT budget are achievable within six to 12 months, while better IT decision-making can increase IT productivity by a further 20%. Indirectly, the benefits resulting from re-prioritising projects and re-engineering IT-enabled processes can also deliver considerable improvements in returns. To assist senior executives in this endeavour, Accenture’s Strategic IT Effectiveness (SITE) practice has developed a transformational approach to help organisations obtain better strategic, operational, and financial value from IT investments.
Figure 7.1.1: Transformational Approach
(Source: Accenture SITE)
Setting the IT agenda includes Accenture’s IT Value Discovery methodology, which identifies organisationspecific opportunities to create value. The approach also provides a mechanism for the organisation to collaborate with IT in the formulation of an IT agenda to capitalise on these opportunities. The managing IT investments aspect incorporates a structured IT Governance process, supported by tools and resources, that guides enterprises through the challenges of aligning IT and the organisation, IT demand planning, IT supply control, and IT value review. The ability to deliver on the requirements of a strategic IT agenda will fail without well-organised execution. In order to achieve this an organisation needs to have efficient IT processes, clear roles and responsibilities, skilled people with the right incentives, and a value-focused culture. The creation of IT capability that provides flexibility, quality, and quick turnaround is challenging and needs constant focus on all the various elements. However, recent software vendor developments have made this easier by beginning to offer integrated tools to assist management in implementing the IT agenda.
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IBM Zodiac Zodiac provides the basic framework for analysis of server and storage inventory and computation of the business case for replacement. The approach has been developed to provide a packaged assessment offering a rapid assessment of systems capability. The method involves a short consulting engagement which:
Investigates and analyses a client’s UNIX and Wintel server environment, and develops technical solutions and business cases for IBM solutions, migration services, and architecture services.
Must be sponsored by senior IT management.
Is completed in 2-3 weeks elapsed, including a 5-day intensive study.
Usually has two experienced IT consultants executing the engagement.
The first stage in the Zodiac approach is to obtain an appreciation of the current state. Capturing and understanding the existing costs is key to formulating the solution business cases. Where detailed data is not available, then estimates, assumptions, and rules of thumb are used. Information assimilated by the study encompasses:
Collecting or estimating server inventory data from multiple sources.
Collecting or estimating server utilisation and availability data.
Gaining an understanding of the major application or functional characteristics including current function, volumes, and utilisation.
Collecting or estimating IT service delivery people and ratios, including initial breakdown using the organisation chart.
Collecting or estimating standard IT expenses and agreeing ‘standard’ costs for hardware, software, and staff.
Validating and analysing server data using inventory, technical estimates, and baseline cost data.
The server inventory data is loaded into the Zodiac workbook, and servers are classified accordingly. A range of server attributes which can constrain opportunities for consolidation are identified, which then form solution targets. In addition, support costs can be identified and allocated to servers at different levels of refinement. From all the data a detailed picture of the current server and storage environment is achieved showing the current capacity and workload for any group of servers defined by a combination of boundaries, together with the associated costs.
Figure 7.1.2: Zodiac Output
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From this analysis it is possible to identify groups of servers with a significant server count and where the total workload is only a small proportion of the available total capacity, which are selected as appropriate targets to build solution business cases, including implementation and migration costs. The Zodiac output is made available to the customer using the workbook, an example is shown in Figure 7.1.2.
Intel’s Managing IT for Business Value Capability Maturity Framework The framework is a matrix of the four main aspects of IT value capability: managing the IT budget, managing the IT capability, managing IT for business value, and managing IT like a business on one axis and the maturity levels on the other, with the intersections indicating the level of maturity for each key facet. Level one is indicative of no mechanisms in place for measurement and control, whilst Levels two to five indicate varying degrees of business value capability.
Maturity Levels
Major Strategies Managing the IT Budget
Managing the IT Capability
Managing IT for Business Value
Managing IT Like a Business
Sustainable Economic Model
Corporate Core Competency
Optimised Value
Value Centre
Expanded Funding Options
Strategic Business Partner
Options and Portfolio Management
Customer/Service Focus
3. Defined
Systemic Cost Reduction
Technology Expert
ROI & Business Case
Customer/Service Orientation
2. Repeatable
Predictable Performance
Technology Supplier
TCO
Technology/Product Focus
5. Optimising
4. Managed
1. Initial
Beginning
Figure 7.1.3: Managing IT for Business Value Capability Maturity Framework
(Source: Intel)
The managing the IT budget portion of the capability maturity framework allows management to appreciate the varying levels of sophistication required in managing the IT budget. At Level one there are no formal budgeting processes in place with no clear owner and little or no tracking in place. Organisations without a formal budgeting process are probably the exception, although many are based on spreadsheets and done once a year without any continual process to enable progress to be monitored. Level two identifies those organisations that have progressed to a defined budget, which is continuously monitored and predictable. This consistency is an important characteristic in gaining the respect of the financial director. Moving up to Level three indicates that the IT department has deployed processes that enable the reduction in the unit cost of IT services. Whilst Level four determines that alternative funding sources other that from the enterprise have started to be employed. This can include usage fees, funding from other divisions, and payments from partners. Finally, Level five identifies organisations that have reached a sustainable financial model for the IT budget. The five levels of maturity for IT capability start at Level one where there is no formal IT presence, where a silo’ed approach predominates with users purchasing and supporting systems on their own. Level two indicates that the IT department is treated, as an external supplier having no strategic input into the organisation, and with the IT department very much a cost centre. On reaching a maturity level of three the organisation has gained a reputation of providing quality services where the users are confident enough to ask the IT department for a solution rather than implement an ad hoc solution. Level four builds on this respect with the IT department seen as a strategic business partner with IT management often involved in strategy discussions with senior executives. Level five identifies that IT’s capability is so important that it is perceived as being critical to the success of the organisation.
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IT business value capability maturity at Level one is shown by a lack of processes to deal with IT investment decision-making where the strong out manoeuvre the weak, regardless as to the relative merits of each initiative. Whereas this is all right in small organisations the problems it creates in the large and complex enterprises are numerous. Level two sees organisations using Total Cost of Ownership (TCO) as a key area of focus with the cost and quality of services rather than value the main consideration. Those organisations moving up the maturity scale at Level three have begun to look at the value that can be generated from IT investments with a swing to the use of Return On Investment (ROI), business cases, and a formal IT governance process. At Level four, organisations are employing a more sophisticated approach for comparing and monitoring IT investments that includes Portfolio Management and other value management mechanisms. Whilst Level five indicates that organisations have become systematic in their approach to assessing optimal value, using performance management techniques to include risk and alignment in the decision-making process. Maturity in managing IT as a business is signified at Level one by the IT department, concentrating purely on the technology aspects with nothing much in the way of asset or cost management systems. Move up the capability levels to Level two, which sees the adoption of basic cost and asset management processes, although the IT department remains focused on technology. At Level three there are the beginnings of becoming customer-oriented, providing services that a client requires rather than implementing technology solutions and surveying users to gain feedback on performance and future requirements. On reaching Level four the IT organisation has deployed chargeback mechanisms and measurable customer service processes. Level five sees the IT department with strong stakeholder focus and good alignment with value drivers. For enterprises having difficulty deciding on a way forward, Intel’s Managing IT for Business Value Capability Maturity Framework, can offer a way of understanding current competence and provide a road map for improvement. Butler Group advocates that organisations start the deployment of tactical solutions to achieve level three, as soon as possible, and have plans to reach Levels four or five, in all capability areas over the next two to three years.
SeaQuation Approach SeaQuation advocates an approach combining multiple disciplines to provide an holistic view of an enterprise’s IT Portfolio, including both risk and return. Most organisations are under increased stakeholder scrutiny, greater demands for governance, and IT management are expected to deliver more with less. This makes understanding the financial investment and the risk in an IT Portfolio of even greater significance. The approach includes a collection of analytical and actuarial techniques to quantify IT investments so that strategies to deliver value to the enterprise, customers and stakeholders can be developed and sustained. A benchmarking data repository containing empirical evidence on several thousand live and completed projects backs up SeaQuation’s methodologies and metrics. SeaQuation’s ING parentage means it employs Financial and Actuarial Economics to measure the real returns on IT investments. A Capital Asset Pricing Model is used to determine the risk-adjusted yield of IT investments against the expected return of other asset classes within the investment portfolio. SeaQuation’s approach provides a common denominator allowing valid comparisons between the cost, benefit, and risk of each of the investment categories and to estimate the opportunity cost. Anticipated returns must always be related to risk, with the higher the risk the better the return that should be generated. To start with, an understanding of the size and shape of the total portfolio is required. This can be straightforward for a single organisation but it can be rather more problematical for large multi-national entities. However, it is important to gain a complete picture of the portfolio to make sure that the appropriate resources are prioritised towards those projects that are likely to deliver real value. Ideally, the portfolio should consist of currently approved projects as well as those making the way through the approval process. This provides better visibility, improves resource allocation, and enables proper monitoring.
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Figure 7.1.4: Integrated Approach
(Source: SeaQuation)
Mandatory projects consume resources and are in most instances given priority in order to meet regulatory or other imposed deadlines. It is essential to have an understanding of the impact that these projects have on the delivery of the rest of the portfolio. From a governance and value viewpoint most of the interest will be on the discretionary projects, although it is important to bear in mind that the delivery of value is reliant upon the successful deployment of all projects. A key aspect of Portfolio Management is understanding the amount of value creation a discretionary project is expected to contribute to the organisation. However, the situation will change during the lifecycle of a project, which could impact the original assumptions in the business case. There needs to be a process of continual assessment, SeaQuation suggests on a monthly basis, during the development phase of projects feeding into the financial, risk and other relevant components of the business case. This ensures that portfolio management and governance utilises the most up-to-date information. The approach uses, amongst other tools, the cumulative NPV graph illustrated in Figure 7.1.5 to show value creation (and potential destruction) within the IT investment portfolio. In this illustrative example from a total of nearly 100 optional projects, positive value is expected to be obtained from around half, and fewer than 20 will deliver 80% of the positive value in the portfolio. On the downside, there are around 30 projects that look to be delivering zero or negative value. In this situation SeaQuation would propose two actions: 1. Review all negative NPV projects to determine whether they should be cancelled, rationalised, or rescoped. Management must be prepared to take appropriate action on those projects that are not performing. This is essential if proper governance is to be achieved. 2. Ensure that the main projects are properly resourced and managed, to make certain they will produce the intended value.
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Figure 7.1.5: Example Cumulative NPV
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(Source: SeaQuation)
SeaQuation believes ensuring value is obtained from investment in IT is an essential element of IT governance and the process needs visibility, leadership, and commitment from the top. All types of investment, and IT is no exception, should not be undertaken without understanding the expected cost and the anticipated return, which should always be related to risk. To make sure the whole process works and becomes part of organisation culture it is essential to establish proper tracking mechanisms and it is crucial to make active portfolio management part of the enterprise.
7.2 CASE STUDIES Intel – BVI Adoption The Business Value Index (BVI) has assisted in decision-making activities over a wide variety of IT projects. For example, Intel’s IT Research and Development, Distributed Systems Management (DSM) team, People Systems group, IT Innovation organisation, Customer Services group, and Global Infrastructure teams are using the tool to prioritise project portfolios. A successful initiative prioritised through BVI is the Content Distribution System project, a peer-to-peer middleware services and knowledge management system. Using BVI, the proof-of-concept was prioritised for this project and provided approval for development. Following the successful proof-of-concept, this project has now emerged as a potential next-generation technology for IT. The electronic Content Distribution System (eCDS) project has also utilised BVI. The development of eCDS was appraised before it was integrated into SKOOOL, a national educational portal in Ireland. The preliminary BVI evaluation proved accurate, resulting in a successful implementation. In parallel with SKOOOL, eCDS has also been integrated internally into an e-learning site, and externally at the University of Reading, as part of a pan-European, e-learning educational initiative. The Telecom and Call Centre Services (TCCS) group in Intel’s IT Global Infrastructure organisation, recently adopted BVI into the business process. TCCS is responsible for infrastructure projects funded by IT and for pay-per-view projects financed directly by IT customers. The group wanted a method to help prioritise the diverse projects and make the right investment decisions. In light of the recent economic environment, prioritisation became an even more important process in business management.
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TCCS turned to BVI as a potential tool to help solve these prioritisation dilemmas. A group composed of TCCS managers and project managers studied the BVI tool and started a pilot effort that evaluated whether BVI would fit business requirements. The group selected a set of current and potential future projects for the pilot and used the BVI tool to conduct assessments. As the pilot concluded, the group conducted a survey to gather feedback. The pilot team found the BVI tool valuable in helping them understand and assess the business impact of projects and communicate that information more effectively to customers. The tool also helped the team better prioritise projects. The team commented that the time spent going through the process was well invested. The group presented their findings to senior management, resulting in adoption of BVI as part of ongoing business processes. Every project request is now associated with a BVI assessment before consideration for funding approval.
Microsoft – Isle of Man The Isle of Man is a self-governing dependent territory of the Crown, which is not part of the United Kingdom, serving a population of more than 76,000. The Isle of Man Government (IoMG) was running a number of disparate platforms. This was complicated to manage, and was preventing the Government from fully achieving its e-government objectives and compromising the high-level of service it wanted to deliver to its citizens. The IT infrastructure was reviewed as part of its Joined UP Information for The Electronic Resident (JUPITER) programme. This review identified the need to standardise and consolidate on a common platform to reduce complexity and cost, and enable its small IT team to better support the organisation in more value-add areas. The Government has 200 application servers spread over multiple locations. The eventual aim is to put these into two data centres through physical, and then logical, consolidation. The recommendation was the need to move from its disparate platform mix of operating systems, UNIX, Novell, and SUN, and standardise on a common platform based on Microsoft Windows Server 2003, running mainly on Unisys ES7000 and ClearPath servers. Microsoft and Unisys plan to complete the work by 2006, with the objective of improving security, reducing costs, and enabling quicker deployment of systems. The ultimate goal is to provide citizens with more value through the availability of enhanced service delivery, and ensuring that they receive a superior customer experience. The IoMG wants to make the services it offers to individual citizens and businesses seamless and more joined up, to ensure the continued economic growth and prosperity of the island.
Microsoft – Tesco Tesco is the leading supermarket in the UK with over 15 million customers shopping in its stores every week in the UK. The retailer continues to explore new ways to improve store operations and the customer experience. In market share and sales, it is outperforming rivals and is leading a revolution in retail, by placing the customer at the heart of its every day operations. Tesco has just replaced its in-store delicatessen, butcher, fish, and bakery weighing scale infrastructure with a new system. Scales have a two-fold role, to provide the customer with accurate pricing information and to capture data. Tesco was experiencing problems with its scales, as they were slow, provided no timely information on what was sold or staff productivity, required lots of maintenance, and training staff to use them was difficult. Tesco wanted an intelligent counter scale system that could be managed centrally, would provide a wide range of product and stock information, was easy-to-use, and, above all, was reliable. Any new system had to easily integrate with Tesco’s existing IT infrastructure, and provide timely summarised data to the head office for analysis and supply real-time purchase information to other systems. Tesco asked Conchango to design and implement an intelligent counter application. The vendor used the Microsoft .NET Framework to create the scales applications, and deployed Web services and Microsoft Message Queuing (MSMQ) to share data between the server systems.
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The system enables counter staff to serve customers much faster, and access product information through a touch screen with a series of icons representing products. Product information can be updated at any time and staff can easily answer questions about the products. The system also records information key to management processes, such as stock availability, and provides summarised information to Tesco head office. The deployment of this kind of innovative solution can provide added value through enriching the customer experience, a key organisational value driver for Tesco, and also by improving knowledge capital.
SAS – Belgacom The efficient management of IT equipment is vital to achieve business success. This is particularly true when the IT infrastructure is as large as that at Belgacom, Belgium’s principal telecom operation, where accurate and complete information about capacity usage systems is essential for proper management of the company’s business activities. With more than five million telephone connections, Belgacom is Belgium’s communication market leader. Its key businesses include voice and data transmission, managed solutions, Internet applications, and mobile communication. To support such a wide variety of activities, Belgacom relies heavily on an efficient IT infrastructure. The company’s IT department employs more than 400 people and has 17,500 PCs installed at 250 supported sites, 200 UNIX servers, 500 Windows servers, and a total storage capacity of 165 Tb across its entire network. One aspect of Belgacom’s IT infrastructure that was ready for optimisation was its capacity management. Knowing exactly how much and when any part of the IT infrastructure was being used allowed the identification of significant saving opportunities. Before any reporting solution could be successfully implemented, Belgacom first needed to determine the capacity usage of the hundreds of computers and servers at its offices. The SAS IT Resource Management solution gathers all of the relevant data and stores it on a central server in Belgacom’s IT hierarchy. This data is then combined with standard database configuration information to create a data warehouse. Once that is completed, the reporting tool embedded in SAS IT Resource Management can mine the warehouse and present clear reports to the user. The SAS application complements the Belgacom approval process for new IT projects. Previously, when a new IT project was given the go-ahead, team leaders began purchasing the necessary new hardware for the projects. Now before procurement is started approval from the capacity manager is required. The capacity manager studies the IT project and determines whether it is possible to deliver hardware from unused or available capacity. If so, it is incorporated, eliminating the inefficiencies and unnecessary costs associated with the purchase of new equipment. This new measurement methodology was in place for under a year and in this timeframe Belgacom calculated savings of at least €3.9 million.
SAS – Sanpaolo IMI Group The Sanpaolo IMI Group is Italy’s third-largest commercial bank, with 7 million customers, 3,000 branch offices, 45,000 employees, and total assets of €213 billion in 2004. Its business growth has been achieved through organic growth, as well as mergers and acquisitions, the most prominent of which were the merger between Sanpaolo and IMI, along with subsequent merges with Banco di Napoli, and Cardine.
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As for all large, publicly listed financial institutions, it is very important for Sanpaolo to make its business activities transparent, something its IT department is also embracing. The company believes that IT must proactively demonstrate its own value, which means not only capturing the information flowing in and out of IT systems, but also capturing information about the performance of the IT systems themselves. To achieve this objective, in 2002 Sanpaolo embarked on an IT governance project and selected SAS IT Management Solutions for the implementation. The solution enables Sanpaolo IMI’s IT function to control internal and external Service Level Agreements (SLAs), resource management, economic and time management. The company found that SLAs brought commercial disciplines into IT management. Although, making these commitments in the first place is a two-way process that must involve the client; both parties have an interest in agreeing to service levels. This has brought about a culture of responsibility and accountability on both sides, with Sanpaolo IMI’s 2,000 IT service providers now owning the problems and having an incentive to act on them, or solve them before they arise. This greater transparency boosts employee morale and performance, facilitates business partnerships, and will help Sanpaolo IMI to attract and retain consumers and investors. The company’s experience also demonstrates that greater transparency can help reduce costs.
Telelogic – Swedbank Cost will always be a factor when deciding on project investments, but it is no longer the only aspect, in today’s intensely competitive financial services world, market leading firms need to consider much more. This includes the importance of managing value throughout the Project Portfolio Management (PPM) process to maximise ROI and improve competitive advantage. This was a consideration for Swedbank one of the largest banking groups in the Nordic area with around 15,000 employees, and about 8 million private customers in Sweden and the Baltic States. The inability to make rapid decisions based on prioritised information can inhibit a company’s development effort driving up costs, missing market opportunities, and severely impacting both revenue and competitive advantage. The company embraces a strategy that makes it possible for most business decisions to be made at its local banks by the people who best understand the customers banking needs. The institution recognises that this makes for efficient, decentralised banking, and it supports a vision for collecting new project ideas in a the same way. Accordingly, the various personnel from the local banks register their new proposals for business and IT projects in Focal Point using a standardised template that is easy-to-use and covers all the relevant areas. Using the Focal Point solution, Swedbank now creates proposals that focus on business aspects, rather than technical aspects. The solution collects and monitors information, such as business value, strategic value, and risk. Focal Point automatically calculates business metrics, such as NPV, ROI, and nominal accumulated cost and value, which are related to the requirements and business goals. All financial information is aggregated and displayed on a user-configurable dashboard. Focal Point’s built-in business rules continuously monitor the business metrics and automatically notify the appropriate users of deviations from expected project behaviour throughout the development process. This way, problems are identified and dealt with before they ever become issues. By adopting the Focal Point Platform and using its prioritisation, decision-making, and planning capabilities to determine what is most important to its customers, Swedbank believes it is gaining a competitive edge over other financial institutions that still base their important project decisions purely on cost.
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7.3 IT COST AND VALUE FRAMEWORK Measuring IT costs and value embraces the entire IT environment and is therefore difficult to condense into a simple framework and in many respects should be embedded in IT Management and Governance processes, and not be a method in its own right. However, it is important to identify the key techniques and approaches to enable IT management to ensure that the right concepts and techniques are being used by the relevant roles within the organisation. The framework is not intended to be prescriptive but is provided as a guide to those who wish to improve measurement of IT cost and value. Butler Group cautions against identifying too closely with frameworks that are pyramid in nature, with strategic initiatives at the top and infrastructure at the bottom, sandwiching management and applications in between. Whilst, this equates to the investment currently apportioned to each area, they do not cater for the fact that on occasions, the organisation strategy could be to focus on cost efficiencies with investment directed at IT services or ‘Run the Organisation’ initiatives.
