Third Derivative - Axis Methodology for Large IT Projects

September 22, 2016

Axis is Third Derivative’s proprietary method developed leading IT transformation at complex, global companies.

Method

• Transparently links business goals to implementation and results.

• Adjusts to change across broad, longer projects.

• Links budget and time commitments to agile delivery.

Value

• Reduce key risks for large IT projects.

• Accelerate pace through focused, agile delivery.

• Tailored to buy side, sell side, and wealth management incorporating many business process, regulatory, and technical lessons.

Managing Risk for Large IT Projects

Research and experience shows the biggest risk indicators for large projects are:

• Length of time

• Business goal clarity

• Estimating time and budget

We can mitigate these risks through:

• Short cycle, iterative delivery

• Structured, inclusive business plan development

• Initial pilots and mockups to inform estimates

Sample Execution Risk Dashboard

Transforming Business Through Technology

Business plan

Operate and improve

Deploy

Goals definition

Design• Business process • Product functionality• Technical architecture• Organization and capabilities

Business goals are achieved by more than code. A project must integrate change to processes, organizations, and products.

This approach links business goals to functionality, technical design, coding and testing, and then IT operations.

Confirm and stabilize goals

Articulate goals, functionality, governance

Quantify economic value

Visual mockups to accelerate design

Pilots inform time and budget estimates

Align incentives

Evolve agile, QA, UX capabilities

Automate, rehearse, and run parallel

Track business plan metrics

Stability, scalability, cost kaizen

2016 Budget and Delivery Plan

Business strategy

Build organization and capabilities Build and

test

Mockupsand

pilots

Changeleadership

Governance & engagement

Linking Strategy to Execution and Results

The methodology provides for transparent and rigorous traceability.

Each business goals is linked to use cases and product functionality.

Each business case has corresponding metrics, baselines, and targets.

Governance processes capture production metrics and compare to the business plan.

Example

• Strategy to respond to margin compression by reducing costs, and grow by serving new customer segments.

• One business goal to reduce time and cost to configure core application for new clients.

• Business plan sets a baseline starting points for metrics, and defines a 50,000 hour / 25 FTE savings generating $5,000,000.

• Use case developed by interviewing and observing users.

• UX mockup developed collaboratively to streamline workflow. The mockup is then wired to the flexible instrument model pilot.

• 2016 Budget based on mockup and pilot sets funding and delivery date for October 2016.

• Business metrics capture savings, and compared to business plan as part of governance.

• IT operations show latency is near instant with no unplanned downtime.

Metrics

Test case

Technical design

Governance and transparency

Application functionality

Code component

Business plan

Business goals

Strategy

Process use case

Business Strategy

Business plan

Operate and improve

Deploy

Goals definition



Business strategy

Build organization and capabilities

Business strategy is the starting point for most IT projects. This is a succinct statement of the intended outcome for technology action. This should be generally understood prior to moving to goals definition, but does not need to be precise.

The level of detail could be at:

• Respond to margin compression by reducing costs.

• Achieve growth by reaching new categories of customers.

• Expand into new geographic markets by localizing and extending applications.

Goals Definition

Business plan

Operate and improve

Deploy

Goals definition




Goals translate business strategy into specific implementation. Goals include a measurable target and date.

Example goals could include:

Costs

• Shift x% of headcount to low cost shared service centers by end of 2017.

• Reduce IT operations costs by 10% each year from 2017-2020.

• Sunset legacy system X by the end of 2019.

New Customer Segments

• Enable new customers to be configured on system X in a single day.

Business strategy

Business Plan

Business plan

Operate and improve

Deploy

Goals definition

Design• Business process • Product functionality• Technical architecture • Organization and capabilities



The business plan methodically integrates why, how, and when to achieve the strategy.

The business plan should be as limited as possible in scope and time. The business plan is a confirmation to the organization of alignment across stakeholders.

Components include:

• Definitive and succinct statement of business strategy and goals.

• External analysis of competitive environment, client trends, and regulatory mandates.

• Internal environment analysis of system and alliances necessary to execute.

• Economic value generated by goals with clear and rigorous assumptions.

• Governance and engagement model.

Application screen mockups and technical pilots should proceed in parallel with business plan development. Mockups and pilots produce learning that informs budget and time estimates.

