200901 mm masters of it economics

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Masters ofIT Economics

Volume 1 / Issue 1

How Three Visionary IT ExecutivesImproved IT Economics to RealizeGreater Value


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Managing IT Economics is an art.

Managing IT Economics is about getting more value out of IT.It involves balancing cost and risk trade-offs. Meeting the endlessdemand for services with a finite set of resources. Supportingbusiness objectives to drive profitability, growth and competitiveadvantage, while running a fiscally responsible IT organization.

Becoming a Master of IT Economics requires visionary leader-ship, business savvy and new approaches for changing the cost-value equation.

On the following pages, senior IT executives from New YorkCity Health & Human Services, GE Money and AXA Tech sharetheir strategies, results and recommendations for improvingIT Economics.


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QA

withAhmed Abdelmoteleb, CTO

GE MONEY AUSTRALIA AND NEW ZEALAND 2

Kamal Bherwani, CIO

NEW YORK CITY HEALTH & HUMAN SERVICES 6

Antonio DiCaro, CTO

AXA TECH 10

Summary 14

Masters of IT Economics

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Ahmed AbdelmotelebChief Technology Officer, GE Money Australia and New Zealand

As part of the General Electric family,

GE Money, also known as GE Consumer

Finance, is the personal finance provider

of choice for over 130 million people

worldwide. GE Money has a global

presence across 55 countries. In Australiaand New Zealand, GE Money serves

over 3 million customers.

Career Highlights 10+ years in financial sector

Joined GE, 2003

Transferred to GE Corporate

in U.S. as Global Infrastructure

Manager, 2004

Degree in Engineering

Computer Systems

Personal Interests

4-wheel driving and exploration

Being healthy and active with

family and friends


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Q. A classic economic principle is leveraging economiesof scale to drive down the cost of production howdoes this apply to your experiences?

A. In the late 90s, GE Money in Australia and New Zealand grew primarily through acquisi-

tions. As with a lot of companies that are active in M&A, our primary focus was on integra-

tion projects. About five years ago, GE Money continued the growth agenda with more of an

emphasis on organic growth. As a result, weve become more focused on delivering a higher-

quality IT service.

We first engaged our Six Sigma quality organization, something at which GE Money excels

globally. Also, through the help of our GE corporate parent, weve been able to take advantage

of economies of scale and our global talent resources. We have made our organization much

more efficient by consolidating our facilities and data centers, rationalizing redundant appli-

cations and improving our processes across the entire organization.

One example of an IT process where weve really become much more efficient is provisioning

servers. In the past it could take 34 days to provision a new server. We leveraged our global

relationships with partners like CA and HP, who helped re-engineer our processes and better

leverage our investments to reduce our provisioning effort to six days. Thats a savings of over

$12,000 every time we provision a server. Our new streamlined process involves publishing

offerings through a service catalog, a workflow that automates the approval process and back-

end integration to our inventory and soon our financial systems. This process now frees up

more time for us to deliver a better outcome for our customers.

Q. How do you ensure technology investmentsare aligned with business strategy?

A. Every technology investment we make is discussed at a senior executive level with great

interest from our CEO and CFO on returns and alignment with our business strategy, both

locally and globally.

For example, virtualization is an area that we are investing in. But, for us, virtualization is not

only about saving cost. Its about adding agility so we can more quickly deliver a businessrequirement and ultimately a customer outcome.

When were working with a business unit to develop a new service offering, we need to be

able to quickly determine whether the application being developed runs better in a Windows,

Linux or Sun environment, and we want to test multiple versions of operating systems, hard-

ware and software. To take this heterogeneous approach, youre going to need management

that can handle that.

If our primary goal were to deliver an application in the least expensive way possible, wed

standardize the platform that applications can be developed on. Instead, we leverage built-

for-purpose, nonstandard platforms, so our business can be more agile and our services

more innovative.

Q. I understand youve instituted a formal ITGovernance process. What were the main driversand what benefits have you seen?

A. In the past, most of our technology investment decisions were being made as part of the

project execution process. But what we found was that when you have hundreds of developers


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If our primary goal were todeliver an application in the

least expensive way possible,wed standardize the platformthat applications can bedeveloped on.

Instead, we leveragebuilt-for-purpose,nonstandard platforms,

so our business canbe more agile andour services moreinnovative.Ahmed Abdelmoteleb

Chief Technology OfficerGE Money Australia and New Zealand


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unable to continue coding because they are held up waiting for a purchasing decision to be

made this is not conducive to making sure the right decisions are made.