Figure 7.3.1: IT Cost and Value Model The most important aspects of measuring IT cost and value are transparency and visibility, this is reflected in the framework by the central feedback loop connecting all the IT organisations and stakeholders. Communication channels are key if the IT department is to become a strategic partner and understand the value drivers of the organisation. The techniques and mechanisms to achieve this have been documented elsewhere in this Report, but suffice to say that the most important methods, such as benchmarking, business cases, Balanced Scorecards, and dashboards, all help to communicate the performance measures. The framework also highlights that at the centre of successful measurement processes are methods such as, IT governance, Performance Management, and Enterprise Architecture, along with the utilisation of an integrated toolset linked to a common repository.
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Technology Management and Strategy Report
SECTION 8: Vendor Profiles
Butler Group a Datamonitor Company
www.butlergroup.com
Measuring IT Costs and Value
Accenture Strategic Information Technology Effectiveness (SITE) SITE is an Accenture group that helps top management achieve greater business value from IT. It has the clear perspective that IT is not merely a cost but a critical contributor to the business, focused on improving business value and performance. When it comes to managing IT, balancing the ‘cost reduction versus value creation’ equation is critical. Accenture’s SITE practice focuses on improving the business value of IT. It says that its professionals are experienced with bold, value-creating approaches to IT, bringing boardroom-relevant criteria to IT investments, and helping high-performance businesses to ‘think bigger’ about IT’s ability to improve operating results. To help senior executives in this effort, Accenture’s SITE practice has developed an approach to IT that addresses the factors that determine how a company uses IT successfully to create shareholder value. Accenture’s specific services include:
Focusing the IT Debate on Creating Business Value – Using boardroom-relevant metrics and recognised diagnostic tools, Accenture transforms the IT debate from “utility” to “value creation.”
Creating Powerful Propositions for IT-enabled Change – The company works with senior management teams to frame the business rationale for significant change where IT is a major component.
Optimising the IT Investment Agenda – Accenture’s experts devise clear investment roadmaps to help companies balance short and medium-term investment agendas, appropriate for the economic climate.
Transforming IT to Deliver Improved Capability and Business Results – It delivers a comprehensive approach to transforming the IT organisation for better business performance.
Company Profile Accenture (NYSE:ACN) is a global management consulting, technology services, and outsourcing company, committed to delivering innovation. It collaborates with its clients to help them become high-performance businesses and governments. The company says that with its deep industry and business process expertise, broad global resources, and a proven track record, Accenture can mobilise the right people, skills, and technologies to help clients improve their performance. In the 12 months ended 31 August 2004, it achieved net revenues of US$13.67 billion for the fiscal year. With more than 110,000 employees, which includes approximately 2,300 partners, Accenture has global reach with more than 110 offices in 48 countries, in three geographic regions of the Americas, Asia-Pacific, and Europe/Middle East/Africa (EMEA). Accenture – United Kingdom 1 Kingsway London WC2B 6XD UK Tel: +44 (0)20 7844 4000 Fax: +44 (0)20 7844 4444 www.accenture.com
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Alinean Alinean IT Value Management (ITVM) Alinean IT Value Management (ITVM) solutions comprise a software toolset designed to create third-party validation for Return On Investment (ROI) calculations on IT investment. ITVM provides a framework that allows for a common understanding of IT spend, and for measurement of the effectiveness of an Enterprise’s IT Budget against vertical market competition. The changing roles of the CIO demand closer understanding and reporting between IT and the rest of the body corporate, and ITVM has the functionality required to make this possible. With its form-based methodology, and numerous templates for project scenarios, it can start providing value from day one. The cost is such that there is little risk involved in putting the product through its paces, and it would be surprising if any implementing organisation did not want to extend the use past a pilot project. The depth of analysis available and the algorithms and methodologies used, make ITVM a strong contender to become an accepted standard for all organisations. More than ever, CIOs and IT Executives are being tasked with proving the impact of IT spending on the bottom-line, and justifying the value of each planned investment. To meet these challenges, Alinean has developed a complete budget and planning platform to help IT executives create and build bullet-proof project ROI and budget plans – and quantifiably prove the value of IT investments. The suite includes: ROI Analyst™- Enterprise Alinean says that over 80% of companies require ROI and Total Cost of Ownership (TCO) analysis on projects, yet most do not have the knowledge base, staff capability, and third-party references to do so effectively and credibly. ROI Analyst™- Enterprise, delivers tools to make ROI and TCO analysis easy for those without financial expertise, but able to withstand CFO scrutiny. The ROI Analyst™- Enterprise solution provides the standard platform for Enterprise collaboration on IT project ROI, TCO, and budget analysis. It uses a library of ROI templates and worksheets to help IT executives, project managers, and business unit managers to quickly develop and analyse the costs, benefits, and risks of any planned projects. ROI Analyst™- Enterprise aids in the evaluation and justification of project plans by providing answers to the following questions:
What is the ROI and Value of each planned project?
What are the project’s strategic benefits and potential risks?
Which proposed projects have the best returns, highest strategic impact, and lowest risk?
How can all stakeholders better collaborate, communicate, and rationalise decisions more effectively?
What impact will the portfolio of proposed projects have on budget and corporate financials?
How can IT prepare compelling presentations and prove value?
PeerComparison™- Enterprise The Peer Comparison™- Enterprise tool analyses how a company’s financial performance and IT spending compares with more than 20,000 publicly held companies worldwide, in more than 400 different industry segmentations. The analysis is used as the basis for SearchCIO’s 200, and used by CIOs worldwide to help maximise returns from their IT investments. Peers can be selected by industry, company size, revenue, geography, or name. By comparing the company’s IT spending and performance to benchmarks in over 400 key IT spending and financial performance criteria, all stakeholders are better equipped to identify highest areas of opportunity, establish meaningful spending plans, justify planned projects, prove value, and drive competitive advantage.
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It benchmarks an organisation’s Return On IT (ROIT™), Financial Performance, IT spending, and TCO to uncover opportunities and prove value by answering the following questions:
How does IT spending compare to peers?
How does the overall value derived from IT compare with its nearest competitors?
What opportunities exist for savings or improved performance?
ValueExpert™ Services Alinean provides both Advisory, and Collaboration and Validation Services to assist enterprises in delivering what it terms Business Performance. Advisory Services comprise:
ValueExpert™ Decision Support Services – this one-five day mandate leverages Alinean’s independent research and a team of its IT ROI value experts to produce or validate a complete business case analysis of IT investment decisions.
ValueExpert™ Decision Workshop – a hands-on, action-learning workshop around a specific IT investment decision. The workshop includes instructor reviews and debrief.
ValueExpert™ IT Performance Benchmark Reviews – Alinean ValueExperts provide an assessment of an organisation’s IT spending effectiveness relative to a select set of up to 12 industry peers and best practice companies from the company’s database of over 5,000 organisations globally. The analysis includes Gap analysis against Peer Universe and industry averages, Identification of “hot spots”, and recommendations for IT investment re-prioritisation and re-alignment.
ValueExpert™ Success Assurance – Alinean’s subject matter experts provide deployment and adoption assistance, project management, and ongoing feedback, to ensure that an organisation proceeds towards Value Management best practices and self-sufficiency.
Collaboration and Validation Services include:
ValueExpert™ Secure Hosted Collaborative Environment – where the company’s Value Experts instantiate ROI Analyst™ IT Value Measurement solution in a secure, hosted environment that an enterprise can use internally or to provide managed access for project-based collaboration with technology partners and vendors.
ValueExpert™ Validation – Alinean Value Experts provide an additional degree of confidence based on Alinean independent Value Experts’ review of business case assumptions and vendor (or collaborative) business case recommendations.
ValueExpert™ Content Development – where Alinean Value Experts work with an enterprise’s subject matter experts to develop highly relevant and complete value measurement models, based on Alinean’s independent research and real-world metrics.
ValueExpert™ Business Performance Integration Services – where Alinean leads a co-operative effort with an organisation and its Business Performance Management technology partners and consultants, to deploy a fully integrated total lifecycle IT value management system for ongoing measurement and continuous improvement.
Company Profile Alinean is a privately owned company headquartered in Orlando, FL. The team behind Alinean IT Value Management (ITVM) created the first TCO and ROI software tools company, Interpose, in 1994, and this was subsequently sold to Gartner in 1998. Alinean employs a number of people from the consulting/analyst community to provide the insight needed to provide required functionality. It employs up to 30 people, all in the US, and it sees future growth for the company based more on partnerships, with internal staff mainly dedicated to R&D. As a private company, Alinean is not prepared to divulge any financial information, but it states that it is profitable, and that 90% of its revenues come from the US market.
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Key clients using Alinean IT Value Management (ITVM) IT include:
Deutsche Bank.
JP Morgan Chase.
HP.
SAP.
IBM.
Sun.
Alinean 13501 Ingenuity Drive Suite 212 Orlando, FL32826 USA Tel: +1 (407) 382 0005 Fax: +1 (407) 382 0906 E-mail:
[email protected] www.alinean.com
Artemis International Ltd. Artemis Solutions for Information Technology Management Artemis IT Management (ITM) offers a highly customisable, guided process for constructing a performancebased budget, which can be as simple or as sophisticated as required, to fit the needs of the organisation. The required budget can be built up on a project and asset basis, and then funds can be allocated from different departments or other funding sources. The proposed portfolio can then be scaled to reflect the budget available, and go through an arbitration phase prior to final publication. The budget plan can then be transformed into an IT operational plan, and achievement and expenditure against budget can be reviewed on a continuous basis, with budgets being dynamically reallocated if required, to meet changing priorities. Artemis ITM also maintains a perspective over the life of multi-year projects, so that any changes are reflected into future periods. The Artemis ITM solution helps IT executives establish effective IT governance over both strategy and execution by providing increased visibility and improved decision-making techniques associated with a dynamic budgeting process to enable realignment of expenditures. This is achieved via a unique top-down and bottom-up solution, which associates Project Portfolio Management with Dynamic Budgeting, Project Monitoring, and Resource Management. To cut-down in implementation time while ensuring effective results, this fully Web-based solution provides a set of pre-defined deliverables specific to IT business issues:
Recommended portfolio and IT process.
Cost and benefit structures with immediate graphical representation.
Typical investment categorisation for analysis and prioritisation.
Standard investment lifecycle stages.
Suggested user roles with security access rules.
Pre-configured reports and scorecards based on industry standards and best practices.
Standard implementation approach including an assessment step designed to evaluate the solution against specific needs.
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The pre-defined solution approach, combined with a phased implementation, allows tangible benefits to be achieved in a short time frame. Artemis says that based on feed-back from its customers, the Artemis solution allows IT organisations to achieve:
Improved visibility and alignment of IT investments with the business strategy to better support the organisation’s objectives.
Common ownership of the investments between IT and the business through a standardised justification process.
Improved accuracy and speed of budgeting process for better allocation of capital and resources.
Better reaction and decisions in dealing with unplanned initiatives.
Intelligent cost reduction by identifying IT investments and assets that bring insufficient value.
Alignment of investment planning with execution to ensure benefits achievements.
A particular strength of the Artemis solution is its ability to provide multiple analyses of the IT portfolio, including graphical views, showing factors such as project risk and reward, technology impact, and business value. Company Profile Artemis International Solutions products are targeted at project, portfolio, and resource managers. The company provides investment planning and control software that helps organisations manage their information technology resources, product development, assets, and investment portfolios through a collaborative workflow management and analytics system. Its software enables companies to plan, budget, and share information about projects or resources through Web-based portals. Artemis targets customers in the aerospace and defence, energy, pharmaceuticals, government, and financial services industries. The company was founded in 1976 and it has refined its experience into a suite of industry-optimised solutions that integrate application modules with packaged consulting services to provide an immediate response to business needs. Solutions can be deployed throughout the organisation to address all the investment planning and control needs including; IT management, new product development, program management, strategic asset optimisation, and detailed project and resource management. With almost 600,000 users worldwide, and a global network covering 44 countries, Artemis has helped thousands of organisations to improve their business performance through better alignment of strategy, investment planning, and project execution. Artemis International Solutions Corporation 4041 MacArthur Blvd. Suite 401 Newport Beach California 92660 USA
Artemis international Ltd. Regus House 268 Bath Road Slough, Berkshire SL1 4DX UK
Tel: +1 (800) 477 6648 Fax: +1 (949) 660 6501
Tel: +44 (0)1753 727100 Fax: +44 (0)1753 727099
E-mail:
[email protected]
E-mail:
[email protected]
www.aisc.com
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Atlantic Global Plc Corporate Vision Corporate Vision encourages service-based organisations to re-examine their fundamental value creation process – in terms of how they allocate and balance human and physical resources against the demands placed upon them, the costs associated with the activities, and the time taken to complete them. To refer to Corporate Vision as an advanced timesheet and PPM solution, whilst not wholly inaccurate, would be to miss the real value it can deliver. Through increased visibility and simplified traceability and management, Corporate Vision is able to foster an altogether more holistic and realistic approach to project management, resource allocation and forecasting, time management, and budgeting and planning – in essence, the foundations of good business practice. The solution is designed for extremely rapid and simple role-based deployment. However, the most difficult part undoubtedly lies in encouraging and managing the cultural change required to get the most out of the product. The approach adopted by Atlantic Global differs greatly from other vendors that market solutions in this area. Atlantic Global aims to deliver a higher level of control and visibility of information, taking the onus away from departmental and project-specific capabilities, to more of an integrated, role-based, businesswide platform. In particular, Corporate Vision provides enterprise resource management functionality, from simple skills management to the real time visibility of resource supply versus resource demand, thereby allowing potential problems to be flagged early on. In the area of project management, Corporate Vision addresses the challenge from one of milestone tracking, rather than the traditional task-based approaches, again with the view of providing better overall visibility and more actionable and relevant information. Key feature areas in Corporate Vision include:
Portfolio Management, which establishes a clear line of sight from the top-level, pan-initiative view right down to the individual project layer, allowing managers and executives to clearly see and understand how effective their strategies are, and if necessary, which programs or projects to review.
Resource Management provides resource managers with the ability to match supply and demand, and clearly demonstrate to the rest of the business where potential shortfalls exist.
Project Management integrates data, projects, resources, and time management, and then acts as a central facility for describing and instilling best practice project management disciplines right into the heart of the business.
Corporate Vision provides service-based organisations with visibility over their resources, projects, and initiatives that is superior to a typical departmental or project-centric approach. In order to achieve this, Corporate Vision blends financial management disciplines with resource management and project management, to give its users a better understanding of what is currently happening. It then builds on this by acting as a role-based platform for proactive planning, more effective resource utilisation, and hence improved profitability. Company Profile Atlantic Global’s head office is in Bradford with satellite offices in London and the US. It currently employs 31 people in the UK, split mainly between Bradford and London, with the following functional breakdown: R&D – 9, Marketing – 5, Sales – 8, Support – 2, Consultancy – 6, Administration – 3, Board – 8 (some overlap with the above). The vendor intends to bolster this headcount with further recruitment in the sales and R&D functions expected. The company was founded by the current CEO, Eugene Blaine, in January 1993, with the specific aim of developing business software products in the time management field. After moderate success, in 1998 the Atlantic Business Suite of software products was launched, which marked the ‘true beginning’ of the company. The company is now publicly traded, following initial listing on the Alternative Investment Market in June 2001.
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The past three years published financial figures are as follows (UK£000’s):
Turnover Gross Profit
2004
2003
2002
2,146
1,956
1,551
850
1,374
927
The forecast for FY 2005 is UK£3.2 million, which if confirmed will indicate extremely promising growth. Atlantic Global has 78 customers, all of which can be referenced, which indicates the company’s confidence in its solutions. These include Barclays Bank Plc, Virgin Mobile, Logica CMG, Norwich Union, Man Group, Telewest, 3 mobile, and Computacenter. Atlantic Global Plc Head Office Park House Woodland Park Bradford Road Cleckheaton West Yorkshire BD19 6BW UK Tel: +44 (0)1274 863300 Fax: +44 (0)1274 865966 E-mail:
[email protected] www.atlantic-global.net
BMC Remedy Remedy IT Service Management Suite Remedy IT Service Management (ITSM) Suite is a fully IT Infrastructure Library (ITIL)-compliant suite to support the IT service function within medium- to large-sized organisations. A fully operational IT service is essential to the majority of organisations today, who rely heavily on high uptime, and excellent service levels – but the complexity of the IT infrastructure means that manual methods of monitoring such services are unlikely to be successful. Remedy provides a highly flexible, user-focused suite of tools that can be customised to suit existing processes, as well as best-practice processes out-of-the-box. Plans to create closer partnerships with other tools vendors will help Remedy ITSM to cover areas, like asset discovery, that depend on such tools at the moment. Larger organisations that have a complex infrastructure to support, and find it hard to determine which areas are causing the most pain, would benefit from Remedy’s ITSM solution. The suite can be deployed in a modular fashion, enabling problem areas to be attacked first. Remedy IT Service Management for the Enterprise is a suite of highly flexible applications from BMC Software that takes a uniquely integrated approach to automating IT service and support. Remedy Help Desk, Remedy Change Management, Remedy Asset Management, and Remedy Service Level Agreements work together seamlessly straight out-of-the-box. Shared workflow, a consistent user interface, and a common platform result in fast implementation, low TCO, and synergy between related ITIL processes, including incident, problem, change, configuration, service level, and financial management. Each application in the suite is part of one or more Business Service Management Routes to Value™ – complete solutions that can be implemented independently for quick ROI but that ultimately function together to deliver business-IT alignment. In addition, along with other BMC Software solutions, each share common infrastructure services, such as, the BMC® Atrium™ Configuration Management Database (CMDB). By operating on this common model of the IT environment, service and support applications and infrastructure management are finally unified.
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Built on the Action Request System® (AR System®) service process management platform, the Remedy IT Service Management Suite provides proven best practice processes to get organisations up and running quickly, and the flexibility to configure and extend processes –without programming. Remedy says that this both improves business effectiveness and lowers TCO. Remedy Help Desk provides the foundation for an integrated, end-to-end approach to IT Service Management, automating the organisation’s ability to submit, monitor, and manage help desk cases, change requests, and asset inventory records. Remedy Change Management enables IT to implement the critical, standardised processes needed to effectively manage enterprise change processes – from request to planning to implementation, to verification. Remedy Asset Management provides best practice automation of IT asset lifecycle management from requisition to retirement, and enables contract entitlement, compliance management, and total cost and financial controls. Remedy Service Level Agreements enables IT to manage the entire range of Service Level Agreement (SLA) processes, from defining SLAs and monitoring compliance, to collecting and analysing performance data, addressing problem areas, and continually refining the services offered. Company Profile Remedy, a BMC Software company, has headquarters in Sunnyvale, California. The company also has major offices in the Asia-Pacific region and throughout Europe, including Paris, Frankfurt, and Milan, with the UK head office in Egham, Surrey. Its parent company, BMC, has headquarters in Houston, Texas, and international headquarters in Amsterdam, The Netherlands. BMC has research and development offices in the US, France, Singapore, Israel, and India. While Remedy has had a long history of profitability and stable growth, having originally been founded in 1990, it went through a period of uncertainty when Peregrine Systems Inc acquired it. Since November 2002, Remedy has found new owners under the wing of BMC Software; however, it retains a strong sense of separate identity, and operates as an independent business unit within BMC Software. Since then the synergies between the solutions provided by both BMC Software and Remedy are growing. BMC Software is quoted on the New York Stock Exchange under the symbol BMC. Customer satisfaction is extremely important to Remedy, and it carries out regular surveys that indicate good rates of satisfaction, resulting from its own help desk service. It also has an Executive Advisory Council made up of major customers, which meets as part of the annual user group conventions and helps to drive future direction. Remedy employs some 800 staff overall. Remedy has in excess of 7,000 customers, including 79% of the Fortune 100, and 83% of the top 100 European companies. Remedy, a BMC Software Company 1030 West Maude Avenue Sunnnyvale CA 94085 USA
Remedy Assurance House Vicarage Road Egham, Surrey TW20 9JY, UK
Tel: +1 408 571 7000 Fax: +1 408 571 7001
Tel: +44 (0)1784 478478 Fax: +44 (0)1784 478479
E-mail:
[email protected]
E-mail:
[email protected]
www.remedy.com
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BMC Software Business Service Management BMC offers a range of solutions that help organisations to optimise IT performance, including the management of enterprise applications, networks, databases, and other infrastructure elements, with a strong focus on the business requirements of the organisation. IT infrastructures have become very complex, and the effort involved in their management can be disproportionate to the business needs – often all applications may be monitored equally when it might be more appropriate to manage business-critical areas more thoroughly, and automate other areas as far as possible. The breadth of management capability is one of BMC’s key strengths, with tools to support both distributed and mainframe infrastructures. There is less focus on the support of internally developed applications, although the underlying infrastructure technologies are well supported. Medium to large organisations with a heterogeneous applications infrastructure, based on more standard industry components, are likely to benefit most from BMC’s offerings. The management of the systems environment has become very complex in most large organisations. Systems impact upon each other, and small changes can have a catastrophic effect if not correctly handled. BMC has developed a very broad suite of technologies to help manage change and speed up delivery in the systems environment, including the following components:
Service Level Management.
