BUSINESS ALIGNED IT MOVING TO INNOVATION

Transcription

1 An Outsourcing Center White Paper BUSINESS ALIGNED IT MOVING TO INNOVATION Measuring True Business Value By Samuel Crow, Business Writer W W W. O U T S O U R C I N G - C E N T E R. C O M OutsourcingCenter All Rights Reserved.

2 It s no secret that business leaders need consistent, accurate and applicable value metrics to make informed strategic and operational decisions. For decades, most measures of business results have been rooted in the accounting world from net profit to earnings per share to return on capital. Indeed, a recent Gartner survey found that more than 70 percent of the key performance indicators (KPI) published by large multinational companies in their annual reports were conventional financial metrics. It s easy to understand the dominance of accounting-based metrics in measuring and reporting business value. The world s financial markets continue to place a high degree of emphasis on the achievement of quarterly financial targets, most notably revenue, net profit and earnings per share. And until now, a company s numbers have been the only common language for evaluating business performance, particularly for corporations with diversified operations. With a lack of standard non-financial metrics and few best practices for relating them to business impact, companies naturally fall back on the old stand-by accounting measures. While financial metrics will remain a fundamental measure of value, they re lagging indicators; they only give executives a glimpse of the outcome of business activities. To survive and thrive in the global economy today, business leaders need a better understanding of the real drivers of their business non-financial metrics that are the leading indicators of business outcomes. W W W. O U T S O U R C I N G - C E N T E R. C O M OutsourcingCenter All Rights Reserved. 1

3 IT Outsourcing: The Next Chapter Outsourcing information technology work to India intensified in the late 1990s. This first chapter of offshore outsourcing was focused on augmenting technical skills to meet the demands associated with the looming Y2K issue. The next generation of offshore outsourcing deals saw customers embracing broader delivery models for application development and maintenance projects as well as IT infrastructure support. The emphasis remained on access to technically-skilled talent, but very few providers offered service level agreements based on actual business outcomes. In recent years, some forward-thinking IT service providers recognized the need to move beyond conventional IT-centric measures of success to create real business value for its customers. Predicting that clients would increasingly seek business benefits from their IT vendor relationships, rather than effortsbased procurement, these providers embraced a new customer engagement model emphasizing partnership with the CIO to elevate IT s role as an enabler of business change. A business-aligned IT framework maps business processes to the IT applications and infrastructure landscape, creating a new outsourcing model that focuses not just on cost reduction or staff augmentation, but business process improvement. With the business aligned framework, the initial transition and knowledge transfer period of an outsourcing engagement is dedicated to capturing information across three layers to enable business change: mapping complex business processes, connecting those processes to the IT landscape, and creating a visual dashboard of the entire enterprise ecosystem and its interdependencies. The framework enables application support personnel, for example, to link a software issue to potential business process impacts. Provider and customer can then monitor those business processes to identify where the inefficiencies might occur, such as shrinkage or waste common in the consumer packaged goods industry. They can then collaborate on solutions to improve those business processes. W W W. O U T S O U R C I N G - C E N T E R. C O M OutsourcingCenter All Rights Reserved. 2

4 Meaningful SLAs for the Modern Enterprise There is no shortage of IT organizations struggling to rationalize the metrics they re being fed by outsourcing providers with the reality of their day-to-day business experience. As the old lament goes, If the dashboards show that all of IT s operational service level agreements (SLAs) are green, then why do my business users see red? IT appears to be performing on paper, yet end users continue to be frustrated by significant obstacles to performing their duties effectively and efficiently. IT s real measures of success are never clearly articulated to the business. IT operations are reactive order takers rather than collaborative partners. The ultimate end state IT aligning with the business to analyze massive amounts of data and turn it into the best information to make strategic business decisions becomes forever waylaid due to myriad operational issues. Worse yet, no one in IT operations can accurately measure the impact of IT s failures on strategic business outcomes. Five Signs of Non Business Aligned IT Organization: 1. SLAs are met, yet business users are unhappy. 2. There is no connection between business processes and IT performance. 3. IT metrics of success are never articulated to the business. 4. IT runs in constant reactive mode. 5. There is no business case review of completed IT projects to evaluate their performance. IT organizations that employ a business-aligned framework move beyond traditional IT outsourcing SLAs to focusing on measuring IT results that matter those that directly influence business outcomes in order to foster a closer connection between IT and the business. W W W. O U T S O U R C I N G - C E N T E R. C O M OutsourcingCenter All Rights Reserved. 3

