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Management Consulting / Running the Business of IT / August 2014 1© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity.

Member firms of the KPMG network of independent firms are affiliated with KPMG International.

Running the business of IT


The need for changekpmg.com

2 Management Consulting / Running the Business of IT / August 2014© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity.



These changes are putting tremendous pressures on CIOs. Now they must respond quickly to evolving markets, think in terms of revenue objectives, and truly run IT as a business. This means they need to support greater speed, agility, and efficiency, even while ensuring quality, compliance, and security.

The way to address these challenges is to have a holistic approach to managing the business of IT, an approach that sees the “big picture;” focuses on understanding demand and aligning supply; identifies appropriate enabling technologies; and looks at technology costs in terms of business value, and technology metrics in terms of business intelligence. Managing the technology organization as a business demands that a CIO evaluate working capital, plan and forecast requirements, and adapt to the changing needs of the client, thereby exhibiting strong and clear leadership. It is an approach that enables CIOs to become the CEOs of their IT businesses. KPMG refers to this approach as Running the Business of IT.

Across this changing business and technology landscape, a number of key business drivers underscore the urgent need for change within an IT organization:

• Enterprise growth, including growth from increased sales into current and new markets, more product offerings, and growth through mergers and acquisitions

• Increased agility as business accelerates beyond the pace of older legacy environments and traditional IT processes

• Customer expectations for more and better services enabled through online and mobile channels, faster and more flexible delivery, and greater product selection

• Innovation that leverages mobility, social media, the cloud, big data, and other disruptive technologies

• Operational excellence that requires a more efficient and cost-effective approach as organizations constantly strive to “do more with less”

Running the business of ITThe need for change

The world around the CIO is dynamic. The pace of business is increasing and more companies depend on a growing number of new and disruptive technologies to support their mission and to maintain their competitive advantage.

by Mitch Kenfield, Managing Director, KPMG Advisory and Matt Bishop, Principal, KPMG Advisory




The CIO is becoming an increasingly key player in today’s changing business landscape. IT is no longer a back-office supporting function but a business-critical function that drives business processes and enables business growth. In this new landscape, the CIO must be a trusted business partner, and that partnership demands a strategic focus on the CIO agenda.

This agenda includes the following five imperatives, each with its own set of opportunities:

CIO OpportunitiesCIO Imperatives

Create BusinessValue

Navigate Business Change

Optimize IT Investments

Transform IT Capabilities

Deliver IT with Confidence

Clear Business understanding of IT contribution and value

Right-sizing of IT to the business to align with current and enable future

Intelligence to drive IT decisions

Ensure operational excellence in service delivery

Understand and mitigate exposure and impact of cyber-attack threats

Promote a culture of innovation

Accelerate speed to market for new services

Maximize quality and effectiveness

Minimize investments and costs

Continually assess and improve operations

Ability to flex and adapt to meet changing business needs

Stewardship of risk mitigation allowing business to innovate

Figure 1 | CIO Imperatives

While the CIO has to cover each of these objectives to be successful, specific business situations will demand more emphasis in some areas rather than others. Tough economic times require a rigorous business focus on cost reduction, even as IT has to work harder to optimize services and deliver them with confidence. This may mean less focus on innovation and transformation. However, a business planning for growth will require that IT carefully refocus its priorities and concentrate on these objectives in support of the business agenda.

Today’s CIO agenda




CIOs inherently understand and strive to work toward achieving all five imperatives. However, challenges arise when these imperatives (see Figure 1) are managed through separate processes, with some IT functions perhaps focusing on development, others on support, and others on finances.

Organizations need a set of effectively integrated capabilities that enable them to manage the business of IT holistically. These capabilities must connect practices and information from various areas of IT in order to effectively enable the business of a technology organization.

For example, a business would leverage financial data on sales and profit margin in order to manage product supply, identify enhancements and plan for retirement. In the same way, IT can combine demand, portfolio, service and financial data to ensure that it is focused on the right products, providing the greatest value to the business. By using this approach, CIOs can ultimately gain the intelligence they need to make broad-based decisions across all five imperatives. This, in turn, can help them better align the IT strategy and offerings with real business needs.

