IBM Global Services Thought Leadership IT Optimization Solutions: Transforming the enterprise “ The drive for business value in IT starts inauspiciously if we can’t properly convey the role and intent of the very organization meant to deliver it.” 1 — John Berry, InternetWeek Online Introduction In today’s Web-connected world, information technology (IT) has become a crucial business-level concern and priority — affecting decisions from the factory floor to the executive suite. CIOs and CTOs alike now sit in the board- room, joining CFOs and CEOs in shaping strategies for everything from supply chain management solutions to mergers and acquisitions. Today, the effective application of technology alone can be the deciding factor in determining whether companies are, in the end, successful. A formidable and seemingly contradictory list of challenges — including reducing costs, enhancing busi- ness capabilities, increasing customer satisfaction and improving performance across the enterprise — has thus become leading IT imperatives.
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IBM Global Services
Thought Leadership
IT Optimization Solutions: Transforming the enterprise
“ The drive for business value in IT starts inauspiciously if we can’t properly convey the role and intent of the very organization meant to deliver it.” 1
— John Berry, InternetWeek Online
Introduction
In today’s Web-connected world, information technology (IT) has become a
crucial business-level concern and priority — affecting decisions from the
factory floor to the executive suite. CIOs and CTOs alike now sit in the board-
room, joining CFOs and CEOs in shaping strategies for everything from supply
chain management solutions to mergers and acquisitions. Today, the effective
application of technology alone can be the deciding factor in determining
whether companies are, in the end, successful. A formidable and seemingly
contradictory list of challenges — including reducing costs, enhancing busi-
ness capabilities, increasing customer satisfaction and improving performance
across the enterprise — has thus become leading IT imperatives.
Thought Leadership
2
The environment
As companies make the increasingly mandatory
transition to e-business, they are faced with a growing
and fundamental reliance on their IT infrastructure:
the servers, networks and applications; the Web sites,
Internet and intranets; security and e-mail solutions; plus
data centers and storage sites. The current climate calls
for enabling business alignment and streamlining these
infrastructure components which, in turn, requires revis-
iting the organization and the processes necessary to
support it. Just as a manufacturing or retail business
focuses on improving its internal efficiencies to reduce
costs while improving customer satisfaction and introduc-
ing new products, so, too, must the e-business focus
on improving its vital infrastructure. However, address-
ing such a comprehensive spectrum of business and
technological issues is a complex and difficult under-
taking — one that can become costly and cumbersome.
To truly optimize the IT infrastructure, it becomes
critical to create and implement a holistic plan that is
at once manageable, adaptive and highly effective.
“ A typical large corporation depends on 49 different software applications to run its business, and spends up to a third of its IT budget getting those applications to communicate with each other.” 2
— The META Group
The IBM answer: IT Optimization Solutions
In response to the overwhelming complexities involved
in evaluating, rationalizing and optimizing an IT organ-
ization, IBM has formed IT Optimization Solutions, a single
point of contact for an enterprise’s IT optimization needs.
IBM IT Optimization Solutions leverage the vast scope
of IBM Global Services — capabilities needed to under-
stand your enterprise, combine your data centers and
servers, optimize your networks, integrate post-merger
infrastructures and more — all controlled by you via an
IBM-staffed and managed Program Office. This single
focal point brings together the many disparate views of
IT value into one holistic optimization program. Through
a series of prioritized initiatives, centrally managed, your
optimization goals can be achieved more quickly and
successfully than with discrete projects.
3
Establish mandate for change• Gather and evaluate data• Create foundation for change• Identify imperatives• Perform concept checkpoint
Even in today’s fast-paced e-business environment,
companies differ widely in their relationship with IT. Before
executing an optimization initiative, it is crucial to charac-
terize how a company relates to — and leverages — IT.
In many large enterprises, various departments will
have a different definition of “IT value” and fundamentally
want the IT organization to serve different purposes. It
is important to acknowledge and weigh these competing
value requirements when developing appropriate optimi-
zation strategies.
There are four distinct profiles that describe these
varying perspectives:
• Commodity Profile — An enterprise fitting the Commodity
Profile views IT services as a basic investment for automat-
ing fundamental administrative functions at the lowest
possible cost. In optimizing a commodity-framed IT organi-
zation, the primary focus is on lowering expenditures.
• Utility Profile — The Utility Profile fits companies that are
still primarily focused on cost, but acknowledge the impor-
tance of building customer relationships. These businesses
may want to use IT optimization to work on service-level
agreements, response times, availability and other customer-
focused issues.
• Partner Profile — The Partner Profile describes an organiza-
tion in which IT is valued at the business level. While cost
is always an issue, the emphasis is on the business benefit
derived from an investment in IT. In these situations, busi-
ness units partner with IT organizations to achieve overall
quality of service and bottom-line business goals.
• Enabler Profile — Companies in which IT is an important
element in the development of business strategy fit the
Enabler Profile. In these businesses, IT initiatives drive
business strategy and are viewed as essential to achieving
a competitive advantage.
The true challenge in deciding which optimization activi-
ties to undertake is that, in many environments, IT is
asked to take on aspects of all of these profiles — based
on the varying requirements of different business units.
Understanding these differences, and learning to balance
and prioritize them, is a critical step in making successful
optimization choices.
