IT as a Strategic Capability of the Business Thomas Koedding Director Customer & Partner Experience Society for Information Management June 16, 2003

IT as a Strategic Capability of the Business

Thomas KoeddingDirectorCustomer & Partner Experience

Society for Information Management

June 16, 2003

Page 2Copyright © 2003

CIO Agenda

Providing IT guidance to senior corporate executives Demonstrating the business value of IT Improving the internal governance of IT operations Taking steps to reduce total IT costs Developing or enhancing corporate IT architectures

Top IT Management Priorities for CIOs

Base: 620 CIOs and other IT executives worldwide, surveyed in the fourth quarter, 2002Source: Gartner Inc., Stamford, Conn.

Keeping costs down, innovating faster and managing business risk.


IT Spend

Source: McKinsey

Need toshift $s

from support to

development

15% CAGR Growth

Expected Total IT Spend

Growth During Bubble

Actual IT Spend

1998 1999 2000 2001

0

100

200

400

300

500

600

2002

$ Billions

15% CAGR Growth

Expected Total IT Spend

Growth During Bubble

Actual IT Spend

1998 1999 2000 2001

0

100

200

400

300

500

600

2002

$ Billions


IT a Strategic Capability

EnterpriseSystems

Support for Efficiency,Standardization

Low High

Support forInnovation,Experimentation,Flexibility

Low

High

LegacySystemsLegacy

Systems

FlexibleIT Architecture

Source: Dr. Prahalad, MIT Sloan Management Review, Summer 2002


Life Cycles

ServiceValue/Cost

Time

Business Value

Cost of Change

Operating Cost

Life Cycle BandSelection based on Role of IT Selection based on Role of IT

Optimal Cycle

©MIT Sloan Center for Information Systems Research 2003—Ross Center for Information Systems Research

Jeanne W. Ross Center for Information Systems Research (CISR)

MIT Sloan School of Management Phone: (617) 253-2348, Fax: (617) 253-4424

[email protected] http://web.mit.edu/cisr/www

Pursuing Alignment and Pursuing Alignment and Agility:Agility:Architecture and GovernanceArchitecture and Governance

This research was made possible by the support of CISR sponsors and, in particular, CISR patrons Microsoft and Accenture.


Agility is…

the set of business initiatives an enterprise can readily implement

Enterprises must choose the manner in which they want to be agile—they cannot be universally agile.


Two Things IT and Business Must Get Right

Enterprise Architecture– The organizing logic for IT applications, data, and

infrastructure captured in policies and technology choices to achieve the standardization and integration requirements of the enterprise.

IT Governance– The decision rights and accountability framework to

encourage desirable behavior in the management and use of IT.


Traditional IT Architecture

Corporate Data

Corporate Networks &Infrastructure ServicesCorporate Networks &Infrastructure Services

TECHNOLOGYPLATFORM

APPLICATIONS

DATA


Creating a Flexible IT ArchitectureCreating a Flexible IT Architecture

Applications

Data

Application Silo

ModularRationalized

DataStandardized Technology

Architecture Maturity

Data CenterData Warehouses

Shared Product&/or CustomerData Bases

Accessible CoreData Objects

Specific BusinessNeeds

Local KnowledgeWorker Support

Non-core Business Needs

Local Customization

TechnologyStandardization

Core ProcessIntegration

Wired BusinessCore

Infrastructure


DELTA DELTA WIREDWIRED

ERMBusiness Reflexes

Delta Nervous System

Delta Nervous System

Scanners

Desktops FIDS

Laptops

RIDS

GIDS

Gate Reader

sVoice

Video

Cell Phone

s PDA's

Kiosks

ProfIle

Events

Electronic Events

Electronic Ticket

HandHelds

Pagers

Location Maint. Equip.Schedule Flight Employee Aircraft Customer Ticket

OAGCRS

WiredWiredWorkforceWorkforce

JobRelated

Communications

PersonalProductivity

DigitalDigitalDashboardDashboard

NetworkManagement• Schedules• Pricing / Rev.

