2. This presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the intended Gartner audience or other authorized recipients. This presentation may contain information that is confidential, proprietary or otherwise legally protected, and it may not be further copied, distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates. © 2010 Gartner, Inc. and/or its affiliates. All rights reserved. Val Sribar Group Vice President Applications & Information Research Financial Executives International

3. Agenda Fundamental Recommendations (Pace Layer Pre-Requisites) Pace Layered Application Strategy Information Capability Framework Pattern-Based Strategy

4. Money and Projects: Are You Creating More Legacy? Current Year Next Year Base Ops. Increase for A Maintenance for A Ops. Increase for B Maintenance for B Project A Project B New Project New Project Budget

5. Multiyear Run Out Base Project A Project B New Project New Project Current Year Next Year … Base Several Years Budget No More Project Funding Left?

6. IT "Cleanup": A Cost-Cutting Checklist — Freeing Up Run Rate for Legacy Renewal Application Rationalization Business Process and Business Information Project Rationalization Vendor and Contract Management IT Asset Management (Inventory) IT Process Refinement Infrastructure Cleanup IT Staffing/Sourcing Alignment Cost-Cutting Wall

7. Exercise 2: Apply the Checklist — How Can You Free Up the Run Rate? Project Rationalization Vendor and Contract Management IT Asset Management (Inventory) IT Process Refinement Infrastructure Cleanup IT Staffing/Sourcing Alignment

8. Business Must Engage: Use TIME to Overhaul Your Applications Portfolio High Technical Quality/Condition Business Value Low Poor Great

9. Exercise 3 — Try Applying TIME Tolerate: Invest: Migrate: Eliminate:

10. Treat Applications as Assets The "E" in TIME is logical, but requires intestinal fortitude. Most of the time, things stay around until they pose an obviously huge risk, or break and cannot be fixed. Unless there is a life-threatening moment… Value Cost Value/Business Benefit Time Project Expense Project Capital Depreciation Upgrade Expense Ops Cost App Maint. … …

11. Capital Planning and Portfolio Management Whenever someone wants something new, the CFO (or CEO, COO) asks, "What will go away?" Business cases include financials for full life cycles — from creation through retirement (including decommissioning). Retirement and reuse lists exist, and execution is tracked. Base Project A Project B New Project New Project Current Year Next Year … Base Several Years Budget …

12. Rethink Program/Project Success and What It Means to Be a Business Sponsor Project success today: -On time -On budget -On specification -On value (rare) Phase 1 Phase 2 Phase 3 Phase 4 Phase 5 Others Retire Sys 1 Retire Sys 2 Retire Sys 3 2011201220132014 Measure and reward project leaders to drive value, reuse and retirement. Business sponsors must step up and make sure the business key performance indicators are achieved, and drive their employee base to the new capabilities so that old systems can be retired. Success tomorrow: -Today's metrics + -% functions retired -% functions reused

13. Track Value and Costs Postdeployment IT Costs Total Costs Cycle Time Quality Innovation (Ease of Change) Scale (Quantity) Revenue

14. Exercise 4: How Will You Change Capital Planning and Project Governance? CFO (or COO, CEO) Actions: - Project Leader Actions: - Business Sponsor Actions: -

15. Recommendations Clean up underneath the applications. Use TIME to overhaul the application portfolio. Build the question of what will go away into capital planning. Redefine: -Program and project success (functions retired, functions reused) -Project leader goals -Business sponsorship Track value (in addition to costs) postdeployment. Move to a pace-layered application strategy.