“ The successful IT suppliers of the future will be those that work on developing a basis of trust, and an alliance-type relationship with their customers.” 4
— Dennis Benner, VP and CIO, Fluor Corp.
5
IT value profiles
Bu
sin
ess
ben
efit
focu
s
Cost focus
Provider researches, recommends and implementstechnology to enable quantum leap in business capability
Enabler
Provider works with othersto develop a service and provide resources/skills necessary to support the service
Provider
Provider of a quality serviceat a cost equal to or lower thanthe competition
Utility
Provider of an adequateservice at a cost lower than the competition
Commodity
Thought Leadership
6
The Balanced Scorecard
To establish what the internal business, external
customer, overall financial and innovation/learning
perspectives are for the client organization, IBM
IT Optimization Solutions uses the widely accepted
Balanced Scorecard framework. All analyses and con-
clusions are then structured into this framework, which
is used as a way to connect the many optimization
decisions and build a comprehensive business case.
The Balanced Scorecard framework is then used as the
foundation for the optimization plan and to establish
priorities for all proposed initiatives, to track progress
through implementation and to measure what matters
most — results.
“ A company with 25,000 users and seven directories can expect to pay US$364,700 a year to keep all directories up-to-date. It would cost the same company about US$52,100 to maintain a single metadirectory.” 3
— The Burton Group
Each of these Balanced Scorecard Categories is com-
posed of more specific value propositions which may help
you determine your own optimization strategies. Perhaps
your organizations can benefit from one of the following:
• A scalable, adaptable infrastructure supportive of new busi-
ness, e-business, processes and applications — from supply
chain management to customer relationship management
• More effective data management, including improved global
access to corporate data, with an emphasis on sharing all
forms of information across and beyond the enterprise
• An integrated and consolidated infrastructure designed
for optimized use of IT assets and seamless enablement
of new technologies, while maintaining service levels
and operations
• Global consistency of IT management through redefined
enhanced management systems and services, increasing
overall efficiencies and improving the consistency of
service delivery
• A basic and companywide reduction of total IT spending
incorporating critical examinations of the IT expense-to-
revenue ratio, as well as the overall IT capital and opera-
tions budget
• Streamlined technical architectures and vendor networks
through the reduction or standardization of vendor interfaces
and the accompanying architectures
• Consistent service delivery achieved by improved global
systems performance, inclusive of server configurations and
locations, network performance, systems management,
capacity planning application performance and design, as
well as skills and organizational design.
7
Value proposition:• Enable an adaptable IT infrastructure• Leverage data more effectively
Enable new business
Value proposition:• Optimize use of IT assets• Establish global consistency of IT management
Improve internal efficiencies
Value proposition:• Reduce total IT spending• Streamline technical architecture/vendors
Reduce cost
Value proposition:• Provide consistent service delivery
Promote customer satisfaction
Commodity
Utility
Partner
Enabler
Cost Efficiency CapabilityCustomersatisfaction
60%
40%
20%
10%
40%
50%
30%
20%
10%
30%
35%
20%
35%
Balanced Scorecard category (Example)
IT v
alu
e p
rofi
le
The Balanced Scorecard synchronizes the IT optimization value proposition with the client’s business strategy . . .
. . .and drives business-aligned priorities for IT funding allocations
8
Thought Leadership
Characteristics of IT optimization
An early step toward IT optimization is one of simple
but crucial evaluation: In what ways could your company
streamline and advance its position? In what areas—
technology infrastructure, organization or process—
could your business effect such transformation? Only by
evaluating and understanding what your business wants
to accomplish as an enterprise can you effectively work
with IT to achieve your goals.
An IT infrastructure consists of both management and
technical components. These components can be further
segmented into seven discrete, interrelated “domains”
which collectively define the potential areas of analysis
and applied expertise. Because of their general appli-
cability, these domains permit quick linkage to methods,
tools and practitioners who can integrate them into
a cohesive approach. Management domains, including
strategic alignment, process, organization, and finance
and environment are those which apply to the structure
and decision-making processes of the IT organization.
Technical domains, including infrastructure, network and
applications and data, are those which apply to the physi-
cal and logical elements of the infrastructure itself.
The Management Domains:
• Strategic alignment: establish an understanding of your
current and prospective business drivers; documents the
alignment between business and IT strategies; create the
basis for optimization design and investment priorities;
provide the foundation for the Balanced Scorecard
• Process: analyze the extent to which the management
system is formally defined and measured based on the
IT Process Model; assess the effectiveness of the man-
agement system; examine process ownership, efficiency,
effectiveness and consistency; help determine your
preparedness for implementation
• Organization: establish an understanding of the current orga-
nization structure; provide a foundation for change man-
agement; examine roles, responsibilities, skills and change
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References1 Berry, John. “Do Your IT Projects Mean Business?” InternetWeek Online,
March 20, 2000.
2 Leibs, Scott. “Think Before You Link,” citing META Group, Inc. IndustryWeek, April 17, 2000.
3 Violino, Bob. “The Internet and E-Business are Reshaping IT Purchasing,” citing Dennis Benner, VP and CIO, Fluor Corp. InformationWeek, March 6, 2000.
4 Burton Group Study. “The Enterprise Directory Value Proposition,” May 22, 1998.
5 Kirkpatrick, David. “IBM: From Big Blue Dinosaur to E-Business Animal,” citing Tom Bittman from GartnerGroup. Fortune Magazine, April 26,1999.