Reduction of ICT Cost:

Strategies towards clean IT audit and IT spending

28 May 2013

Razak Alli

Introduction Governance RequirementsSITA InitiativesICT Cost Reduction Strategy Clean IT Audit

Agenda

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Introduction Total annual IT expenditures range from 2% to 15% of annual

revenues (Source: ITGI – IT Governance Performance Case Study)

Reducing the cost of ownership of IT assets directly linked to supporting business process and decision making processes governing IT spending

Moore’s Law—”the number of transistors on integrated circuits doubles approximately every 4 years”. This law correlates with a decrease in the cost of computing power. This availability of cost-effective computing power also corresponds

with an increase in the global generation of data by devices, machinery, appliances and humans.

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King III - King Report on Governance for South Africa 2009

Chapter 5 – The Governance of Information Technology The board/accounting officer should be responsible for information

technology (IT) governance IT should be aligned with the performance and sustainability

objectives of the company/business The board/accounting officer should delegate to management the

responsibility for the implementation of an IT governance framework The board/accounting officer should monitor and evaluate significant

IT investments and expenditure IT should form an integral part of the company’s risk management The board should ensure that information assets are managed

effectively A risk committee and audit committee should assist the board in carrying out its IT responsibilities

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IT Governance Driving Improved Performance Most common IT governance objectives are focused on cost

containment (including efficiency, standardization, and automation) and risk reduction (including compliance, security, and public scrutiny of IT failures).

For most businesses, cost containment is desirable, but not a business strategy.

As IT becomes a more strategic business enabler, organizations should build on existing cost and risk focused IT governance initiatives, and expand objectives to also include meeting strategic business objectives, improve agility to meet changing business needs.

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SITA Initiatives - Partner and Supplier Relationships

Implementation of the Partnership ModelForming strategic partnerships with main suppliers and

industry for high consuming services by clientsRevision of current contracting process with suppliersUsage of State Owned Companies (SOCs)New contracting framework implemented

Umbrella agreements allowing improved cost savingsNot on a transactional basisNegotiating new deals with suppliers for better costing

savings “Lock In” with software vendors (long term better cost

savings)6

SITA Initiatives - Partner and Supplier Relationships (continued)

Negotiations with critical suppliers within the environment

MIOS Compliance (Minimum Interoperability Standard)

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SITA Initiatives - Infrastructure Environment

Cost management and saving initiatives:Targeting transversal systemsShared infrastructure reducing scopeUse of virtualisation and convergenceMoving decentralised infrastructure to centralisedCentrally managed infrastructure environment

leading to improvement of administration and security

Robust and secure infrastructure (preventative)Consolidation and synchronisation of applications

and toolsets used8

SITA Initiatives - SLA Contracting Method

Service Based SLAs - Redevelopment of SLAs according to services provided to clients

Single SLA per client with services identifiedDefine level of performance via standardised manner

(not managed on “per item basis”)Service Based SLAs based on approved Costing and

Pricing Models in alignment with approved Service Level Catalogue

Packaging of services to include value added services

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SITA Initiatives - Strategic Projects

Implementation of key identified projects as per Board approval:Could Computing IFMS E-GovernmentConvergence Partnership ModelCosting and Pricing Model Unified Communication (lowering broadband prices

contributing)

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Supply Chain Management: Strategic Goals

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Provide IT procurement to ensure that the Government gets value for money

Improve Procurement

Processes

Improve Purchasing

Power

Drive Economies of

Scale

Saving on acquisition of ICT goods and services; Number of industry partners established in the acquisition of

ICT delivery of goods and services; and Monitor and enforce supplier performance compliance.

Improved Supply Chain Management Mean Time To Respond;

Drive 30% of acquisition spend through SMME; Automate procure to pay process; and Drive 100% electronic ordering with suppliers.

Improved Supply Chain Management turnaround time: 90 days on Bids 90 days on preferred list RFQs 45 days for contract finalising 30 days for Adhoc RFQs

Create & centralise strategic sourcing Standardise procurement processes.

Improved Supply Chain Management Turnaround Times

Acquisition Method Target Actual

Tenders (Bids) 90 Days 127.55 Days

Preferred list RFQ’s 90 Days 72.23 Days

Contract Finalisation 45 Days 37 Days

Adhoc RFQ’s 30 Days 16.65 Days

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Cost Saving For Government

SITA has entered into four (4) Strategic Partnerships ICT to provide goods and services to government at a discounted price.

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Cost Saving For Government

SITA Supply Chain Management has managed to save government an amount of R 262 652 243.05 on acquisition of ICT goods and services(2012/2013).

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Best Practices from Industry (continued)

ICT Procurement Strategy: Cost Reduction and Integration Strategy

Alignment of IT Strategy with ICT Procurement Strategy

Optimum Return on ICT Investment (usage of COBIT processes)

Controlled IT spending via approved architectures and technology stacks incorporating:IT cost transparencyBenchmarking of IT Service Costs Enforcement of IT Cost reductions

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Best Practices from Industry (continued)

Design to Delivery: contract lifecycle for investing in ICT

On time, within budget, to specification

Strengthen IT-Finance Collaboration to Drive ROIIT Cost quality thresholdsBusiness process harmonisationProcess complexity reviewMetrics and success measurementsTransparent reporting

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ICT Cost Reduction Strategy

Cost reduction should be performed via a structured approach considering the long-term impact

Should be performed for improving efficiency and effectiveness ICT Cost Reduction Strategy similar to Generic Enterprise Cost

Reduction Strategies Examine all IT spend and prioritise the right cost reduction

opportunities Adopt an end-to-end approach by considering:

All sources of IT costs - Leverage multiple views to examine all sources of ICT spend

Analyse drivers of the IT costs Prioritise the right opportunities Create an organisation wide portfolio of investments to achieve

measurable savings17

ICT Cost Reduction Strategy (continued)

Make sure scope includes all components of IT expenditure across the enterprise ecosystem

Ensure proper engagement with the right stakeholders Examine all sources of IT spend using the following views:

Expenses versus Investments Locked in spending per year versus new initiative spend Monitor expenses versus investments ratio

Assets versus IT Capabilities Spend on business applications, infrastructure and data to

deliver IT capabilities Spend on IT capabilities is on people, process and

technology and assets required to deliver IT capabilities

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ICT Cost Reduction Strategy (continued)

Lines of Business (LoB) IT spend by LoB’s provides insight into the IT landscape Best practices to be applied across LoBs Standardisation of processes across LoBs

Fixed versus Variable Maintain a mix of fixed and variable costs Trade off of maintaining capabilities in-house at fixed costs

versus outsourcing them at variable costs.Business Process

Analyse IT spend by business processes to provide the cost to serve the end customer

Identify cost reduction opportunities by business process redesign and supporting IT solutions

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Clean IT Audit

IT Audit is a subset of the overall Audit Department

Cannot achieve Clean Audit ain the absence of issues without the other environments

Size matters – In-house, outsourced or hybrid

If outsourced:Ensure the right to audit by the third party Must be included in signed agreementCompliance to SAS70 (replaced by SSAE16) – Auditor General

provides this service at SITA annually

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Clean IT Audit (continued)

If in-house:Good people and capabilities Core Skills and IT Technical abilities Streamlined processes, policies and proceduresHigh levels of compliance

IT Compliance framework and compliance officer

IT compliance and monitoring activities

SITA can only assist in the achievement of a Clean IT Audit if in control of the full IT function

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Thank You

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