Business strategy

Design

Business plan

Operate and improve

Deploy

Goals definition



Business strategy


Design specifies how to implement the business plan.

Business process design drives use cases. We will iterate visual mockups, rather than static documents, to confirm business design. Final mockups go to production: “code talks”.

Product functionality begins with analyzing incumbent competitors and emerging new entrants. Functionality is designed to implement streamlines processes. Functionality includes elegant user experience including a thoughtful and simply sequenced approach to change.

Technical architecture is a central decision. This stream can start earlier, at project inception. We often start by examining leading approaches to similar needs in other industries. Architecture will be confirmed iteratively through pilots.

Organization design includes deciding sourcing, balancing variable costs for surge capacity with fixed costs, team structure, talent development, and aligning incentives.

Capabilities begins with a frank assessment of collective team abilities and talent. Large scale projects impose new demands on organizations. This phase focuses on proven key needs for large projects: project leadership, agile development, QA and test case management, and UX design. As needed, we may assess data quality, controls, compliance, or security.

Capabilities extend beyond people to include technical environments. Specifically, we will ensure that test environments match production and include appropriate data. We will target a production environment allowing low-risk parallel deployments. The team will work with the finance function to plan and control investments.

Budget and Delivery Plan

Business plan

Operate and improve

Deploy

Goals definition

Design• Business process • Product functionality• Technical architecture • Organization and capabilities


Business strategy


The budget builds on design and-importantly-learning from mockups and pilots to commit to funding, business outcomes, and delivery dates.

The budget and delivery plan includes:

• Funding requirements developed by tracing business goals to process to functionality, and to develop capabilities

• Date milestones within a consistent tempo of iterations, e.g. functionality each month

• Finance decisions allocating capex and opex, and capitalization periods

Large projects often start with top down budgets, and evolve to estimation. Intuitive estimates of complex, multi-year projects are not effective. Companies can instead execute pilots. Based on this learning, capital commitments can evolve from top down to bottom up.

Connecting Plans to Agile• Agile practices can fulfill hard date and budget commitments.

• Change will happen, e.g. customer RFPs, regulatory events, or M&A. Development processes need to accommodate change.

• Last minute changes to releases affect quality and stability, and demotivate teams.

• Disciplined, consistent iterations allow the business to confidently change which features go in which release .

Business planGoals definition DesignBusiness process design determines use cases, which are implemented within the technical architecture.

2016 Budget and Delivery PlanBusiness strategy

Design phase pilots provide baseline references for budget and delivery commitments.

Unsuccessful pilots can be stopped.

Begin to stabilize spring timing, e.g. monthly.

Design phase pilots can vary in time and scope. They should be built with intent to bring features to production.

Agile Development in Global Organizations

DesignProcess design guides use cases.


• Agile streams work well within a site, while less well across sites.

• Agile can take many forms such as Kanban or scrum. Sites will adopt their own practices.

• Within a site, there is a limit to how many agile teams are effective concurrently. Smaller numbers of effective people produce more than big teams.

Prague

New York

Tampa

Assign sites well-bounded, discrete processes.Ideally assign complete responsibility, with local managers accountable.

Plan for reasonable T&E, and send people between locations. Ideally move a small number of experienced people to new locations.

Leading Change• Ineffective change leadership is a top cause of “black

swan” projects with very large cost and time overruns.

• Large projects produce uncertainty, affecting productivity and quality.

• IT managers should explicitly discuss, learn, and plan change leadership. Creating written plans works well.

• Communication is the central need. Show how change produces new career opportunities, enables learning interesting technologies, and is positive for people.

The Kotter change model fits well with the Axis methodology.

A bottom up, Socratic approach is particularly effective: form teams of junior people to recommend how to change.

Governance and Engagement

Product management

• All large IT projects are business projects.

• Start by involving business leaders in change leadership communication, e.g. video interviews.

• Always hold forums and send reports, even when initially not actively engaged.

• Track and report how strategy connects to business goals, and then to process design and use cases.

• In operation, show realization of business plan targets.

Customer service

Audit

Finance

HR

Sales

IT Engagement opportunities:

• Within communication campaign

• Business sponsors of sprints

• At the completion of each sprint

• Defining business processes and use cases

• Optimizing visual mockups

• Defining test cases

• Performing QA checks

• Governance forums and reports

Change ElementsAxis can optionally include developing new capabilities. We can bring knowledge, techniques, and tools.

