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Running IT as a BusinessDave McNallyIT Executive AdvisorJuly 2012Copyright IDC. Reproduction is forbidden unless authorize...
Agenda•        Market Forces and a changing landscape•        The CIO Challenge•        The Service Management Organizatio...
Market Forces driving dissatisfaction anddisrupting the IT Operating ModelTechnology was “not a Core Competency”  • Explos...
IT has not “stood idly by”Efforts to Professionalize and Create ValueSuccess stories of the past ten years  • Architecture...
Impact of Self-Service ITThe IT Supply Chain has been Disintermediated  IT connects the “Supply” of technologies and servi...
CIOs want to move up the Value ChainIT resources heavily weighted in Operational Tasks                                    ...
IT Organization and CultureBarrier to Running IT Like a Business  IT Organizations structured to Engineer, Build and  Oper...
Standalone IT in 2012The Challenge of Value and RelevanceNet Results  • Legacy IT Costs may be > 60% of SG&A without a val...
The Services-based IT OrganizationRunning IT Like a Business Realigned Roles and Refocus Objectives     • Business Relatio...
Business Relationship ManagementDelivering Information Services not Technology     Dedicated Business Services Function   ...
Business Relationship ManagementTransition Practices to Run IT Like a Business    I.      Develop a Customer Relationship ...
IT Service DeliveryIncreasing Alternatives to Market-Based Services Integrated & Discrete Services available across Apps &...
IT Management ServicesShared Services or Fiduciary Activities  Common Support Capabilities  • IT Strategy  • Governance, R...
Situation AssessmentIs a Services-based Organization the right fit?  Some questions to consider before making the move:  •...
Thank you!                                        dmcnally@idc.com                                        @dave_mcnallyCop...
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Running IT as a business

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We describe the market forces driving changes in the role of IT and the CIO. These forces include: Cloud Service; Outsourcing; and business acquisition of technology-based services. We predict the emerging role of IT as a broker of Business Services as well as IT Services. A new Business Services function will source services both internally and externally, enabling a broad market perspective on industry best practices and a greater focus on value and innovation. This will enable CIOs to shift their attention from Technology Managers to Service Brokers and possibly Chief Innovation Officers.