Management• Forecasting.

OperationsManagement• IROPS• Connection

Management• Operational

Measures

ERP• Financial

Management• Procurement• Human

Resources

Operational PipelineOperational Pipeline

Crew

Catering

Cargo

Tower Gate TOCOCC

Terminal

T A B C D E

Clean/ServiceAircraft

UnloadAircraft

Flight Arrival and

Closeout

MonitorFlight

Flight Departure

and Closeout

Load Aircraft

Prepare for Flight

Departure

AllocateResources

Resources

Core ProductsCore Products

Customer Customer ExperienceExperience

BaggageInflightBoardingCrownRoom

TicketCounter

SkycapTravelAgent

Reservations SkymilesSkylinks

Personalization Digital Relationships Loyalty Programs

Core ServicesCore Services

Value AddedValue AddedServicesServices

Rationalized Data Stage


Strategy-Architecture Relationship

Applications

Data

Application Silo ModularRationalized

DataStandardized Technology

Architecture Maturity

Strategic Implications of ITLocal/Functional

OptimizationStrategic

AgilityProcess

OptimizationIT

Efficiency

Data CenterData Warehouses

Shared Product&/or CustomerData Bases

Accessible CoreData Objects

Specific BusinessNeeds

Local KnowledgeWorker Support

Non-core Business Needs

Local Customization

TechnologyStandardization

Core ProcessIntegration

Wired BusinessCore

Infrastructure


Learning in StagesApplication

SiloStandardized Technology

Rationalized Data

Modular

IT Capability

IT applications serve isolated business needs

Firm-wide technology standards

IT focused on wiring core process

Modules enable business model extensions

Key Management

Innovation

Technology-enabled change management

Standardization and exception management, refresh

Recognizing essence of the business

Practices facilitating reusability

Business Case for IT

ROI of applications

Reduced IT costs; interoperability

Improved business performance; integration

Speed to market; Strategic agility

Locus of Control

Local control Senior management support of CIO

Senior management, IT, and process leadership

Senior mgmt, IT, process, and local leadership

Key Governance

Issues

Estimate, measure, communicate value

Establish (local/ regional/ global) standard setting, exception & funding processes

Determine core processes and funding priorities

Define boundaries for business experiments


Designing an Agile Architecture

Recognize the dominant stage of the firm’s existing architecture.

Squeeze the benefits from the current stage. Identify any aspects of technology, strategic thinking, and architecture governance that are “out of synch,” and assign ownership for implementing needed adjustments.

Avoid skipping stages. Look ahead but recognize the learning necessary to benefit from each stage.

Recognize that agility requires a base to build on. Know what is core.


Management Framework Business-centric

IT services Planning and road mapping based on business needs

Portfolio management Services Projects

Guiding principles Social ecosystem Life cycle

Domain architectures Firm-wide platforms

Value management Value assessment and measurement


Approach

IT Services Vision and Portfolio Planning

Enterprise Architecture Definition and Roadmap

Initiative / ProjectsPortfolio Execution

Strategic plan and governance frameworkEvaluation of current IT

services, technologies and practices

Vision and guiding principles for IT services portfolio

Roadmap and lifecycle planning

Enterprise-level blueprint and operating planPlanning and design for domain architectures, for example,

e-services, Portal, Security, Directory and Client

Specific solution design, development and deploymentSolution-specific architecture designValue measurement


Approach

IT Services Vision and Portfolio Planning

Enterprise Architecture Definition and Roadmap

Initiative / ProjectsPortfolio Execution

Approach to managing IT services portfolio for effective business-IT alignment, ROI, prioritization of projects, and lifecycle management of technologies.


