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IT Process Organization
(Provided by Booz-Allen & Hamilton)
Technology Issues
DRI VER I /T CHALLENGE
I /T Staff Turnover Rates > 14%
Wages increasing at a rate of 4x average
Renewal Eff orts Major ERP implementations (SAP, Peoplesoft, Oracle)
Emerging Technologies Requires diff erent management model than maturetechnologies
Outsourcing Must determine where and how to use service providers
Demand Management What level of service, which development projects?
Costs Costs perceived to be too high with too little control
from the business
How should businesses be charged for these services?
Growth How can I /T support and enable corporate growth?
Organization
What organization model should I /T adopt (Centralized,Decentralized, Shared Service)?
How can duplicate services (“shadow” I /T shops) bemanaged?
Extended Enterprise What I /T services can enable supplier/customer processimprovements?
Business Imperatives are Putting Challenges on the I/T Capability
Business I mperatives I /T Implications
Scaleability
Mergers, acquisitions and entry into new markets require thecapacity to deploy increased levels and coverage of services quickly
Divestitures, J V’s and outsourced business processes drive loss ofscale and loss of cost eff ectiveness in existing services
I mplementing new technologies and accommodating business changecreate large peak demands f or services
Flexibility
Flexibility is essential to introduce new technologies andaccommodate business change
Freedom to select the technologies best suited f or businessobjectives is important (i.e., technology choice is not dictated byinternal skill base)
Responsiveness andManageability
Quick access to productive, external resources is needed torespond to business opportunities
Reliability Service levels must be reliable in an unpredictable, changingenvironment
Sustainability
Need skills that will eff ectively transfer technology into theorganization
Viable career paths are needed to eff ectively manage and leverageI / T f or business benefi ts
Cost- Eff ectiveness Variable costs must be kept variable
Must maintain our cost competitiveness while changing scale
Risk Minimization Need to make the right choice on technologies and partners
Need to manage the overall risk in our technology portfolio
Taking a Process View Has Helped Several Organizations Improve the Value Received from the I/T Capability
• Improving the value and return on I/T assets by focusing resources on critical market driving capabilities (e.g., “Advantaged Systems”)
• Positioning the I/T Organization to support growth
• Improving service management disciplines using process based organization concepts
• Capturing cost reduction opportunities of up to 40%
Capturing Information Technology Opportunities Requires the Implementation of Best Practices on a Global Basis
• Simplifying I/T Operational Processes
— Separate supply and demand, fixed and variable
— Eliminate low value added work and redundant support systems accumulated over years of growth, acquisitions, etc.
— Optimize I/T processes for low cost delivery…benchmark to best practices
— Develop processes to share expertise and internal best practices
• Restructuring I/T Delivery Model to Achieve Operational Effectiveness
— Centralize operations where strong economies exist
— Develop service level agreements to create accountability to the line
— Balance sourcing of I/T capabilities (insourcing vs outsourcing)
Capturing Information Technology Opportunities Requires the Implementation of Best Practices on a Global Basis (Cont.)
• Leveraging Information Systems Investment
— Enforce common technical architecture standards (hardware, software, network)
— Implement rigorous cost/benefit standards for new application software investments
— Optimize application software maintenance requirements
• Reducing Headcount Costs
— Strip out redundant support systems and staff accumulated over years of growth, acquisitions, etc.
— Staff to “base case” I/T delivery model and streamlined I/T processes
I/T Transformation is a Long-Term Program for Change
Identify/Validate/Prioritize
DetailedDesign
ImplementProcess
Scopingthe
OpportunityContinuous
Improvement
Segment/Roles/Responsibilities
TransitionPlanning
ImplementOrganization
StructureDecision Go
Iterate/Streamline/Structure
Accountability/Alignment Action
PolicyDecision
Go
BusinessProcess Redesign
Phase I Phase II Phase III
Corporation Staff Design Approach
Each Phase is Based on Facts and Analysis to Drive the Business Change
Lost Economies of Scale in Help Desks(FTE’s Versus Call Volume)
Client’sHelp Desks Were Too
Small and Did Not LeverageEconomies of Scale
Sufficiently
HelpDesk
(FTE’s)
Help Desk Call Volume(Calls Per Month)
Root Cause Analysis Highlights Common Themes That Erode Value
COMMON THEMES I MPACT EXAMPLES
Decentralized anddiversified corporatestructure
Limited sharing among divisionsand/or geographic areas
Duplicate groups and assets
Loss of economies of scale
Small and subscale Help Desks
Small and subscale Data Centers
Multiple applications supportingthe same process
I nformal cost/benefitprocesses
Selection often driven byhistorical not economicconsiderations
Excessive dependence onautomation through technologyto capture benefits
Excessive number of productdevelopment projects focused onautomating low- value transactions
I nsuffi cient support of cross-functional applications targeted tosupporting key decisions
I nsuffi cient costvisibility andaccountability over I /T
Excessive discretionaryactivities
Lack of visibility of I /T costslimits opportunities to makeeff ective cost/service tradeoff s
Multiple planning and technologygroups
Underutilized computers andnetwork, often viewed as “sunkcost” with no incremental cost
I nadequate level ofstandardization
Unclear definition of whocontrols assets – often leadingto lack of standards and tounderutilized assets
Limited definition andenforcement of standards
Multiple Networks and Desktopstandards increased support costsunnecessarily
Multiple organizations defining andenforcing standards often createda diff erent set of standards bydivision and/or geography
Once the Opportunities are Understood, Objectives are Set to Guide the Design:
• Achieve best in class cost savings
• Redirect cost efficiencies to fund new business opportunities