Key capabilities in this Running the Business of IT approach include the following:

Portfolio Management

Product Development

Business Management

Supplier Management

Service Management

Risk, Regulatory & Compliance

Business of IT

Figure 2 | Running the Business of IT Approach

Running the Business of IT – Integrated Capabilities




Customer Relationship Management – understanding the changing business needs and demands for IT services, and presenting the quality, performance, and value of the IT function to the overall business

IT Intelligence – gathering and relating data and metrics from across the IT management space in order to provide IT intelligence that enables strategic and operational decisions for IT

Portfolio Management – aligning the portfolio of IT investments, services, and projects with the needs of the business and ensuring that this portfolio provides ongoing value

Product Development – identifying, designing, and delivering technology solutions that support business needs through an approach that drives quality and enables agility

Business Management – understanding and optimizing the underlying costs and associated business value of these services

Supplier Management – overseeing the performance and value of IT providers, both internal and external, while also ensuring that their services are integrated into the business of IT

Service Management – enabling the efficient and effective design, transition, and operation of IT services to the business

Risk, Regulatory, and Compliance – proactively identifying, mitigating, and managing internal/external risks, protecting technology services and business information and ensuring IT compliance




To maximize value, the IT function must evolve from a service provider to a strategic business leader, with the CIO acting as a CEO for the IT organization. The journey can start in multiple places and take multiple paths. Priorities for any given organization depend on their specific business needs and the industry environment in which they work. The CIO must consider both the current state of IT and the future needs of the business in order to define a specific path for this journey.

Some organizations must manage across a number of technology business capabilities in parallel. This process can include improving service quality through IT service management (ITSM), understanding the true cost of service through Technology Business Management (TBM), and gathering initial IT metrics to illustrate results.

Other organizations have made significant progress in individual areas and are ready to take the next step toward true proactive and empowered decision-making for IT. This comes through the integration of processes, data, information, and capabilities from multiple areas to help manage the business of IT. ITSM data around incidents and

customer satisfaction can help improve the quality of solution delivery. TBM data around true cost of service can help better prioritize future investments. Demand data around business changes and “what ifs” can help ensure that IT resources are proactively aligned.

We should also keep in mind that all businesses experience cycles of growth, steady states, and contraction. As such, business leaders must work to proactively identify, mitigate, and capitalize on market opportunities and changing landscapes by increasing production, adjusting investments, and cutting costs. IT is no different, and CIOs will have to continually adjust their strategies and services to address a multitude of rapidly evolving business and technology factors.

In short, the improvement journey for IT has no single path and has no real end. It is a journey that focuses on continued results and constant alignment versus a project-based approach of reaching a goal and relying on past accomplishments.

Welcome to running IT as a business.

Running IT as a business




KPMG’s Approach

Case Study

KPMG recognizes that today’s CIOs face an increasing number of demands and complex tasks. We can help you become the strategic technology partner that your business requires. We offer an experienced viewpoint and independent advice, and our CIO Advisory practice brings experience, lessons learned, tools, and accelerators to help enable the business of the IT organization. Our professionals work closely with IT executives to provide candid assessments and recommendations, as well as valuable support to help in the change process.

The customers of a large IT organization for a major telecommunications firm had little insight into how their business units were being charged for the IT services they consumed. They were concerned that the costs were not in line with the service IT was providing their organizations.

In response, the organization engaged KPMG to assist in the creation of a new cost allocation strategy and mobilize an IT financial management program. The program goals were to improve cost transparency and identify cost reduction opportunities

KPMG worked with the client to identify the total cost of each of its services provided, and created a methodology to allocate those expenditures back to each of its customers on the basis of the consumption of each of those unique services.

The client team also assisted the IT organization in developing more sophisticated costing methods for each of their technology domains (e.g., server, storage), activity-based labor, and supplier contracts. As a result of these efforts, the IT organization has since identified cost savings of greater than 20 percent of their annual budget, while launching projects to address future growth opportunities.

Learn More

For more in this topic from KPMG, please visit our Management Consulting IT page on KPMG.com

For information and research from KPMG’s Advisory group, visit the KPMG Advisory Institute at http://www.kpmginstitutes.com/advisory-institute/

http://www.kpmg.com/US/en/services/Advisory/management-consulting/management-consulting-by-function/Pages/information-technology.aspx

http://www.kpmg.com/US/en/services/Advisory/management-consulting/management-consulting-by-function/Pages/information-technology.aspx

http://www.kpmginstitutes.com/advisory-institute/

The information contained herein is of a general nature and is not intended to address the

circumstances of any particular individual or entity. Although we endeavour to provide

accurate and timely information, there can be no guarantee that such information is

accurate as of the date it is received or that it will continue to be accurate in the future.

No one should act on such information without appropriate professional advice after a

thorough examination of the particular situation.

© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member

firms of the KPMG network of independent firms are affiliated with KPMG International.

KPMG International provides no client services. No member firm has any authority to

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trademarks of KPMG International

August 2014_MC6281

Contact us

Matt BishopPrincipal, CIO Advisory T: +1-214-840-2749 E: [email protected]

Marc SnyderManaging Director, CIO Advisory – Global Centre of Excellence T: +1-978-807-0522 E: [email protected]

Mitch KenfieldManaging Director, CIO AdvisoryT: +1-404-222-3295 E: [email protected]

www.kpmg.com/us/IT

Documents

Running the Business of IT - KPMG Institutes · PDF filethat a CIO evaluate working capital, ... selection • Innovation that ... Running the business of IT KPMG’s Approach Case