1. IT Value – Making “IT” Real
MGB 2003
IT Value – Making “IT” Real
"Getting Past the Hype -- Delivering Business Value"
Shafeen Charania
Director, Platforms Communications
Microsoft Corporation
© 2003 Microsoft Corporation. All rights reserved.
This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.

2. MGB 2003
The Value of IT?
© 2003 Microsoft Corporation. All rights reserved.
This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.

3. E-Government Hype Cycle Evolution
Source: Hype Cycle Shows E-Government Overcoming Disillusionment
3/17/04 - Gartner  

4. IT… …or the Business??? So – What Matters More???
MGB 2003
So – What Matters More???
IT…
…or the Business???
Related question – what matters more – the people? …or HR?
© 2003 Microsoft Corporation. All rights reserved.
This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.

5. Tracking the Impact of Information Technology Investments
MGB 2003
Tracking the Impact of Information Technology Investments
Impact Sought
Sample Value Measures IT
Management
Responsibilities
Business
Revenue growth
Return on assets
Revenue per employee
BUSINESS UNIT FINANCIAL BV
Dilution of Impact
Time to bring new product to mkt.
Sales from new products
Product or service quality
BUSINESS UNIT OPERATIONAL BV
Dilution of Impact
Dilution of IT Impacts
Time to implement a new application
Cost to implement a new application
Information
Technology $
BUSINESS UNIT
IT APPLICATIONS BV
Dilution of Impact
Infrastructure availability
Cost per transaction
Cost per workstation
FIRM-WIDE IT INFRASTRUCTURE BV
Information
Technology $
Time BV
= business value
Source: P. Weill & M. Broadbent “Leveraging the New Infrastructure: How market leaders capitalize on IT,” Harvard Business School Press, June 1998.
Center for Information Systems Research
© 2003 Microsoft Corporation. All rights reserved.
This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.

6. Business Capabilities
MGB 2003
Context
Need: Resilience, Flexibility, Opportunism
Drivers: People, Process, Information, Relationships
Business Strategy
Business Processes
Focus: Governance Portfolio Architecture Sourcing
Focus: “Processized” Analysis – Vocabulary Metrics
IT Strategy
Business Capabilities
IT Solutions
Approach:
Cost/Value Analysis
© 2003 Microsoft Corporation. All rights reserved.
This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.

7. Agility and the Process of Change
MGB 2003
Agility and the Process of Change
Agility is “Optimal Sense and Response”
Sense: Are you aware of significant changes in your business environment?
Strategize: Are you able to effectively plan to respond to the change?
Decide: Can you commit to the plans?
Communicate: Are you able to get the word out to everyone who needs to know?
Act: Are you able to follow through as efficiently as you can?
© 2003 Microsoft Corporation. All rights reserved.
This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.

8. The AQ Analysis Awareness Flexibility Productivity People Processes
MGB 2003
The AQ Analysis
Awareness
Flexibility
Productivity
People
Processes
Relationships
Information
What key
technologies
can help?
What can you
do to improve
your agility?
What does your
company do that
needs to be agile?
Business Drivers
Agility Enablers
Key Agility technologies
Those you have
Those you need
Recommendation
Prioritization
Assessment & Gap Analysis
Current vs. Desired State
You vs. Industry
Prioritized
Initiatives
Top Issues
Overall
© 2003 Microsoft Corporation. All rights reserved.
This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.

9. AQ Executive Summary Agility State Sense Act Strategize Communicate
CUSTOMER wants to be sense environmental changes quickly and respond efficiently and effectively to those changes. It wants to be agile not only to survive but to maintain its leadership in the industry.
Agility is the ability to sense, strategize, decide, communicate and act throughout the organization at the right time with the right economics.
CUSTOMER does a fairly good job in strategizing and communicating with appropriate support from IT infrastructure and services. The effectiveness of good strategy is tampered by lack of timely awareness and flexibility and speed in taking actions.
Sense: Awareness is a prerequisite for sense and respond. CUSTOMER must ensure that the right information is made available to the right people at the right time.
Strategize: The organization is reasonably good at planning in response to changes in the environment it can detect.
Decide: In order to evaluate and execute the plans, CUSTOMER needs the flexibility of re-wiring processes and integrating information across application and organizational boundaries.
Communicate: The organization has various communication channels and culture to communicate information and decisions at all levels and across groups.
Act: Due to limited flexibility to connect and consolidate information and processes, business activities and people are not very efficient and effective in executing strategies.
Agility State
Sense A F P W A F P W
Act
Strategize A F P W
Actual A F
Desired
IT Environment
Firm-wide infrastructure and applications: standard (utility) desktop and server infrastructure ( , office tools, directory, OS); Collaboration (Web Ex, net meeting); SAP
Architecture and governance: Primarily application-based; Insufficient architecture for application and data integration. P W
Communicate
Decide A F P W
A: Awareness
F: Flexibility
P: Productivity
W: Willingness
Poor
Recommendations
Enterprise Architecture: Develop set of principles and guidelines to direct the process of acquiring, building, modifying, interfacing and managing IT services and resources.
Role-based Information Dashboards: Provide consolidated view of information and business processes for individual groups.
Moderate
Good
Based on the response to the agility questionnaire and the agility analysis tool developed by Gartner and Microsoft.