• Deploy a flexible organization that will support a growth strategy– Respond proactively to strategic changes -- e.g., new JVs, deregulations– Facilitate entry into new markets– Establish partnerships with service providers
• Respond promptly to business needs– Establish clear accountability over key services– Create global organization to facilitate cooperation– Establish priority over delivering services -- not technology
• Develop reliable solutions, more cheaply and more quickly– Consolidate Infrastructure -- on a global scale– Leverage learning and expertise on a global basis– Fund and create a global, standard infrastructure -- new applications will
“plug in” to the infrastructure– Develop global, common application solutions
Benchmark Studies on Growth Companies and Leading Edge Practices are Useful to Guide Design
• Growth company benchmarking concluded successful companies were leveraging scale and standards to control overhead costs and deploy quickly in new geographies
• Best practice process benchmarking revealed options to improve value– Demand and supply management– Cost restructuring– Leveraging the market– Knowledge sharing
• Our benchmarking confirmed a new approach to HR management is needed:– Demand for I/T resources will continue to outpace the supply– Traditional HR practices are challenged by rapidly changing business
and technology environments– Existing retention and reward practices are not always market
competitive and can hinder I/Ts ability to attract and retain key talent– Employee training and development practices often lack a strategic
focus on business, organization and people requirements
Fundamental Reengineering Starting With a Service Mission and Definition Allows the Organization to Redesign Itself
Based on Priorities
• Process Improvements
• Development
• Computer Operations
• Telecommunications Networking
• Problem Support
1
2
3
Identify KeyServices
ReengineerProcess
Deploy Process-Based Organization
Clients
EncouragesNew
Behaviors
Measure, Benchmark,and Manage
Service Levels
The Analysis Starts by Prioritizing the Key Services and Processes to Redesign
Key I/TServices
I.BusinessSystemsPlanning
II.Architecture& Standards
III.ApplicationDefinition &
Analysis
IV.Develop &Implement
Applications
V.Support/Maintain
Applications
VI.Engineering,
Design &Implementation
VII.Asset &Contract
Management
VIII.Operations
IX.End-UserSupport
ProcessImprovement
Development
ComputingOperations
Telecommuni-cations, Net-working
ProblemSupport
These marksrepresent the focus of the
reengineering effort
See Overhead Slide
The New Processes Address All Key Management Issues Identified in Phase I and Drive the
Organization Design
KEY I SSUES (PHASE I ) ORGANI ZATI ON DESI GN I MPLI CATI ON
Excessive demand
Lack of accountability of demand to business
Separate demand and supply groups and makethe business accountable for demandmanagement (through formalized I /Tembedded groups)
Poor management of standards
Multiple, duplicate I /T groups
I nsuffi cient scale (e.g., data centers, helpdesks)
Multiple, unclear accountability over I /Tservices
Create a single I \ T shared serviceorganization, design the organization to beprocess- based to deliver services eff ectively
Establish I /T Business Council to manage I /T
Establish a single architecture and standardsfunction
Merge data centers into one
Eliminate unnecessary management positionsand create an empowered work force
Need to perform business processreengineering Establish the I /T Process Specialist position
A Key Aspect of the Change is to SeparateDemand and Supply Management
I/T BusinessManagers
(Embedded)
I/T BusinessLeaders
(Embedded)
ManagementCouncil
GlobalInformation
Manager
GlobalSystems
RegionalI/T
Supply
GlobalNetwork
ComputingService
Service &Asset
Management
DEMANDDEMAND SUPPLYSUPPLY
I/T SHARED SERVICE ORGANIZATION
Focus = I/S Service Delivery
Separate Demand and Supply Organizations are Needed to Maximize Sharing While Maintaining
Strong Business Focus
• Enable I/T to meet two separate goals– Reduce I/T supply costs by increasing sharing and by
standardizing I/T services -- throughout the embedded organization
– Increase I/T value by prioritizing I/T solutions aligned to specific business strategies and filtering discretionary, low value-added requests -- through I/T shared services
• Create constructive tensions between both groups which enables the organization to make cost/service tradeoffs effectively
• Formalize a demand management process and organization which helps control and eliminate “shadow” costs
An Implementation Guide Defines the New Organization and How It Operates
TABLE OF CONTENTS
I. Implementation Guide Summary
II. Products and Services
III. Major Processes
IV. Major Process Changes
V. Organization
VI. Governance
VII. Demand Management
VIII. Organization Linkages
IX. Organization Capabilities
X. Roles and Responsibilities
XI. Accountabilities
XII. Budget
XIII. Service Agreements
XIV. Related Projects
IMPLEMENTATIONGUIDE
See Overhead Slide
Regular Benchmark Analysis Ensures That the Organization Remains Market Competitive and Focused on Supporting the Business Strategy
ReengineerFor Growth
Establish“Balanced”Scorecard
Deliver I/TServices,Measure
Performance
Benchmark Periodically- Cost- Service Levels- New Investments
NegotiateCost, Service
Levels
Client Requirements
Updated StretchTargets
InitialTargets
Market Input
• Identify “Market” competitive performance targets -- especially in a high-growth environment
• Review current performance against market cost and service levels
The Organization Must Implement Best Practices for Continuous Improvement
• Assign accountability for continuous improvements to those responsible for each service -- not to a dedicated quality management group
• Establish a close link between scorecard performance and performance based systems -- in process
• Define periodic market competitive “stretch” targets through benchmarks
• Continuously improve I/T cost and service structure– Ongoing Service -- Organize I/T buyers’ committees to review cost
and service performance and to negotiate future targets– Current Investments -- Appoint “process professionals” to maximize
the value of current applications/investments on an ongoing basis– Discretionary Investments -- Review value proposition for new
projects and perform “post-audit” reviews to capture benefits
• Negotiate cost and service levels with clients