IBM Global Services The IT Value Model: Winning the business “battle” with the right IT “nails” The Horseshoe Nail “ For the want of a nail the shoe was lost, For the want of a shoe the horse was lost, For the want of a horse the rider was lost, For the want of a rider the battle was lost, For the want of a battle the kingdom was lost — And all for the want of a horseshoe nail.” Introduction The above, paraphrasing the aphorism from Ben Franklin, illustrates the implicit connection between a battle and its “infrastructure.” But like the horseshoe nail on the battlefield, it can be difficult to align the value of a single information technology (IT) investment with the business at large. After all, how do you determine which “nail” is attached to the horseshoe that could have helped win the battle? To fully exploit each and every element of the IT infrastructure (the horseshoe nails), it is critical to map those components to mission-critical business initiatives (the battle-winning horses) and, in turn, long-term business success (the war). More than ever, a better understanding of the value delivered by any one IT “nail” is critical to informing and guiding IT investments and initiatives. The IT Value Model This is a new way to view and manage the IT infrastruc- Now, with the IBM IT Value Model, it is possible to ture. Until recently, IT investment decisions have been establish business/IT linkage and accumulate accurate a “tops down” management issue. While organizations and specific data about the intrinsic value IT brings viewed IT as a necessary resource in helping to achieve to specific business activities and components as and sustain competitive advantage in a global and well as to an organization, or “kingdom,” overall. This dynamic marketplace, it was also viewed as an obvious type of value-informed decision making can help target for cost efficiency improvements — through server executives better contain costs, target investments, consolidation or asset management, for example. accelerate and optimize ROI (without negatively affecting business results), and drive profitability. ������������������ ������������������ ������������������� ��������� ���������� ��������������������� ��������������� ����������������� ������������������ 2 ����������� Mission critical: The state of the IT infrastructure Today’s executives are accustomed to using information Now, with costs more under control and the economic technology to enhance capabilities and support specific outlook brightening, executives are placing more business initiatives — from supply chain management to emphasis on the strategic business value IT can provide. e-commerce and customer relationship management. A recent survey of the world’s top corporate CEOs Consequently, over time, organizations have increased reveals that for a large majority, revenue growth is now their reliance on servers, networks, applications, e-mail their top priority.1 This research, based on interviews with solutions, data centers, and storage systems. Similarly, hundreds of executives from across geographies and the people and processes associated with a company’s industries, offers valuable insight into corporate trends, IT organization have become mission-critical resources. including the emphasis on top-line improvements. Global economic pressures and uncertainty have placed While many companies have made improvements in additional stress on the IT infrastructure. As CIOs and cost control, there remains a gap when it comes to con- CTOs struggle to do more with less, many organizations necting specific IT investments to strategic business have launched optimization initiatives aimed at evaluating, gains or benefits. The answer may lie in implementing a rationalizing and streamlining their IT environment. These holistic, value-based approach to optimize the entire efforts have focused on making the infrastructure more IT environment. By doing this, companies can continue manageable, adaptive, productive and cost-effective. to reduce costs and complexities while establishing a direct relationship between IT services or elements (the horseshoe nails) and business success or ‘‘wins.” “ We are over the crisis and now we’re in a new cycle of growing the business.” — Media executive in the UK2 3 The IT Value Model ������������������������������������������������������������������������������ ���� ������� �������������������������������� ������������������������������������ ������������������������������������ ����������������������������� ������� �������������������������������������� ������������������������������� �������������������������������������� ������������ ������� ���������������������������������������� ��������������������������������������� ��������� ������������������������������������� �������������������������������� ���� ����������������������� 4 Serving the kingdom: Optimizing IT for value Partner — The business driver is market share; the cor- Value-driven optimization initiatives can contribute porate view of IT is that it is strategically aligned with the significantly to operational excellence and set the stage business; IT investment decisions are made according for evolving to advanced capabilities such as IT agility to enhanced portfolio management. and on demand — characterized by focused, variable, resilient and responsive systems and processes. Enabler — The business driver is industry leadership; the corporate view of IT is as an enabler of corporate vision; While enterprises (and sometimes even individual IT investment decisions are based on future options. business units) can differ in their specific IT requirements and optimization strategies, most could Business and IT executives should agree on the best characterize their strategy for using IT according strategy for using technology in order to achieve to the following “provider profiles”: business-IT alignment and provide context for IT investment priorities. Once this agreement is achieved, the Commodity — The business driver is expense control; infrastructure can be analyzed for optimization potential the corporate view of IT is as a provider of technical in terms of management and technical “domains,” capabilities; IT investment decisions are project-based. pinpointing areas for improvement. These improvement areas can be narrowly or broadly defined; most Utility — Business drivers are business unit measure- optimization opportunities span multiple domains. ments; the corporate view of IT is in terms of organizational efficiencies; IT investment decisions are based on portfolio management of applications within a process. 