Incident and Problem Management.
Infrastructure and Application Management.
Service Impact and Event Management.
Asset Management and Discovery.
Change and Configuration Management.
Capacity Management and Provisioning.
Identity Management.
Business Service Management (BSM) from BMC Software provides an incremental approach to understanding and meeting the specific business needs of enterprises. The company says that with BSM customers can identify the best technology solution to support their business and make the most of their current investments. BMC asserts that faster, more comprehensive and consistent services can be delivered, increasing revenue opportunities, lowering the cost of ownership, and reducing the risk of unnecessary IT expenditures. BMC says that its open approach to enterprise management integrates its best-of-breed products with enterprise’s current structure, and offers proven ways to accelerate IT-business alignment and realise nearterm ROI. BSM supports best practices such as ITIL, so that customers can leverage proven methodologies to assess and optimise their current systems and lower the TCO across their organisations. BMC’s BSM Managed Services deliver best-practice enterprise management as a service, combining the capabilities of BMC Software products with the in-depth expertise of service provider partners and a payas-you-go model. Company Profile BMC Software is one of the largest software providers in the world, and it is a member of the S&P 500. It was founded in September 1980, and has grown both organically and by acquisition since taking on PATROL in 1994, BGS Systems in 1998, Boole & Babbage and New Dimension Software in 1999, Perform SA in 2001, and Remedy in 2002.
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The company has its headquarters in Houston, Texas, with its International division based in The Netherlands. The company has an extensive network of offices throughout the world, and BMC research and development offices are located in the US, France, Singapore, Israel, and India. The company is publicly traded on the New York Stock Exchange [NYSE: BMC]. BMC Software has over 6,000 employees worldwide; 2,200 in sales and marketing, about 500 in professional services, and 2,000 in research and development. Around a third of its employees are in the EMEA region. Total revenues for the last three fiscal years ending 31 March are: Year
2004 (US$ millions)
2003 (US$ millions)
2002 (US$ millions)
1,400.0
1,326.7
1,288.9
BMC Revenues
BMC has approximately 13,000 customers worldwide, including those of its Remedy subsidiary. BMC says that over 80% of the Fortune 500 companies rely on its software products. Key customers for its APM solutions include Corio, Egg Plc, ForeningsSparbanken, UBS, and The Salvation Army. BMC Software 2101 City West Boulevard Houston Texas 77042-2827 USA
BMC Software Assurance House Vicarage Road, Egham Surrey, TW20 9JY UK
Tel: +1 713 918 8800 Fax: +1 713 918 8000
Tel: +44 (0)1784 478000 Fax: +44 (0)1784 430581
www.bmc.com
www.bmc.com/uk
Borland Software Delivery Optimisation Borland’s Software Delivery Optimisation (SDO) programme, its vision for application development, is a natural progression for the company that started with individual productivity products, which progressed to an Application Lifecycle Management (ALM) suite, and now the next level of abstraction melds tools, team management, and methodology. SDO covers the complete path from software inception to product delivery and management. The tools aspect features deep embedding of appropriate functionality for a set of roles: Analyst, Architect, Developer, and Tester; this goes beyond merely having the convenience of a single console for launching tools. Borland’s recent acquisition of TeraQuest, the Capability Maturity Model (CMM) specialist, allows it to offer the spectrum of development methodologies in on-site mentoring and training through its Professional Services division. Borland has positioned itself as a platform agnostic application development enabler, which will appeal to many organisations, particularly at the large enterprise end, seeking to reduce project risk. SDO is designed to enable IT organisations to reduce their software delivery risk by transforming software development into a managed business process. One way it does this is by aligning business stakeholders with software development, and in turn aligning software development with IT Operations. The manifestation of the SDO vision is divided into three projects: Themis, Hyperion, and Prometheus, representing visibility of IT at increasingly higher levels of the business. The various deliverables within these projects are occurring simultaneously, so while the projects are layers of an ‘onion’ model, they are not milestones on one chronology. The first deliverables, designated Core Software Development Platform (Core SDP) Functionality, are as follows (indicating the project source in brackets):
Team-Work Infrastructure (Themis): Role-Based Development, Change Management, Traceability, Artifact Management, Process Management, and Technical Foundation.
Visibility and Predictability (Hyperion): Decision Support.
ERP For Software Delivery (Prometheus): Risk Management.
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There are several unique competitive differentiators in this offering compared to the standalone ALM component products. The Core SDP components provide a degree of integration that was not available before in Borland’s ALM products. So, where previously a common console launched separate tools, on Core SDP the functionality of various tools are embedded at a deeper level within one common console; therefore depending on the role of the user, there is seamless access to functionality. Company Profile Borland (NASDAQ: BORL) has been an application development vendor since being founded in 1983, and by 1992 it had become a leading client/server tools provider. The mid-1990s saw a change in fortunes, but a more recent focus upon the core strengths of the company resulted in the return of the Borland brand and resurgence in performance as well. Financial results for the second quarter of 2004 reported revenues of US$76.5 million. Borland’s corporate headquarters are in Scotts Valley, California, US. Following a series of acquisitions, one of the most high profile of which was the purchase of TogetherSoft, Borland now has around 1,300 employees worldwide. Research and Development, along with distribution, operate on a global scale, with major offices and development teams based in California, Russia, the Czech Republic, and Singapore. The net income, operating, and revenue figures for the last three years are: Year Ending 31 December
2004 (US$ million)
2003 (US$ million)
2002 (US$ million)
309.5
295.2
244.6
Change in Revenue
4.8%
20.7%
10.3%
Operating Income (loss)
18.7
(39.9)
19.1
Net Income (loss)
11.4
(40.5)
17.3
Total Revenue
Borland states that over three million developers in enterprises worldwide, including 25,000 large enterprises and 95 companies in the Fortune 100, are using Borland products in support of their key business applications. Borland Software Corporation 100 Enterprise Way Scotts Valley California, CA 95066 USA
Borland UK Ltd. 8 Pavilions Ruscombe Business Park Twyford, Berkshire RG10 9NN, UK
Tel: +1 831 431 1000 Fax: +1 831 431 4321
Tel: +44 (0)118 924 1400 Fax: +44 (0)118 924 1401
E-mail:
[email protected]
E-mail:
[email protected]
www.borland.com
www.borland.co.uk
Business Engine Business Engine Network™ The Business Engine Network™ (BEN™) is an integrated business and project portfolio management system, for use in solving complex portfolio, financial forecasting, and project and resource management issues. It is a single, integrated process and technology framework that improves information visibility, and better supports related workflows and business processes. It addresses the requirements that organisations have for rapid decision-making by enabling them to align projects, people, and partners with corporate objectives. BEN customers typically replace several disparate legacy systems because the BEN provides a critical three-way linkage between project data, budget data, and resource information, integrating all project-related information in a single collaborative Web-based solution.
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The BEN is a single environment for IT planning, financial governance, and operational execution. IT organisations use the BEN in partnership with the business to:
Select work in concert with strategic objectives with the BEN Alignment Engine™.
Invest to maximise return with the BEN Financial Engine™.
Execute project portfolios with speed and efficiency with the BEN Delivery Engine™.
Leverage corporate knowledge with the BEN Platform™.
With the BEN, IT executives can better understand their portfolio of projects, make informed decisions faster, get project teams on the same page for increased performance, and interact more effectively with project sponsors and customers. With a clear understanding of investments and performance, IT executives are therefore able to run their organisation like a business – continually working with business leaders to ensure IT investments are aligned with the highest performing business opportunities. BEN has been built on the principle that it must drive five primary value propositions that support IT governance. These comprise:
Align Business Strategy and Execution – This involves integrating executive guidance for portfolio and financial plans, aligning sponsorship, and project-level execution to ensure that the correct work is carried out.
Plan and Execute Effectively and Efficiently – workflows should be standardised and business processes automated to speed up the rate of work.
Leverage Resources – Resources need to be managed across the enterprise to ensure that the appropriate resources are used including people, partners, money, and assets.
Make Global Teams More Productive – Information should be shared and reused, as well as work products and templates.
Improve Visibility and Control – The objective of this is to gain organisational transparency so that problems can be identified and solved before they impact on the organisation.
The above propositions are fairly obvious requirements of a business and project management solution and Business Engine claims that BEN supports all of these. An area of strength is the integration with Microsoft Project. BEN embeds Microsoft Project within the solutions, enabling bi-directional transfers of data. Implementation services can be carried out by internal Business Engine consultants, Business Engine thirdparty implementation partners, or client-preferred partners. Training is generally performed as part of the implementation process, with Business Engine preferring the training-the-trainer approach. Support is provided through two Global Support Centres located in Ontario, California, US and Brussels, Belgium. Round the clock support is provided through the opening hours of the two centres, which means that when one centre is closed the other centre can provide support. BEN supports MS SQL Server or Oracle. It runs on Windows NT 4 or 2000, and UNIX platforms that are TCP/IP enabled, such as Sun Solaris, HP-UX, or IBM AIX. The BEN supports the following client operating systems for data entry and retrieval: Windows XP Professional; Windows NT 4.0 Workstation with Service Pack 6a; Windows 2000 Professional; and Windows 98. Company Profile Founded in 1985, Business Engine is headquartered in San Francisco, California, US with offices in New York, Ontario, and Dallas in the US, London, UK, and Brussels, Belgium, in Europe. There are currently 140 employees. It is a privately held company. There are 36 installations of BEN with over 70,000 users comprising Global 2000 companies across the financial Services, Telecommunications, and Retail and Manufacturing sectors, who use it primarily for managing their internal IT, engineering, and Research and Development project or product portfolios. Key clients include Merrill Lynch, Deutsche Bank, Tesco Stores plc, and Horizon Blue Cross Blue Shield. The company has a total customer-base of over 400.
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Headquarters Business Engine 100 Bush Street, 22nd Floor San Francisco CA 94104 USA
UK Office Business Engine 37-39 Kew Foot Road First Floor, Richmond Surrey, TW9 2SS UK
Tel: +1 (415) 616 4000
Tel: +44 (0)208 614 9390
www.businessengine.com
www.businessengine.co.uk
Computer Associates International Inc. (CA) CA’s Business Service Optimisation (BSO) solution is aimed at the strategic alignment of IT with business goals and objectives. The company says that managing IT as a business and delivering the right level of service to customers, partners, and employees is critical to meeting the demands on enterprises in a costand resource-effective manner. Its BSO solution enables the definition and management of business and IT processes, the prioritisation of projects, assets, and resources according to business priorities, and the delivery of IT as a service to the business with service level commitments and associated costs. CA says that this helps enterprises deliver the most value from existing resources, align IT with the business, and ensure that compliance, financial, and service level objectives are achieved. Its IT Governance solutions include:
Project Portfolio Management with Clarity by Niku.
IT Asset Management comprising Unicenter Asset Management, Argis Asset Portfolio Management, and Unicenter Asset Intelligence. All Unicenter ITAM solutions have been fully integrated to allow the automated discovery and management of IT assets throughout their lifetime, from request to procurement, to allocation, to retirement and disposal. They deliver a number of disciplines, including inventory discovery, allowing an organisation to understand the IT assets that it holds. Once these assets have been discovered, it is important that they can be centrally controlled, and this facility is also included. In order to have an appreciation of the cost of assets, an organisation needs to know how much is being spent on its IT assets – money already spent, money that is currently being spent, and the future spending intentions. It incorporates contract and vendor management, negotiation support, lease management, asset replacement planning, and software licence management
IT Financial Management through Service Accounting, CA-NeuMICS, and CA-Jars. Unicenter® Service Accounting provides organisations with detailed financial analysis information based on activities completed and resources utilised, including service usage information in monetary terms for reporting, budgeting, and financial planning purposes. Unicenter NeuMICS Resource Management Accounting and Chargeback Option utilises the breadth and comprehensive detail maintained in its data repository, enabling the customer to decide on the accounting strategy it wants to deploy and what rates it wants to apply. CA-Jars identifies and equitably distributes IT costs to cost centres and development projects. It also provides a means of comprehensively determining their financial impact on the enterprise’s bottom line.
Software Change Management with AllFusion Harvest Change Manager, AllFusion Harvest Endevor, and AllFusion Harvest Enterprise Workbench. CA’s Software Change Management (SCM) solution delivers centralised and integrated control to automate and govern change processing across the enterprise. It aims to speed deployment, lower cost, and provide insight and accountability to management regarding application development and maintenance. It also automates the collection and analysis of information across multiple platforms for better visibility and decision-making, and helps meet regulatory compliance obligations
Service Management through CA’s range of Unicenter Service and ServicePlus products. CA Service Management solutions provide the ability to deliver expected levels of service and support to maximise business performance. The company says that they help customers quickly resolve incidents and problems, control changes, manage resources, and monitor to service levels. To assist in the prioritisation of management, reduce costs, and increase efficiencies, these solutions map IT infrastructure to business processes and automatically detect, diagnose, repair and recover complex problems across the entire technology stack, supporting critical business applications and services.
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Company Profile CA International, Inc. (NYSE:CA), positions itself as the world’s largest management software company. It delivers software, and services across operations, security, storage, life cycle, and service management to help organisations optimise the performance, reliability, and efficiency of their enterprise IT environments. Founded in 1976, CA is headquartered in Islandia, N.Y., has 15,000+ employees, operates in more than 100 countries, and has achieved ISO 9001:2000 certification. Revenues and operating income for the last three fiscal years (ending 31 March) were as follows: 2004 (US$ million)
2003 (US$ million)
2002 (US$ million)
Revenue
3,276
3,027
2,886
Change on Previous Year
8.23%
4.89%
(38.10%)
25
(267)
(1,102)
Total Net Income/(Loss)
Computer Associates has a stated policy to enhance and protect its clients’ IT investments by integrating a wide range of systems in heterogeneous environments. To maintain this stance it has a wide range of partnerships with technology vendors, systems integrators, and IT consultancies. Key alliance partners include:
Microsoft.
Oracle.
HP.
SAP AG.
BearingPoint Inc.
PeopleSoft.
Intel.
Ernst & Young LLP.
Computer Associates counts 95% of the Fortune 500 amongst its customers. US Headquarters Computer Associates International Inc. One Computer Associates Plaza Islandia New York 11749 USA
UK Headquarters Computer Associates Plc Ditton Park, Riding Court Road DatchetSlough, Berkshire SL3 9LL UK
Tel: +1 631 342 6000 Fax: +1 631 342 6800
Tel: +44 (0)1753 577733 Fax: +44 (0)1753 825464
www.ca.com
Compuware Ltd. Compuware IT Governance and Management Compuware provides a range of solutions that address key areas of IT Governance and Management that include Development, Quality Assurance, IT Performance Management, and Support. Its Compuware Vantage and the STROBE product family are tools that help organisations to manage the efficiency and responsiveness of mission-critical applications on a range of platforms. Compuware’s tools offer the ability to gain visibility into how applications are performing and where the trouble spots lie. Crucially, they also offer assistance with resolution and can automate many of the more mundane tasks enabling support to be provided to the most critical areas.
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Since its acquisition of IT Governance specialist, Changepoint, in May 2004, Compuware has worked to integrate the Changepoint product with its existing lifecycle management solutions, and the first fruits of this work are now emerging. Compuware believes that Portfolio Management process must link to the project portfolio (new initiatives), the application portfolio (the existing set of deployed solutions), and the infrastructure portfolio (the platform which supports the first two), to capture all types of IT demand, enabling a holistic view for strategic IT decision-making. Its first two integration points are to its CARS quality assurance solution for application deployment, and to its application service management tools, VantageView, Fault Manager, and STROBE. The CARS integration will allow quality metrics to be assessed within the IT project portfolio, providing a better measurement of risk, and the likelihood of delivering projects on time and to budget, both on a discrete project-by-project basis, and as a continuous trend over time. The integration with application service management tools will allow performance and metrics to be viewed within the context of the application portfolio in Changepoint IT Governance (including viewing Vantage portlets), and application faults to be passed through as a source of demand into the IT Governance process. Future plans for Changepoint will also see the integration of Compuware’s application development management tools, which will further strengthen its proposition. Compuware Vantage is a performance management solution for distributed applications, which monitors application performance across the Client, Network, and Server infrastructure. The STROBE family of products help the various functional groups within the IT organisation to find and then fix the causes of poor performance within applications. It is designed for mainframe environments, including Java-based applications as well as a comprehensive range of older languages such as COBOL. Applications that do not perform up to expectations can be extremely costly, requiring hardware upgrades before they are really needed, causing users to be dissatisfied and unproductive, and potentially customers maybe lost. Also, applications may have been designed for optimal performance in a specific way, for example, by accessing data using a specific key. If users in practice are not aware of the appropriate way to use an application and use searches in an inappropriate manner, this can be a cause of poor performance that could be identified by the use of appropriate tools, and remedied by further training. Compuware differentiates itself by providing tools for organisations that have a heterogeneous applications infrastructure. Company Profile Founded in 1973, Compuware (NASDAQ: CPWR) has its headquarters in Michigan, USA, with offices in some 60 countries worldwide. European headquarters are in The Netherlands. The company initially focused on the provision of mainframe technical services, and is a recognised leader in testing tools for the mainframe. Over the years, it has evolved and expanded to incorporate software and technical solutions for mainframe and distributed computing environments. After a successful Initial Public Offering (IPO) in 1992, the company has grown significantly. Revenues for the last three fiscal years (ending 31 March) were as follows: Annual data
2003 (US$ million)
2002 (US$ million)
2001 (US$ million)
Revenue
1,375
1,740
2,035
Change on previous year
(21%)
(14.5%)
(9.5%)
Total Net Income/(Loss)
103
(245)
119
A significant proportion of the company’s revenues are from professional services. Compuware is the fifth largest Independent Software Vendor (ISV) in the USA based on revenue (Fortune Magazine). It employs in excess of 9,000 people worldwide, with over 5,000 providing professional services. Compuware has 130 product offerings, and claims to have more than 23,000 customers in more than 54 countries.
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Key clients include British American Tobacco, House of Fraser, BT, Alliance & Leicester, Amerada Hess, Thomas Miller, DEFRA, WM Mercer, the John Lewis Partnership, and Safeway. Compuware Corporation One Campus Martius Detroit Michigan 48226 USA
Compuware Ltd. 163 Bath Road Slough, Berkshire SL1 4AA, UK
Tel: +1 (313) 227 7300 Fax: +1 (800) 521 9353
Tel: +44 (0)1753 444 000 Fax: +44 (0)1753 444 900
www.compuware.com
www.compuware.co.uk
CorVu Performance Management With CorVu 5, the company has further integrated its series of modules around a flexible solution architecture that allows organisations to approach strategic performance management in the most relevant way. Each module inherits key services from the base architecture, delivering cross-platform workflow, security, reporting, and collaboration facilities. CorVu 5 aligns well with the belief that effective performance management disciplines need to be driven from a well developed and effectively communicated corporate strategy – indeed CorVu provides facilities that assist companies with their strategy development. CorVu 5 is a purpose-built performance management application that enables organisations to drive efficiencies, drive priorities, and drive performance. Unlike scorecarding, business intelligence, and desktop solutions, it ties performance metrics to key business processes. The company says that it is an easy-touse, scalable, and rapidly deployable system, and it combines two critical technology components: Strategic Management System This is a single, structured performance management environment that links performance metrics to key business processes, including objective management, initiative management, budgeting and planning, risk management, and employee incentive management. It automates popular management methodologies such as Balanced Scorecard, Six Sigma, Economic Value Add (EVA), European Foundation of Quality Management (EQFM), Earned Value Management System (EVMS), Total Quality Management (TQM), Malcolm Baldrige Award for Quality, and others. It provides a secure and consistent electronic communication and collaboration framework for all performance-related content. Performance Metrics A pre-built performance management data warehouse, which acts as a central repository for all metrics, calculations, and commentary. It provides rich capabilities for custom and ad hoc reporting, alerts, dashboards, and briefing books. Also incorporated are advanced analytics, including sophisticated modelling, forecasting, and data mining for “what-if” analysis. It provides ADX technology that automates data collection from virtually any source, including ERP systems, databases, and flat files. Company Profile CorVu was founded in 1990 as a BI software development house. With an initial product released in 1993, the company is now a well-established global provider of enterprise business performance management, BI, and Balanced Scorecard solutions. CorVu has historically been a BI vendor with its CorBusiness product offering; however, the company is now able to offer these established CorBusiness customers an easy growth path to enterprise performance management applications. The company has over 4,500 customers covering a wide range of sectors and industries, such as aerospace, banking, financial services, healthcare, hospitality, insurance, manufacturing, mining, the public sector, telecommunications, and transportation. Some of CorVu’s better known customers include: Skandia, Bosch, HM Customs and Excise, London Underground, DELL, FedEX, T-Mobile, The US Army, Sun Microsystems, Caterpillar, Crown Castle International, Akebono, and Schlumberger.