IT Services and Value Linkage

IT ServicesIT Services

BusinessBusinessPerformancePerformanceDriversDrivers

TechnologiesTechnologies

ProfitProfit SpeedSpeed FlexibilityFlexibilityProcessProcess

Standardization Standardization & Integration& Integration

DigitizationDigitization(e-enablement)(e-enablement)

TransparencyTransparencyof Informationof Information

StrategiesStrategies

Initiatives / Initiatives / ProjectsProjects

PortalPortalERPERP

CRMCRMBIBI MobilityMobility

NextNextIdeaIdea

Authentication

SchedulingNotification

VPN

Calendaring

Identity

IndexingSearch

ObjectLocation

ReviewData

Interchange

SoftwareDistribution

Computing Platform

Directory and Security

Development Environment

Dat

aIn

teg

rati

on

Ap

pli

cati

on

Inte

gra

tio

n

Dat

abas

e

Mes

sag

ing

Ap

pli

cati

on

s

Sto

rag

e

Net

wo

rkin

g

Man

ag

emen

t


Guiding Principles

Universal Guiding Principles

1. Four Cs: A technology or solution must not compromise the ability to connect, communicate, collaborate and consolidate information and transactions between people and processes.

2. Utility and Sharedness: IT services that provide the foundation for four Cs should be maintained as a firm-wide utility with the broadest reach in people and locations.

Communicate Connect Collaborate

Internal and external technologies, solutions and services

Consolidate

People and Processes Information and Transactions

Utility Sharedness


IT ServicesIT is all about providing services to the business

OperationsOperationsServicesServices

ApplicationApplicationServicesServices

ManagementManagementServicesServices

InfrastructureInfrastructureServicesServices

InfrastructureInfrastructureServicesServices





Ap

plic

atio

ns

Ser

vice

sA

pp

licat

ion

s S

ervi

ces



Infr

astr

uct

ure

Ser

vice

sIn

fras

tru

ctu

re S

ervi

ces


IT Services EvaluationEvaluate IT services for redundancy,

complexity, quality or scope

Technology Use

Governance

Service quality/scope


IT Services Evaluation (Example)Evaluate IT services for redundancy, complexity, quality or scope

Governance


IT Services: Today (example)Evaluate IT services for redundancy, complexity, quality or scope

Technology Use

Governance

Service quality/scope


IT Services: Vision (example)Based on the business capabilities needed and opportunities to reduce redundancy and complexity in the current environment


IT Services: Roadmap (example)

Include vendor and technology lifecycles

Delivering services to the Business


Governance

Business Strategy Assessment and Alignment

Business Strategy Assessment and Alignment

IT Services Architecture and Life Cycle ManagementIT Services Architecture and Life Cycle Management

EnvisioningEnvisioning ManagingManaging

Value ManagementValue Management

IT InitiativeIT Initiative

Solution & Product Support Solution & Product Support

Operations Readiness Operations Readiness

Trustworthy EnvironmentTrustworthy Environment

IT InitiativeIT Initiative IT InitiativeIT Initiative IT InitiativeIT Initiative

Enterprise Program Management Enterprise Program Management

Current IT ServicesArchitecture Assessment

Current IT ServicesArchitecture Assessment

Current IT OperationsAssessment

Current IT OperationsAssessment

Strategic Vision and Roadmap

Strategic Vision and Roadmap

Value StatementsValue Statements

Operating Planfor Next StepsOperating Planfor Next Steps

IT Services Vision and Portfolio

Strategy ServicesStrategy Services


© 2002 Microsoft Corporation. All rights reserved.© 2002 Microsoft Corporation. All rights reserved.This presentation is for informational purposes only. MICROSOFT MAKES NO WARRANTIES, EXPRESS OR IMPLIED, IN THIS SUMMARY.This presentation is for informational purposes only. MICROSOFT MAKES NO WARRANTIES, EXPRESS OR IMPLIED, IN THIS SUMMARY.

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IT as a Strategic Capability of the Business Thomas Koedding Director Customer & Partner Experience Society for Information Management June 16, 2003