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Text S Mahalingam Chief Financial Officer October 2009 Return on IT Investments – Key Issues.

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Presentation on theme: "Text S Mahalingam Chief Financial Officer October 2009 Return on IT Investments – Key Issues."— Presentation transcript:

1 Text S Mahalingam Chief Financial Officer October 2009 Return on IT Investments – Key Issues

2 11 April 2015 Abstract To thrive in today’s new business landscape marked by fundamental technological change, CIOs need to take leadership role to enable businesses to adequately respond to changing needs. Finding impactful solutions requires continuous collaboration and exchange of ideas between other CXOs. This panel discussion will focus on the collaboration required between CFOs and CIOs on the Return from IT Investments.

3 11 April 2015 The Changing Role of the CIO Research at the MIT Sloan School Center for Information Systems Research has shown* –44% of a CIO’s time is spent in managing IT services –36% is spent in working with non-IT CxO colleagues –10% is spent in working with external customers and partners –10% is spent in managing and working on enterprise-wide processes and initiatives Further, the research shows that –50% of enterprise CIOs are predominantly ‘Services’ CIOs with a focus on IT Services at the right cost, quality and effectiveness –30% are predominantly ‘Embedded’ CIOs with a focus on business process innovation –10% are ‘External Customer’ CIOs with a focus on making the firm easier to deal with –10% are ‘Enterprise Process’ CIOs with responsibility in Shared Services, Enterprise Processes, Operations or Product Development These numbers point to the substantially changed expectations from the CIO role, and the different mindsets and competencies needed * The Future of the CIO – Weill and Woerner, Jan 2009

4 11 April 2015 Agenda The CIO to CFO dialog –Develop a holistic view of IT –Understand IT Costs and correlate to business drivers –Typical IT spend optimization examples The CIO to CEO/COO dialog –Shared Services –Connected and Extended Enterprises –Cloud Computing and SaaS

5 11 April 2015 Develop a Holistic View of IT Spend IT Spend spans across two dimensions –‘Run the Business (RTB)’ i.e. drive operational efficiency and excellence –‘Change the Business (CTB)’ i.e. drive innovation and business growth Most businesses have a 2 to 1 ratio of RTB to CTB i.e. spend most of their IT money on routine activities which are necessary for business operations but do not lead to competitive advantage IT Spend needs to be understood holistically across multiple dimensions –Governance related e.g. IT Architecture, Program Management, Information management –Infrastructure related e.g. hardware, software, network –People related e.g. applications, infrastructure support, services –Risk related e.g. security and information and assurance Finally, the RTB / CTB imbalance needs to be corrected, aligned to the business strategy

6 11 April 2015 Sample Step-wise process to understand IT Spend Step 1: IT Cost Mapping –Capture the IT Spend of the organization across various BUs/ functions/ portfolios –Classify and map the IT Cost into the Step 2: Analysis of Spend Profile –Baseline the Enterprise's IT Spend against benchmarks –Conduct a Deviation Analysis which will result in a snapshot view of the Pain Areas Step 3: Arrive at Findings & Recommendations –Summarize findings based on analysis in the Current Spend Profile –Carry out benefit analysis for Solution Lever OFIs and determine Target Spend Profile Outcome –Spend Profile illustrating the Current and Target IT Spend Profile –OFIs for each IT Cost Category that address pain points –Roadmap outlining Short term, Medium term, Long term recommendations

7 11 April Sample output - Reducing IT Spend Savings Operations & Maintenance Costs ~ 20% 60% Storage equipments are typically 30-70% underutilized Standardizing the configuration of PC's can typically save 15% per year Sourcing from strategic level companies can cut procurement costs from 5-10% on an average per year Savings in excess of 10% from a well executed demand mgmt. program. Effective IT Portfolio Mgmt. can increase ROI by 5-10% Leveraging Six Sigma, ITIL, CMMI, etc. can save around 15-45% Standardization of processes can reduce cost by 20-30% 19% of the work force is "actively disengaged“ 25% - 35% Systems 10% - 20% Sourcing 12% - 18% Demand 18% - 26% IT Processes 16% - 20% Workforce Systems*: Applications and Infrastructure Reduce cost of outdated technology increase server & storage utilization Control high project costs Improve alignment with business Develop sourcing strategy Improve Vendor governance & consolidation Reduce Development cycle time Reduce/Rationalize applications/systems Reduce diversity of servers, storage & network devices Improve RAS Improve visibility into performance Better management of IT and Business risks Ensure consistency and stability of IT processes Establish process management framework Implement a flexible resource model Improve service lever management Savings Potential Opportunities for Cost Optimization Demand and workforce will be included on need basis Reducing RTB Spend can Release Funds for Strategic Initiatives and Innovation, Enabling IT Effectiveness Source: Figures based on TCS analysis & benchmarks; RTB: Run the Business

8 11 April 2015 Agenda The CIO to CFO dialog –Develop a holistic view of IT with The Optimize IT framework –Understand IT Costs and correlate to business drivers –Typical IT spend optimization examples The CIO to CEO/COO dialog –Connected and Extended Enterprises –Cloud Computing and SaaS

9 11 April 2015 Connected and Extended Enterprises Have we delivered on the promise of breaking away from ‘silo’ applications within an enterprise, to a truly collaborative extended enterprise? The enabling technologies like SOA and web services have matured, but functional challenges remain

10 11 April 2015 Cloud Computing Cloud Computing will be very attractive to the Enterprise IT world and specifically to IT service providers, primarily due the infinite opportunities around innovative variable-cost business models Business Models 3.0 Software as a Service 4.1 Services 3.2 Applications 3.1 Domain Components 2.0 Platform as a Service 2.2 Enablers and Frameworks 2.1 Abstractions 1.0 Infrastructure as a Service 1.2 Logical Infrastructure 1.1 Physical Infrastructure 4.0 Cloud Services

11 11 April 2015 Summary The CIO to CFO dialog –Develop a holistic view of IT with The Optimize IT framework –Understand IT Costs and correlate to business drivers –Typical IT spend optimization examples The CIO to CEO/COO dialog –Connected and Extended Enterprises –Cloud Computing and SaaS

12 11 April 2015 Discussion Items Related to IT Spend – Measurement, Justification and ROI Are Indian Companies spending enough on ICT, as a % of Revenue and also in absolute amounts, in comparison with the counterparts in developed countries? What is the motivation for choosing computerisation area? How are the benefits quantified? How do we arrive at the total cost? Is internal training and readiness part of this? How are the benefits monitored? What are the financial parameters? Is ‘Investment Sustainability’ a necessary part of the IT strategy – obviating the need for constant upgrades of technology? New areas and opportunities to ‘lead the business’ Has Shared Services approach proved to be beneficial? Are we doing enough to create the eco system for Connected Enterprises? Is there any expectation from "Cloud Computing"? What cost reduction is it supposed to bring about? Has SaaS matured? What are the experiences? Strategic Questions –If there was one thing you could change about the relationship between Finance /CEO/COO and IT in your company, what would it be

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