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CorVu markets its products and services into three distinct geographies: the Americas, Asia-Pacific, and EMEA. The company works very closely with three global partners (EDS, Mincom, and Progress Software) and leading systems integration and software partners such as Accenture, KPMG, Seabrook, and Morse. CorVu is investing significant energy to establish a strong partner network, recognising the fact that to tailor its enterprise performance management solutions to the specific requirements of companies around the world, requires a strong combination of business consulting and technology management skills. With approximately 120 employees, CorVu is headquartered in Minnesota, US. The Company has additional locations in Atlanta, Brisbane, Dallas, London, Melbourne, Perth, Stockholm, and Sydney. CorVu is a publicly traded company listed on the OTC:BB exchange under the symbol CRVU. Company financials are shown in the table below: Period Ending:
2004 (US$ million)
2003 (US$ million)
2002 (US$ million)
Annual Sales
16.2
15.7
12.2
Net Income/(Loss)
(2.1)
3.7
0.4
CorVu Australasia Level 8 Tower A Zenith Centre 821-843 Pacific Highway Chatswood NSW 2067 Australia
CorVu plc Craven House 40 Uxbridge Road Ealing London W5 2BS UK
Tel: +61 2 9495 5400 Fax: +61 2 9495 5444
Tel: +44 (0)20 8832 7700 Fax: +44 (0)20 8832 7709
E-mail:
[email protected]
E-mail:
[email protected]
www.corvu.com
EMC Smarts EMC Smarts Product Suite, version 6 EMC Smarts’ Product Suite is a set of products for managing the entire IT environment, which can report the results as part of an ITIL-oriented model of services. The solutions focus on root-cause and business impact analysis of IT problems, and add significant value by prioritising infrastructure problems and automating discovery and mapping of infrastructure changes. Smarts solutions are used by a large number of service providers and telco companies, but are also suitable for large end-user organisations with complex requirements. The EMC Smarts Product Suite delivers value-added information from organisational infrastructure elements in order to ensure that problems can be resolved. The products available enable customers to implement a management model of the infrastructure based on the ITIL model, in modular stages – Business Services Management, Application Services Management, in combination with Infrastructure Management can be provided. At the highest level, Smarts terms the value delivered to customers as Business Insight. The Suite is based on a technology platform that Smarts terms ‘A3 Architecture’, because its approach is based on three characteristics with the initial letter A:
Abstraction: using a built-in common information model to build a logical representation of complex IT and business domains, including all components, relationships, behaviours, and interactions.
Analysis: pinpointing the root cause of service-affecting problems and calculating their impact, automatically, and in real time.
Automation: building high-cost, labour-intensive tasks into software for automated problem management prioritisation, and adaptation to infrastructure changes.
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The Suite leverages the Smarts Common Information Model (SCIM), which links the normally distinct domains of business services, applications, and systems. Additionally, its Codebook Correlation Technology™ (CCT) can automatically diagnose any service-affecting problem, and link it to its business impacts via ICIM. It is specifically designed to automate its problem diagnosis, employing knowledge of the most important effects of problems that affect infrastructure, and avoiding the difficulties that can arise from the mass of monitoring information that is generated by infrastructure elements. EMC Smarts Service Assurance Manager is the top-level layer of the solution, as it integrates and correlates the data obtained from the other software managers and integrated third-party managers, to provide an endto-end management across networks, systems, applications, and the business processes that they support. All Smarts modules come with a library of generic models of IT objects in the managed environment, detailing the problems that can originate in them, the symptoms of each problem, and how these symptoms spread to related objects. The ICIM repository is originally built by instantiating generic objects from the ICIM Library with results from Smarts Auto-Discovery, piecing together data about business objects and their “last mile” relationships to the infrastructure – the repository subsequently stores and maintains an up-to-date representation of the specific customer environment, with objects such as routers, servers, or applications. The Extensible Mediation Layer associates these objects with customer data to enable applications with an open-ended set of IT objects, as well as give incremental device support for extensions to the infrastructure. The ICIM Repository is leveraged by CCT to map object relationships to cause-andeffect relationships, allowing assessment of the impact that infrastructure problems will have on other infrastructure elements, services, users, and customers. Company Profile EMC Smarts was founded as System Management ARTS (SMARTS) in 1993 by its president, Dr. Shaula Alexander Yemini, who had left IBM to form a ‘think tank’ focused on network management Research and Development (R&D). The concepts and algorithms developed to help the company’s early clients, who included Motorola and the US Department of Defense, were formalised in Smarts patented Codebook Correlation Technology. The company sustained steady growth of revenues to over US$60 million annually, and attained consistent profitability, without repeatedly increasing funding. At the end of 2004, agreement was reached for Smarts to be acquired by EMC for US$260 million, and consequently the company gained the branding EMC Smarts. EMC continues a strategy of growth of its markets by acquisition, having extended from its origins as a vendor of storage-related software, via acquisitions of Enterprise Content Management, virtualisation, and other capabilities, to encompass ‘information lifecycle management’ and, with Smarts, management of infrastructure, applications, and business services. EMC’s President and CEO gave an undertaking after the completion of the acquisition to execute and expand Smarts’ product roadmap, add R&D resources to increase the number of engineers developing, extending, and leveraging Smarts technology to meet this roadmap, and explore new opportunities for customers of EMC information storage and management software. EMC Smarts has its headquarters in White Plains, New York, USA, but the main EMC headquarters are in Hopkinton, Mass, USA. The EMC Smarts division also has other offices in the USA, and in the UK, and Germany, as well as satellite offices in France, The Netherlands, Belgium, China, and Australia. The EMC Smarts part of EMC has in the region of 300 people, of whom a third work in R&D, and a third in sales and marketing. The company’s European presence involves 15% of employees, with 5% based in AsiaPacific, and the remainder in the US. Over 20% of revenues arise from European operations, while over 50% arise from the US. Partners include Accenture, BT Global Services, The Allied Group, CSC, Dimension Data, EDS, General Dynamics, Northrop Grumman IT, and Sayers. Customers include clients in both the service provider and enterprise sectors, with names such as BT, Cable & Wireless, COLT, Deutsche Bank, Shell, Radianz, Swisscom, SWIFT in EMEA, AT&T, Citigroup, Coca-Cola, Dow Jones, Federal Express, Goldman Sachs, Qwest, UBS Paine Webber, and Vodafone, globally. The product has been sold direct to over 100 customers, while over 1,000 organisations use it via channel sales. Most customer implementations are EMEA-wide, or global, in scale.
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Worldwide Headquarters EMC Smarts 1 North Lexington Avenue White Plains New York 10601 USA
EMEA EMC Smarts Gainsborough House 17-23 High Street Slough, Berkshire SL1 1DY, UK
Tel: +1 (914) 948 6200 Fax: +1 (914) 948 6270
Tel: +44 (0)1753 878110 Fax: +44 (0)1753 878111
E-mail:
[email protected]
E-mail:
[email protected]
www.smarts.com
eProject eProject Enterprise eProject says that its eProject Enterprise is built for complex project-driven organisations, and it offers the latest in advanced Web-based project management and collaboration. It provides increased productivity because the people and information critical to project and process success are seamlessly connected in eProject’s shared environment. The company says that it develops products with three key components in mind:
Intuitive and easy-to-use.
Simple and rapid to deploy.
Low TCO allowing customers to seize a greater ROI.
eProject Enterprise also offers the following key benefits: Comprehensive Feature Set Unlike other easy-to-use Web-based project management software, eProject Enterprise does not compromise on the core capabilities that project managers rely on. It is built on the key capabilities found in traditional project management software, avoiding the complex capabilities that only a minority of users actually understand. Enterprise combines the best of both worlds by offering an intuitive Web-based dynamic workspace environment coupled with a relevant and extensive feature set. Configurable and Customisable eProject Enterprise is easily configurable and customisable to meet an organisation’s unique needs. From configurable project hierarchy to custom dashboards and applications, organisations can easily mirror their own business processes, allowing improvements in the way that they work. eProject says that unlike traditional project management software, customisation can be done without the help of specialist IT resources or consultants. More than a Project Tool Because eProject Enterprise can be easily configured to map to an organisation’s needs and customised to capture unique relevant project data, the solution becomes more than a project management tool. eProject Enterprise allows businesses to seamlessly implement and automate methodologies and business processes across the organisation. Automating methodologies and business processes streamline how work is accomplished by leveraging knowledge and best practices, and enabling on-demand information sharing. Company Profile eProject was founded in the summer of 1997 with the vision of offering organisations a better way to work by delivering a foundation on which next-generation digital workspaces are created. Based in Seattle, Washington, privately held eProject has used its unique position in the marketplace and a grassroots approach to develop an extensive customer base built on referrals and customer adoption. The company’s vision is to drive project success for every business. It claims to accomplish this by remaining focused on creating intuitive Web-based project management solutions. Its solutions offer unified project planning, communication, and execution for organisations, project managers, and teams, helping them achieve increased productivity through effective interaction and collaboration.
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eProject, Inc., was established to meet a vital need for project managers in mid-size companies for project management and collaboration tools that are powerful, integrated and complete, without the complexity that characterises traditional approaches. Since 1997 eProject has served more than 250 companies with intuitive, Web-based solutions that help project teams share, communicate, and collaborate quickly and cost effectively. An intense focus on user needs is complemented by professional staff with hands-on experience in customer industries. Over the last five years, eProject has built a growing base of more than 200,000 users in organisations such as, Honeywell, Petco, Washington Mutual, Cushman & Wakefield, and HP. The company offers professional and consulting services to help customers get the most from their eProject investment, together with training courses. EProject 83 King Street, Suite 300 Seattle, WA 98104 USA Tel: +1 (206) 341 9117 E-mail:
[email protected] www.eproject.com
Hewlett-Packard (HP) Inc. OpenView HP is recognised as one of the leaders in the service management arena, and its holistic approach to both infrastructure and business-focused service management, provides the ability for prospective clients to deal with a single vendor for many of their requirements. The exception to this is where an organisation has operations based on legacy systems, but here HP has a history of strong partnerships and can deliver integrated solutions for heterogeneous infrastructures. HP says that its OpenView portfolio of management solutions helps organisations take control of their IT and telecommunications resources. By the provision of tools to troubleshoot problems, adapt quickly to change, and keep data secure, its solutions ensure that business-critical data and services are delivered on time, all the time. HP OpenView solutions enable enterprises to align their people, processes, and technology to contribute to an Adaptive Enterprise environment. Its management solutions extend across the enterprise, helping solve critical enterprise-wide business challenges. HP’s solutions address these challenges by providing the software and services needed to manage today’s demanding IT environments. Operational costs are reduced by increased staff efficiency, better application availability, and optimised service delivery, allowing organisations more freedom to focus on innovation instead of maintenance. HP OpenView comprises the following modules:
Application management that allows application owners to comprehensively monitor their entire business-critical application environments.
Business management enables the IT team to understand the health of key business processes along with the health of the underlying applications and IT services. This leads to improved business performance through better process throughput, lower IT costs, and optimised IT resource allocations.
Industry management to dynamically link business strategy and IT, transforming IT from a maintenance function to a strategic business asset.
Infrastructure management allows enterprises and service providers to understand the availability and performance of their infrastructures, and enables them to exercise control over them.
IT service management combines powerful HP OpenView software with years of experience to transform an organisation’s IT into a real business and competitive differentiator.
Lifecycle management solves critical security and business process challenges spanning digital identity, change and configuration, and usage management. This allows management the time and resources to focus on the strategic needs of the business.
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Company Profile HP was founded in a garage behind Bill Hewlett’s house in Palo Alto, California, in 1939. Today, its corporate headquarters remain in Palo Alto, and the company has more than 540 sales and support offices and distributorships worldwide. It has been at the forefront of technical innovation over the past six decades. It has become one of the giants of the IT industry, with recognition of its name and stature by a wider audience due to its broad product base. In September 2001, HP and Compaq announced a definitive merger agreement to create a US$87 billion global technology leader, and this came to fruition in 2002. HP (NYSE, NASDAQ: HPQ) serves customers across 162 countries, with an employee base of 150,000. HP believes that the future technology landscape will be dominated by service-centric computing, in which information technologies are delivered, managed, and purchased as services. Over the past few years, it has reorganised its business into three product-generation divisions and three customer-facing organisations. In the 1990s, HP achieved growth rates of 20% in most years. The company is a technology solutions provider to consumers, businesses, and institutions globally. Its offerings span IT infrastructure, personal computing and access devices, global services, and imaging and printing. For the fiscal year ending on 31 October 2004, HP revenues totalled US$79.9 billion. HP’s OpenView worldwide revenues increased 30% year-over-year. Corporate Headquarters Hewlett-Packard 3000 Hanover Street Palo Alto, CA 94304-1185 USA
UK Headquarters Hewlett-Packard (UK) Ltd. Cain Road, Amen Corner Bracknell, Berkshire RG12 1HN, UK
Tel: +1 650 857 1501 Fax: +1 650 857 5518
Tel: +44 (0)1344 360000 Fax: +44 (0)1344 363344
www.hp.com
HyPerformix Integrated Performance Suite Performance Optimizer Integrated Performance Suite Performance Optimizer (IPS-PO), from HyPerformix, allows modelling of application behaviour and performance from the business transaction or end-to-end perspective, and runs simulations of the effects of changes in operational infrastructure, and demand profiles. While vital in an increasing number of cases where the risk of impaired performance (and consequent cost) is high, the assessment of end-to-end application performance is a complex undertaking, and without tools such as IPSPO, it can entail significant investment in dedicated infrastructure, and lengthy involvement of expert resources. Planners can use IPS-PO to assess where performance problems might be experienced, or where to invest in infrastructure or application changes to resolve problems or meet demand. It can provide benefits throughout the application lifecycle, and is most appropriate for use by organisations undertaking deployment of complex and large-scale applications, in circumstances where performance is critical to the business. The Integrated Performance Suite (IPS) family of products, which implement a performance modelling process that helps organisations make key decisions about the performance and capacity of IT applications and environments, throughout the application lifecycle, are as follows:
Within the design phase, architecture requirements, and the impact of performance requirements on budget, can be initially assessed. Early knowledge of any unforeseen scale of cost can assist planning and prevent the impact of these being more difficult to accommodate later.
During the development phase, performance assessment can validate the design, and the budgeting for performance features, as well as identifying any performance issues due to application code at an early stage.
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During application testing phases, IPS-PO can dramatically reduce the cost of performance testing by executing ‘what-if’ scenarios with the library of over 1,600 infrastructure models provided with the product. Different scenarios can be run and the performance and utilisation of these scenarios can then be measured and compared until the optimal configuration for the business is reached. Typically, this reduces the cost and time needed in the test phase by reducing the need to test as many alternative hardware configurations.
After application deployment, the impact of external changes on critical applications can be assessed quickly and inexpensively. Once an application’s model is built it can be tuned to reflect the production environment, and upcoming changes in the environment like server consolidations, network upgrades, or workload mix changes can be tested first in the model to see what the impact will be on the performance and utilisation of the application.
IPS-PO includes various features that automate the processes of building models and of managing results, thereby reducing further the expense incurred by including performance modelling in the application lifecycle. It enables specialists to conduct modelling using all of the factors that affect performance: performance data captured from applications and the infrastructure environment; application characteristics (which can be defined automatically by IPS-PO, and adjusted manually); and demand levels. It is intended for use by system designers, testers, capacity planners, and systems analysts, equipping them with better information about the effects of changes on complex IT environments, without the sacrifice of costly resources in experimental assessment of such results. Company Profile HyPerformix can trace its origins to the formation in the early 1970s of Information Research Associates (IRA), which conducted scientific and engineering research. In 1989, IRA became Scientific and Engineering Software (SES), which developed and marketed simulation and modelling products to the engineering community. In 2000, the company transformed its mission, vision, management team, and business model to provide enterprise performance solutions, and was renamed HyPerformix, Inc. The company has approximately 100 employees, and is headquartered in Austin, Texas. It has regional offices throughout the US, European offices in England and France, and an office in Japan. Being privately owned, its preference is not to divulge details of its financial status. The following well-known names are amongst more than 100 customers of IPS-PO:
Charles Schwab.
CheckFree.
Credit Suisse First Boston.
eBay.
France Telecom.
Freddie Mac.
Hitachi.
Nationwide Building Society.
The majority of customers have performance engineering groups, with responsibility to ensure the performance of new applications across their organisations. HyPerformix UK Ltd. 200 Brook Drive Green Park Reading, RG2 6UB UK
HyPerformix, Inc. 4301 Westbank Drive Building A, Suite 300 Austin, TX 78746-6564 USA
Tel: +44 (0)870 3510206 Fax: +44 (0)870 3510207
Tel: +1 512 328 5544 Free from US: 800 759 6333 Fax: +1 866 495 4291
E-mail:
[email protected] www.hyperformix.com
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IBM Corporation The need for a reliable, scalable, available, and security-rich IT infrastructure, has never been more critical to the success of organisations. IBM says that it has a comprehensive set of solutions and services that can help optimise IT investments, improve performance, achieve availability objectives, and avoid costly problems. IBM has introduced a range of software and services products aimed at helping customers to automate and standardise the way that they design and integrate IT processes. The products are built on IBM’s Tivoli, Rational, WebSphere, and DB2 middleware and they include IT process management for change, configuration, release, and information lifecycle management. The solutions extend the company’s selfmanaging autonomic technology, and include ‘tool mentors’ that help customers to practically implement best practice guidelines described in the ITIL. IBM says that its offerings will enable customers to evaluate their business designs, processes, and infrastructure to build responsive and automated IT environments. IBM introduced its IBM Tivoli Unified Process solution in Q2/05, and prescribed specific actions for ITIL through ‘tool mentors’ that enable customers to improve their IT processes integration. These provide information on how to customise a system, put the correct steps in place, and what hardware and software is required. IBM believes that 80% of the problems encountered in IT services is due to changes; these occur in infrastructure elements, their relationships, and software applications. It therefore released in Q3/05 its IBM Tivoli Change and Configuration Management Database (CCMDB) that is a virtualised database that federates IT information spread across multiple databases. The company says that organisations adopting CCMDB as their entry point can achieve value from the start. Next year, it will introduce its IBM Tivoli Process Managers, which will comprise pre-packaged software to automate IT processes. They will support change and release management, availability management, and information lifecycle management. Additionally, IBM supports the ITIL, its relationship to IBM’s own IT Process Model methodology. IBM’s support for ITIL serves as a foundation for its global Infrastructure and Systems Management Services offerings, designed to deliver high-customer value. Company Profile IBM is the world’s largest IT company, with over 329,000 employees. It operates in over 160 countries, and almost 60% of the company’s sales are to non-US customers. Its first chairman, Thomas J. Watson, joined the company (then The Computing-Tabulating-Recording Company) in 1914, from NCR. He relinquished the role to his son and namesake in 1956, shortly before his death. Thomas J. Watson Jr. led the company until 1971, during which time it grew from income of US$892 million to US$8.3 billion and became one of the world’s dozen largest corporations, as it still is today. The company suffered setbacks in the early 1990s, shedding over 80,000 staff and recording record losses, but recovered its market leading position and now employs more staff than before that period. In 2002, Sam Palmisano became IBM’s CEO and realigned it with an initiative to enable ‘on demand’, which has since pervaded the whole company and its products. Although its aims also relate to business strategy, on demand is enabled by IBM’s middleware technology, and has to be mirrored in technology strategy – its delivery has been defined as requiring software to be based on open standards, to enable integration, to cater for virtualisation of resources, and to be autonomic (resilient to failure). IBM manufactures a broad range of computers, including mainframes, network servers, and peripherals. Its services arm employs about half of the employees, and contributes approximately half of the company’s revenues. It also specialises in infrastructural software, offering solutions based on its DB2 database, WebSphere integration and development, Lotus development and collaboration, Rational development and testing, and Tivoli management, products. In 2002, IBM made key acquisitions of PricewaterhouseCoopers Consulting (PWCC) to augment its services capability, and Rational, which now stands as one of IBM’s five software brands. In 2003, ThinkDynamics Inc. was acquired, and with it the foundation software for the TIO and TPM products.
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IBM common stock is listed on the New York Stock Exchange (NYSE: IBM), and on other exchanges in the United States and around the world. Revenues and Net Income for the last three financial years ending 31 December were as follows: 2004 (US$ million)
2003(US$ million)
2002 (US$ million)
96,293
89,131
81,186
% Change on Previous Year
8%
10%
-7%
Net Income/(Loss) After Tax
8,430
7,583
3,579
Revenue
IBM United Kingdom Ltd. PO Box 41 North Harbour, Portsmouth Hampshire, PO6 3AU UK
IBM Corporation New Orchard Road Armonk NY 10504 USA
Tel: +44 (0)990 426426 Fax: +44 (0)239 222114
Tel: +1 914 499 1900
www.ibm.com
Intel Intel® Solution Services Intel® Solution Services is a worldwide consulting and services R&D organisation, specialising in distributed solutions and data centre infrastructure. Intel Solution Services works with solution providers, Independent Software Vendors (ISVs), Original Equipment Manufacturers (OEMs), System Integrators (SIs), and endcustomers to architect cost-effective, leading-edge solutions to help solve complex business problems. With its world-class resources, state-of-the-art facilities and key industry alliances, it can help design and deploy scalable, manageable, reliable, and available e-business solutions on Intel technology. Intel Solution Services provides onsite consulting, and also works with customers at its Intel Solution Centres located worldwide. The Intel Solution Centres are optimal environments for designing and testing flexible, high-performance solutions infused with best-known methods and technologies from Intel and other industry leaders. Intel’s services allow companies to architect, design, test, and optimise their solutions with minimal impact to their day-to-day business. Enterprise architecture planning provides a high-level vision of current and future technologies necessary for delivering business products and services. These structured activities enable companies to build manageable technology adoption plans that are consistent with their business goals. This integrated plan should address important concerns, including plan flexibility, technology maturity versus risk tolerance, and the aggressiveness of implementation timelines. Successful architecture planning will help you execute an accelerated technology transition, reduce the risk when adopting emerging technologies, and manage the complexity of stakeholders’ priorities for the short-term and the long-term. With its Enterprise Architecture Practice, Intel® Solution Services offers a collaborative, enterprise-wide planning service, based upon the Intel® Distributed Enterprise Architecture eXtended (Intel® DEAX) framework. A successful architecture plan must start with an alignment of business strategy and overall IT strategy. It works with enterprises to model the IT strategy and develop technology transitions plans, which lay the foundation for successful implementations. Ultimately, the architecture plan will guide an organisation’s multi-year technology transition as driven by its business requirements, with strategies for risk mitigation, budget control, and provisions for checkpoints and midcourse corrections. Intel® Solution Services can help guide enterprise architecture planning by bringing together Intel® products, emerging technologies, and IT best practices to help enterprises to successfully deploy solutions. It works side-by-side with software developers, OEMs, and SIs to help mitigate risks associated with adopting next-generation technologies based on Intel® architecture.