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Running IT as a business

  1. 1. Running IT as a BusinessDave McNallyIT Executive AdvisorJuly 2012Copyright IDC. Reproduction is forbidden unless authorized. All rights reserved.
  2. 2. Agenda• Market Forces and a changing landscape• The CIO Challenge• The Service Management Organization • Business Service Management • IT Management Services • IT Service Management• Discussion about Aetna’s needs• Next Steps Copyright IDC. Reproduction is forbidden unless authorized. All rights reserved. Aug-12 2
  3. 3. Market Forces driving dissatisfaction anddisrupting the IT Operating ModelTechnology was “not a Core Competency” • Explosive growth in IT Costs, Staffs, and Complexity to put Infrastructure in place • First generation solution to IT’s uncheck growth - IT Outsourcing • Results: Proof of Concept and Cost reductions but only Moved the ProblemBroad adoption of External Business Services in the 2000s • Business Process Outsourcing • Cloud Services • Mobile Services • External Providers are deliver with unprecedented speed • Results: By comparison, legacy IT looks even more brokenTechnology is now a “Core Competency” and the mystery is gone • Technology and Business are becoming inseparable • Business Leaders are more Tech-Savvy Copyright IDC. Reproduction is forbidden unless authorized. All rights reserved. Aug-12 3
  4. 4. IT has not “stood idly by”Efforts to Professionalize and Create ValueSuccess stories of the past ten years • Architecture • Governance • Planning • Strategic Sourcing • Lean IT and Agile DevelopmentWork-in-Process • IT Supply Chain • IT Service Management • IT Cost ModelsFuture Efforts • Legacy Modernization • Identifying Innovations outside of the IT Service Catalog • Brokering Services Copyright IDC. Reproduction is forbidden unless authorized. All rights reserved. Aug-12 4
  5. 5. Impact of Self-Service ITThe IT Supply Chain has been Disintermediated IT connects the “Supply” of technologies and services with the “Demand” for business capabilities On the Supply-Side: • Services are replacing technologies and delivery options allow immediate access • Suppliers are selling to our (previously captive) customers • Virtualization and Cloud Services allow IT to focus less on the technology stack On the Demand-side • For most companies, basic transaction processing needs are met and higher order solutions are in demand • Technology is an element of many business solutions blurring the lines between an IT service and a business service • Perceptions of quality and value are higher when it’s their solution Consequences: • IT will compete with external service providers (both App Dev and Infrastructure) • You’ll need to define your products (service catalog) and cost model • Manage the Business Relationship as a Service Broker, sourcing from external as well as internal services. Copyright IDC. Reproduction is forbidden unless authorized. All rights reserved. Aug-12 5
  6. 6. CIOs want to move up the Value ChainIT resources heavily weighted in Operational Tasks Chief Customer Intimacy & Value Aspirational Role Innovation Officer Business Change Agent Value Added Roles Architecture Service IT Essential CIO Roles Broker Architecture Custodian of IT  Operational and Utility Roles Services Operational to Transformational Run Build Buy Business Service Architect Business Management Transformation Copyright IDC. Reproduction is forbidden unless authorized. All rights reserved. Aug-12
  7. 7. IT Organization and CultureBarrier to Running IT Like a Business IT Organizations structured to Engineer, Build and Operate systems are now an impediment to Services Residual effects of the First Generation IT Silos • Business and Vendor Relationships owned by Application Development • Customer Relationship often owned by Service Delivery • Solutions defined by Legacy Development and Maintenance skills / tools • Infrastructure silos block innovation CIO App. Dev. Infrastructure Ops. Bus. Function A, B, C Servers, Storage, Networks Copyright IDC. Reproduction is forbidden unless authorized. All rights reserved. Aug-12 7
  8. 8. Standalone IT in 2012The Challenge of Value and RelevanceNet Results • Legacy IT Costs may be > 60% of SG&A without a value contribution • Business leaders taking more ownership of IT • A point of view that “There must be a better way to run IT”Possible Outcomes • Death of the IT department? A possibility in SMBs with simple technology portfolios. • Diminished role of IT? In lieu of new roles, IT will simply get smaller over time. • A new role for IT? CIO Leadership may effectively rebrand IT as Information Services, reflecting the on-going abstraction of technology in providing services.Possible Solution: Running IT Like a Business • Separate the IT Service Delivery from the Essential and Value Add roles • Redefine Business Relationship Management and Service Delivery • Develop a Business Service Catalog and Benchmark SLAs and Costs • Let the market for IT Service prevail Copyright IDC. Reproduction is forbidden unless authorized. All rights reserved. Aug-12 8
  9. 9. The Services-based IT OrganizationRunning IT Like a Business Realigned Roles and Refocus Objectives • Business Relationship Management sources Information Services both internally and externally • Architecture manages an Extended Information Architecture • IT Management Services deliver common capabilities • Apps, Infrastructure & Operations are captive suppliers competing for market share CIO Relationship Arch. IT App. Dev. Infrastructure Ops. Mgt. Management Services “Business Service “IT Service Management - Strategy, Sourcing and Competing for Services” Innovation” Copyright IDC. Reproduction is forbidden unless authorized. All rights reserved. Aug-12 9
  10. 10. Business Relationship ManagementDelivering Information Services not Technology Dedicated Business Services Function • Business Relationship Management • Single point of contact for Customer Services Customer Services • Service Strategy • Service Design / Owner • Service Management • Demand Management • Business Architecture (Process and Data Management) • Program and Change Management Measures of Success • Pent-up demand • Utilization of external as well as internal services • Business Agility – support for start-ups • Business ownership of Information Services Copyright IDC. Reproduction is forbidden unless authorized. All rights reserved. Aug-12 10
  11. 11. Business Relationship ManagementTransition Practices to Run IT Like a Business I. Develop a Customer Relationship Management strategy II. Business Relationship Managers are embedded in the business and perform a range of functions: • Industry benchmarking – use of technology by function • Strategic advisory – opportunities to create value or innovate • Report on the State of Applications (Business Services) • Project Planning and Change Management III. Conduct an Application Portfolio Review • Identify business owners • Measureable value • Lifecycle status • Costs to maintain (TCO) IV. Project Portfolio Management • Consolidate demand • Analyze IT project cost and business investment by business function • Assess strategic and financial value Copyright IDC. Reproduction is forbidden unless authorized. All rights reserved. Aug-12 11
  12. 12. IT Service DeliveryIncreasing Alternatives to Market-Based Services Integrated & Discrete Services available across Apps & Infrastructure • IaaS: Data Center, Hosting, Data, Network, Archive • Infrastructure Management (e.g. Incident Mgt.) • Cloud Integration • All procured Internally or Externally IT Service Management as a Sourcing Mechanism • Infrastructure leaders are analyzing service alternatives within the technology stack IT Service Catalog (fully loaded with Costs) will drive clarity • You can pay someone to manage an E-Mail service and all underlying IT Services and still not know what to charge the Business for E-Mail Service. Or you can buy Gmail App. Storage Server Network Device Support E-Mail Service Copyright IDC. Reproduction is forbidden unless authorized. All rights reserved. Aug-12 12
  13. 13. IT Management ServicesShared Services or Fiduciary Activities Common Support Capabilities • IT Strategy • Governance, Risk and Compliance • Architecture o Solution Architecture o Integration Architecture o Information Architecture • IT Financial Management • Program Office • Strategic Sourcing • Vendor Management Office • IT Service Management o IT Service Strategy o IT Service Catalog o IT Service Desk Measures of Success • Benchmark services • Overhead costs structure Copyright IDC. Reproduction is forbidden unless authorized. All rights reserved. Aug-12 13
  14. 14. Situation AssessmentIs a Services-based Organization the right fit? Some questions to consider before making the move: • What are the business perceptions of IT that need to be addressed reorganizing? • What else is driving the interest in Running IT Like a Business? • Other than the CIO, who owns Business Relationship Management? • What impediments are there to realigning Roles, Responsibilities & KPIs? • Which resources would be impacted by the creation of a Business Services Management function? • Is there a Service Management Framework? • Does the Service Catalog include Business Services? • Are vendor contracts and Service Level Agreements aligned to Business priorities? Copyright IDC. Reproduction is forbidden unless authorized. All rights reserved. Aug-12 14
  15. 15. Thank you! dmcnally@idc.com @dave_mcnallyCopyright IDC. Reproduction is forbidden unless authorized. All rights reserved. Aug-12

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