MOVE FROM A COST CENTER TO A GAME CHANGER. Change perceptions. Define, measure and maximize business value realized from IT.

Transcription

1 MOVE FROM A COST CENTER TO A GAME CHANGER Change perceptions. Define, measure and maximize business value realized from IT.

2 Introduction The role of Information Technology (IT) in developing, selling and delivering products and services on behalf of the business enterprise has never been more critical. Yet, a fundamental disconnect between the business side and IT side of an enterprise still remains. Business leaders often believe that IT investments don t add direct value or propel business growth. As a result, business teams often don t find adequate justification in IT investments. In some cases, IT analysts have gone so far as to question the value of IT altogether. But it is not that IT is not critical to business success, but that both IT and the business lack the means to link IT spending to business value. It is critical for IT to bridge this gap in perception. If IT can focus on delivering business value while demonstrating successful contribution to business goals, the gap between business and IT will have been successfully bridged. Business value of IT360 TM is a framework that helps define, measure and maximize value from IT investments. The framework can demonstrate and validate IT s position as a critical partner and enabler of business. The traditional view that IT is merely a cost centre can be effectively neutralized using Wipro s IT360 TM. A way to link IT spending to business value is urgently required. Why? Recent years have witnessed a reassessment of IT spending. With nearly constant economic growth during the year 1980 to 2000 timeframe and with the availability of generous budgets, enterprises were willing to invest in the best technology in the hope of achieving greater benefits. Inefficient manual processes were routinely replaced by IT and the value delivered from this automation was evident and tangible. However, with greater economic uncertainty, IT investments have fallen under new scrutiny, heralding the end of the automation wave. Also driving this reassessment is the realization that the overwhelming proportion of IT spend is on non-differentiating activities. Over the last decade, demands placed on IT have changed. IT has become complex. It spans multiple entities and is used across the enterprise. Everyone uses it, for even the most mundane tasks. This has resulted in IT being taken for granted, particularly among younger staff who have grown up on the Internet. In this context, the recognition of IT s contribution to business value has been diffused. More importantly, complexities in IT have resulted in project delays and cost overruns. Incompatible technologies have too often hampered business growth instead of supporting it. The result? IT is now seen as a necessary evil and as an unavoidable cost in many quarters. The focus over the last decade has turned to a single question: How can we reduce the cost of IT? The impending transition to cloud-based IT delivery brings with it the possibility that IT spending decisions will be dominated by cost concerns above all else. This focus on cost control, while appropriate to a degree, misses the larger point. The questions business should have been asking all along are, How can we leverage IT for business growth? How can IT help lower operational cost? How can IT help meet regulatory pressure and de-risk business? These are questions that businesses need to urgently answer. And IT can help address them, with the help of Wipro s IT360 TM. 02

3 Primary Challenge Moving from a Cost Centre to being a Game Changer The challenge that enterprises face is in demonstrating business value from their IT spends. IT and Business organizations are equally not clear about the returns delivered by their IT investments. The lack of visibility into IT s impact corners it into the classic cost-centric debate. The challenges are evident at three different levels of the business value cycle: in Value Definition, Value Creation and Value Delivery and Realization. The challenges at each level are distinct. The solutions to each are different too. The illustration below explains these challenges and their solutions. Pain-Point IT and Business speak different languages Lack of a common definition of Business Value Desired Solution A common definition of Business Value based on fundamental business dimensions Benefit A common definition of Business Value and Success that leads to better productive value discussions Pain-Point Lack of a mechanism to measure, monitor amd maximize Business Value delivered by IT forcing IT into cost-orinted debates instead of value-orinted discussions Desired Solution A standard mechanism (with a proven framework and monitoring & reporting too) to measure and monitor Business Value delivered by IT Benefit Clear linkage between IT Spend and Business Outcomes Value Delivery & Realization Value Definition Value Creation Benefit Informed IT prioritization, aligned to Business Objectives and desiered Business Outcomes Pain-Point Lack of value-centric ROI information to determine the right focus areas and enable IT budget prioritization Desired Solution A mechanism to prioritize IT funds based on... -Revenue opportunities across BUs -IT Critically to Business Performance -IT capability gaps vis-a-vis competitors While optimizing IT s value is top priority, there currently is no integrated, standardized approach to evaluate IT budgets and investments from a business value perspective. Enterprises need metrics to capture tangibly value from their IT investments. Enterprises lack a mechanism that links IT spends to business value by specific business functions and the overall measure, monitor and maximize the business value of IT. Wipro s IT360 framework provides an integrated, phased approach to address the issues at each stage of the IT Value Lifecycle. It creates a path to transform IT s capability and perceived value from technology supplier to differentiator and game-changer. organization. They also lack a methodical approach to continually 03