So, we introduced a formal IT Governance committee that I chair. Now we can make technol-

ogy decisions faster and ensure alignment with both our GE corporate standards and business

strategy. Our Enterprise Architecture team is also engaged in this process, so they can make

the right recommendations, taking into account our long-term requirements.

Our governance process has also given us broader visibility into IT costs, investments, risk

items and compliance issues we might identify, for instance, that across a series of projects

were spending a lot of money on an infrastructure element that doesnt directly support our

strategy, and we can make an informed decision about it.

Q. What steps can a CIO take to begin

instilling a service-focused culture?A. Turning a culture around generally involves turning your processes around. But this is clearly

easier said than done. At GE we must first apply our Six Sigma LEAN methodology to ensure

that we have an optimum process. Its also important to set realistic goals and build the foun-

dation that will help you improve your processes.

Were believers in ITIL, but there are some assumptions ITIL makes, and to successfully

implement ITIL requires a level of maturity that many organizations dont have. For example,

if you dont have the right monitoring tools in place or if you are organized too deeply into

silos, you wont be able to make the necessary process improvements.

My view of service management nirvana would be where you know when a particular valued

customer is having difficulty with an application, youre automatically alerted and informed

what to do to fix the problem. But before you can even think about attaining this nirvana, you

need to have the basics in place. You need to monitor the application performance from the

customer point of view, you need to have built your application so that it can respond in cer-

tain ways when thresholds are crossed.

You will also need to have open lines of communication across the groups responsible for the

different divisions within IT. At GE Money, we have built a dedicated team that is focused onthe delivery of services end-to-end. This team has greatly helped improve collaboration and

has helped us build a service-centric culture.

Q. To what degree does your IT management strategychange when the broader market economy changes?

A. No one is immune to market and economy changes, especially whats happening currently

at a global level. But this is the time when it is most important for us to help manage the busi-

ness to balance our commitment to provide shareholders with acceptable returns and our

customers with competitive products and services.

We put a lot of emphasis on transparency and making sure that the business executives have

insight into both our costs and the value being delivered. There is widespread understanding

of the cost savings weve realized in the past four years. So even now, when the economy is

taking a downturn, we havent faced pressure to significantly further cut operating expendi-

tures beyond what we are already doing as part of normal business.

We will continue to look closely at balancing our commitment to provide our shareholders with

acceptable returns and our customers with competitive products and services.


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Kamal BherwaniChief Information Officer, New York City Health & Human Services

NYC HHS is a domain that comprises nine city

organizations, which focus on social services, criminal

justice and health. In 2008, Mayor Michael Bloomberg

announced a groundbreaking new system, HHS-

Connect, that will link more than a dozen city

agencies so that caseworkers can share clientinformation without compromising confidentiality.


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Career Highlights

20+ years in technology

Has been the CIO of three diverse

NYC agencies focusing on publichealth, housing and construction

CEO and Chairman of Relativity

Development, a global

technology investment firm

CIO of Bridas Corporation,

a global energy firm

Personal Interests

Motorcycle enthusiast

Traveling with his family


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Q. IT has a classic economic supply and demandproblem infinite demand and limited supply.How do you address this challenge?

A. The keys to managing demand are having a consistent methodology for prioritizing

projects and basing decisions on the potential for a project to meet agreed-upon organiza-

tional outcomes.

As new projects are requested, I meet with the business executive spearheading the project

and we agree to the expected outcomes, including the projected timeline. Typically there is

both an expected cost savings and a mission effectiveness outcome. For instance, we might

set a goal for how IT can contribute to an organizations goal to reduce homelessness year-

over-year. No new project enters our pipeline until we have gone through this exercise. We

make decisions about which projects get funding based on the expected value.

Then, we continue to evaluate projects and reprioritize spend even after projects are under-

way. We have created a formula to measure the Net Present Value of all of our in-flight proj-

ects. We compare the cost to finish a project against the expected return of the project. And

because this changes as the project is executed, its important to reevaluate this every two to

three months for each project.

Q. Too often it seems that IT is seen as a cost

center and not an enabler of business objectives.How can CIOs change this perception?A. In many organizations, the IT organization has a credibility problem. The perception is that

projects take longer and cost more than planned and its unclear what value is delivered.