Product design: elegant UX design including omni-channel interaction with clients

Data science: data quality, data modeling (e.g. HDFS), predictive model development

Agile development: advanced techniques for unit testing effectiveness, static tests, code reviews

Agile deployment: continuous deployment, low-risk parallel deployment environments

Operations: latency, volume, and stability kaizen; technical change management processes to reduce downtime

Cost reduction: opex/capex optimization including for cloud and agile, deciding capitalization; reducing costs in datacenters, operations, and software licensing; global sourcing models

Summary: Traditional vs. New ApproachCreate enduring new capabilities for IT to operate with more efficiency and agility.

Long waterfalls

Design expressed in long documents

Intuitive estimates

Manage only to time and budget

Test after coding.

Address non-functional needs like security and scalability after launch.

Big bang deployment

Tight, rapid iterations. Each sprint engages the business and is nearly ready for production.

Visual mockups, and technical pilots. Provides a running start.

Facts from mockups and pilots inform estimates

Achieve business outcomes and motivate people

Test continually. Potentially code to tests.

Quality, security, and scalability starting with planning and coding.

Automated, rehearsed, parallel deployment

Traditional Axis

Team: Buy Side Middle and Back Office Expertise

Philippe Berckmans Jeremy Lehman

Buy Side Technology Expert Large, Complex IT Project Leadership

Philippe has led design or selection, and implementation of trade management, middle and back office, and risk systems for several buy side firms and banks. Philippe combines domain expertise-particularly with derivatives-with strong project leadership and technical engineering skills.

Philippe earlier led technology for Caisse de depot et placement du Quebec, one of the world’s largest pension funds, and served as a buy side team leader for Sungard professional services.

Previously, Philippe served as a derivatives trader with JPMC covering EMEA markets.

Philippe began his career as an officer with the Belgian Air Force. He holds an MBA from Carnegie Mellon, and a BS in electrical engineering from Universite libre de Bruxelles.

Jeremy has led large scale transformations of buy side middle to back office platforms (PORTIA, Vestek), sell side trading and risk management (Citi’s Quantum), and evolved core transactional systems to deliver new analytic capabilities (Barclays).

Jeremy most recently led product development and operations at Experian Marketing Services. Earlier, he led sales, investment banking and wealth management technology for Barclays. He served as CTO for Citi Global Equities, and CTO for buy side products at Thomson Reuters. Jeremy was with Microsoft in Redmond, and with Deloitte Consulting.

Jeremy began his career as an infantry officer with the US Army. He holds a BBA and MBA from University of Miami, and completed the Advanced Management Program at Harvard Business School.

Team: Buy Side Middle and Back Office Expertise

Rick Ross

Rick is a industry leader in achieving new business value from computational optimization, with significant +expertise in valuing financial instruments. He is currently advising a prominent family office on quantitative techniques for tax efficiency.

Rick has founded several ventures. Rick had early involvement with several technologies including having been the second engineer hired by Lotus in 1983 before joining the seminal startup Analytica. He founded Telemedia Devices, a Java optimization venture, and sold the company to HP. Rick also founded Gigalogix, a provider of high performance messaging technology. Rick has pioneered mathematic techniques for derivatives valuation while advising trading organizations.

Rick holds a SB and SM in computer science, and finished courses (ABD) for an SM in technology and policy, and a PhD in computer science, all from MIT.

Jeffrey has led design and implementation of buy side middle and back office platforms for numerous firms. Jeffrey most recently was President of SunGard Consulting Services, which developed, sold and managed client specific technology solutions in the asset management, capital markets, energy and wealth management. Under Jeffrey’s leadership, SCS grew to over $100m in global revenue. Jeffrey also led key client relationships and personally developed solutions.

Earlier, Jeffrey led equities technology at JP Morgan Chase and Knight Securities. Jeffrey was a member of CIO-chaired Industry Committees at NASD, NASDAQ and NYSE.

Jeffrey began his career with Ernst & Young LLP focusing on enterprise technology and architecture. Jeffrey lives in Charlotte, NC. He holds a BS in engineering from Georgia Institute of Technology.

Quantitative Analytics InnovatorJeffrey Wallis

Buy Side Technology Implementation Leader