16. Extra Credit: Business Leader Checklist — Develop a Road Map for Each Business Area People: -What do their people need to succeed? -Who are the customers of the business leader? Business Process: -How does the business leader want things done? -What are the most important process futures? Business Information: -What are the leader's current information needs? -What are the most important information futures? Key Performance Indicators (KPIs): -What are the KPIs for the business leader? -How are the KPIs likely to change? Current State Future Milestone 1 Milestone 2 Milestone 3

17. Improving The Business/IT Conversation One Size Fits All One Size Fits All Business Leader Apps/IT Leader

18. How Do Other "Systems" in Industry Deal With Varying Rates of Change? Pace Layering/Shearing Layers Structure: Skin: Space Plan: Services: Stuff: 30 – 300 Years 20 Years 3 – 30 Years 7 – 15 Years 1 Day to 1 Month Site:Eternal Note: For more on pace layers and shearing layers in building architecture see “How Buildings Learn” (1994) by Stewart Brand

19. Let's Avoid Terminology Traps: Remember Your Audience and Context Our intent is to discuss three "layers" of things that help business leaders: try new ideas, codify better ideas and efficiently execute common ideas. "System" — A set of information technology associated with one or more business processes and related data. Depending on your context and who your audience is, replace "system" with any of these terms: -Process -Information, Data -Capabilities -Environment, Ecosystem -Toolkit or Tools

20. Systems of Record Systems of Differentiation Systems of Innovation A Pace Layered View of Systems New Ideas Common Ideas

21. Joint Marketing Example: New Idea — Fast Change Brainstorm Campaign Exchange Basic Materials/Info Manually Work Around Processes Product (Offering) Order Financial Customer Record

22. Joint Marketing Example: New Idea Matures — Medium Change: Develop Repeatable Routines & Rules Automate Processes in Systems Integrate Systems Contractual Agreement Brainstorm Campaign Exchange Basic Materials/Info Manually Work Around Processes Product (Offering) Order Financial Customer Record

23. Example: Moving Higher Rate of Change Out of Systems of Record (Airline Res) Systems of Record Systems of Differentiation Systems of Innovation Airline SeatPricing Engine Web Travel Planning

24. What Are Your Systems of Record? Employee Customer (Constituent) Order Product (Offering) Asset Financial Supplier Others Core Banking Policies (Insurance) Etc.

25. What Are Your Differentiating Capabilities? Finance (Evolves to PM) Customer (Constituent) Market Deliver Service Deliver Employee Recruit/Hire Review Promote Develop Supplier Contract Manage Procure Offering R&D Version End of Life Source/Make Asset Buy/Build/Lease End of Life MRO Upgrade

26. How Should New Ideas be Supported? Open Innovation Employee Recruit/Hire Customer (Constituent) Market Service Offering R&D

27. Systems of Record Systems of Differentiation Systems of Innovation Sentiment Analysis Service Open Innovation Submission Box Product Review Service Recommendations Engine iPhone App Droid App Facebook Presence Customer Service Processes & Systems Configurator R&D & Product Development Systems & Processes Customer ProductSupplierOrder Example: Externally Driven Innovation and Differentiation Meet "Layers" Facebook, Twitter, YouTube, Communities, Portal, etc. People are talking about us; what do we do?

28. Characteristics of Layers Characteristic Process Characteristics RecordDifferentiationInnovation Structured, repeatable Configurable, autonomous Dynamic, ad hoc Data/InformationHighly structured, well managed, mainly internal, audited Internal and external, some unstructured; more dynamic Structured and unstructured data; heavy reliance on external data ContentStatic/StableBothDynamic Security Reporting, historicalPlanning, budgetingPredictive, scenario- based Analytics Tightly controlled, managed complexity Distributed control, manageable complexity Federated control, high potential complexity CollaborationLimitedModerateHigh

29. It's All About the Governance Governance of the stakeholders, by the stakeholders, for the stakeholders Demand-Side Stakeholders Supply-Side Stakeholders Enterprise Architecture Named Owner

30. System of Record Governance Differences Between the Layers System of Differentiation System of Innovation Process Change Architecture Funding Agile Practices Incremental & Iterative Waterfall Development Practices Business Engagement Planning Horizon Strict Change Control Experimentation Investment Pool Departmental Capital Process Traditional Alternate Platforms Doing the Work Part of the team Formal Process 7+ years2-3 months1-2 years

