The IT Value Model: Winning the business battle with the right IT nails

Transcription

1 IBM Global Services The IT Value Model: Winning the business battle with the right IT nails The Horseshoe Nail For the want of a nail the shoe was lost, For the want of a shoe the horse was lost, For the want of a horse the rider was lost, For the want of a rider the battle was lost, For the want of a battle the kingdom was lost And all for the want of a horseshoe nail. Introduction The above, paraphrasing the aphorism from Ben Franklin, illustrates the implicit connection between a battle and its infrastructure. But like the horseshoe nail on the battlefield, it can be difficult to align the value of a single information technology (IT) investment with the business at large. After all, how do you determine which nail is attached to the horseshoe that could have helped win the battle? To fully exploit each and every element of the IT infrastructure (the horseshoe nails), it is critical to map those components to mission-critical business initiatives (the battle-winning horses) and, in turn, long-term business success (the war). More than ever, a better understanding of the value delivered by any one IT nail is critical to informing and guiding IT investments and initiatives.

2 The IT Value Model This is a new way to view and manage the IT infrastructure. Until recently, IT investment decisions have been a tops down management issue. While organizations viewed IT as a necessary resource in helping to achieve and sustain competitive advantage in a global and dynamic marketplace, it was also viewed as an obvious target for cost efficiency improvements through server consolidation or asset management, for example. Now, with the IBM IT Value Model, it is possible to establish business/it linkage and accumulate accurate and specific data about the intrinsic value IT brings to specific business activities and components as well as to an organization, or kingdom, overall. This type of value-informed decision making can help executives better contain costs, target investments, accelerate and optimize ROI (without negatively affecting business results), and drive profitability. 2

3 Mission critical: The state of the IT infrastructure Today s executives are accustomed to using information technology to enhance capabilities and support specific business initiatives from supply chain management to e-commerce and customer relationship management. Consequently, over time, organizations have increased their reliance on servers, networks, applications, solutions, data centers, and storage systems. Similarly, the people and processes associated with a company s IT organization have become mission-critical resources. Now, with costs more under control and the economic outlook brightening, executives are placing more emphasis on the strategic business value IT can provide. A recent survey of the world s top corporate CEOs reveals that for a large majority, revenue growth is now their top priority. 1 This research, based on interviews with hundreds of executives from across geographies and industries, offers valuable insight into corporate trends, including the emphasis on top-line improvements. Global economic pressures and uncertainty have placed additional stress on the IT infrastructure. As CIOs and CTOs struggle to do more with less, many organizations have launched optimization initiatives aimed at evaluating, rationalizing and streamlining their IT environment. These efforts have focused on making the infrastructure more manageable, adaptive, productive and cost-effective. While many companies have made improvements in cost control, there remains a gap when it comes to connecting specific IT investments to strategic business gains or benefits. The answer may lie in implementing a holistic, value-based approach to optimize the entire IT environment. By doing this, companies can continue to reduce costs and complexities while establishing a direct relationship between IT services or elements (the horseshoe nails) and business success or wins. We are over the crisis and now we re in a new cycle of growing the business. Media executive in the UK 2 3

4 The IT Value Model 4

5 Serving the kingdom: Optimizing IT for value Value-driven optimization initiatives can contribute significantly to operational excellence and set the stage for evolving to advanced capabilities such as IT agility and on demand characterized by focused, variable, resilient and responsive systems and processes. While enterprises (and sometimes even individual business units) can differ in their specific IT requirements and optimization strategies, most could characterize their strategy for using IT according to the following provider profiles : Commodity The business driver is expense control; the corporate view of IT is as a provider of technical capabilities; IT investment decisions are project-based. Utility Business drivers are business unit measurements; the corporate view of IT is in terms of organizational efficiencies; IT investment decisions are based on portfolio management of applications within a process. Partner The business driver is market share; the corporate view of IT is that it is strategically aligned with the business; IT investment decisions are made according to enhanced portfolio management. Enabler The business driver is industry leadership; the corporate view of IT is as an enabler of corporate vision; IT investment decisions are based on future options. Business and IT executives should agree on the best strategy for using technology in order to achieve business-it alignment and provide context for IT investment priorities. Once this agreement is achieved, the infrastructure can be analyzed for optimization potential in terms of management and technical domains, pinpointing areas for improvement. These improvement areas can be narrowly or broadly defined; most optimization opportunities span multiple domains. 5

6 The IT Value Model Domains fall into the following categories: Technical domains Computing systems and storage The server, desktop and storage hardware, along with operating software and middleware that provides the platform for business applications. Applications and data The portfolio of business applications and data used to manage operations and achieve competitive advantage. Network Voice and data networks, including wide area, local area, wireless and other technology interconnection capabilities. Management domains Strategic alignment Business and IT alignment, comple- mented by domain alignment. Process The systems, processes and governance structures used to manage IT. Finance and environment The financial structure of IT as well as the larger legal, geopolitical and environmental context. Organization The staff, structure and skills of the IT organization. For several years, the IBM IT Optimization Solutions portfolio has offered a proven, holistic approach for assessing these domains and tailoring a solution to a company s requirements through the various stages of solution framing and design, transition planning and governance, and solution delivery. 6