4 Business Value What does it really mean? Business Value has become a liberally used term. More people talk about it than those who can clearly define it. The interpretation of the term varies depending on the stakeholders in the enterprise ecosystem (the enterprise business organization, the enterprise IT organization, the IT services provider, the technology vendors, IT-users and the end consumer of the business products and services). Each has their own definition and measurement for business value. The yardstick used to measure business value extends from basic Service Level Objectives to Operational Key Performance Indicators (KPIs) to financial ratios and indicators. All of these are contextually justified. However, most of them are intermediate enablers rather than end outcome focused. Behind the variations in these yardsticks is the underlying commonality of business outcomes. A definition of business value based on business outcomes can serve as the base definition. It can then be customized to the context and role of different stakeholders. The first step, therefore, in This is how we break down and define business value based on set objectives and achieved outcomes In business language, an IT Service / program / project is said to have delivered business value if it has tangible impact on one or more of the business dimensions depicted in the below representation. Some of the dimensions are quantitative (revenue, cost, risk). Others are relatively qualitative (customer satisfaction, employee satisfaction, brand value). While socializing this with business and IT leaders across customer organizations we have seen good agreement on this definition. While some of the leaders saw the need to include specific dimensions like Productivity and Quality, they could fairly be deduced as a combination of one or more of the outcome-based dimensions shown below. What we need today is a tight linkage between the IT investments and the perceptible shift in each of these dimensions. While in some cases this shift is easy to measure (revenue/costs) in others like risks, brand value, clear metrics are not yet available. In almost all cases, a tight linkage to IT investments is a common problem area. finding a solution is to baseline the definition of business value. Increase Revenue Enable Sustainability Protect Revenue Improve Employee Satisfaction Business Value Reduce Business Risk Enhance Brand Value Reduce Cost of operations Increase Customer Satisfaction 04

5 How can IT investments deliver Business Value? What is Wipro s IT360? How does it help you? It is a well-known -- but grudgingly -- acknowledged fact that as much as 80% or more of IT spend is on keeping the lights on. The essential business value delivered from this spending is Protect Revenue. Organizations, without exception, want to minimize this spend. They understand that maximizing the transformation spend can deliver higher value to business. This requires a tighter integration between investments in building and managing IT infrastructure and applications, and the performance of the business processes supported by the IT landscape. A firm and clear linkage is the key to business value delivered to the organization. Wipro s IT360 framework uses proven methodologies and tools to create this linkage. The outcome is visibility to tangible value from IT to business. Wipro s IT360 is a holistic framework-based approach towards defining, measuring and maximizing business value realized from IT. Research by business advisory and consulting teams in Wipro in collaboration with leading academic and research entities has resulted in IT360. Its cornerstone is a philosophy that delivers an accurate and granular handle on cost and value of IT to an enterprise. The illustration below is a representation of Wipro s IT360 framework that spans the IT Value Lifecycle. The framework s philosophy encompasses the entire IT Value Lifecycle, including Value Definition, Value Creation and Value Realization (hence the name IT360 ). While the Value Definition zone deals with the Plan phase of IT to optimize Business-IT strategy alignment, the Value Creation Zone spans the Build and Operate phases that involve the setup and operation of the right IT apps and infra portfolio that derive from the IT strategy. The Value Realization zone deals with the IT Strategy IT-enablement of business processes, and measuring and monitoring the impact of IT on business outcomes. Business Strategy Guides VALUE DEFINITION ZONE Process Strategy Drives Operations VALUE CREATION ZONE Application Portfolio Business Outcomes VALUE REALIZATION ZONE Infrastructure Portfolio Enables Business Processes Empowers IT360 TM - Strategy Formulation and Execution 05