31. Establish Realistic Process and Data Integrity Requirements System of Record System of Differentiation System of Innovation Ambiguous, and Highly Flexible Well Understood, Tightly Controlled Process IntegrityData Integrity Modest Expectations High Integrity Scenario Models Audit & Compliance Reporting, Reconciliation Direct Marketing Database Budgeting, Planning, Forecasting Social Database Facebook Campaign Prospect Web Visit Sales Interaction Quotation Order Entry ShippingInvoicing Cash Receipt

32. Interaction Between the Layers Requires "Connective Tissue" Master Data Management Process and Data Integration Business Service Repository Integrated Composition Technology Common Security Architecture Integrated Monitoring and Management Common Elements of Connective Tissue VS. System of Differentiation System of Innovation System of Record

33. Create Your Recommendations for Layers Characteristic Strategic Focus Lifespan Business Process Data Integrity Support Requirements Sourcing Pace of Change Budget Investment RecordDifferentiationInnovation

34. Recommendations for Layers Characteristic Strategic Focus Lifespan Process Viability Data Integrity Support Requirements Sourcing Pace of Change Technical Deployment Investment Record Improve execution 10 to 20 years Understood and stable High 75% technical 25% business Integrated packaged application suite Infrequent On-premises cloud emerging Capital asset Differentiation Better design 3 to 5 years Understood and dynamic Moderate 50% technical 50% business Best of breed More frequent; configurability is key On-premises or SaaS Capital or expense Innovation New idea 6 months to 3 years Ambiguous and dynamic Limited Custom, orchestrated, open innovation Very frequent; "throwaway" customization Any, but typically on- premises Expense 25% technical 75% business

35. Recommendations Move away from a monolithic application strategy and categorize current and planned applications by layer. Develop a differentiated strategy for each layer: -Budgeting- Maintenance and support -Selection criteria- Data management -Architectural standards- Deployment model Establish standards for connective tissue across the layers: governance, integration and integrity. Overhaul — rationalize, standardize, simplify, modernize — applications from the bottom layer up. Drive "new idea"-style innovations from the top layer down by providing a system of innovation.

36. Published Pace Layer Research  How to Get Started with a Pace Layered Application Strategy (G00211245) - http://www.gartner.com/resId=1607414http://www.gartner.com/resId=1607414  How to Use Pace Layering to Develop a Modern Application Strategy(G00208964) - http://www.gartner.com/resId=1488129http://www.gartner.com/resId=1488129  Gartner’s Application Pace Layer Model: Governance and Change Management (G00211809) - http://www.gartner.com/resId=1635516 http://www.gartner.com/resId=1635516  Connecting Technology for a Pace-Layered Application Strategy (G00211492) - http://www.gartner.com/resId=1635415http://www.gartner.com/resId=1635415  Systems of Record: You can Innovate on an Unstable Foundation (G00214816) - http://www.gartner.com/resId=1759924http://www.gartner.com/resId=1759924  Using Pace Layers to Boost the Value from Your SAP ERP Investment (G00213735) - http://www.gartner.com/resId=1745114http://www.gartner.com/resId=1745114  SOA Enables a Pace Layered Approach to Applications (G00213703) - http://www.gartner.com/resId=1728037http://www.gartner.com/resId=1728037  Operational Tempo and Pace Layers: Go Fast When You Must; Be Thorough When You Can (G00205005) - http://www.gartner.com/resId=1401131 http://www.gartner.com/resId=1401131  Business Domain-Specific Pace Layer Notes: -Use Gartner’s Pace Layer Model to Structure Customer Service Applications Based on Business Value (G00213641) - http://www.gartner.com/resId=1718814 http://www.gartner.com/resId=1718814 -Applying Pace Layering to E-Commerce Processes and Applications ((G00213791) - http://www.gartner.com/resId=1749814http://www.gartner.com/resId=1749814 -Use Gartner’s Pace Layers Model to Better Manage Your Financial Management Application Portfolio (G00213657) - http://www.gartner.com/resId=1730539 http://www.gartner.com/resId=1730539 -Applying Gartner’s Pace Layer Model to Human Capital Management (G00214212) - http://www.gartner.com/resId=1749915http://www.gartner.com/resId=1749915 -Applying Pace Layers to Marketing Processes and Applications (G00213629) - http://www.gartner.com/resId=1744727http://www.gartner.com/resId=1744727 -Applying Pace Layering to Customer-Centric Order Processes and Applications (G00213908) - http://www.gartner.com/resId=1744722 http://www.gartner.com/resId=1744722 -Use Gartner’s Pace Layers Model to Structure Your Procurement Application Portfolio (G00213761) - http://www.gartner.com/resId=1738114 http://www.gartner.com/resId=1738114 -Apply Gartner’s Pace Layer Model to Sales Applications (G00213505) - http://www.gartner.com/resId=1746633http://www.gartner.com/resId=1746633 -Applying Gartner’s Pace Layers to Supply Chain Applications and Processes (G00214453) – http://www.gartner.com/resId=1750324 http://www.gartner.com/resId=1750324