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Intel’s Practice Methodologies include:
Envision the current and desired end-states. The benefits from these include articulating problems and motivations for change, building a consensus on goals and success metrics, and identifying the benefits and mitigating the risks.
Define IT strategy which gives access to greater breadth and depth of technology through Intel’s alliances with key industry leaders, communicates plans effectively, and helps secure management approval.
Plan enterprise architecture transition provides core system architecture diagram, technology roadmap, and seamless migration plan.
Optimise the solution to create a highly scalable framework. This delivers a reliable, available, scalable, and protected solution, and enables growth without business interruption.
Deliver financial analysis, provides operating and resource budget analysis, and provides TCO and ROI analysis to help justify capital investment.
Company Profile Intel Corporation is headquartered in Santa Clara, California, and has 294 offices around the world. Intel Solution Services is Intel Corporation’s worldwide professional services organisation, enabling enterprise companies to capitalise on the full value of Intel Architecture through the provision of consulting on architecture transitions. The organisation was formed just over three years ago and has 150 employees worldwide, with 40 consultants based in Europe. Intel Solution Services consultants are spread across the 12 Intel Solution Centres around the world, including four in Europe, located in London, Munich, Stockholm, and Moscow. Intel Solution Services are available at the Intel Solution Centres, as well as through on-site consulting. Intel Solution Services has worked with over 100 EMEA-based customers over the last year on projects including platform migration, server consolidation, and the deployment of new technologies such as Web services. Customers have included Autovas, Altoweb, Cedara, DoubleClick, E-Hand, Eniro, Expoexchange, GAP, IONA, Marriott Hotels, Merrill Lynch, MOAI Technologies, Pectra Technology, Pension Consult, Philips, Picturesafe, SinnerSchrader, SunGard, T-Mobile, United Airlines, USA Today, QXL, Vordel, and Virgin.com Intel Solution Services 650 Wharfedale Road Winnersh Triangle Wokingham, Berkshire RG41 5TP, UK Tel: +44 (0)118 944 7931
US Tel: +1 866 268 9812 Asia-Pacific Tel: +852 2844 4555 Japan Tel: +81 3 5208 5375
E-mail:
[email protected]
Managed Objects Business Service Management Managed Objects’ Business Service Management (BSM) range of products based on its software platform, Formula®, provide alignment between business services and the IT infrastructure. It now incorporates automated Business Service Configuration Management that lowers the risk of operational problems and issues through more effective change management. The increasing pressures on business to become more agile and the growth in complexity of the IT infrastructure, mean that enterprises need more proactive and intelligent management tools to control their business services. Managed Objects was a pioneer in promoting BSM, and it has now added additional functionality. The company has historically aimed its products at Global 2000 enterprises, but it is now targeting Small and Medium-sized Enterprises (SMEs) through its partners. Its Formula® platform is backed by a suite of software including Business Service Level Manager™, Business Experience Manager™, and Business Data Integrator™. It is used to measure, improve, and enforce the performance and availability of all kinds of services, such as on-line trading, customer relationship management, and corporate e-mail.
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The modules that comprise Managed Objects’ BSM are: Business Experience Manager Business Experience Manager™ provides an integrated solution for monitoring real end-users, for synthetic testing, and for application performance. The data that is collected is passed to Formula, where it is correlated with any other combination of technology and business data. Business Data Integrator Business Data Integrator™ enables the incorporation of business metrics from databases, including sales totals, help-desk tickets, and analytics from business intelligence tools. By using these metrics, key performance indicators for business can be produced and used to populate real-time executive dashboards. Business Service Level Manager (BSLM) Business Service Level Manager™ evaluates and compares the real-time and historical state of entire business services, together with the technology components that support them. BSLM is able to inform customers of how technology problems impact business applications, and it helps them to determine optimal business conditions and proactively establish them. This results in the provision of better service, which is delivered more efficiently. Business Service Dashboard Business Service Dashboards can provide real-time and historical information on performance, availability, outages, SLA compliance, and other business and IT metrics through an intuitive browser-based interface. Formula Event Integrator The Formula Event Integrator provides a way to receive, filter, de-duplicate, and normalise line-oriented event data from sources, such as a mainframe environment and telecommunications devices. It transforms a raw data stream into a coherent, derived event stream, which the Formula server subsequently treats as a series of managed objects and associated alarms. Proxy Integration Formula integrates with many management tools out-of-the-box that have the ability to receive information from other environments. Formula has the ability to integrate directly with these outboard management tools, and can be used as the communication vehicle for bringing other types of data into Formula. SNMP Integrator The SNMP Integrator enables the polling and gathering of data that is available to SNMP agents for integration into Formula. All the hosts and devices are displayed as objects within Formula. Business Service Configuration Management (BSCM) BSCM addresses the requirements of change management, and includes the following features:
Mining, which involves integration with any combination of: ESM and/or NSM tools, any configuration, asset, or inventory data sources that may exist and the ability to integrate with tools that discover topology and relationships.
Mapping of Relationships and Dependencies.
Correlate Element Management to achieve a consolidated view of all management systems activity.
Visualise IT Configuration provides a single view of the IT infrastructure, a virtual Configuration Management Database (CMDB).
Analyse and Manage Change through the use of the real-time virtual CMDB allowing IT Operations to diagnose and correct impacts from infrastructure changes, and discover gaps in the managed environment.
Business Technology Insight (BTI) To enable service discovery BSCM deploys adapters to integrate with all the popular discovery tools e.g. Tideway, Collation etc. For clients that do not have an existing discovery tool Managed Objects has an option called BTI.
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Company Profile Managed Objects is a private company that was founded in 1997. Siki Giunta is President and Chief Executive Officer. The company’s recruitment policy has been concentrated on professionals with relevant experience of infrastructure management systems who previously worked for the major players in the IT industry. The company has already built up an impressive list of clients who use its products based on the Formula platform. In 2004, it added 25 new customers, and had a 60% year-over-year growth. AIB, Auchan, Barclays, Capgemini, Computer Sciences Corporation, Credit Suisse, Decathalon, DISA, Ericsson, Fidelity Investments, JPMorganChase, UK National Health Service, NIH, Progress Energy, Reuters, TIAA-CREF, Volvo, and other global organisations rely on Managed Objects’ BSM technology to manage their infrastructures. Managed Objects’ headquarters are in Virginia, USA, and it has offices in London, Frankfurt, and Paris. Over the past year, it has appointed Tock-Ling Chua as General Manager of its new Asia-Pacific operations, and it is opening new sales channels in Asia including the Peoples’ Republic of China, Japan, and other Asian countries. In Europe, Managed Objects substantially increased business from partner channels, and as an example, its partner Selesta France signed Agence France-Presse (AFP), a news service that produces one of the top feeds for news stories breaking worldwide. It also added a major US government health organisation as a customer that will leverage Managed Objects’ Executive Dashboard and Enterprise Systems Management capabilities. It signed one of the UK’s major High Street banks, with more than 88,000 employees and revenue in excess of UK£60 billion, with a mission to generate business value from IT. Apart from its US HQ it has offices in New York City, Chicago, and San Francisco that support its sales presence throughout North America. Its European operations are headquartered in London, Asia-Pacific from Singapore, and its partners support sales in continental Europe, South America, South Africa, and Australia. It has grown in size to what it considers to be manageable, and it currently employs about 100 people, 17 of whom are based in Europe. About 25% of its workforce is deployed in R&D of the Formula framework. UK Office Managed Objects Transworld House 100 City Road London, EC1Y 2BP UK
Headquarters Managed Objects 7925 Westpark Drive McLean VA 22102 USA
Tel: +44 (0)20 7549 8720 Fax: +44 (0)20 7608 1331 E-mail:
[email protected] www.managedobjects.com
Mercury Mercury IT Governance Center Mercury’s approach to IT Governance optimises IT business processes from demand through value realisation – ensuring that both strategic projects and “keep-the-lights-on” IT activities are aligned with business goals. The company’s IT Governance Center™ is a suite of software and embedded best practices that provides enterprises with the capability to automate and control enterprise IT processes. It delivers powerful visibility over the demands being made of IT, the portfolio of projects, and the roll-out of strategic changes. Mercury describes it as providing one version of the truth, enabling:
The alignment of IT investments with business goals.
Decisions to be made on what not to do, and when to end projects.
The elimination or automation of low-value activities.
The management of time to free resource for more strategic projects.
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Mercury IT Governance Center also helps you lower the cost of compliance with regulations such as IFS, and Sarbanes-Oxley by automating processes, required controls, and reporting. It also supports quality programs and process control frameworks such as Six-Sigma, CMMI (Capability Maturity Model Integration), ITIL (IT Infrastructure Library), ISO-9000, and CobiT (Control objectives for information and related technologies). Mercury IT Governance Center applications can be implemented individually, starting with the area of greatest need, and then expanding across IT, adding value all the way. Here are four popular starting points: 1. Portfolio Management for the management of the enterprise’s portfolio of current applications, in-flight projects, and proposed investments to align IT with business priorities. Because of the solution’s workflow capability, it can also handle project requirement changes, issues, and risks. 2. Project Visibility and Control with complete visibility into project and program status, using a real-time dashboard to manage assignments, exceptions, and drill into details. 3. IT Services Automation for managing the demand on IT by providing visibility and control over processes and resources, including those that are outsourced. 4. Application Change Management provides control of the change process to support compliance initiatives, reduce application downtime, lower total costs, and minimise risk. Mercury says that its customers use its products to automate and enforce their IT governance decisionmaking frameworks and align the priorities, processes, and people required to run IT like a business. Mercury Professional Services as well as certified partners can be used to implement the full solution set. Consultancies and SIs add additional value by delivering Business Process Re-engineering (BPR) skills, Business Process Outsourcing (BPO) skills and services, as well as, application and outsourcing services. Company Profile Founded in 1989, Mercury conducts business in more than 35 countries worldwide. Nearly 90% of Fortune 100 companies use Mercury software and services to fulfil their Business Technology Optimisation (BTO) strategies. Mercury began shipping software quality testing products in 1991. Since then, it has introduced a variety of software and services for BTO, including offerings in application delivery (pre-production quality and performance testing), application management (in-production application performance monitoring and management) and, following the acquisition of Kintana, Inc. in August 2003, a family of IT governance offerings. Mercury’s BTO offerings for application delivery, application management, and IT Governance are designed to help customers maximise the business value of IT by optimising application quality, performance, and availability as well as managing IT costs, risks, and compliance. Mercury is a public company (NASDAQ: MERQ) employing over 2,700 people worldwide. There is a large emphasis on R&D, with around 10% of revenue deployed in this area. There are over 550 organisations using the IT Governance Center solution. These include:
Accenture.
Vodafone.
Chicago Board of Trade.
Credit Suisse.
GMAC.
Linde Gas.
Paetec.
Xcel Energy.
Mercury (UK) Ltd. 410 Frimley Business Park Camberley Surrey, GU16 7ST UK
Mercury Building A 379 North Wishman Road Mountain View, CA94043 USA
Tel: +44 (0)1276 808 200 Fax: +44 (0)1276 291 34
Tel: +1 (650) 603 5200 Fax: +1 (650) 603 5300
E-mail:
[email protected] www.mercury.com
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Microsoft Inc. Dynamic Systems Initiative Microsoft believes that the IT industry has a responsibility to dramatically simplify the computing environment by seamlessly weaving together all of the devices, services, and multiple layers of software into a coherent, efficiently managed technology framework. By designing systems that can be managed much more easily, or manage themselves, the company says that efficiency can be improved, business overhead can be reduced, and IT management can be empowered. Over the past several years, Microsoft, in partnership with other IT industry leaders, has been making significant investments in the Dynamic Systems Initiative (DSI), with the goal of building a comprehensive set of solutions for the Windows platform, that can help automate the design and management of the increasingly complex and distributed computing systems that customers need. The company says that it is about doing three things well: 1. Building software development tools that help IT managers and software-development teams design computing systems that are inherently simple and inexpensive to manage. It calls this “design for operations.” 2. Enhancing the Windows operating system platform with powerful management technologies suited for complex and constantly-changing IT environments, such as automated deployment, configuration, and monitoring. 3. Building easy-to-use, scalable solutions that cover every aspect of the management experience, with real-time feedback on system performance and a high level of automation. Microsoft Windows Server 2003 is at the core of DSI, and helps customers become much more productive and efficient by solving basic manageability problems. Building on this foundation, it has developed technologies and services that further simplify deployment, management, and security. Systems Management Server 2003 helps companies efficiently deploy and manage their software in a systematic way, so that they no longer have to individually ensure that every server and PC has the right set of applications. Microsoft Operations Manager 2000 improves performance and streamlines management by identifying “IT health” issues automatically, so that IT teams can identify problems and solve them quickly and efficiently. Microsoft is also working to create a continuous feedback loop of information between developers, IT administrators, and end-users, so that software developers get real-time information on the performance of their applications, allowing them to more accurately identify problems and solve them faster. For software developers, it is building technologies that help them work more closely with IT managers to envision and design applications that work well in today’s distributed and complex computing environments. Its Visual Studio 2005 system of development tools is designed to make it easier to build management into applications from the ground up, ensuring that they are simple and inexpensive to operate after they are deployed. Through the Microsoft Operations Framework, it is offering guidance that helps organisations develop an optimal management strategy, and it offers a series of services and solutions built on its management technologies, through a program called Microsoft Solutions for Management. Microsoft is building its management solutions so that they can integrate more easily with the diverse platforms, applications, and tools that IT managers use today. It has created a framework that enables customers to use the capabilities of Microsoft Operations Manager to ensure the health and performance of their Windows computers, while continuing to use existing management systems. It is working with partners to make it possible for customers to manage UNIX, Linux, and Mac computers in conjunction with Systems Management Server 2003, and to manage hardware devices such as desktops and servers through solutions that update hardware-based software components using the same familiar interfaces that an administrator would use to update software applications. DSI is about helping customers optimise their IT investments, while simplifying, and lowering the TCO. Over the next few years, it plans to deliver advanced solutions, such as System Center 2005, which brings its existing management tools together and adds enhancements that simplify and optimise basic IT management tasks. Its next version of Visual Studio will provide IT managers and developers with the tools that they need to create and collaborate on software and services that are simple to manage. Microsoft is also continuing to evolve the Windows Server System with advances in manageability, reliability, and security, to an efficient IT infrastructure.
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Company Profile Microsoft (NASDAQ:MSFT) was formed in 1975 and has since grown to be one of the largest global IT organisations in the world. It is headquartered in Redmond, Washington, USA, and has offices in more than 66 countries. The company employs approximately 57,000 people on a full-time basis, 37,000 in the United States and 20,000 internationally. The number in product research and development is 24,000. It supplies a wide range of products and services, including operating systems, Internet platforms, and office documentation and workflow products. The Microsoft organisation is currently structured around its core software and services competencies. The company is divided into seven groups, which include the Personal Services Group, MSN and Personal Services Business Group, Platforms Group, Productivity and Business Services Group, Worldwide Sales, Marketing and Services Group, Operations Group, and Microsoft Research (MSR). Microsoft partners with many organisations such as Sony, Dell, HP, Intel, and IBM. Within the knowledge management sphere, Microsoft has partnerships with KPMG, HP, and SAP. Published revenues and incomes for the past three fiscal years were as follows: Annual data (30 June)
2004 (US$ billion)
2003 (US$ billion)
2002 (US$ billion)
36.8
32.2
28.4
Change on previous year
14.4%
13.4%
12.1%
Operating income (loss)
9.0
9.5
8.3
Net income (loss)
8.2
7.5
5.4
Net Revenue
Microsoft Corporation One Microsoft Way Redmond, WA 98052-6399 USA
Microsoft UK Thames Valley Park Reading, RG6 1WG UK
Tel: +1 (425) 882 8080
Tel: +44 (0)870 60 10 100
www.microsoft.com
www.microsoft.com/uk
Monactive activeSAM Monactive’s activeSAM is a Software Asset Management (SAM) solution that enables effective management and optimisation of software licences and IT assets. It is a further development of the company’s dxPRO product. There is an increasing need for organisations to get maximum benefit from their assets, and at the same time comply with the growing amount of regulation. activeSAM is ITIL-focused and provides all facilities necessary to comply with the ITIL SAM Best Practice Guide. The product will benefit all types of organisation with a PC user population of greater than 100 up to over 25,000. In addition to its value to IT management in managing their infrastructure, activeSAM provides benefits for senior financial and procurement management to assist them in negotiating better software licences, avoiding risk, and achieving compliance. The activeSAM product family can be deployed in a modular manner. Monactive’s activeSAM facilitates the management of software licences and IT assets for both Microsoft and UNIX platforms. It discovers the PCs and Servers on an organisation’s network and deploys agents to the PCs and Servers. These agents monitor all the software applications running on the computer, and record usage statistics and installed inventory on a daily basis. An integrated database provides a repository for licence entitlement evidence and financial information. A variety of compliance and reconciliation reports are available to enable the management of risk, and the optimisation of future purchases. Information can also be used for improved decision making for infrastructure planning, implementation, change management, policy enforcement, and control.
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In order to gain significant value from a SAM solution, it is necessary that information is available to enable the successful management of desktop and server software. activeSAM provides:
A daily inventory of software installed on PCs.
A powerful analysis and report engine.
A daily usage history for all software by PC and by User.
Reconciliation of licences against software inventory and software use.
Integrated licence database that represents the true licence position.
In order to achieve the granularity of information available from activeSAM, agents monitor application usage and inventory, and send a daily summary to a shared network for collection and processing by the administration console into an SQL database. The inventory service discovers networked PCs and can deploy the agent to these PCs. Remote PCs are catered for with FTP file transfer on connection to the Internet. The product covers desktop PCs, laptops, thin clients, and servers. It also includes applications that are launched locally or from servers, including Citrix and terminal servers. The activeSAM active agents continuously monitor all the use of software products daily. This includes all software and processes launched, the total and active use of them per day in minutes, and the usage identified by users and computers. Audits are available on a daily basis of all licensed, unauthorised, and user specified software together with PC configurations and disk space. On-demand audits are available to provide a full scan of all files on computer disks to FAST and Business Software Alliance (BSA) certified standards. activeSERVER agents continuously monitor each Citrix or Terminal server, and transmit data at preconfigured intervals to manage licence compliance for thin clients. Company Profile Monactive is a private company that was founded in July 1998, as Xpert Client Systems, by Dr. Ian Dunn, the author of the leading PC audit software Expert Audit (formerly Dr. Solomon’s Audit). Xpert Client Systems was renamed as Monactive in December 2001. Its headquarters are at 100 Longwater Avenue, Green Park, Reading, and it has plans to significantly increase the size of its staff over the next 12 months. The company is funded by leading venture capitalists, 3i, VCF, and Matrix. Monactive has sold solutions to over 400 organisations, with more than half of them using activeSAM in the UK and Europe. Its UK and international customers include:
HBOS Financial Services.
ABN Amro Corp Finance.
Orange.
London Borough of Hammersmith and Fulham.
Imperial Tobacco.
Invesco.
Pearson Group.
Telewest.
TUI.
W H Smith News.
