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S MahalingamChief Financial OfficerOctober 2009
Return on IT Investments – Key Issues
April 13, 2023
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.
April 13, 2023
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
April 13, 2023
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
April 13, 2023
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
April 13, 2023
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
April 13, 2023 - 7 -
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 PotentialOpportunities 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 EffectivenessReducing RTB Spend can Release Funds for Strategic Initiatives and Innovation, Enabling IT Effectiveness
Source: Figures based on TCS analysis & benchmarks; RTB: Run the Business
April 13, 2023
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
April 13, 2023
Connected and Extended Enterprises
Corporation
Corporation
Function
Customer service Route optimization Inventory management Sourcing Order taking
Business process
Supplier Manufacturer Distributor Customer
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
April 13, 2023
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
- 10 -
4.2 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
April 13, 2023
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
April 13, 2023
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
End of Deck
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