37. This presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the intended Gartner audience or other authorized recipients. This presentation may contain information that is confidential, proprietary or otherwise legally protected, and it may not be further copied, distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates. © 2010 Gartner, Inc. and/or its affiliates. All rights reserved. Financial Applications

38. Midsize B2B Product-Centric Company (2011) Systems of Record Systems of Differentiation Systems of Innovation Purchasing Strategy Management Project Accounting Financial Consolidation Profitability Modeling and Optimization Collection and Deduction Management General Ledger/Fixed AssetAccounts Receivable Accounts Payable Accounts Payable Invoice Automation Forecasting Treasury Management Travel and Expense Management Supplier E-Invoicing Financial and Management Reporting Budgeting and Planning Close Management Disclosure Management

39. Midsize B2B Product-Centric Company (2016) Systems of Record Systems of Differentiation Systems of Innovation Purchasing Strategy Management Project Accounting Financial Consolidation Profitability Modeling and Optimization Collection and Deduction Management General Ledger/Fixed AssetAccounts ReceivableAccounts Payable Forecasting Treasury Management Travel and Expense Management Supplier E-Invoicing Financial and Management Reporting Budgeting and Planning Close Management Disclosure Management

40. Midsize Service-Centric Frim Systems of Record Systems of Differentiation Systems of Innovation Purchasing Strategy Management Project Accounting and Billing Financial Consolidation Profitability Modeling and Optimization Collection and Deduction Management General Ledger, Fixed Asset Accounts Receivable Accounts Payable Forecasting Treasury Management Travel and Expense Management Financial and Management Reporting Budgeting and Planning Close Management Disclosure Management

41. Large Multinational Company (2011) Systems of Record Systems of Differentiation Systems of Innovation Purchasing Strategy Management Project Accounting Financial Consolidation XBRL-Based Management Reporting Profitability Modeling and Optimization Travel Booking Collection and Deduction Management General Ledger/Fixed Asset Risk Management Close Management Disclosure Management Accounts ReceivableAccounts Payable Supplier E-Invoicing In-House BankingAP Invoice Automation Forecasting Bank/Cash Management Expense Reimbursement Debt and Investment Management Budgeting and Planning Financial and Management Reporting

42. Large Multinational Company (2016) Systems of Record Systems of Differentiation Systems of Innovation Purchasing Strategy Management Project Accounting Financial Consolidation XBRL-Based Management Reporting Profitability Modeling and Optimization Travel Booking Collection and Deduction Management General Ledger/Fixed Asset Risk Management Accounts ReceivableAccounts Payable Supplier E-InvoicingIn-House Banking Forecasting Bank/Cash Management Expense Reimbursement Debt and Investment Management Budgeting and Planning Financial and Management Reporting Close Management Disclosure Management