ABN Amro Corporate Finance currently deploys 16,500 PCs worldwide managed by activeSAM, which is due to increase to more than 23,000 during 2005. Its environment is managed by EDS using Microsoft SMS in conjunction with activeSAM. HBOS Financial Services has agents on 5,600 PCs throughout the UK and Europe, managed by activeSAM for its procurement division. This is scheduled to increase to 6,500 by the second quarter of 2005. The telecommunications company, Orange deploys 14000 PCs in the UK, and has been managing this domain for three years utilising activeSAM. The London Borough of Hammersmith and Fulham CC manages 2500 PCs using activeSAM, and claims to have achieved a 10x ROI in the first year of operation. Monactive Ltd. 100 Longwater Avenue Green Park, Reading RG2 6GP, UK Tel: +44 (0) 8700 113 222 Fax: +44 (0) 8700 119 111 E-mail:
[email protected] www.monactive.com
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Niku Corporation Clarity™ Clarity™ is an IT Management and Governance system that provides an integrated middle-office solution for providing visibility across multiple aspects of organisational planning. The cohesiveness of informational view allied to a range of tools for planning and project management is a key strength of the product. Modular in nature, the end-user and administration modules are underpinned by a common service layer that resides on top of a highly scalable and secure foundation. Architected on the J2EE standard, this approach of interlaying common services away from the functional specifics of individual modules has many advantages when it is implemented well. The architecture allows for a great deal of extensibility for the introduction of new modules, and more importantly, ensures that personalisation and organisation-specific customisation is reflected across all the modules. It also creates an effective scenario for deployment, where an initial rollout can provide proof-of-concept, but the work carried out is directly usable for later deployments. Niku is a well-established project and portfolio management company, and Clarity is its latest offering, and is a further development of Niku v6.1. The name change reflects the greater functionality and the wider breadth of the solution. Based upon the Clarity G2000 Architecture, the solution consists of a number of modules that cover the whole range of asset and resource management. Of the eight available modules, five are designed for use throughout the organisation, while the other three are concerned with management, administration, and configuration of automating processes. The first five modules are Portfolio Manager, Project Manager, Resource Planner, Financial Manager, and Process Manager. The three modules aimed at management, administration, and configuration of automated processes are Clarity Studio, Workbench, and Author, which are supported by Clarity Core. This is a set of services covering Collaboration, Document Management, Portals, and Reporting and Analytics. These core services and, by extension the modules that use those services, are in turn supported by the Clarity G2000 Architecture, which provides a secure platform. It uses a 3-tier architecture built around the J2EE standard. The client tier is thin with no resident or transitory software. The middle tier performs standard tasks such as security, workflow, caching, load balancing, and failover. Clarity also has its own management tool, Clarity System Administration, for centralised management of clustered servers. Company Profile Niku was founded in 1997, is headquartered in Redwood City, California, with other major offices in London, Paris, Munich, Amsterdam, Melbourne, Atlanta, Chicago, and New York. The first product to be released by the company was developed to support the service supply chain and was a forerunner of today’s integrated Portfolio Management solution. To add depth to its original offerings, Niku grew through acquisition, acquiring a number of product-relevant organisations, companies such as ABT to provide project management functionality, Proacta for project accounting capability, Legal anywhere for collaboration, and bSource to provide market place functionality. The initial integrated Portfolio Management solution, Niku 6, was developed as a result of pulling together this disparate set of applications onto a single Internet-based platform with a single user interface. Clarity has now created extended functionality and a highly scalable architecture. Amongst current Niku clients are:
Armstrong.
British Telecom.
Harrah’s Entertainment.
HSBC.
Nissan.
Royal Caribbean Cruise Lines.
SingTel Optus.
Unilever.
Niku is a publicly owned company (NASDAQ – NIKU), and employs around 220 staff worldwide, servicing a total of over 600 current customers. The company is now running profitably and growth is impressive. Part of this is due to Niku being one of the earliest players in the market, but the Clarity product is strong enough to meet the challenges that will come as the market develops. Niku is in the process of being acquired by CA.
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Niku Corporation 305 Main Street Redwood City CA94063 USA
Niku Corporation Limited Ziggurat, Grosvenor Road St. Albans, Hertfordshire AL1 3DL UK
Tel: +1 (650) 298 4600 Fax: +1 (650) 298 4601
Tel: +44 (0)1727 888 000 Fax: +44 (0)1727 888 100
www.niku.com
www.uk.niku.com
OPNET Technologies Ltd. IT Guru, IT Sentinel, and SP Sentinel OPNET specialises in management software for networks and applications, and has positioned its solutions to address business problems, rather than purely technical ones. OPNET provides products for application troubleshooting, intelligent network auditing, and predictive network planning, to enterprise customers, government and defence, and service providers, based on the company’s deep expertise in network modelling and analysis. The company asserts that by more intelligent infrastructure planning, its customers can better understand the impact of this optimisation process on their organisations, avoiding unnecessary upgrades, and reducing IT-related risk. Similarly, with application troubleshooting it is the ability to relate performance problems to daily operations that adds considerable value, reducing the time to resolution, enabling improved service quality, and helping organisations to understand the impact of infrastructure changes on end-to-end response times. OPNET’s VNE Server solution creates a comprehensive model of an organisation’s infrastructure, including its applications, servers, and protocols, as well as details of the physical network and its components. Utilising this model, OPNET’s tools, including IT Guru and IT Sentinel, are able to address areas including problem and incident management, release management, configuration and change management, capacity management, and security management. OPNET has built on its success in the network management space, extending its capabilities into application management. OPNET IT Guru can be used to diagnose end-to-end performance problems, validate changes prior to implementation, plan ahead for growth and high availability, and conduct ‘whatif’ scenarios without affecting the production infrastructure (networks, servers, and applications). IT Guru’s modelling engine uses a number of best-of-breed approaches in its various network simulation products, with discrete-event, analytical, rules-based, or a hybrid of these. An accurate network model can be built automatically from live production data, leveraging integrations with a diverse range of third-party tools. A range of add-on modules supports further specialist network diagnosis and modelling, as well as application-related capabilities that can visualise in-depth behaviour characteristics, diagnose performance problems, and optimise service levels. IT Sentinel is a network configuration management solution for ensuring the integrity and security of networks. It maintains a real-time network model, performs automated configuration audits, and informs users about critical issues, and provides results through an integrated Web-based server, e-mails, and pagers. Due to the complexities and continual change in infrastructure networks, and the need for enterprises to become more responsive to their customers, they need a proactive management solution that will enable them to avoid expensive downtime, performance degradation, and insecure networks. OPNET specialises in management software for networks and applications, and in addition to IT Sentinel for medium to large enterprises, the company offers SP Sentinel that performs the same functionality for service providers. Company Profile OPNET (NASDAQ:OPNT) is headquartered in Bethesda, Maryland, USA, with international offices in Reading, UK; Paris, France; Sydney, Australia; and Ghent, Belgium. In addition, OPNET has partners worldwide.
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The company was founded in 1986 by Marc and Alain Cohen, based on simulation technology created by Alain Cohen at MIT. OPNET currently employs approximately 330 employees, the majority of whom are based in the US. The net profit, operating, and revenue figures for the last three years are: Year Ending 31 March
2004 (US$ million)
2003 (US$ million)
2002 (US$ million)
Total Revenue
56.5
46.4
44.6
Change in Revenue
22%
4%
36%
Operating Expenses
38.2
36.1
33.9
5.7
2.7
4.4
Net Profit
Approximately 20.5% of total revenues are from outside the US. OPNET invests nearly 25% of its yearly revenue into R&D for its products, and has made significant improvements to the products since their first inception. Key clients in the UK include: HSBC Bank, TNT Express, CGEY, Warner Brothers UK, Vodafone, Orange PCS, and Norwich Union. OPNET has over 2,500 customers worldwide. OPNET Technologies, Inc. 7255 Woodmont Avenue Bethesda MD 20814 USA
OPNET Technologies Ltd. 17-23 High Street Slough, Berkshire SL1 1DY UK
Tel: +1 (240) 497 3000 Fax: +1 (240) 497 3001
Tel: +44 (0)1753 878 260 Fax: +44 (0)1753 878 261
E-mail:
[email protected]
E-mail:
[email protected]
www.opnet.com
Oracle PeopleSoft PeopleSoft Project Portfolio Management Oracle’s PeopleSoft Enterprise applications are designed for complex business requirements. They provide Web services integration with multi-vendor and home-grown applications, and they can be easily configured and adapted to meet customer requirements. In addition, PeopleSoft Enterprise supports a very broad choice of technology infrastructure. Following Oracle’s completion of the acquisition of PeopleSoft Corporation in 2005, PeopleSoft Enterprise belongs to the Oracle Applications product line, which also includes JD Edwards EnterpriseOne, JD Edwards World, and the Oracle E-Business Suite. PeopleSoft Project Portfolio Management is a decision support application for enterprises to achieve maximum IT value through knowing how their resources are allocated to investment opportunities. It enables management of all disciplines to speak the same language, share risks, and collaborate in decisionmaking. PeopleSoft Project Portfolio Management is a centralised on-line tool that provides a structure to the whole project planning process. Requests can be collected from all parts of an organisation, the status of project requests can be evaluated, compared, and reviewed in real-time, and requests can be routed to stakeholders for review and approval. The solution also analyses costs, benefits, and the value of projects over time using net present value, breakeven point, ROI, and other financial calculations to assist in the decision-making process. PeopleSoft Project Portfolio Management also groups requests into portfolios based on objectives and risks, prioritises projects and identifies duplicates, and can weight financially potential risks. It continually monitors the state of projects against metrics, business unit alignment, and corporate objectives, and enables the selection of dashboard displays of KPIs that the enterprise chooses from a library of customisable charts. Proactive alerts and indicators can be set to notify stakeholders of hot spots, projects can be compared with similar projects, and financial performance can be analysed at department, business unit, and enterprise level.
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PeopleSoft Project Portfolio Management was designed specifically for CIOs and IT managers to continuously evaluate, monitor, and manage project investments against objectives. In conjunction with the PeopleSoft Enterprise Service Automation (ESA) suite of applications from Oracle, PeopleSoft Project Portfolio Management provides an integrated, end-to-end solution to align projects with corporate objectives, reduce project delivery costs, and increase resource usage. It can be integrated with Oracle’s PeopleSoft Enterprise Program Management, to automatically create projects for approved project requests and feed real-time project performance updates to the portfolio manager. Budgets can be compared with project actuals as well as new project requests using the integration with Oracle’s PeopleSoft Planning and Budgeting solution. Company Profile Oracle Corporation (NASDAQ:ORCL) has its headquarters in Redwood Shores, California, and it has offices worldwide. It is the world’s second largest independent software company, specialising in information management. Product lines cover database, tools, and application products. The company also offers consulting, education, and support services. Oracle technology can be found in nearly every industry worldwide and in 98% of Fortune 100 company offices. Larry Ellison, Robert Milner, Edward Oates, and Bruce Scott originally founded the company as Software Development Laboratories Inc. (SDLI), in 1977. In the early days, the company built a commercial database management system for IBM, in a project commissioned by the Central Intelligence Agency (CIA) with the code-name ORACLE. In 1982, this became the new name for SDLI, and the company pursued the development and distribution of database software, with Milner, Oates, and Scott concentrating on the database development side, while Ellison was, and still is, responsible for the vision of the organisation and for bringing clients on board. Oracle went public in 1986. Following the acquisition of PeopleSoft, Oracle now has a combined workforce of nearly 50,000, and supports 23,000 applications customers throughout the world. The company quickly outlined its strength in market share, particularly in specific industries, and the speed at which it had moved to support users of Oracle, PeopleSoft, and J.D. Edwards application software. It said that it was in a stronger position than ever before to offer leading technology and industry expertise, greater innovation through increased R&D, and world-class support to the benefit of its customers. Revenues and Net Income for the last three financial years, ending 31 May, were as follows: 2004 (US$ billion)
2003 (US$ billion)
2002 (US$ billion)
10.156
9.475
9.673
7.2%
(2.0%)
(11.8%)
2.681
2.307
2.224
Revenue % Change Total Net Income/(Loss)
A sample of key clients include: MTR, Ladbrokes, Pharmacia, Abbey National, and GlaxoSmithKline Switzerland (profiles are available on the Oracle Web site). Over 200,000 customers worldwide are using the Oracle Database. World Headquarters Oracle Corporation 500 Oracle Parkway Redwood Shores CA, 94065 USA
Oracle UK Headquarters Oracle Parkway Thames Valley Park Reading, Berkshire RG6 1RA UK
Tel: +1 650 506 7000
Tel: +44 (0)118 924 0000 Fax: +44 (0)118 924 3000
E-mail:
[email protected]
E-mail:
[email protected]
www.oracle.com
www.oracle.com/global/uk/index.html
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Peregrine Systems Inc. IT Asset Management and IT Service Management Peregrine Systems’ Asset Management and Service Management solutions enable IT departments to gain greater visibility and control of their IT environment through the lifecycle management of IT assets and the optimisation of global service delivery for the business. In a climate where IT management is under increasing pressure to align resources to demonstrate a significant value contribution and ROI to the business, these requirements will get more pressing for all organisations. Managing the trade-off between enhanced service delivery and cost reduction in a climate of shrinking budgets and over-stretched resources, has become a critical business issue. Peregrine’s solutions provide comprehensive functionality and powerful integration facilities to work with an organisation’s existing infrastructure. It is aimed at larger organisations with complex infrastructures but can be implemented in a modular manner, providing early ROI. Peregrine says that it offers a lifecycle approach to IT Asset Management, and that its solutions fit the needs of diverse organisations. They are designed to create real value for customers by helping them identify, track, and allocate their IT assets more effectively and intelligently. The solutions are tailored to the needs of organisations, and use a combination of Peregrine’s AssetCenter and its other products to help enterprises evolve their asset management capabilities. The products include:
Asset Tracking.
Asset Optimisation.
Expense Control.
Outsourcing.
Process Automation.
Business Continuity.
Asset Portfolio Management.
Consolidation.
Peregrine offers Service Management solutions that are based on ITIL for Integrated Incident, Problem, Change, and Service Level Management. It says that its solutions deliver real business value to the organisation. They are built on the powerful foundation technology of Peregrine’s ServiceCenter, and its solutions help create service efficiencies, reduce service outages, streamline service desk operations by integrating processes and tools across the organisation, and ensure that service levels meet customer requirements. Peregrine says that its solutions enable organisations to evolve wisely, and adapt to the everchanging needs of the most complex and demanding IT service environments. Its modules include:
Service Establishment.
Outsourcing.
Service Control.
Business Continuity.
Service Alignment.
Consolidation.
Service Optimisation.
Company Profile Peregrine Systems is a public company with its global headquarters in San Diego, California, and its EMEA head office is in Richmond, Surrey, UK. It also has more than 20 other offices throughout the world. The company was founded in 1981, and it has evolved through both organic growth and acquisition. However, its core focus has remained on service and asset management. Peregrine has grown a strong global customer base and forged significant strategic partnerships with companies such as IBM, EDS, Fujitsu, and Siemens Business Systems. Peregrine has traditionally addressed the market through both direct and indirect routes to market. Peregrine Systems has about 625 employees, with approximately 40% of them located outside the United States. Over 25% of employees are involved in Research and Development. Gross revenues grew from US$131.6 million in 2000, to US$ 213.3 million in 2001. Approximately 70% of its revenues come from the US. However, in 2002, the company voluntarily entered Chapter 11 status, and the following year was difficult for the company, although Peregrine said that its customer base remained loyal.
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On 7 August 2003, Peregrine Systems announced its emergence from Chapter 11 and that it would implement its confirmed Plan of Reorganisation. Peregrine is the first enterprise software company to reorganise successfully under Chapter 11 as a public entity. It reminded investors that it had not filed Annual Reports for the fiscal years ended 31 March 2003 and 2002 nor the Quarterly Reports for the fiscal quarters ended 30 June 2003, 31 December 2002, 30 September 2002 or 30 June 2002. Peregrine has a customer base of about 3,500 organisations that are using its Consolidated Asset and Service management products, including:
ABN Amro.
Bayer.
Danske Bank.
Panasonic.
EDS.
IBM.
KBC Bank.
Aeroport de Paris.
Peregrine Systems, Inc. Peregrine House 26-28 Paradise Road Richmond, Surrey, TW9 1SE UK
Peregrine Systems, Inc. 3611 Valley Centre Drive San Diego CA 92130 USA
Tel: 0800 849 2050 Tel: +44 (0)20 8939 1111 Fax: +44 (0)20 8939 1170
Tel: +1 800 638 5231 or 858 481 5000 Fax: +1 858 481 1751
www.peregrine.com
PlanView PlanView Enterprise™ The PlanView solution comprises a set of tools and packaged IT governance processes to help organisations gain greater visibility of business strategies and projects. It addresses a need of organisations for better accountability and more efficient management of projects, as budgets become increasingly squeezed and all spend has to be justified. The core functionality of the solution covers the areas of work initialisation, workflow, content management, collaboration, configurable portals, portfolio management, and business intelligence. PlanView Enterprise™ combines portfolio management software, best practices, and proven cultural adoption methods in a comprehensive solution that enables customers to achieve comprehensive IT portfolio management within their organisation. It combines total business demand management with real-time portfolio analytics, best-of-breed resource management, and action-driven processes. Working together, these elements give customers total IT visibility, fewer redundancies, increased efficiency, and the ability to focus limited resources on higher-value work. By integrating analytics with root-cause analysis, PlanView Enterprise enables true optimisation, yielding greater efficiency and productivity. Components of PlanView Enterprise are: Portfolio Management Software PlanView Enterprise applies portfolio management methods to strategies, investments, projects, service work, and service delivery – the total demand on IT. The demand is balanced against capacity and availability of IT resources, with the ultimate goal of realising the business benefits of IT investments. With PlanView Enterprise, people at all levels within an organisation gain the visibility they need to make better decisions. In Strategic Management, it helps users to aggregate work into portfolios from where investment decisions are made and performance measurements carried out. Within portfolios, tasks using structured analysis, ROI, benefits stream, and balanced scorecard may be performed. Using a structured approach it is easier to manage risks and changes, and also identify redundancies and dependencies. Collaboration is supported, a useful feature for decision-makers and others involved in projects.
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Investment Analysis and decision-making is supported through a repeatable process to scope, score, and prioritise work. The investment decision is integrated into the processes via workflow. In order to evaluate performance and make decisions, measurements can be taken at the portfolio level for comparative purposes. Scenarios may be defined and activated. For Project Management, PlanView provides functionality to help organisations manage projects from inception to completion. Project models, project planning, estimating, scheduling, resource assignments, and time capture and analysis functionality is provided as well as bi-directional integration with Microsoft Project, which Butler Group regards to be a useful feature. Resource Management is supported with features that ensure that the right people are working on the right work at the right time. The functionality provided includes resource capacity planning and demand management, and also resource reserves, resource allocation, and resource performance, which is based on time and expense reporting. Resource schedules can be viewed and managed, with the ability to reserve and allocate resources in real-time, while at the same time tracking employee backgrounds and their levels of experience in different disciplines, ensuring that staff are allocated to tasks that are appropriate to their level of experience and abilities. Financial Forecasting provides the ability to perform organisational and project-based financial planning. Incorporated are cost, benefit, and revenue planning, organisational budgeting, project budgeting, forecasting, and analysis functionality. The information required for invoicing and chargeback is provided by the time and expense reporting process that is available in the system. In addition to chargeback, cost allocations and multiple bill and cost rates are supported, and the application provides flexibility in the way in which financial data can be structured. It has clearly been designed for global operations, as there is a full currency conversion feature that allows planning to be undertaken in a local currency, which is then aggregated to a common currency. There is a financial repository, XML document server, and API, that support interfaces with other applications including ERP, payroll, human resource, and other enterprise financial systems.
Enterprise Portfolio Management for alignment of strategies and resource capacities.
Project Portfolio Management for the management of project portfolios and resource assignments.
Service Portfolio Management for the capture and management of the total cost of services.
IT Management Best Practices PlanView’s flexible IT business process delivery allows users to select the process areas that give them the fastest ROI, and can be adapted to their unique environment.
PRISMS™ – adaptive IT management best practices. Pre-defined PRISMS are delivered as part of the PlanView solution, which can be used out-of-the-box or customised as required. They are delivered with work initialisation and project model workflows, workflow roles, content documents, work breakdown structures, resource requirements, and portal layouts. Each process is documented with training material and quick reference cards provided. Additional re-packaged processes are available and other industry standard processes can be input. Alternatively, organisations can create their own processes.
Cultural Adoption PlanView’s proven implementation model and active user community gives customers confidence that they will realise the benefits expected from an IT management solution.
Implementation Assurance Methodology is a structured change process that focuses on a quick ROI and low organisational impact.
PlanView Direct Community provides mentoring and support through year-round forums and the company’s on-line user community.
Company Profile PlanView is headquartered in Austin, Texas, US, with offices across the US, and Country offices in the UK, Germany, Italy, France, and The Netherlands. It is a privately held company that has 230 employees. From a Financial aspect, PlanView follows a conservative growth path with stability and longevity seen as key. PlanView has grown revenues of 30% year on year, and has been profitable every year since 1993.
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PlanView has in excess of 300 customers worldwide with approximately 275,000 licences including Allianz, Reuters, Vodafone, Allied Irish Bank, and British American Tobacco. Global Headquarters PlanView Inc. 8300 North Mopac #100 Austin Texas 78759 USA
UK Office PlanView UK Limited Atlantic House Imperial Way, Reading Berkshire, RG2 0TD UK
Tel: +1 (512) 346 8600
Tel: +44 (0)118 903 6166
www.planview.com
Primavera Project Portfolio Management Primavera says that with its best-of-breed Project Portfolio Management solutions for specific business applications, it is helping companies around the world successfully manage all of their projects and services, even in the most complex environments. IT organisations face the challenge of running IT like a business by prioritising projects, improving operational efficiencies, and maximising ROI. Primavera says that it helps them achieve these by making the best use of personnel and their skills, aligning projects and resources with company strategy, and improving governance processes and quality programs. Primavera helps IT formalise project selection and initiation processes, and once projects are under way, it makes it easy to analyse the portfolio and assess project success metrics. It enables CIOs to increase customer loyalty and build valuable credibility with internal customers and executives for the business value of IT. Primavera says that it helps IT organisations succeed when facing today’s increasing demands and challenges. It improves alignment, execution, and control, assuring that the corporation’s most strategic needs are met. Whether customers are focused on maximising resources to provide IT support and maintenance or developing large, strategic business applications, Primavera claims that it has a solution that is designed to work the way that people work, whether they are an executive, project manager, resource manager, or a team member. Primavera says that its information technology solutions offer the following benefits:
Value creation through the maximising of investments through portfolio analysis and resource management.
