norbert kriebel director, consulting forrester research measuring the business value of it –...
TRANSCRIPT
Norbert KriebelDirector, ConsultingForrester Research
Measuring the Business Value of IT – Managing IT as a Business
Theme
IT Services -
outsourced, out-tasked, selective sourced, offshore, managed service, hosted...
~ ~ ~
How Do I Manage and Measure IT as a Business Service?
Agenda
European IT Services Trends
IT Value Communication
Establishing and Justifying Business Value
Applying Total Economic Impact
Forecast: Europe's IT Services Spending By Region, 2003 To 2008
From TechStrategy® Research: Exploiting Europe’s IT Services Growth, November 2003
Established Patterns Of Outsourcing Spending Remain In Force
From Tracking Europe’s Outsourcing Stampede, May 2004
Midsize Deals Dominate As Continental Countries Loom Larger
From Europe’s Outsourcing Momentum Shifts Its Country and Industry Focus, September 2004
Established Patterns Of Outsourcing Spending Remain In Force
From Tracking Europe’s Outsourcing Stampede, May 2004
From Europe’s Outsourcing Momentum Shifts Its Country and Industry Focus, September 2004
Shifting Patterns In Service Types
Germany's IT Services Consolidation Gathers Pace
More than any other national market in Europe, Germany features the practice of large enterprises maintaining a free-standing subsidiary specializing in IT services -- the outsourced internal IT department.
Two recent developments have signaled the beginning of a wholesale review of the future of these firms -- one which will have a significant impact on the broader IT services market in Germany.» HP announces the acquisition of Triaton from
ThyssenKrupp.
» Ruhrkohle puts its IT services daughter company up for sale.
From Germany's IT Services Consolidation Gathers Pace, March 2004
Shifting Goals
Value/Cost Management Replaces Cost Cutting» Cost management needs tools and a methodology. Cost
transparency to be as important as the reduction of development and operational costs.
» Cost transparency will extend its reach outside of IT. The business will also recognize the need for cost transparency regarding its consumption of services delivered by IT organizations.
Increased Focus on Business Metrics» Establish internal benchmarks for key measurements
» Build a business case
» Include benchmarking clauses in Outsourcing agreements
» Build the appropriate processes for measurement and reporting
Agenda
European IT Services Trends
IT Value Communication
Establishing and Justifying Business Value
Applying Total Economic Impact
Emerging Technology
Vendor
Discrete ITVendor
Investor
IT Sourcing Market – Early to Late 90s
IT ServiceProvider
Enterprise IT Organization
IT ServiceProvider
IT Driven Decisions
Enterprise Change Around Decision Process – Increasing Collaboration
Line-of-Business Driven Decisions
2000 20041996
Collaborative Collaborative DecisionsDecisions
EnterpriseLine of Business
Enterprise IT Organization
Investor
IT Sourcing Market – 2002
IT ServiceProvider
Discrete ITVendor
Emerging Technology
Vendor
IT ServiceProvider
Investor
IT ServiceProvider
IT ServiceProvider
Investor
IT Sourcing Market – 2002
IT ServiceProvider
Discrete ITVendor
Emerging Technology
Vendor
EnterpriseLine of Business
Enterprise ITOrganization
IT ServiceProvider
Agenda
European IT Services Trends
IT Value Communication
Establishing and Justifying Business Value
Applying Total Economic Impact
Getting the Budget
“Our model for IT governance revolves around one thing:
Shrinking the size of the total IT pie while growing the
amount we spend on strategic initiatives.”
— A financial services CFO of IT
SuccessfulProjects
PotentialFailures
1/31/3
2/32/375%75%75%75% 25%25%
Budget devoted to Budget devoted to operationsoperationsBudget devoted to new projectsBudget devoted to new projects
Only 8.33% of IT Only 8.33% of IT budget budget is is knownknown create create new new valuevalue
Past IT Project Performance
TEI Value Analysis - Aligning IT and Business Objectives
Business Needs
ITSolutions
Value
Goals(CSFs)
StakeholdersProducts/
Applications/Services
Features
Benefits
Key Performance IndicatorsWhat metric can we use to indicate
progress toward the goals?
Strategies/Tactics
What we see happen
Align Metrics with Outsourcing Model
Sample IT-Value Balanced Score Card
From The Balanced Scorecard For IT: Value Metrics, November 2004
Agenda
European IT Services Trends
IT Value Communication
Establishing and Justifying Business Value
Applying Total Economic Impact
TEI – The Basic Model
Costs
Benefits
FlexibilityIndirect Benefits•Technology Strategic Intent•IT & BU Technology “Options”
Cost to Change•IT & BU Budget Allocation•IT & BU Accountability
Direct Benefits•IT & BU Technology Opportunity•IT & BU Accountability
TEI – Risk
Costs
Benefits
FlexibilityRisk
UncertaintyUncertainty• Impact of AssumptionsImpact of Assumptions• Accuracy vs. PrecisionAccuracy vs. Precision
Common Risk FactorsCommon Risk Factors• Market RiskMarket Risk• Management RiskManagement Risk• Vendor\Technology RiskVendor\Technology Risk• Project Size\ CostProject Size\ Cost• Cultural Risk Cultural Risk • Training RiskTraining Risk
What is TEI – The Basic Financial Model
Costs
Benefits
FlexibilityIT
BU Risk
Total Total EconomicEconomic
Impact Impact
Benefits - CostsCosts
= ROI %
Standard ROI
IT
IT
BU
BU
ROI using TEI Methodology
(Benefits + Flexibility)R - CostsR
CostsR
IT ROI %BU ROI %Net ROI %
=
Norbert Kriebel
Forrester Research
www.forrester.com
Thank you
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