43. Recommendations for Layers: FM Apps Characteristic Strategic Focus Lifespan Business Process Data Integrity Support Requirements Sourcing Pace of Change Budget Investment Record Improve execution 10 to 20 years Understood and stable High 75% technical 25% business Integrated application suite Infrequent, incremental Shared-service/IT Capital Differentiation Competitive differentiation Three to five years Understood and dynamic High 50% technical 50% business Best-of-breed or suite vendor extension More frequent, configurability is key Mix of line of business and IT Capital and/or expense Innovation Business transformation 12 months to three years Ambiguous and dynamic Moderate Specialist niche vendor, possibly larger vendors Line of business Capital and/or expense 25% technical 75% business Rapid deployment of new capabilities

44. This presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the intended Gartner audience or other authorized recipients. This presentation may contain information that is confidential, proprietary or otherwise legally protected, and it may not be further copied, distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates. © 2010 Gartner, Inc. and/or its affiliates. All rights reserved. Information & Pattern-Based Strategy

45. Context-Aware Computing Search/ Mobile Social Computing Social Networking Pushing Information Initiatives to the Extreme Pattern-Based Strategy™ Enterprise Systems Transactional Data DocumentsVideoTextAudio Images IT/OT VarietyComplexity VelocityVolume

46. Extreme Information Management: More Than Quantification — The 12 Dimensions of Information Management Qualification and Assurance: -Fidelity, co-created meaning and context -Linked data -Validation -Perishable nature Access Enablement and Control: -Sensitivity/classification -Agreed taxonomy/ontology or contracts -"Heat" mapping or pervasiveness of use case -Technology enablement and advances Quantification: -Volume, big -Variety -Complexity -Velocity ClassificationContracts TechnologyPervasive Use PerishabilityFidelity ValidationLinking VelocityVolume VarietyComplexity

47. Information Continuum 4545 Very Structured Unstructured Hybrid Structured Data Content

48. From “Information as a By-product” to “Information as an Asset” 4646 Information Semantic Styles Specialized Capabilities manage metadata TextImage Mobile Transactional Data Social Audio Video IT/OT Search Engine Documents DescribeOrganizeIntegrateShareGovernImplement Common Capabilities Structured Data Content Hybrid

49. Analytics Continuum 4747 Predictive Analytics What is likely to Happen? Why did it Happen ? What Happened? Forensics & Data Mining Reporting, Dashboards What is Happening? Real-Time Analytics FuturePast Why is it Happening? Real-Time Data Mining What should I do About it? Prescriptive Analytics

50. Seeking Exceptions and Fact-Based Decisions in Information Just as there was too much data — now there's too much information Information is not shared (trust, technology, language) Information is often conflicting New sources of information (e.g., the collective) are often not considered No recognition of patterns across different types of information (people, processes, data) But …

51. Pattern Seeking: Focus on Your Organization and Multiple Information Sources The "Collective" Focus Pattern Seeking on Your Organization's Issues/Opportunities See Patterns Across Multiple Information Sources Data People Process

52. Requirement: Move Beyond Seeking Patterns Seeing New/Novel Business Patterns Before They Impact Your Organization Using Business Patterns, Make the Right Decisions (Fact Basis), and Execute Analyze the Impact of the Business Pattern on Operations or Strategy Enabling Others to See How the Above Leads to More Consistent and Improved Business Outcomes

53. Innovation Risk OperationalStrategic New Order Process New Product/ Service Patterns Will Vary in Organizational Impact Oil Price Fluctuation Supplier Cancels Contract e e

54. You Need a Pattern-Based Strategy Seek Patterns That May Have a Positive or Negative Impact on Your Strategy or Operations Model Pattern Impact on Strategy/Operations Decide and Execute Change Pursuant With Requirements of the Pattern

55. 2011: Leading Organizations Will Excel at Identifying New Patterns and Exploiting Them for Competitive Advantage Fraud Detection Systems Supply Chain Management Algorithmic Trading Recommendation Engines What are the best practices/technologies for identifying business patterns that may have a negative/positive impact on business outcomes? How can we exploit these disciplines/technologies for competitive advantage? A Pattern-Based Strategy provides a framework to proactively seek, model and adapt to patterns that may have a positive or negative impact on your strategy or operations across many sources of current and evolving information.