5 The IT Value Model Domains fall into the following categories: ������������������������������������������������������� Technical domains Computing systems and storage — The server, desktop ������������ �������� and storage hardware, along with operating software and middleware that provides the platform for busi���������� ������������ ������� ness applications. Applications and data — The portfolio of business applications and data used to manage operations and achieve com- ����������� ������� ���������� ��������� petitive advantage. Network — Voice and data networks, including wide area, local area, wireless and other technology intercon- ������������ ������� nection capabilities. Management domains ����������� ����������� Strategic alignment — Business and IT alignment, complemented by domain alignment. Process — The systems, processes and governance structures used to manage IT. Finance and environment — The financial structure of IT as well as the larger legal, geopolitical and environmental context. Organization — The staff, structure and skills of the IT organization. For several years, the IBM IT Optimization Solutions portfolio has offered a proven, holistic approach for assessing these domains and tailoring a solution to a company’s requirements through the various stages of solution framing and design, transition planning and governance, and solution delivery. 6 The IT Value Model: Identifying and aligning the IT “nails” with the objectives and benefits of the business “battles” IBM can help companies derive even greater value A value primer from their IT infrastructure by incorporating the insights Business value chain —The components, processes gained through the use of the IT Value Model (IVM) and services that collectively deliver value to the into IT Optimization Solutions. Implicit in the IT Value firm’s customers. Model is the recognition that just as businesses deliver value to their customers by way of business products IT value chain —The IT components, processes and and services, IT delivers value through IT products and services that collectively deliver value to the firm’s services. The challenge lies in articulating the specific business components and services and, potentially, role of the IT processes, technologies and organization to the firm’s external customers. in business terms, and establishing the connection between the IT capabilities or “services” and the related IT services —The capabilities provided by a company’s business activities and components. Toward these IT processes, technologies, applications and organiza- ends, IVM is designed to assist organizations in mapping tion, articulated in business terms and linked to specific the IT “nails” to the relevant business “battles” by help- business benefits. ing enterprises: • Connect IT services to their specific contributions to business value. • Assess the potential business impact of infrastructure investments. • Leverage IT to enable revenue growth and increase competitiveness. • Discern which IT elements support specific business results. Achieving a data-driven roadmap to value: The IVM framework In the IT Value Model, IBM defines IT as a “fabric” of processes, technologies and organization that supplies or supports IT services. As a part of any value-based optimization initiative, IBM consultants assess the maturity of an enterprise’s IT “fabric” in the context of its strategic intent and status (the provider profile) and its structure (business process integration). Enterprises can, in turn, articulate the current state — and value — of their IT infrastructure, and compare that status to desired state data. 7 The IT Value Model This is a multidimensional task, best illustrated below by Moreover, the IBM IT Value Model enables organiza- the IT Value Model cube — a visual representation of the tions to directly link IT and business value by connecting firm’s strategy for the use of IT on one axis; the level of related business and IT key performance indicators business process integration on another; and the maturity (KPIs). KPIs offer a tangible mathematical link between of the IT “fabric” on the third. This analysis helps enter- IT services and business processes by using financial, prises define and work toward tomorrow’s best practices, functional, performance and availability measurements, while serving the needs of the “kingdom” today. such as the cost per transaction or Web site transaction volumes. KPIs, then, are the mechanism with which we can quantify the business-IT linkages that are essential to the IT Value Model. In short, these KPI connections enable businesses to quantitatively assess the impact of IT investments on the business. ��������������������������������������������������������������������������������������������������� ����������� ��������������� ��������������� ������������������ � ����������� �������������� ����������� ������������ ���������� � ����������� ��������������� ������������ �������� �������������� ������������ ������������� ��������������� � � � ������������ ������������ � ��������� 8 ������������ �������������� �������� ������������������� ����������������� The IT Value Model provides a framework for fabric Forward-looking organizations can leverage the metrics and KPIs to facilitate the IT maturity analysis and IT Value Model to: help identify and evaluate potential value-add opportu- • Target particular business or IT pain points nities. Furthermore, IBM applies proven, leading-edge • Create a model of the current business and analytics to address the often complex and interrelated IT environment characteristics of IT maturity, integration and strategy. • Identify appropriate KPIs This permits companies to target their value enhancement • Assess the current IT fabric efforts more appropriately, resulting in a roadmap to an • Map the fabric status to KPIs improved future state. • Compare the current environment to the desired ideal state • Evaluate alternative scenarios against the model to pinpoint improvement potential • Design a roadmap for value-driven optimization • Evaluate the current services catalog ������������������� �������������������������������������� ������������������������������������������ ��������������������������� ���������� ������������� �� �������� �������� �� �� �������� �� �� � ���������� �� �� �� �� �� �� �� �� �� �� ���� � ����������������������������������� ������������������������������������ �������������������������� �� �� �� �� �� �� �� �� �� ����� �� �� �� �� �� �������� �� �� �� ����������������������������� ������������������� ������������������������� ������������� �������� �� �� �� �� �� �� �� �� 9 ���������������������������� ������������������ The IT Value Model In Maslow’s hierarchy of needs, basic needs — survival and safety — must be satisfied if higher-order needs such as self-actualization are to be met. A fully optimized IT infrastructure requires the same type of methodical, hierarchical building process. Basic operational excellence must be established before next-generation levels of responsiveness, integration and flexibility can be achieved. The IT infrastructure according to Maslow In a more general sense, an IT infrastructure reflects a “Maslow’s hierarchy” of attributes. Said differently, higher order capabilities, such as agility and on demand, require that fundamental or survival needs, such as operational excellence, be satisfied. A fully “actualized” IT infrastructure will demonstrate a full range of attributes, building on the effective execution of those attributes at lower levels to provide the essential platform for delivering more advanced capabilities. At the base — or “survival”— level of this hierarchy are the fundamental characteristics of efficiency (and effectiveness): a focused commitment to differentiating competencies and tightly integrated strategic partners providing non-differentiating activities; operations �������������������������������� ��������� ���������� ��������� �������� ������������������ ������������������ ��������������������������������������������������������������������������������������������������������� ���������������������� 10 Conclusion at the lowest possible costs for the given IT strategy; The IT Value Model can enable companies in every effective use of automation to reduce complexities and sector to define and work toward an ideal IT state — management costs; and high levels of reliability to pre- identified in terms of business value through KPIs and pare for threats and help enable the business to continue according to the company’s strategy for IT. In this way, operating consistently. IVM can provide critical insight into a company’s current environment and help define a strategic roadmap for Building on this base of efficiency, the IT fabric is now positive change. More specifically, this approach can be capable of supporting the needs of an agile business used to identify potential areas for improvement in the by delivering commensurate IT agility through the IT fabric such that IT services deliver more value to the implementation of open standards, unconstrained by business — and the bottom line. vendor-proprietary architectures. The agile business is able to share resources in virtual pools, regardless of IBM Global Services offers the IT Value Model through location or application, and can be more responsive by our IT Optimization offering — leading-edge solutions sensing and responding to rapidly changing requirements. driven by world-class skills, top technologies and proven expertise. Our optimization consultants are skilled in Finally, at the pinnacle of “actualization,” the fully on IVM and can help you identify and leverage your most demand fabric adds to the efficient and agile founda- valuable IT “nails” for winning the business “battle.” tion by connecting disparate data, applications and processes across and beyond the enterprise into an For more information integrated whole. It can also adapt variable cost struc- To learn more about the IT Value Model and IBM tures and business processes to reduce risk and Optimization Solutions, contact your local IBM sales increase levels of business productivity, cost control, representative, or visit: efficiency and predictability. ibm.com/services 11 About the authors © Copyright IBM Corporation 2004 IBM Global Services Route 100 Somers, NY 10589 U.S.A. L. Mark Ernest, Distinguished Engineer, IBM Global Services [email protected] Produced in the United States of America 12-04 All Rights Reserved Albert L. Swett, Principal, IBM Global Services [email protected] IBM, the IBM logo and the On Demand Business logo are trademarks or registered trademarks of International Business Machines Corporation in the United States, other countries, or both. William G. Miller, Global Offering Executive, IBM Global Services [email protected] Other company, product and service names may be trademarks or service marks of others. Dennis P. Ondik, Senior Consultant, IBM Global Services References in the publication to IBM products or services do not imply that IBM intends to make them available in all countries in which IBM operates. [email protected] 1 “Your Turn: Global CEO Study,” IBM Business Consulting Services, 2004. 2 Ibid. G510-3887-00
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