10. MGB 2003
What is IT Governance? Decision rights and accountability framework to encourage desirable behavior in the use of IT
Who has decision rights and input to key IT decisions.
IT Principles—role for IT
IT Infrastructure—what is shared and put in first
IT Architecture—integration & compatibility
Business application needs—what is required
IT Investment & Prioritization—how much and when
What is desirable behavior in the enterprise.
Sharing, reuse, cost savings, innovation, growth
What mechanisms are used to implement governance.
E.g., IT council, process teams, architecture office, SLAs
How much business value.
Responsibilities, accountabilities, measurement and metrics
Source: Don’t Just Lead, Govern!: Empowering Effective Enterprise Use of Information Technology, P. Weill & J. Ross, Harvard Business School Press: Boston, Forthcoming
© 2003 Microsoft Corporation. All rights reserved.
This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.

11. How do enterprises govern?
MGB 2003
How do enterprises govern?
Most common patterns
The numbers in each cell are percentages of the 256 enterprises studied in 23 countries. The columns add to 100%.
©MIT Sloan Center for Information Systems Research – Weill This framework is adapted from Weill & Woodham's work originally published and copyrighted by the MIT Sloan CISR as Working Paper No. 326, "Don't Just Lead, Govern: Implementing Effective IT Governance," April 2002.
© 2003 Microsoft Corporation. All rights reserved.
This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.

12. INFORMATIONAL STRATEGIC
MGB 2003
Rethinking IT as an Investment Portfolio - asset class, risk and return, strategy
(Innovation)
(Major Change)
(Facilitation)
(High Value Added)
(Interact with customers)
Increased control
Better information
Better integration
Improved quality
Increased sales
Competitive advantage
Competitive necessity
Market positioning
INFORMATIONAL STRATEGIC
Cut costs
Increase throughput
Business integration
Business flexibility
Reduced marginal
cost of BU’s IT
Reduced IT costs
Standardization
TRANSACTIONAL
INFRASTRUCTURE
( ) = public sector
Source: Weill & Broadbent “Leveraging the New Infrastructure: How market leaders capitalize on IT,” Harvard Business School Press, 1998.
© Weill
Center for Information Systems Research
© 2003 Microsoft Corporation. All rights reserved.
This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.

13. IT Portfolios In Different Industries
MGB 2003
IT Portfolios In Different Industries
Information (15)
Strategic (5)
Finance, Insurance1 7
Nonmetal Manufacturing, Utilities, Construction 19
Metal Manu-facturing 86
Wholesale Retail, Transport 21
Information
&
Services5 14
All
147
Transactional (40)
Infrastructure (40)
No. of firms
Firm-wide $IT as a Percent of Net Sales (Three year averages)
3.5
1.4
2.3
1.3
2.0
2.1
Firm-wide $IT as a Percent of Discretionary Expense3 (Three year averages)
5.2
1.7
2.6
1.4
2.0
2.5
IT Investment 2001/02
12% %
18% %
22% %
17% %
26% %
20% %
14%
15%
11%
14%
18%
13%
54%
54%
56%
52%
45%
54%
IT Investment 1993–974
(54 businesses over 5 years)
13% %
22% % 15
22% %
16% %
13%
12%
12%
13%
61%
52%
52%
57%
1 Net Sales = Interest Income plus Fees
2 Total Expenses = Net Sales – (Net Sales * Net Margin)
3 Discretionary Expenses = Net Sales – (Net Sales * Operating Margin before Depreciation)
4 Source: Leveraging the New Infrastructure: How Market Leaders Capitalize on Information Technology, Peter Weill & Marianne Broadbent, HBS Press, 1988.
5 Services include Professional, Scientific and Technical Services, Heath Care Services, Social Assistance, Accommodation and Food Services
NSF Grant Number IIS
Center for Information Systems Research
© 2003 Microsoft Corporation. All rights reserved.
This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.

14. $IT compared to industry avg. as % of expenses or revenues
MGB 2003
Synchronize Information Technology Portfolios to Strategy
Business Strategy
Average Firm
Cost Focus
Balance Cost & Agility
Agility Focused
IT Portfolio
Mix of Investments
20% %
14% %
20% %
13% %
11%
13%
15%
40%
54%
58%
50%
42%
$IT compared to industry avg. as % of expenses or revenues
Average % of Revenues & Expenses
IT is 10-20% lower than industry average
IT is around industry average
IT is 10-25% higher than industry average
Source: P. Weill & M. Broadbent “Leveraging the New Infrastructure: How market leaders capitalize on IT,” Harvard Business School Press, June (Based on a study of 54 businesses in 7 countries over five years and 117 firms studied in 2001/02.)
Center for Information Systems Research
© 2003 Microsoft Corporation. All rights reserved.
This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.