6 Wipro s IT360 sub-services The IT360 framework is based on the premise that each of the IT and business stakeholders has a context-specific definition of business value. Each therefore needs similar-yet-contextually unique business value dimensions / metrics. Recognizing this complex need Wipro has created the following IT360 sub-services: IT360 strategy focuses on measuring the business value of IT at the planning stage, both at the enterprise level and the individual business unit level, both to understand existing IT costs and to establish a conceptual foundation for recognizing IT s role in delivering business IT360 operations evaluates the impact of both Build IT and Run IT activities while forecasting IT s contribution using relevant frameworks including Six Sigma and Lean methods. This yields a scientific, ROI-driven methodology to guide IT investment, while identifying the optimal mix between both ongoing investments as well as value-adding investments in IT. IT360 process establishes a mechanism to monitor and measure cost, availability and performance of business processes (tied to underlying IT infrastructure investments), enabling a business process-level view of IT s performance, as opposed to the typically technical and silo-driven view of IT performance. The illustration below outlines the scope, objectives and benefits of these sub-services: value. This serves to build a common definition and language for aligning IT s role in delivering high-impact services. Objectives Scope Measure and manage Business Value of IT at the Plan IT phase at the Enterprise level and individual Business Unit level Establish a conceptual resonance between the Business and IT to recognize the potential of IT as a value contributor as against a cost centre Get an accurate, granular handle on IT costs as a fundamental pre-requisite to measuring IT s value Benefits Better Business-IT partnership Establishes a common definition and language of Business Value that enables better alignment and partnership between Business, IT and third-party IT service providers Scope Business Value Impact of IT at Business Process enablement level Objectives Business Process enablement through IT--Establish a mechanism to measure and montior the cost, availability and performance of business processes (based on the dependencies they have on underlying IT services.) Benefits A holistic IT monitoring and management capability that provides a business process level view of IT s performance as against the traditional, silo view of Infrastructure and Application availability Process Strategy Operations Benefits Better IT Portfolio Managment: A scientific, ROI-centric methodology to prioritize IT spend on the basis of Keep-the-Lights-on expense versus Transformational investments, to arrive at the optimal IT-enabled business investment portfolio that maximises Business Value. Scope Business Value of the Build IT and Run IT phases Objectives IT Benefits: Forecasting, Measurement and Realization: Establish a mechanism to prioritize Build IT spend and track benefits realized Increase the value delivered by operational IT capabilities by deploying appropriate frameworks like Lean and Six Sigma 06

7 Tangible business value in four easy steps with Wipro s IT360 An implementation of the IT360 approach for an enterprise can be done in four easy modular steps. This allows the organization to calibrate its progress towards the goal of define, measure and maximize business value of IT. Depending on organizational maturity, some of the steps can be skipped. 1. Align the objectives: This step involves a 1 to 2 day workshop with the key stakeholders (senior business leaders and IT leaders) to align the objectives and communicate the need and value of viewing IT as a strategic enabler. The workshop is conducted by our strategic advisor. Specific data points, benchmarking data, and relevant examples from industry ensure the audience develops an appreciation for the business value IT delivers, what it takes to extract that value and how other enterprises have achieved this successfully. 2. Get a granular view of Costs : A discussion on the value of IT is incomplete without base lining the real cost of IT. Step 2 aims to remedy the fact that enterprises do not have an accurate view of what IT costs across business units. This step takes two to three months and deploys the platform and methodology that provides an accurate view of the IT costs along with relevant parameters. 3. Make a Value Assessment: Having aligned the objectives with key stakeholders and armed with an accurate view of IT costs, the stage is set for an assessment of how much value is being delivered today. This steps involves a value assessment across the organization or a business unit of actual value delivered by IT proportionate to the spend incurred on IT. This is aligned with the value dimensions relevant to the enterprise. This step which takes 6 to 8 weeks is driven by the consulting side with the help of the advisor and the business value framework chosen for the exercise. 4. Define a roadmap to maximize business value: A team of enterprise architects and domain consultants work on a three-year transformation plan. This step takes 10 to 12 weeks and defines the roadmap for the enterprise to maximize business value from the current state captured in Step Three. Roadmap Provide strategic guidance to prioritize IT spend (as expendture and Investments), and Increase transformational grow the business investments as compared to keep-the-lights-on operational spend. (Indicative duration: 12 weeks) Roadmap Goal Setting Business-IT Strategic Alignment Workshop (BITSA) Orientation workshop for CXOs, to generate the necessary resonance in the way the role of IT is perceived both by the Business and the IT organizations and to bring in a universal view of IT as a contributor of business value as against the traditional view of IT as a support function. (Indicative duration: 2 days) IT360 TM Assessment Deploy a proven framework to Assess the as-is value contribution of IT, identify specific strength/improvement areas, benchmark perfromance of IT with best-in-class performers in the peer group of the client organization. (Indicative duration: 8 weeks) Value Lens Cost Lens Bill of IT (IT Cost Transparency) Provide an accurate and granular baseline for the Cost of IT services consumed by the individual business units. This will be the fundamental step to measure the Business Value of IT. (Indicative duration: 12 weeks) 07

