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Research » Strategy » Transformation » Governance
How to improve your IT organisation to become more innovative?
Dr. Gerard M. WijersManaging Director Governance & Sourcing Management practice EquaTerra
18 May 2010
Copyright © EquaTerra 2010. All rights are reserved.
Cost control versus Innovation?
» IT organisations have reduced their staff, made their IT processes more lean and mean, outsourced IT commodities, and consolidated their application portfolio.
» This has led to reduced power of IT to contribute to business innovation and strategic thinking.
» What is crucial to be innovative and to add value to the business?
2
Copyright © EquaTerra 2010. All rights are reserved.
Agenda
1. Objectives
2. Processes to emphasize
3. Roles to get implemented
4. Demand management to align with the business
5. Metrics to size your organisation
6. Lessons learnt
3
Copyright © EquaTerra 2010. All rights are reserved.
1. Know and share your objectives
4
1. Focus on more efficient demand supply chains (leading to FTE reductions)2. Focus on Supply side
1. Focus on HR processes, and organisational development2. Focus on quality and compliancy processes
1. Focus on improvement of project and change management processes2. Focus on improvement of operational delivery processes 3. Focus on contract management and sourcing strategy
1. Focus on improvement of service management processes2. Focus on improvement of incident and problem management processes
1. Focus on service - and project portfolio processes2. Focus on the demand side
1. Focus on improved strategic planning2. Focus on improvement of architecture processes3. Focus on improvement of service- and project portfolio management
Focus areas
1. Focus on strategic planning2. Focus on architecture processes3. Focus on improvement of project management processes
Low complexity
Short time to market
High efficiency
High quality
High customer satisfaction
Optimised added value of IT
Goal
High innovation capability
Copyright © EquaTerra 2010. All rights are reserved.
Added value and innovation require
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1. Focus on service - and project portfolio processes2. Focus on the demand side
1. Focus on strategic planning2. Focus on architecture processes3. Focus on improvement of project management processes
Optimised added value of IT
High innovation capability
Copyright © EquaTerra 2010. All rights are reserved. 6
Management control
Operationalcontrol
Change&innovation
Businessgovernance
Strategicplanning
BusinessDemand
managementSupply
managementIT Delivery
Annual planning cycle
Portfolio management & architecture
Strategy & policies
Operations & operational control
Support
Requirements, project & change management
Release, test & transition management
Service level management
Contracts & service agreements
Project portfolio management
2. EquaTerra’s Best Practice Process model
Organisation development & human resource management
Security, compliancy & quality management
Finance
Copyright © EquaTerra 2010. All rights are reserved.
Implications are
» An explicit choice how to organise demand management
» The introduction of portfolio management
» More capabilities to create roadmaps
» The application of strategic and yearly planning cycles
» More capabilities to formulate ideas and requirements
» The rebirth of the CIO Office
» A close working relationship with the business
» Activating the role of the business
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Ce
ntr
al
De
ce
ntr
al
IT DeliveryBusinessDemand
managementSupply
management
Central supply management organisation
Central demand management organisation
Director
Executives
Staff directors
Business managementLocal
Suppliers
Central internal or external suppliers
Central management Central demand mgt Central supply mgt Shared delivery
Decentral management Decentral demand mgt Decentral supply mgt Specific delivery
CIO Office
Decentral demand - supply management unit
Copyright © EquaTerra 2010. All rights are reserved.
Implications are the following
» We need strong demand managers
» Demand management organisations focus on strategic and tactical role and on change
» Operational activities as much as possible in the business or with providers
» A proper sizing of the necessary roles is fundamental
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Demandmanagement
IT DeliveryBusinessSupply
management
Str
ateg
isch
Tac
tisc
hO
per
atio
nee
l
Broad view retained organisation
12 - 24%
Narrow view retainedorganisation
4 - 8%
Copyright © EquaTerra 2010. All rights are reserved. 9
4. Do we know the characteristics of the real demand?
Demand management
Strategic
Tactical
Operational
10-15%
35-45%
5-10%
20-30%
5-10%
5-10%
50 - 70% 30 - 50%
10 - 20%
55 - 75%
15 - 25%
Supply management
100%
Conservative investment
strategy
Average investment
stratgey
Agressive investment
strategy
Strategic planning
Management control
Projects and maintenance
Operational execution
5%5%
6%
5%
7%
5%
25%
65%
33%
56% 43%
45%
€
Strategic importance of IT
Enabling the business Supporting the business
Taking the lead
Business managers in the driver seat Strong expert role of IT management
Commoditized services
IT services are market commodityIT services are unique and not standard in the market
Sourcing attitude
Do-it-yourself Use the market
Demandmanagement
IT DeliveryBusinessSupply
management
Str
ateg
isch
Tac
tisc
hO
per
atio
nee
lBroad view retained organisation
12 - 24%
Narrow view retainedorganisation
4 - 8%
Copyright © EquaTerra 2010. All rights are reserved.
5. Metrics
10
€ 25 MiO
Total IT spend
€ 75 MiO
24%
12%
Spend on Demand mgt + Supply mgt as a % of total IT spend
1
2
34
The contingency factor scale:In small organisations the tactical coordination of IT is relatively
expensive (point 1). The optimum lies around 25 MiO; with spend above 25 MiO complexities increase, as do the demand supply mgt costs (point 2) Above 75 MiO scale advantages lead to decrease in spend on demand and supply management towards the optimum (point 3)
Other contingency factors for determining the optimum scale:1. The investment strategy. As organisations spend more aggressively on innovation, the optimum scale will rise because governance of projects
is relatively expensive2. The application architecture. Organisations with a lot of custom made applications have to calculate for larger demand-supply spend and a
larger optimum scale than organisations with more standard packages3. The sourcing approach (single sourcing / multi sourcing, off shoring/ near shoring, insourcing / outsourcing) influences the optimal size in
several ways4. The organisational set up of demand and supply mgt influences the optimal size (central, federative, decentral)
In the broad view of the retained organisation, between 12 -24% of total IT spend is spend on demand – supply management
Demand management
Strategic
Tactical
Operational
10-15%
35-45%
5-10%
20-30%
5-10%
5-10%
50 - 70% 30 - 50%
10 - 20%
55 - 75%
15 - 25%
Supply management
100%
Copyright © EquaTerra 2010. All rights are reserved.
6. Some lessons learnt
» Demand & Supply deserve balanced focus
» Create awareness & responsibility of demand in the business
» Align capabilities in demand – supply chain
» Hire the appropriate level of competences
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Copyright © EquaTerra 2010. All rights are reserved.
Q&A
1. Internal IT organisations should get themselves focussed on the demand and the related strategic and tactical concerns.
2. Innovation is to be led by the business.
12
Copyright © EquaTerra 2010. All rights are reserved. 13
About EquaTerraEquaTerra sourcing advisors help clients achieve sustainable value in their IT and business processes. Our advisors average more than 20 years of industry experience and have supported over 2000 transformation and outsourcing projects across more than 60 countries.
Supporting clients throughout the Americas, Europe, and Asia Pacific, we have deep functional knowledge in Finance and Accounting, HR, IT, Procurement and other critical business processes. EquaTerra helps clients achieve significant cost savings and process improvement with internal transformation, shared services and outsourcing solutions.
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