Velocity by increased speed and efficiency of project execution and IT operations.
Repeatability to achieve repeatable project success through documented best practices and knowledge management.
Visibility through the monitoring of the portfolio and resource performance with business analytics.
Company Profile Primavera has specialised in project, portfolio, and resource management solutions since 1983. The company believes that this experience gives it a powerful insight into implementing IT governance initiatives, reflecting its understanding of project and portfolio management success factors. The company was founded in May 1983 by Joel M. Koppelman and Richard K. Faris. Its headquarters are in Bala Cynwyd, Pennsylvania, and it has regional offices in San Francisco, Chicago, and London. Primavera has achieved 22 consecutive years of growth and profitability, and employs more than 425 people with over 30% involved in Development and 20% in customer support. In 2004, the company achieved US$102 million in revenue, which showed an increase of 16% over the previous year. International revenue increased by 56% and Primavera continued to be profitable. The company has strategic partnerships with companies such as AGC, BEA Systems, BearingPoint, IBM, OpenText, Oracle Corporation, PeopleSoft, SAP AG, and Telelogic.
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The company operates through authorised resellers in 85 countries around the world, and includes among its customers, organisations such as Alcatel, Bovis Lend Lease, ChevronTexaco, Citicorp, ConocoPhillips, EDS, Ericsson, ExxonMobil, Federal Express, Fluor, Ford-Jaguar, General Motors, Guardian Life Insurance, Hewlett-Packard (HP), Intel, Johnson & Johnson, Lockheed Martin, and the U.S. Census Bureau. Worldwide Headquarters Primavera Three Bala Plaza West Bala Cynwyd, PA 19004 USA
International Headquarters Primavera 2nd Floor, Commonwealth House 2 Chalkhill Road, London W6 8DW, UK
Tel: +1 610 667 8600 Fax: +1 610 667 7894
Tel: +44 (0)20 8563 5500 Fax: +44 (0)20 8563 5533
E-mail:
[email protected]
E-mail:
[email protected]
www.primavera.com
ProSight Project Portfolio Management Project Portfolio Management is software for the speed of today’s business. The ProSight software application and its interface were constructed to run in traditional Web browsers on Microsoft® Windows platforms so that they would be simple to understand and easily accessible – ensuring that customers become rapidly self-sufficient. ProSight Portfolio Management software carries power and complexity – running on relational database system like Oracle® and Microsoft SQL Server – to deliver long-term value and a significant ROI for enterprises. ProSight Project Portfolio Management has been designed to provide a common, easily understood reference point for dynamic and collaborative portfolio management, aggregating and interfacing many data sources to consolidate the information in one location. Anyone in an enterprise, from the executive level to the individual team member, can easily understand, review, and communicate about the technology portfolio using the application, creating an invaluable resource for increasing corporate efficiency and the success rate of technology projects. ProSight says that its solution was designed by experts in portfolio management software, who understand that automating portfolio management with software and services for technology organisations requires more than a project management roll-up or a compilation of resources. Portfolio management software must also take into account soft or subjective metrics, like value to the business, adherence to enterprise strategy, customer satisfaction, and overall health. It ensures that corporations engage in more successful, strategically aligned portfolios of technology initiatives. Projects are prioritised and selected based on business need, so that organisations can choose what projects they will do. It also means effectively managing projects through to completion, and real-time monitoring of both the on-going priorities and project execution, continually reviewing and adjusting as necessary. The company says that CIOs have consistently reported that their number one concern is whether the IT projects in their portfolio are aligned with the needs of the business. They are troubled by the nagging doubt that they might be doing a perfect job of implementing a project that has little or no value to the business. Many organisations assume that if a project is on time and under budget it is successful. But equating this notion of project success with its value to the organisation is dangerous. Good management of the project portfolio is essential, and it must incorporate strong portfolio management and strong project management, which ProSight says that its solution provides. It says that Project Portfolio Management means:
Capturing and comparing new project concepts and business cases.
Prioritising and selecting project investments for optimum value to the business, based on an objective process.
Determining feasibility and planning a schedule based on costs and resource availability.
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Tracking all aspects of the project throughout its lifecycle.
Managing project execution through to benefits realisation.
Objective evaluation and review of results obtained.
Measuring IT Costs and Value
ProSight’s Fast Track PPM presents key project information at the appropriate level for everyone in the organisation, tracking strategic and operational issues and activity in a single solution. With a shared system of record, the communication and collaboration throughout the management chain works far better. ProSight’s Fast Track for Project Portfolio Management incorporates a process with three basic stages, Propose, Select, and Manage, that can be as brief or as detailed as the enterprise chooses. Company Profile ProSight delivers portfolio management software and portfolio management services. It comprises a number of industry veterans with substantial expertise in software and high-technology companies. It says that it has experienced the same problems that face customers, and that its software has been designed to solve those problems. The company was founded in 1998 and has its headquarters in Portland, Oregon. ProSight has gathered an executive team and employee base with a substantial history in process management and software development for companies such as Tektronix, Symantec, MERANT, Siebel, SAP, Oracle, Mentor Graphics, Sequent, InFocus, MedicaLogic, and Unicast. ProSight is a well-funded, privately held company with capital provided by the BRM Group, Genesis Partners, Giza Venture Capital, Orama Group, Prism Opportunity Fund, and Sequoia Partners. ProSight, Inc.Corporate Headquarters 9600 SW Barnes Road, Suite 300 Portland Oregon 97225 USA Tel: +1 877 531 9121 Fax: +1 503 889 4800 www.prosight.com
SAS SAS® IT Management Solutions SAS says that its SAS IT Management Solutions are designed to help organisations establish an enterprise approach to optimising IT performance that is easy to maintain. The company says that the effective use of technology can determine the success of an enterprise, and it affects both the quality of its output, and its ability to provide products and services on a timely basis. There are a variety of budget constraints that enterprises face. Decision makers need access to IT business information to develop and achieve strategic goals in an ever-changing computing environment. At the same time, IT managers need to leverage investments in existing technology. They must sustain systems performance, stability, recoverability, and availability across the enterprise in order to provide the best IT services to their clients, and they must protect the data centre infrastructure and company assets that lie at the heart of the organisation. Overall, IT delivery and business demands must be aligned to optimise profitability and competitiveness. SAS contends that these needs can be satisfied with SAS IT Management Solutions, which extend beyond traditional IT performance management and leverage the full potential of each IT resource across the enterprise. They enable the management of the IT organisation and service delivery, control costs, and make informed decisions. SAS IT Management Solutions provide:
Integrated and intuitive products for IT management across the enterprise.
Sophisticated analytical reporting and data visualisation.
Reliable information on IT usage and costs.
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The following modules are available in SAS IT Management Solutions:
SAS IT Resource Management gathers disparate data into a customised warehouse where it can be used for IT resource management across the enterprise from the desktop.
SAS IT Charge Management combines IT subscription and transaction-based charge information to allocate, audit, and invoice IT usage to specific business cost centres.
SAS IT Value Management manages the cost, value, and efficiency of IT services delivered to each line of business. It optimises the overall performance of the IT enterprise.
SAS IT Service Level Management provides a clear and concise view of IT services with the capability to analyse, measure, and understand the quality of services and service delivery to each line-of-business.
SAS IT Management Solutions are aimed at satisfying the critical need of organisations to align with the bottom-line goals of the enterprise, and continuously prove the value they add to the business. Company Profile SAS was launched from North Carolina State University in 1976, by Dr. Jim Goodnight and three of his colleagues. Dr Goodnight is now President and CEO of SAS. The company has its headquarters in Cary, North Carolina, and since 1976 has grown to encompass over 9,500 employees, and 329 offices worldwide. European Headquarters are located in Heidelberg, Germany; UK offices are located in Marlow, Manchester, and Glasgow. SAS integrates leading data warehousing, analytics, and traditional BI applications to create intelligence from massive amounts of data. It is one of the leading vendors in the decision support and data warehousing market, providing an integrated enterprise BI-platform. SAS maintains a significant budget for Research and Development (R&D), with the stated aim of driving its domain expertise in analytical intelligence and information capture out to end-users through its solution range. The company is ranked as the largest privately held software company in the world, and its total revenues for the financial year ending 31 December 2004 were US$1.53 billion. Over 40,000 customers at business, government, and university sites use SAS software solutions. Customers include 97 of the top 100 companies on the Fortune 500 list. SAS has a strong network of partners through its SAS Alliance programme, including Computer Sciences Corp, EDS, HP, IBM, Intel, Sun, Unisys, Accenture, BearingPoint, Capgemini, Deloitte Consulting, and IBM Global Services. Worldwide Corporate Headquarters SAS Institute Inc. 100 SAS Campus Drive Cary NC 27513-2414 USA
EMEA Headquarters SAS International PO Box 10 53 40 Neuenheimer Landstr. 28-30 D-69043 Heidelberg Germany
Tel: +1 (919) 677 8000 Fax: +1 (919) 677 4444
Tel: +49 6221 4160 Fax: +49 6221 474850
www.sas.com
www.sas.com
UK Headquarters Wittington House Henley Road, Medmenham Marlow, Bucks SL7 2EB UK Tel: +44 (0)1628 486933 Fax: +44 (0)1628 483203 E-mail:
[email protected] www.sas.com/uk
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SeaQuation Enterprise Portfolio Intelligence SeaQuation uses a unique approach combining many disciplines to provide an holistic view of an enterprise’s IT Portfolio with proper regard to both risk and return. Within today’s corporate environment of increased shareholder scrutiny, greater demands for corporate governance and CIO’s under pressure to deliver more with less, understanding the financial investment and the risk in an IT Portfolio is growing in importance. SeaQuation aims to bring Wall Street to Enterprise IT. In the same way that a financial investment portfolio needs active management (buy, hold, or sell) by the fund manager, so too does the IT investment portfolio. An equity or fixed income portfolio requires constant monitoring against the Dow Jones or other benchmarks in order to maximise the risk-adjusted returns. This involves making decisions on increasing or reducing individual stock holdings and, in particular, making disposals of nonperforming assets. Precisely the same process. needs to be applied to corporate IT investments. SeaQuation has developed a range of analytical and actuarial methods to quantify investments in order that executive boards can create and manage strategies to ensure that value is delivered to the business, clients and shareholders. SeaQuation’s methodologies and metrics are supported by a benchmarking projects data store containing empirical evidence on several thousand live and completed projects. SeaQuation offers services providing a holistic approach to determine the financial investment, return and risk associated with an organisation’s IT Portfolio. The services are flexible to respond to the critical factors identified by both SeaQuation and its clients. The drivers for these assignments include:
De-politicising the process of making IT Investment decisions.
Determining the contribution of IT investments to Shareholder Value.
Supporting the business case of major IT projects through an independent financial assessment of the risk and return.
Due diligence to assess the financial make-up, performance, and exposure of the IT Portfolio.
IT related management information benchmarking studies to determine comparability with selected peer groups.
Within each of the services the analysis may differ from client to client, recognising the fact that no two organisations may manage its business in the same way and the key business indicators may differ from company-to-company. The Services are of a flexible nature and can cover many service options or additional services to provide the client with the business indicators of greatest interest. Company Profile SeaQuation is a new company that was formed in 2004 as a spin-out from the highly successful IT Performance and Investment Management Department of ING Group in The Netherlands. The company was formed due to market demand from other corporations in the oil and gas and financial services sectors, wanting to benefit from the methods developed and deployed by ITPM at ING. SeaQuation now assists Fortune 2000 corporations to gain a better understanding of their IT Portfolio and investments using financial, actuarial and insurance risk based techniques. It has also worked closely with the IT Governance Institute in the development of the ITGI’s new ValIT product which complements the existing CobiT standard. The company’s headquarters are in The Netherlands with operations throughout Europe, the US and the Far East. Its business is to bring financial discipline and a quantitative, actuarial approach to assist corporations to optimise the risk-adjusted return of their business related IT investments. The SeaQuation approach can be summarised as bridging the gap between the CIO world of bits and bytes and the CFO world of dollars and cents. To date, SeaQuation has supported Fortune 500 enterprises to rationalise IT portfolios resulting in significant risk reduction and overall cost savings and cost avoidance of more than US$800 millions. SeaQuation 60 Woodlands Road Surbiton, Surrey KT6 6PY, UK
SeaQuation Headquarters Roermond Wilhelminasingel 25 6041 CH, The Netherlands Tel: +31 475 381 888 Fax: +31 475 311 808 E-mail:
[email protected]
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Serena Software Serena ProcessView Composer, and Serena RTM, Serena ChangeMan ProcessView Composer is a new member of the Serena product family, which enables visualisation and prototyping of applications to drive requirements elicitation and provide a clear business context for application development teams. Designed for use by business analysts, the Composer environment consists of an integrated series of visual editors that carry a Microsoft Office look and feel. Collectively these editors enable modelling and simulation of everything from business processes and interaction scenarios, to user experiences, business logic, and connection points to existing systems. Once the model and prototype are complete, the Composer software can auto-generate requirements documents and specifications for delivery to both business and IT stakeholders. As such, ProcessView Composer becomes a key source of business input for downstream Serena ALM products, including Requirements and Traceability Management (RTM), TeamTrack, and ChangeMan. Serena RTM solution tracks and manages requirements throughout a project lifecycle. Enterprises are able to quickly get the information that they need to ensure that their projects succeed. While every project follows its own process, or lifecycle, one of the first steps is the specification of requirements. Requirements can come from anywhere – customer and end-user requirements from the field, object-oriented design models from development, test procedures from Quality Assurance, defects from customer service, and change requests from all stakeholders. By tracking all these requirements across different organisations, and understanding the impact that various requirements have on cost, schedule, and time-to-market, can have a significant impact on project success. Key features include:
Familiar interfaces – Microsoft Word and Web browser.
Collaboration through Discussion Threads and Change Requests.
Lifecycle Traceability with Impact Analysis and Powerful Queries.
Change Management with Versioning, State Transitions, and Change Approval.
Process Flexibility.
Data Repository.
Serena offers a full range of scalable Change Management software solutions that fit both distributed and mainframe environments. Serena ChangeMan products automate the entire application lifecycle across all development environments making software alterations increasingly streamlined and efficient. The ChangeMan family includes ChangeMan Dimensions, ChangeMan ZMF, ChangeMan DS, and the ChangeMan Professional Suite – Version Manager, TeamTrack, and Builder. The Serena ChangeMan Professional suite brings together Serena’s home-grown products and acquisitions in the Software Configuration Management (SCM) space, including what was Merant Professional. The suite comprises Serena ChangeMan Version Manager, Serena TeamTrack (replacing the previous Tracker product), and Serena ChangeMan Builder, offering version control, defect, and issue tracking, and automated builds in a single package. On top of its strengths in scalability, performance through its multi-threaded architecture, security and distributed, Web-based development capabilities, version 9 adds the following:
Integration options into the Eclipse Platform and Microsoft Visual Studio.NET.
Integration between TeamTrack and Version Manager.
Improved Builder features, such as Java Ant support.
Compliance features include electronic signature authorisation, audit trails, and controlled workflows.
Company Profile Serena Software (NASDAQ: SRNA) headquartered in San Mateo, California, was first incorporated in 1980, and provides infrastructure software for Enterprise Change Management. Serena has US regional Offices in Colorado Springs, CO, and Woodlands Hill, CA. Major European offices are located in the UK (including a development centre at St. Albans), France, Germany, and Belgium.
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In May 2004, the company completed its acquisition of Merant – giving it a broader range of Change Management tools, including Professional. The company now provides a comprehensive range of multiplatform products meeting the needs for Software Change Management and Enterprise Change Management, including the Serena® ChangeMan® series of tools, Serena® StarTool® to edit and manage data, and Serena® Comparex® for comparing files intelligently (this was in fact the first product Serena shipped). The company acquired TeamShare in 2003 principally for the TeamTrack® product, which has now replaced ChangeMan ALM in the Serena tool portfolio. Serena has about 750 employees, over 200 of these are engaged in Research & Development, 250 in Sales & Marketing, 170 in Customer and Consulting Services, and 120 in Finance, Administration, and Operations. In the last financial year, the company spent 15% of its revenue on Research and Development, amounting to US$31 million. The net profit and revenue figures for the last three years are: Year Ending (31 January)
2005 (US$ million)
2004 (US$ million)
2003 (US$ million)
Total Revenue
208
106
96
Operating Income/(Loss)
137
53
46
9
21
23
Net Income
Revenue is split by region as follows: North America – 69%, Europe, Middle East, and Africa – 30%, and Asia-Pacific – 1%. There are many hundred thousands of seats of Professional implemented worldwide at 15,000 sites, including 98 of the Fortune 100. Key customers include: US Government, Blue Cross & Blue Shield, Lockheed Martin, General Electric, United Parcel Service, Siemens, The Hartford Financial Services Group, and Intel Corporation. Serena Software Abbey View Everard Close St.Albans Herts, AL1 2PS UK
Serena Software, Inc. 2755 Campus Drive 3rd Floor San Mateo California 94403 USA
Tel: +44 (0)1727 812812 Fax: +44 (0)1727 869252
Tel: +1 (650) 522 6600 Toll Free: 800 457 3736 Fax: +1 (650) 522 6699
E-mail:
[email protected]
E-mail:
[email protected]
www.serena.com
Solution Matrix Ltd. Business Case Analysis Solution Matrix products and services include:
Consulting services, including business case analysis and business planning.
Professional training.
Business case tools such as published guides, software, and templates.
Special reports and white papers on business case issues.
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The company contends that the business case that is produced and delivered must score high in credibility, accuracy, and practical value. Solution Matrix says that in order to achieve this objective, an organisation must begin by understanding that numbers alone do not make the business case. How the business case is designed, developed, and presented is as important as the ROI and other figures that are projected. Since 1994, Solution Matrix has helped hundreds of individuals and organisations use the Business Case Solution to obtain solid, practical answers to questions such as:
How long will it take for a new Enterprise Resource Planning (ERP) system to “pay for itself”?
How can a capital review process be put in a business case framework?
How to determine if there is a profitable business model for all partners in a proposed business alliance?
The company draws on 10+ years of experience in a wide range of industries and business issues, and delivers business solutions with a focus on decision-making and planning issues in business investment decisions, strategic business planning, alliances and partnerships, sales support, emerging technologies, and IT justification. Justifying IT actions or acquisitions in a complex business environment can be a serious challenge. IT is notorious for ‘hidden’ long-term costs and business benefits that are hard to quantify. Solution Matrix says that all the business case questions about IT ‘ROI’, IT payback, and TCO are important. It is no secret that the challenge in justifying IT actions is not financial arithmetic. The mathematics in justifying IT actions is simple and has been used since the early 1900s, but the real challenges are:
Deciding which costs and which benefits belong in the case and which do not (or, whose costs, and whose benefits).
Assigning value to cost and benefit impacts from the IT action.
Making concrete the benefits and costs that may not be measurable in financial terms, the so-called ‘intangible’ benefits and costs.
Making tangible the connection between IT actions and contributions to business objectives.