56. IT Intrinsic to Pattern-Based Strategy Today … Act on the results as appropriate at appropriate speed: Model-Driven Business Applications Business Process Management Application Development Business Activity Monitoring Service-Oriented Architecture Find and document patterns: Predictive Analytics Industry-Specific — e.g., Fraud/Security Social Media Platforms Information Mediums (Access to Data) Business Intelligence Interpret, analyze pattern impact, and define scenarios: CPM Operation Planning and Modeling Tools Social Network Analysis Forecasting Tools Patterns have been recognized and are often valuable, but have been limited in applicability … until now.

57. … And Technology Will Continue to Evolve to Support Pattern-Based Strategies Communications Collaboration Social Software Rule Engines Recommendation Engines Complex Event Processing Taxonomy/ Ontology XBRL Integrated Business Planning

58. Pattern-Based Services Pattern-Based-Service Brokers Pattern-Based Ecosystems

59. Pattern-Based Strategy Requires New Disciplines Pattern Seeking is a discipline to seek and exploit signals that may lead to a pattern that will have a positive or negative impact on strategy or operations. Optempo Advantage is a discipline for improving an organization's competitive rhythm so that it can consistently and dynamically match pace to purpose. Transparency is a discipline that enables awareness and visibility to facts that are critical to the achievement of the desired outcomes of an organization. Performance-Driven Culture is a discipline that extends the traditional performance focus to leading indicators, modeling the impact of patterns, and driving desired behaviors (as a result of a new pattern) across the organization.

60. Innovation Risk Operational Strategic Discipline No. 1: Pattern Seeking Pattern Matching Pattern Recognition

61. Discipline No. 2: Establishing a Performance-Driven Culture Performance-Driven Culture MonitoringEnterprise Metrics Framework Predictive Planning/ Modeling Pattern-Based Strategy Degree of Business Impact and Value Evolution Stage Focus Seek, model, adapt to changing patterns What-if analysis, scenario planning, optimization and simulation Driving/outcome metrics, balanced scorecard, strategy maps, leading/lagging indicators and validation of key performance indicators Reporting, dashboards, alerts and business activity monitoring

62. Discipline No. 3: Operational Tempo Advantage Matching Pace to Purpose Operational Tempo Advantage is a discipline for improving an organization's competitive rhythm so that it can consistently and dynamically match pace to purpose. Shift the Levers, Shifts Your Tempo InformationPeopleProcess Time

63. Discipline No. 4: Transparency Is an Enabler of Pattern-Based Strategy Regulated Financial Weak Signals Key Performance and Key Risk Indicators Example Metrics Auditability Business Pattern Activities DefinedExceptionCreativeCollective Revenue Cash Backlog Order to Cash Cycle Damage to Physical Assets Net Promoters Score Social Network Size Very High HighMedium Low Profit Time to Market Fraud Events Business Disruptions (Lagging) (Very Leading) Timeliness of Indicator Patterns

64. Pattern-Based-Strategy Recommendations Focus on patterns that impact business outcomes Combine current/emerging sources of information to see patterns: -Data + people + process + new sources of information (collective and creative) Culture: -From sense and respond (reactive) to seek, model, adapt (proactive) -If you perfect "seek," your inability to adapt will be a constraint (hint: you need to focus on all three areas — not just one) -Increased focus on leading indicators, integrated business performance, change management -Technology-enabled cultural change is critical Explore technology to support seek, model and adapt: -Current technology will continue to evolve -Integration will occur (either by you, a system integrator or vendors) across seek, model and adapt to enable new business outcomes -New technologies that span seek, model, adapt are available and will continue to emerge Pattern seeking — Explore emerging category of pattern-based services: -Pattern-based-service brokers -Pattern-based-service ecosystems will form around major vendors