The first step to building credibility is to prove that you know what it costs to manage ongoing oper-

ations. Project and portfolio management can help you make better timeline and cost projections.

If you have bad news to communicate that costs are going to be higher or timelines longer than

expected dont wait to tell the business executives. Communicate early and often. The sooner

you close the gap between what people expect and what they are going to get, the better.

Financial transparency is also important for establishing credibility. Everyone should be on the

same page about where IT spend is going. Finally, dont forget to take credit for past successes.

Often the true value of a new service offering isnt fully realized until years after it is launched.

Q. What are your strategies for reducingcosts without compromising service?

A. I look at IT across three different parameters: Governing services, managing services and

securing services. Increasing automation can help you realize operational efficiencies acrossall three of these parameters.

For instance, in the realm of IT Governance, you can realize cost savings by automating the

way work moves between various project teams.

For management, I focus on virtualization and automating data center tasks like provisioning

servers and storage. Service desk is another critical area for cost savings, especially if you


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can help users help themselves with knowledge tools, a self-service interface and automatic

password reset.

For security, I focus on centralizing logging and event correlation. If you have good centralized

data, you can manage threats with a relatively small staff.

Q. What role does innovation playin improving IT Economics?

A. Innovation is extremely important in our efforts to support organizational goals.

One of our major initiatives is called HHS-Connect its a massive effort to bring online health

and human service interactions that have typically been handled over the phone, through the

mail or in person. The in-person, paper-based processes are very inefficient and costly.

One recent HHS-Connect example involves the process for applying for free or reduced-priceschool lunches. There are 1.1 million schoolchildren in New York City, and 75% of them apply

for the school lunches each year. With an investment of about $900,000 and, in just a matter of

months, we launched an online form for applying for school meals in September. If we can get

households representing just 10,000 children to use the online forms, the project will pay for

itself in under a year. We expect to realize a return of several million dollars over time due to

better allocation of funds and the operational efficiencies created by the online process as

disintermediation occurs from the paper to the online process.

So, this is a great example of a government agency leveraging a modest technology investmentto yield great results in a short period of time. Its the right thing to do for the people we serve,

and its the right thing to do for us.

Q. How do you manage innovation at NYC HHS?A. Establishing an enterprise architecture is essential. Otherwise, every new service offering

would be based on a unique architecture. The result would be even greater complexity, and the

cost of maintaining these new services would be too expensive.

The challenge is that requests for new services and the funding for those services come in a

siloed way. Its up to IT to allocate funds from individual projects to be able to build an enter-

prise architecture over time and to convince business executives of the value of moving to a

shared service model.

Ive found that it works best to incrementally adopt an enterprise architecture. A place to start

might be with a centralized infrastructure, then establishing a centralized approach for middle-

ware, identity and access management, enterprise content management and so on. The order

in which you proceed will likely depend on the new initiatives underway. The business objec-

tives should drive the technology projects, which should drive your enterprise architecture.


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We have created a

formula to measurethe Net Present Valueof all of our in-flightprojects. We comparethe cost to finish aproject against theexpected return of

the project.Kamal Bherwani

Chief Information OfficerNew York City Health & Human Services


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Antonio DiCaroChief Technology Officer, AXA Tech

A worldwide leader in financial protection,

AXA Group serves 67 million clients and

had revenue of 93.6 billion in 2007.

AXA Tech is a 3,000+ person subsidiary

that provides IT services to AXA Group.

Career Highlights

20+ years in technology

CTO of AXA Tech since

2004

10 years as Trading Floor

Technology SupportManager

Hands-on technical

experience

Personal Interests

Spending time with his

wife and five children

Coaching soccer


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Q. AXA has some very ambitious growth andprofitability plans. Can you discuss those plans andhow AXA Tech is supporting those initiatives?

A. In 2006, AXA Group launched an initiative we call Ambition 2012 the goal is to dou-

ble revenue and triple profitability in six years. Also, we want to become the preferred company

in our industry by improving the customer experience.

AXA Tech is a not-for-profit, wholly owned subsidiary of AXA Group. It was created in 2002

to provide infrastructure services to the companies that make up AXA Group.

Each company within AXA Group was challenged individually to meet the objectives of

Ambition 2012. For AXA Tech, this means significantly reducing our cost structure, while at

the same time providing infrastructure services that can support the growth initiatives being

driven by the other AXA companies, to provide new services and service new markets.Im pleased to say that two years into Ambition 2012, weve been able to scale our infrastruc-

ture to support increased demand while keeping our infrastructure costs essentially flat

with only a 2 to 3% increase in infrastructure costs year-over-year.