Solution Matrix says that it specialises in devising the approach and the kind of business case that answers the challenging questions effectively, in practical terms that everyone including CFOs, engineers, and other professionals can understand and trust. Company Profile Solution Matrix Ltd. was founded in 1994 and is based in Boston, Massachusetts, USA. The company is a management consulting firm dedicated to helping executives, managers, consultants, and other professionals understand the impact of management actions on business performance. Its clients include individuals and organisations on five continents, in business, government, education, the military, and nonprofit organisations. Its primary objectives are to help clients to meet decision support and planning needs through high-quality business case analysis, and to help them establish business case skills and resources in their own organisations. Solution Matrix Ltd. 304 Newbury Street Suite 350 Boston MA 02115 USA Tel: +1 617 267 9607 (Mon-Fri, 0900-1700 US Eastern Time) Fax: +1 617 249 0130 Email
[email protected] www.solutionmatrix.com
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Telelogic Telelogic DOORS/ERS, TAU Generation2, SYNERGY, and Focal Point Telelogic provides an integrated family of software solutions that collectively automates, supports, and manages the development lifecycle. The company’s core products consist of: DOORS/ERS – a requirements management toolset; TAU Generation2 – a set of visual systems/software development and testing tools; and SYNERGY a change and configuration management solution. The strength of the solution offered by Telelogic comes from the integrated nature of the core product families, as a combined entity, and from their individual abilities to operate as stand alone products, often alongside other, third-party application development solutions. Within the development environment, and throughout its lifecycle, the Telelogic toolset supports the automated tracking of compliance to user specified requirements, enables and supports rapid impact and change analysis, delivering an end-to-end development automation solution. Telelogic, through the use of its Automated Lifecycle Management products, provides an integrated set of software development tools that have particular strengths in the areas of requirements management, modelling and automated code generation, and change/configuration management. The company’s focus is on delivering technology solutions that can be used to build and deploy specified end-user processes and systems as quickly and as accurately as possible – this, from a systems perspective, means fast tracking the systems build and delivery capabilities, whilst maintaining the accuracy required to build solutions that fit the end-users stated specifications, and at the same time keeping down costs through the integration of its end-to-end development processes. Requirements Management – The Telelogic DOORS/ERS product family is used to document systems requirements, and for code generation. The product set comprises of an integrated family of tools that can be used by organisations and their developers to capture the scale and detail of user requirements. It makes use of a structured requirements management process build methodology, which supports effective communication and collaboration between all active participants in the development process. DOORS/ERS is positioned by Telelogic as a multi-platform solution, which has enterprise wide systems design capabilities. This positioning supports the products ability to capture, link, trace, analyse, and manage information from across the enterprise, aligning it to support project/compliance issues, and enabling it to support defined standards within the organisation. DOORS is the central tool in the DOORS/ERS family. DOORS/Analyst is a superset of DOORS, it provides the facilities to analyse requirements using Unified Modelling Language (UML) models to deliver improved clarity and understanding. However, this is also providing the core functionality to align the open nature of the solution with industry standards. Visual Modelling and Testing Facilities – These are provided using the Telelogic TAU Generation2 products, a range of visual development tools that support the modelling, design, implementation, and systems/software elements of the process development cycle. Telelogic TAU Generation2 supports the visual modelling and testing elements of systems and software engineering projects. Its core features are TAU/Developer and TAU/Architect. TAU/Developer enables users to generate applications based directly upon graphical models. This provides significant benefit in environments where the complete design, development, and deployment of software is a common requirement. TAU/Architect has been designed to support the specification and design of large, and often complex enterprise systems, based upon UML. Supporting this approach, one of the reasons why visual modelling strategies are winning converts at the enterprise level is that complex specifications can be visually validated, a step that using TAU/Architect can now occur much earlier in the development process than would be possible if traditional methods were being used. From the user perspective this greatly reduces the opportunity for error, and should result in a more rapid and cost-effective project development cycle.
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Change and Configuration Management – Is provided by the Telelogic SYNERGY product family. Telelogic SYNERGY delivers an advanced change and configuration management offering, covering areas such as, the lifecycle control of digital assets, and project tracking – including all tasks and the people assigned to them (even where these are distributed across multiple locations). We believe that a key differentiator from traditional CM tools is the product’s ability to break down change and configuration management into basic tasks, enabling a more detailed level of management and tracking to be evolved. The solution centrally manages all software versions and configurations, and includes the use of a change request and defect tracking facility that allows organisations to respond effectively to both internal and external changes. The solution incorporates the use of an integrated central repository database of software assets, as well as providing a single common touch point for all personnel involved in projects. In Butler Group’s opinion, the value of such a common resource is considerable, as software engineering, in the context of this solution is not restricted to developers alone – it is seen as a collaborative process, and the Telelogic offering, which can be delivered in various flavours, has been designed specifically to be flexible in its delivery methodology to meet the needs of individual customer organisations. Decision Support, Portfolio Management, and Product Management – are supported with the FocalPoint, a Web-based application that incorporates tools to assist with activities such as stakeholder collaboration, prioritisation, decision-making, and visualisation. FocalPoint is helping product development and IT organisations at AstraZeneca, ABB, and Sony Ericsson to optimise business and product decision-making. Company Profile Telelogic was originally founded in 1983, as an R&D unit by the main Swedish Telecommunications operator. Since 1999 the company has been publicly owned, and is listed on the Stockholm Exchange (using the symbol TLOG). Telelogic has its headquarters in Malmö, Sweden, and operates in 17 countries worldwide. It has major offices in Irvine, California (USA); Oxford (UK); Munich (Germany); Paris (France); and Tokyo (Japan) – employing around 700 staff across its operations. The company’s focus is upon the provision of solutions to enable software development, and to support the operation of advanced enterprise systems. Telelogic is recognised as a provider of advanced integrated software tools – supported by a professional services arm – which are designed to enable the automation of developmental lifecycles. Telelogic is actively involved in the work of various standards bodies, such as the OMG, where it has contributed significantly to the advancement of the UML 2.0 standard. Its products are based upon open architectures and standardised languages, in order to ensure minimal integration issues when its products are deployed. Telelogic has reported the following revenues figures over the last three trading years:
Revenues in millions of Swedish Krona (MSEK)
2004
2003
2002
1039.3
937.0
1121.0
The company’s current customer list includes the following high-profile organisations: Bank of America, BAE Systems, BMW, Boeing, Ericsson, Ford, Lockheed Martin, Motorola, and Vodafone.
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World Headquarters Telelogic AB PO Box 4128, Kungsgatan 6 SE-203 12 Malmö Sweden
Americas Headquarters Telelogic North America, Inc. 9401 Jeronimo Road Irvine CA 92618 USA
Tel: +46 (40) 650 00 00 Fax: +46 (40) 650 65 55
Tel: +1 (949) 830 8022 Fax: +1 (949) 830 8023 Sales TollFree: +1 877 275 4777
E-mail:
[email protected] www.telelogic.com UK Headquarters Northbrook House Oxford Science Park Oxford OX4 4GA UK Tel: +44 (0)1865 784285 Fax: +44 (0)1865 784286 E-mail:
[email protected]
Touchpaper IT Service Management Suite (ITSM) Touchpaper ITSM Suite is a series of Infrastructure Management products that run as stand-alone or fully integrated applications. IT staff often find themselves spending most of their time reacting to problems, at the expense of projects, to improve the efficiency of the infrastructure. Touchpaper ITSM Suite provides a wide range of functionality to enable administrators to manage end-users, the infrastructure, and applications. A particular strength is the tight integration between all of the products, facilitated by the utilisation of Web services developed using the Microsoft .NET architecture. It has elements that will be of benefit to any organisation requiring true IT service management capabilities, particularly if they have a significant desktop or mobile PC population. Touchpaper ITSM Suite provides a wide range of products to enable IT staff to be more proactive in managing events before they turn into problems and start impacting performance. Furthermore, Touchpaper ITSM allows organisations to be more proactive in terms of using IT to help drive business growth and development. The range of products available includes:
HelpDesk.
NMS.
ChangeManager.
SurveyCenter.
AutoServe.
PassMe.
Recently, Touchpaper has added ServicePortal, MobilePortal, ProcessManager, Enterprise AssetManager, and ActiveAssistance to its range of solutions.
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The company’s strategy is to move away from simple, help desk products to complete IT Business Management solutions, and services encompassing IT Service Management, Customer Service Solutions and Systems and Network Management. To achieve this, it has embraced Web services to facilitate fast and flexible development, efficient re-use of code, and automated management processes. Architecturally, these latest modules represent the way forward for Touchpaper. Using .NET as the development and deployment framework allows for high levels of component reuse and simplifies deployment. Customers can simply plug-in the various parts of the suite they need today whilst retaining the ability to add-on as and when their needs change. Customers can also easily integrate Touchpaper applications with other applications across the organisation. Touchpaper Console is the vendor’s .NET container, and gives a central point of administration and management. Over time, the whole Touchpaper portfolio will become ‘.NET-enabled’. Company Profile With over 20 years of experience across the UK and Europe, the USA, and South East Asia, Touchpaper is one of the most established and respected international providers of IT Business Management (ITBM) solutions. Instrumental in redefining the move away from simple help desk products to complete ITBM solutions and services encompassing IT Service Management (ITSM), Customer Service Solutions (CSS), and Systems and Network Management, they now have over 1700 customers around the world, supporting over 3 million users. Touchpaper’s goal is to help its customers deliver efficient, effective IT and customer services through teams who exceed expectations for service, minimise security risks, and drive operational value through technology. The company has grown from its UK origins to become a successful international software solution provider to a worldwide customer base. Touchpaper employs 200 staff with approximately 80% in the UK and Ireland, 10% in Germany, and 10% in the US. The company has a loyal customer base of over 1700, including a wide cross-section of corporate and public sector organisations such as: Reebok, Merrill Lynch, Mercedes/AMG, Parliament of Victoria, The Body Shop, Staffordshire County Council, Dixons, DSO National Laboratories, London Business School, Kent County Constabulary, Reuters, Michelin, and Jordan F1. Touchpaper has had steadily increasing revenues throughout its history. The major share of its revenue, 75%, comes from the UK and Ireland market, approximately 10% from the US, and a similar amount from the German market. Headquarters Touchpaper Dukes Court Duke Street Woking, Surrey GU21 5RT UK
North America Touchpaper Corporation 440 Ninth Avenue 8th Floor New York NY 10001 USA
Tel: +44 (0)1483 744400 Fax: +44 (0)1483 744401
Tel: +1 (646) 205 3400 Fax: +1 (646) 205 3499
Germany Touchpaper GmbH Otto-Hahn-Straße 46 D-63303 Dreieich Germany
Ireland Touchpaper, Denshaw House 120/121 Lower Baggot Street Dublin 2 Ireland
Tel: +49 (0)6103 3 79 04 0 Fax: +49 (0)6103 3 79 04 44
Tel: +353 1 659 9424 Fax: +353 1 676 1960
E-mail:
[email protected] www.touchpaper.com
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SECTION 9: Glossary
Butler Group a Datamonitor Company
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Accounting Standards Board (ASB) A subsidiary of the UK Financial Reporting Council. ACCA Association of Chartered Certified Accountants. Advanced InTelligent (AIT) A type of tape cartridge developed by Sony, which uses 8mm cassette tapes and can hold up to 100GB of data. Advanced Technology Attachment (ATA) A disk drive implementation that integrates the controller on the disk drive itself. AIM Alternative Investment Market. Anti-Money Laundering (AML) The processes that identify when monies that are generated by crime, or are going to be used to fund crime or terrorism, pass as transactions through the banking system. ARA Assets Recovery Agency; set up by the Proceeds of Crime Act 2002. AS Australian Standard. ASB Accounting Standards Board. B2B Business-to-Business. BS British Standard. BS 7799 British Standard 7799 (also known as ISO 17799), an internationally recognised information security standard comprising a broad range of information security controls and best practice. BS ISO 15489 (See ISO 15489) Business Activity Monitoring (BAM) A process that identifies the ways in which the provision of instant access to disparate data sources and applications within an organisation, can optimise the speed and efficiency with which business decisions are made. Business Process Management (BPM) BPM concerns the software and tools required to model and execute an organisation’s business processes, through the orchestration and integration of the necessary people, systems, applications, and application components. BVPI Best Value Performance Indicator, used in the public sector in the UK. CAO Chief Accounting Officer. CARD Consolidated Admissions and Reporting Directive, UK. CCTV Close Circuit Television. CEO Chief Executive Officer. CFO Chief Financial Officer.
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CLI Calling or Connected Line Identification: this relates to the display on certain telephone equipment which alerts the subscriber to the identity of the caller before the connection is made, and the 1471 service in the UK. CMS Centers for Medicare and Medicaid Services, US. Compliance The active process of addressing the relevant legislation and regulation. Content Addressed Storage (CAS) An object-oriented system for storing data that is not intended to be changed once it has been stored, for example, medical images, sales invoices, and archived e-mail. CAS assigns a unique identifying logical address to the data record when it is stored, and that address is neither duplicated nor changed in order to ensure that the record always contains the exact same data as was originally stored. CAS relies on disk storage rather than removable media, such as tape. Corporate Governance The way in which companies are directed and controlled. Corporate Performance Management (CPM) CPM fits within the BI sphere and can be thought of as a largely (70%-90%) pre-built BI solution for financials. Data Controller Data Controllers make decisions about how Personal Data is processed or used (DPA). Data Processors Individuals and organisations who process Data on behalf of Data Controllers (DPA). Data Subject An individual who is the subject of Personal Data (DPA). Digital Imaging and Communication in Medicine (DICOM) The DICOM standard provides a common specification for the distribution of medical images such as CT scans, MRI scans, and Ultrasound images. DICOM format files are those which are compliant with Part 10 of the DICOM standard. The UK standard for digital imaging. Digital Linear Tape (DLT) A well-established tape standard with a back-up speed of 20GB per hour. Digital Versatile Disk (DVD) DVD provides high-quality video, audio, and data storage and access. Direct Attached Storage (DAS) Traditional form of storage where the storage devices are directly attached to, and managed by, an individual server. Discussion Paper (DP22) UK Financial Services Authority discussion paper on extension of ‘Know Your Customer’ requirements across the Financial Services. DoD Department of Defense, US. DPA Data Protection Act 1998, UK. DPEC Directive on Privacy and Electronic Communications. DTI Department of Trade and Industry, UK.
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Dublin Core The Dublin Core Metadata Element Set is a common semantic building block of Web Metadata. It has 15 elements that provide broad categories for describing most information resources. Often, additional semantics are required to fully describe resources, and other pieces of metadata can be combined with it to create richer descriptions. Dublin Core metadata can reside in XML, HTML, or RDF. ECA Electronic Communications Act 2000, UK. ECHR European Convention on Human Rights 1950. EEA European Economic Area. e-GIF UK electronic Government Interoperability Framework, one of the UK’s e-Government standards. e-GMF e-Government Meta Data Framework, one of the UK’s e-Government standards. e-GMS e-Government Metadata Standard, the UK Government’s standard to describe the way that metadata should be structured. Enterprise Application Integration (EAI) A software framework that enables links between applications on an organisation-wide scale. Provides different types of interfaces, such as data integration, application integration, and process integration, to cope with the requirements of different software packages. ERM Electronic Records Management. EU European Union. eXtensible Business Reporting Language (XBRL) An XML-based specification for publishing the financial information of an enterprise. The standardisation of the specification makes it easier for public and private companies to share information with each other and with industry analysts across all software formats and technologies, including the Internet. eXtensible Markup Language (XML) Markup language, derived from SGML, defined by the W3C as a Recommendation in 1998. Used as a metalanguage to describe data, it is now finding widespread application in areas such as application integration, content management, electronic data interchange, and wireless communications. XML is ‘extensible’ because, unlike HTML, the markup symbols are unlimited and self-defining. Using an XSL Stylesheet, XML can be transformed for display as HTML on a Web page, or to alternative formats for display on other types of client device. FBI Federal Bureau of Investigation. Financial Reporting Council (FRC) A unified, independent UK regulator which: Sets, monitors, and enforces accounting and auditing standards.
Oversees the regulatory activities of the professional accountancy bodies, and regulates audit.
Promotes high standards of corporate governance.
Financial Reporting Review Panel (FRRP) A subsidiary of the UK Financial Reporting Council. Financial Services Authority (FSA) UK super regulator of the banking and financial services market
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FOI Freedom Of Information Act, UK. FPS Fax Preference Service UK – statutory lists of numbers where the subscriber has registered a general objection to receiving unsolicited marketing material on that number. FSA Financial Services Authority, UK. FSAP Financial Services Action Plan, UK. FSMA Financial Services and Markets Act 2000, UK. FTC Federal Trade Commission, US. GAAP Generally Accepted Accounting Procedures. GSI Government Secure Intranet, UK. HIPAA Health Insurance Portability and Accountability Act, US. Host-based Intrusion Detection System (H-IDS) A detection system that resides on a particular device, and which only monitors that device. (See IDS.) HRA Human Rights Act 2000, UK. HyperText Markup Language (HTML) A markup language designed to display material in a browser. As with XML, it consists of a series of tags, but unlike XML it contains information about the way in which text is displayed and does not describe the data. IAS International Accounting Standards. IC Information Commissioner, appointed by the UK Government under the DPA. ICAEW Institute of Chartered Accountants in England and Wales ACCA. IFA Independent Financial Advisor, UK. IFRS International Financial Reporting Standards. Intrusion Detection System (IDS) The IDS can be positioned either on a specific device, or on a section of a network. Its role is to monitor traffic and report unusual occurrences to the administrator. However, if the system is poorly configured, alerts will be almost constant. False positives, alarms without good cause, are a serious problem with almost all IDS implementations. Information Lifecycle Management (ILM) A strategy and the technologies for the management and storage of information from the point of creation to its deletion. International Organization for Standardization (ISO) An international organisation composed of national standards bodies from over 75 countries.
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IPv4 Internet Protocol, version 4. IPv6 Internet Protocol, version 6. IRB Internal Ratings-Based approach: part of the approaches to credit risk detailed in Basel II. ISO 15489 An international records management standard based on the Australian standard AS 4390 of 1996. ISO 17799 (See BS 7799) ISP Internet Service Provider. Key Performance Indicator (KPI) An important metric or calculation, usually displayed with graphical notion, illustrating whether the figure has breached a defined maximum or minimum threshold. Lightweight Directory Access Protocol (LDAP) A software protocol for enabling anyone to locate organisations, individuals, and other resources such as files and devices in a network, whether on the Internet or on a corporate Intranet. Linear Tape-Open (LTO) A tape standard developed jointly by HP, IBM, and Seagate. Local Area Network (LAN) A network consisting of machines within close physical proximity to each other: for example, on a single floor of a building. LSE London Stock Exchange. Mean Time Between Failures (MTBF) The average time a device will function before failing, which is measured in hours. Metadata Data that describes or defines another piece or related pieces of data. Mirroring A form of replication. MLRO Money Laundering Reporting Officer: a person appointed as part of the Money Laundering Regulations, to whom knowledge or suspicions of money laundering must be reported. NASD National Association of Securities Dealers, US. NCIS National Criminal Intelligence Service, UK. Network Attached Storage (NAS) A storage device located on the network dedicated to file sharing. Network-based Intrusion Detection System (N-IDS) A detection system that resides on a particular network segment, and which only monitors traffic that crosses that segment. See IDS. NYSE New York Stock Exchange. OFR Operational and Financial Review.
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Personal Data The information held must have the individual as its focus. Also, the information tells you something significant about the individual (DPA). Phishing Generally, e-mails sent to individuals purporting to be from their banks for example, providing them with a link to log on to their on-line banking facility. The input account numbers and security details are recorded by the fraudsters, who subsequently use this information to access the individual’s account. POBA Professional Oversight Board for Accountancy. PRO The National Archives – formally The Public Records Office. Publication Scheme States what information the authority (central and local government and authorities) publishes and can be used to assist members of the public to understand what authorities do under the UK Freedom of Information Act 2002. RAIN Redundant Array of Independent Nodes RDF The Resource Description Framework is a general framework for how to describe any Internet resource such as a Web site and its content. Redundant Array of Independent Disks (RAID) A method of storing the same data on multiple hard disks. RIPA Regulation of Investigatory Powers Act 2000. ROI Return On Investment. SAR Subject Access Request. SEC Securities and Exchange Commission, US. Small to Medium-sized Enterprise (SME) A company comprising of no more than 500 employees. Snapshot A point in time copy of data. SSL Secure Sockets Layer. Storage Area Network (SAN) A high-speed sub-network of shared storage devices. Storage Resource Management (SRM) Software for managing storage resources. Subject Access The right of an individual to be told by the Data Controller whether they, or someone else on their behalf, can process that individual’s Personal Data (DPA). TCO Total Cost of Ownership. TPS The UK Telephone Preference Service – statutory lists of numbers where the subscriber has registered a general objection to receiving unsolicited marketing material on that number.
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Measuring IT Costs and Value
UKLA United Kingdom Listing Authority: regulates the continuing obligations of those companies whose shares are traded on the LSE. Virtual Private Network (VPN) A secure network that uses public wires, most commonly the Internet, to connect nodes, often remote computers, to a network. Voice over Internet Protocol (VoIP) The technology employed to transmit voice over a data network using IP. Wide Area Network (WAN) A network made up of devices that are not located closely together in geographic terms. An example of a WAN might be a college network, spread across several buildings in a city. Workflow This is a term used to describe the tasks, procedural steps, organisation or people involved, required input and output information, and tools needed for each step in a business process. Write Once Read Many (WORM) A technology that allows data to be written to a tape, disk, or optical media once. After that the data is permanent and can be read any number of times. WTO World Trade Organisation.
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Butler Group a Datamonitor Company
Technology Management and Strategy Report
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This Report reveals:
How to focus IT resources on the initiatives that deliver the greatest value.
Why the measurement of IT costs and value is a fundamental component of IT management and governance.
The approaches and methods that can help organisations to identify and augment value.
How the implementation of a structured measurement process brings substantial benefits.
Why most enterprises are quite proficient at measuring IT costs, but neglect to quantify value.
The importance of automated tools and a common repository for the successful measurement of IT costs and value.
Why the IT manager must explore new architectures, technologies, and delivery methods to increase efficiency.
What to consider when moving the IT Department from a cost centre to a strategic partner and value contribution model.
Butler Group Analysis without compromise
a Datamonitor Company
Headquarters:
Australian Sales Office:
USA Sales Office:
Europa House, 184 Ferensway, Hull, East Yorkshire, HU1 3UT, UK
Butler Direct Pty Ltd., Level 21, Tower 2, Darling Park, 201 Sussex Street, Sydney NSW 2000, Australia
Butler Group, 245 Fifth Avenue, 4th Floor, New York, NY 10016 USA
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