Research » Strategy » Transformation » Governance How to improve your IT organisation to become more innovative? Dr. Gerard M. Wijers Managing Director Governance & Sourcing Management practice EquaTerra 18 May 2010

Copyright © EquaTerra All rights are reserved. Cost control versus Innovation? »IT organisations have reduced their staff, made their IT processes more lean and mean, outsourced IT commodities, and consolidated their application portfolio. »This has led to reduced power of IT to contribute to business innovation and strategic thinking. »What is crucial to be innovative and to add value to the business? 2

Copyright © EquaTerra All rights are reserved. Agenda 1.Objectives 2.Processes to emphasize 3.Roles to get implemented 4.Demand management to align with the business 5.Metrics to size your organisation 6.Lessons learnt 3

Copyright © EquaTerra All rights are reserved. 1. Know and share your objectives 4 1.Focus on more efficient demand supply chains (leading to FTE reductions) 2.Focus on Supply side 1.Focus on HR processes, and organisational development 2.Focus on quality and compliancy processes 1.Focus on improvement of project and change management processes 2.Focus on improvement of operational delivery processes 3.Focus on contract management and sourcing strategy 1.Focus on improvement of service management processes 2.Focus on improvement of incident and problem management processes 1.Focus on service - and project portfolio processes 2.Focus on the demand side 1.Focus on improved strategic planning 2.Focus on improvement of architecture processes 3.Focus on improvement of service- and project portfolio management Focus areas 1.Focus on strategic planning 2.Focus on architecture processes 3.Focus on improvement of project management processes Low complexity Short time to market High efficiency High quality High customer satisfaction Optimised added value of IT Goal High innovation capability

Copyright © EquaTerra All rights are reserved. Added value and innovation require 5 1.Focus on service - and project portfolio processes 2.Focus on the demand side 1.Focus on strategic planning 2.Focus on architecture processes 3.Focus on improvement of project management processes Optimised added value of IT High innovation capability

Copyright © EquaTerra All rights are reserved. Management control Operational control Change & innovation Business governance Strategic planning Business Demand management Supply management IT Delivery Annual planning cycle Portfolio management & architecture Strategy & policies Operations & operational control Support Requirements, project & change management Release, test & transition management Service level management Contracts & service agreements Project portfolio management 2. EquaTerra’s Best Practice Process model 6 Organisation development & human resource management Security, compliancy & quality management Finance

Copyright © EquaTerra All rights are reserved. Implications are »An explicit choice how to organise demand management »The introduction of portfolio management »More capabilities to create roadmaps »The application of strategic and yearly planning cycles »More capabilities to formulate ideas and requirements »The rebirth of the CIO Office »A close working relationship with the business »Activating the role of the business 7

Copyright © EquaTerra All rights are reserved. Implications are the following »We need strong demand managers »Demand management organisations focus on strategic and tactical role and on change »Operational activities as much as possible in the business or with providers »A proper sizing of the necessary roles is fundamental 8

Copyright © EquaTerra All rights are reserved. 4. Do we know the characteristics of the real demand? 9 Conservative investment strategy Average investment stratgey Agressive investment strategy Strategic planning Management control Projects and maintenance Operational execution 5% 6% 5% 7% 5% 25% 65% 33% 56%43% 45% € Strategic importance of IT Enabling the businessSupporting the business Taking the lead Business managers in the driver seatStrong expert role of IT management Commoditized services IT services are market commodity IT services are unique and not standard in the market Sourcing attitude Do-it-yourselfUse the market

Copyright © EquaTerra All rights are reserved. 5. Metrics 10 The contingency factor scale: In small organisations the tactical coordination of IT is relatively expensive (point 1). The optimum lies around 25 MiO; with spend above 25 MiO complexities increase, as do the demand supply mgt costs (point 2) Above 75 MiO scale advantages lead to decrease in spend on demand and supply management towards the optimum (point 3) Other contingency factors for determining the optimum scale: 1.The investment strategy. As organisations spend more aggressively on innovation, the optimum scale will rise because governance of projects is relatively expensive 2.The application architecture. Organisations with a lot of custom made applications have to calculate for larger demand-supply spend and a larger optimum scale than organisations with more standard packages 3.The sourcing approach (single sourcing / multi sourcing, off shoring/ near shoring, insourcing / outsourcing) influences the optimal size in several ways 4.The organisational set up of demand and supply mgt influences the optimal size (central, federative, decentral) In the broad view of the retained organisation, between % of total IT spend is spend on demand – supply management

Copyright © EquaTerra All rights are reserved. 6. Some lessons learnt »Demand & Supply deserve balanced focus »Create awareness & responsibility of demand in the business »Align capabilities in demand – supply chain »Hire the appropriate level of competences 11

Copyright © EquaTerra All rights are reserved. Q&A 1.Internal IT organisations should get themselves focussed on the demand and the related strategic and tactical concerns. 2.Innovation is to be led by the business. 12

Copyright © EquaTerra All rights are reserved. 13 About EquaTerra EquaTerra sourcing advisors help clients achieve sustainable value in their IT and business processes. Our advisors average more than 20 years of industry experience and have supported over 2000 transformation and outsourcing projects across more than 60 countries. Supporting clients throughout the Americas, Europe, and Asia Pacific, we have deep functional knowledge in Finance and Accounting, HR, IT, Procurement and other critical business processes. EquaTerra helps clients achieve significant cost savings and process improvement with internal transformation, shared services and outsourcing solutions. Contact Us Europe/Asia Pacific +44 (0) Americas