Q. What results have you achieved and how?A. In the first five years of AXA Techs existence from 2002 to 2007 we saved 280 million

euro. During this time, too, weve been able to deliver infrastructure services priced about 20%

lower than what third-party companies would charge AXA Group for comparable services.

A large percentage of the 280 million euro in cost savings came from pooling together the

IT spend that was previously distributed across separate IT organizations and renegotiating

deeper discounts with vendors.

Another major component of the cost savings came from simplifying our infrastructure. Weve

standardized on certain software and hardware platforms to reduce training and maintenance

costs. Were in the process of consolidating 37 data centers to five state-of-the-art, energy-

efficient data centers. And weve made great progress in increasing server utilization through

virtualization, which is an area we are going to continue to focus on going forward.

The third major contributor to the cost savings was a result of off-shoring some development

and data center monitoring functions to AXA Tech India.

Q. When you measure AXA Techssuccess, is it all about ROI?

A. The success of AXA Tech is not just measured on achieving financial targets. We care very

much about quality of service.

We have formal service-level agreements in place with the AXA Group companies we provide

service to, with penalties if certain service levels arent met. Also, every year we rate ourselves

based on a combination of objective availability measurements and a customer satisfaction


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In the first five years of

AXA Techs existence from 2002 to 2007 wesaved 280 million euro.

During this time, too, weve beenable to deliver infrastructureservices priced about 20% lowerthan what third-party companieswould charge.

Antonio DiCaro

Chief Technology OfficerAXA Tech


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survey completed by executives at the AXA Group companies who use our services. For the

objective metrics, we measure the availability of 440 applications that the business units have

deemed mission-critical.

Q. Can you describe how virtualization isenabling you to improve IT Economics?

A. AXA Tech has been an early adopter and extensive user of virtualization technology. We

are one of the top five VMware users in the world, with about 5,000 guests on VMware today.

Weve saved about 1 million euro annually since 2004 on electricity costs and weve been able

to increase the utilization of some of our servers from 10% to 30%. But were looking to drive

our utilization even higher to about 60%, so we still have quite a way to go.

In addition to leveraging server virtualization technology, weve also begun using network and

storage virtualization technologies. Were very interested in some technology CA has devel-

oped to automatically provision and deprovision virtual servers and applications. And were

also looking into cloud computing as we build out our virtualization strategy for the next three

to five years. Our goal in exploring all of these technologies is to help us further drive down

costs and be more agile and flexible.

Q. When AXA Tech was formed by merging several ITorganizations, you had to quickly build a unified group.What advice would you share with other IT executiveswho find themselves in a similar situation?

A. IT people tend to focus first on technology as the solution to a problem. 99% of the time,

you need to start by focusing on the people, and then focus on the process, and then find the

right technology to support the process.

Some of the things Ive learned include the importance of setting clear objectives and the

importance of providing opportunities for two-way communication. Ive also found that face-

to-face team meetings are essential to building trust and relationships.

Once a year, we bring together folks with similar skill sets from across our global organization

for a two-day Technology Summit. The agenda is designed specifically to facilitate dialogue

and foster collaboration. Feedback Ive received from folks who have participated is that they

have realized that others in the organization are dealing with many of the same issues and that

these summits provide a useful forum for sharing ideas to solve these common problems.


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Successful strategies for managing IT to deliver more value

to the business vary. Some executives focus on leveraginginnovation and governance to ensure that the right short- andlong-term investment decisions are being made. Others focuson virtualization and simplifying IT complexity to drive downcosts and build a more agile infrastructure. Regardless ofthe approach that makes most sense for your organization,one thing is clear: The business of managing IT Economicsis a delicate balancing act.

For more content outlining strategies for

CA Inc. (NASDAQ: CA) is theworlds leading independentinformation technology (IT)management software company.We help companies manage IT tobetter perform, compete, innovateand grow their businesses. Withour Enterprise IT Management(EITM) vision and technology,customers can unify IT and simplifythe management of complexcomputing environments.

Copyright 2008 CA. All rights reserved. All trademarks, trade names, service marks and logos referenced herein belong to theirrespective companies. ITIL is a Registered Trademark and a Registered Community Trademark of the Office of Government Commerce,and is registered in the U.S. Patent and Trademark Office.

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