8 Elements of Wipro s IT360 BVI Alliance The team to make it work As an IT Services Provider Wipro s organizational DNA and expertise is in adopting a global-standard framework, customizing it to cater to the unique needs of customers, and setting the highest quality standards of implementation. We adopted a similar approach to global standards like Six Sigma (for Service Quality Management) and ITIL (for Service Delivery Management). Adopting a similar approach Wipro implements the IT360 sub-services with the help of a Business Value Impact (BVI) Alliance. The BVI Alliance includes partners who will bring in complementary expertise: Wipro Wipro brings together IT expertise (covering IT applications and infrastructure expertise across industry verticals and service horizontals), Business Process consulting and outsourcing services expertise combined with 25 years of valuable experience working with over 700 global customers. Strategic Advisor An independent consultant who is a renowned expert in the discipline of Business Value of IT and who has driven similar engagements in the past for various organizations. BVI Framework Partners Partners with upcoming global-standard frameworks, with unique value propositions for various stakeholders in the Business-IT ecosystem, to help measure Business Value delivered from IT. BVI Tools Partners Niche tools that help accurately measure and monitor the cost and business value of IT. The Customer Plays a pivotal role as the entire IT360 program is centered around enabling the Customer s IT organization to deliver optimal business value to the enterprise Case History - Where have we seen this work? IT360 is currently being piloted with select Wipro customers in different areas of strategy, process and operations. We are working with: A large consumer products company to measure business value delivered by their IT organizations across the entire gamut of operations and projects - the objective is to align value with costs of IT A technology product major to define and measure business value for a large transformation program which spans infrastructure, applications and key business capabilities. IT360 framework can be used to measure the business value at an overall programme level and at individual service level. Summary and Conclusion Wipro has proven capability to deliver business impact through IT infrastructure and applications. Wipro s understanding of how to deliver business value from IT is validated by successful customer engagements ranging from IT infrastructure management through applications and business process consulting. But with IT360 customers gain access not only to Wipro s capabilities, but those of participating partners, including the variety of solution providers and thought leaders. The IT360 framework recognizes the phased approach required to address each layer of the IT Value Lifecycle. The framework defines a roadmap that can change the perception of the IT function from a cost centre to a differentiator and a game changer. For organizations, this shift in perception can result in a competitive advantage as investments in IT lead to measurable business value. As the role of technology changes from reducing operational costs and increasing efficiency to altering the way business is done and creating new products and exposing fresh business opportunities the IT360 framework will become crucial in justifying IT budgets. Wipro s IT360 framework offers a unique methodology to understand IT spends and rebalance the equation between IT as a cost and IT as a strategic business investment. Forrester Research believes that less than 20% of the typical IT budget is spent on applications development, customization and implementation and research and development of new IT technologies. 08

9 Acknowledgements In our goal to create a practical holistic approach to link IT spend to business value, we have reached out to multiple individuals and organizations in the last 2 years to understand their points of views and their goals. Inputs from each of them have helped us immensely and is difficult to thank each of them individually. Contributions from some are very significant and need to be called out specifically. Kris Rao from Hospira contributed significantly to our thinking on evolving this approach during our multiple discussions with him on this subject. The name IT360 which signifies the end to end and complete view of the business value lifecycle is also Kris s idea. We thank him for his contribution and his permission to use this name for this service. The book, The real business of IT was a very useful source of ideas and inputs and George Westerman has helped immensely by offering his inputs on key points. Organisations like Rubin Worldwide, Apptio, and IVI have contributed significantly in terms of their perspectives and offerings in this area. About Wipro Technologies Wipro Technologies, the global IT business of Wipro Limited (NYSE:WIT) is a leading Information Technology, Consulting and Outsourcing company, that delivers solutions to enable its clients do business better. Wipro Technologies delivers winning business outcomes through its deep industry experience and a 360º view of Business through Technology helping clients create successful and adaptive businesses. A company recognised globally for its comprehensive portfolio of services, a practitioner s approach to delivering innovation and an organization wide commitment to sustainability, Wipro Technologies has 120,000 employees and clients across 54 countries. For information visit or mail info@wipro.com 09

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