7 The IT Value Model: Identifying and aligning the IT nails with the objectives and benefits of the business battles IBM can help companies derive even greater value from their IT infrastructure by incorporating the insights gained through the use of the IT Value Model (IVM) into IT Optimization Solutions. Implicit in the IT Value Model is the recognition that just as businesses deliver value to their customers by way of business products and services, IT delivers value through IT products and services. The challenge lies in articulating the specific role of the IT processes, technologies and organization in business terms, and establishing the connection between the IT capabilities or services and the related business activities and components. Toward these ends, IVM is designed to assist organizations in mapping the IT nails to the relevant business battles by helping enterprises: Connect IT services to their specific contributions to business value. Assess the potential business impact of infrastructure investments. Leverage IT to enable revenue growth and increase competitiveness. Discern which IT elements support specific business results. A value primer Business value chain The components, processes and services that collectively deliver value to the firm s customers. IT value chain The IT components, processes and services that collectively deliver value to the firm s business components and services and, potentially, to the firm s external customers. IT services The capabilities provided by a company s IT processes, technologies, applications and organization, articulated in business terms and linked to specific business benefits. Achieving a data-driven roadmap to value: The IVM framework In the IT Value Model, IBM defines IT as a fabric of processes, technologies and organization that supplies or supports IT services. As a part of any value-based optimization initiative, IBM consultants assess the maturity of an enterprise s IT fabric in the context of its strategic intent and status (the provider profile) and its structure (business process integration). Enterprises can, in turn, articulate the current state and value of their IT infrastructure, and compare that status to desired state data. 7

8 The IT Value Model This is a multidimensional task, best illustrated below by the IT Value Model cube a visual representation of the firm s strategy for the use of IT on one axis; the level of business process integration on another; and the maturity of the IT fabric on the third. This analysis helps enterprises define and work toward tomorrow s best practices, while serving the needs of the kingdom today. Moreover, the IBM IT Value Model enables organizations to directly link IT and business value by connecting related business and IT key performance indicators (KPIs). KPIs offer a tangible mathematical link between IT services and business processes by using financial, functional, performance and availability measurements, such as the cost per transaction or Web site transaction volumes. KPIs, then, are the mechanism with which we can quantify the business-it linkages that are essential to the IT Value Model. In short, these KPI connections enable businesses to quantitatively assess the impact of IT investments on the business. 8

9 The IT Value Model provides a framework for fabric metrics and KPIs to facilitate the IT maturity analysis and help identify and evaluate potential value-add opportunities. Furthermore, IBM applies proven, leading-edge analytics to address the often complex and interrelated characteristics of IT maturity, integration and strategy. This permits companies to target their value enhancement efforts more appropriately, resulting in a roadmap to an improved future state. Forward-looking organizations can leverage the IT Value Model to: Target particular business or IT pain points Create a model of the current business and IT environment Identify appropriate KPIs Assess the current IT fabric Map the fabric status to KPIs Compare the current environment to the desired ideal state Evaluate alternative scenarios against the model to pinpoint improvement potential Design a roadmap for value-driven optimization Evaluate the current services catalog 9

10 The IT Value Model In Maslow s hierarchy of needs, basic needs survival and safety must be satisfied if higher-order needs such as self-actualization are to be met. A fully optimized IT infrastructure requires the same type of methodical, hierarchical building process. Basic operational excellence must be established before next-generation levels of responsiveness, integration and flexibility can be achieved. The IT infrastructure according to Maslow In a more general sense, an IT infrastructure reflects a Maslow s hierarchy of attributes. Said differently, higher order capabilities, such as agility and on demand, require that fundamental or survival needs, such as operational excellence, be satisfied. A fully actualized IT infrastructure will demonstrate a full range of attributes, building on the effective execution of those attributes at lower levels to provide the essential platform for delivering more advanced capabilities. At the base or survival level of this hierarchy are the fundamental characteristics of efficiency (and effectiveness): a focused commitment to differentiating competencies and tightly integrated strategic partners providing non-differentiating activities; operations 10

11 Conclusion at the lowest possible costs for the given IT strategy; effective use of automation to reduce complexities and management costs; and high levels of reliability to prepare for threats and help enable the business to continue operating consistently. Building on this base of efficiency, the IT fabric is now capable of supporting the needs of an agile business by delivering commensurate IT agility through the implementation of open standards, unconstrained by vendor-proprietary architectures. The agile business is able to share resources in virtual pools, regardless of location or application, and can be more responsive by sensing and responding to rapidly changing requirements. Finally, at the pinnacle of actualization, the fully on demand fabric adds to the efficient and agile foundation by connecting disparate data, applications and processes across and beyond the enterprise into an integrated whole. It can also adapt variable cost structures and business processes to reduce risk and increase levels of business productivity, cost control, efficiency and predictability. The IT Value Model can enable companies in every sector to define and work toward an ideal IT state identified in terms of business value through KPIs and according to the company s strategy for IT. In this way, IVM can provide critical insight into a company s current environment and help define a strategic roadmap for positive change. More specifically, this approach can be used to identify potential areas for improvement in the IT fabric such that IT services deliver more value to the business and the bottom line. IBM Global Services offers the IT Value Model through our IT Optimization offering leading-edge solutions driven by world-class skills, top technologies and proven expertise. Our optimization consultants are skilled in IVM and can help you identify and leverage your most valuable IT nails for winning the business battle. For more information To learn more about the IT Value Model and IBM Optimization Solutions, contact your local IBM sales representative, or visit: ibm.com/services 11

12 About the authors L. Mark Ernest, Distinguished Engineer, IBM Global Services Albert L. Swett, Principal, IBM Global Services William G. Miller, Global Offering Executive, IBM Global Services Dennis P. Ondik, Senior Consultant, IBM Global Services Copyright IBM Corporation 2004 IBM Global Services Route 100 Somers, NY U.S.A. Produced in the United States of America All Rights Reserved IBM, the IBM logo and the On Demand Business logo are trademarks or registered trademarks of International Business Machines Corporation in the United States, other countries, or both. Other company, product and service names may be trademarks or service marks of others. References in the publication to IBM products or services do not imply that IBM intends to make them available in all countries in which IBM operates. 1 Your Turn: Global CEO Study, IBM Business Consulting Services, Ibid. G