15. MGB 2003 © 2003 Microsoft Corporation. All rights reserved.
This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.

16. Value Tools Total Value of Opportunity TCO Analyst
MGB 2003
Value Tools
Total Value of Opportunity
Measures both costs and benefits
Standard business measures
TCO Analyst
Focus = cost
Reference database
REJ (Rapid Economic Justification)
Alignment, Quantification, Accountability
Framework independent of tools
© 2003 Microsoft Corporation. All rights reserved.
This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.

17. Business Value Inventory
Study
Focus
Deliverable
Duration
Microsoft REJ
BDM Relationship Building
Cost/Benefit Analysis
ROI Analysis
Business Case
4 to 6 Weeks
Gartner TVO
Gartner Credibility
2 to 4 Weeks
Microsoft RPA
Application Portfolio Analysis
Microsoft/Customer Action Items
Customer/MS Account Plan
2 Weeks
Microsoft AQ
BDM/TDM Relationship Building
IT Alignment to Business Agility Gaps
Uses Gartner IT Agility Impact Model
Prioritized Technology Initiatives
Sustained xDM Engagement
2 Days
Navigant Office Value
Industry and process orientation
Value analysis (productivity focused)
Vertically-aligned business case focused on KW productivity
1-2 Days
Microsoft BVA
Product Feature Mapping
Collateral for Business Case
1 Day
Gartner TCO Analyst
Limited to Infrastructure
Cost Analysis Document
1 Week
3rd Party TCO Tools
High Level TCO Estimate
Product Specific TCO
Limited Cost Analysis Document
2 Hours
NerveWire Deployment Cost Tool
Desktop Deployment Costs
For MS, Partners & Customers
Predictive Modeling from RDP Data
Deployment Cost Estimate
1 Hour
Business Value
Total Cost
Cost

18. BV Consultants required
MGB 2003
Assessment Spectrum
Value Oriented AQ
Strategy
Office System
BV Model
1 day - 1 week
Simple/Fast
TVO
2-4 weeks
Mini – REJ
4-6 weeks
REJ
8 – 12 weeks
BVA
1 day
ROI (VS03) Calculator
30min - 1 hour
Comprehensive/Long
BV Consultants required
TCO Analyst
1-2 weeks
Deployment
Cost Tool
1-2 hours
TCO Manager
4-8 weeks
Cost Oriented
© 2003 Microsoft Corporation. All rights reserved.
This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.

19. FedEx “Smart Tags” for MS Office XP
MGB 2003
FedEx “Smart Tags” for MS Office XP
© 2003 Microsoft Corporation. All rights reserved.
This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.

20. MGB 2003
Level and Effectiveness of Senior Management in Governance More senior management is better…
Rank/(Scale) of Effectiveness When Involved*
CEO (4.4)
COO (3.0)
Business Unit Leader (2.7)
Business Unit CIO (1.7)
CFO (1.5)
CIO (1)
CIO must be involved for effectiveness
* Statistically significant relationship with governance performance – scale estimated by strength of coefficient.
© 2002 MIT Sloan Center for Information Systems Research (Weill).
© 2003 Microsoft Corporation. All rights reserved.
This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.

21. MGB 2003 © 2003 Microsoft Corporation. All rights reserved.
This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.

22. © 2004 Microsoft Corporation. All rights reserved.
MGB 2003
© 2004 Microsoft Corporation. All rights reserved.
This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.
© 2003 Microsoft Corporation. All rights reserved.
This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.

23. Shifting the value equation
MGB 2003
Shifting the value equation
© 2003 Microsoft Corporation. All rights reserved.
This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.

24. Manifesting Value Alignment Quantification Accountability
MGB 2003
Manifesting Value
Value Discovery
IS Portfolio Themes/Relationships
Business Needs and Priorities
Alignment
Business Value Planning
Benefits: Scenarios/Proof of concepts
IT Service Portfolio Assessment
Develop Business case
Develop Plan to realise benefits
Quantification
Value Realisation
Exploitation and Accountability
Deliver business benefits
Project implementation/support
Accountability
Developing Opportunities Delivering Benefits
PORTFOLIO VIEW
WHERE US MSFT TYPICALLY
WHERE DO WE WANT TO BE
Technology
Implementation
Projects
Assess &
Qualify
Prioritize & Plan
Design &
Identify
Solution
Ongoing
Operations
Proof
Business
case
Life Cycle Progress
© 2003 Microsoft Corporation. All rights reserved.
This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.