5 IT as a Business Influencer In the modern enterprise, business strategy and IT service delivery cannot live in isolation. Corporate leaders across industries today require IT initiatives to contribute to overall business objectives. With many businesses focused on the dual goals of growth and cost reduction, IT organizations must shift their focus from simply keeping the lights on to generating innovation. Four Ways Business Aligned IT Can Make Business Change: 1. Move beyond technology focused SLAs to demonstrate IT s value to the business 2. Make proactive IT decisions that have material business impact 3. Improve IT efficiency 4. Drive continuous improvement in business processes To contribute in a meaningful way to business goals, IT must become a business influencer rather than a reactive order taker. One of the most valuable assets IT can bring to the table is the data analysis required to uncover what actually impacts business service levels. Picture a dashboard that provides an accurate view of all business processes and maps them to the IT applications and infrastructure framework of the enterprise that could alert IT to opportunities for business process cycle time reduction that could have a measurable impact on business outcomes. In that kind of businessaligned technology environment, IT can truly become a change agent. W W W. O U T S O U R C I N G - C E N T E R. C O M OutsourcingCenter All Rights Reserved. 4

6 The Business-Aligned IT Framework One IT services provider that deploys a business-aligned IT framework to discover, map, evaluate and rationalize the customer s business and IT landscape in order to achieve a real partnership with the business is HCL. HCL works with the customer to connect technology with business processes and redefine service levels by reconfiguring underlying applications and infrastructure. The three goals of the business-aligned IT framework are: 1. To positively impact business outcomes in real time through business process KPI visibility and process cycle time reduction 2. To drive insights into business process interruptions through alerts 3. To proactively resolve those disruptions A visual management framework also creates enterprise transparency around those key performance indicators. The Business-Aligned IT Framework HCL s employs its Enterprise Discovery Framework and PRIZM portfolio management software to map business processes to IT applications and infrastructure. The portfolio management tool provides an analysis of IT health and uncovers dependencies and commonalities in the IT and business process portfolios. Using these tools in concert, HCL can then provide recommendations for redefining IT s portfolio in order to reduce business process cycle time. W W W. O U T S O U R C I N G - C E N T E R. C O M OutsourcingCenter All Rights Reserved. 5

7 A business-aligned IT analysis is more than a generic inventory assessment to evaluate the function, quality, business criticality, scalability and modularity of the IT portfolio. It illuminates all the IT factors that impact business outcomes from applications and infrastructure to integration and usage. HCL then uses ProcessWatch, a services-based process and business activity monitoring solution, to create an end-to-end process-centric view of the business. This tool enables monitoring of all transactions across the supply chain including financials, freight, logistics and trading and benchmarking their performance against industry standards. The system provides IT and the business with insights into the working details of applications, infrastructure, data and processes, and enables stakeholders to identify inefficiencies and inaccuracies in the environment. The business-aligned IT framework outlines the IT factors that actually drive business outcomes and provides recommendations for improving them. As a result, customers are able to implement leaner but more robust IT operations optimized in the areas of incident management, change management, performance management, capacity management and availability management. Five Steps to Business Aligned IT 1. Streamline IT operations via meaningful and effective SLAs, root cause analysis, and problem management 2. Identify enterprise key performance indicators (KPIs) 3. Create a visual map of enterprise KPIs to business processes 4. Uncover and address the key IT factors influencing those processes 5. Create an end to end performance dashboard Business-aligned IT is not a traditional IT project designed to deliver results in a few months. It is a long-term investment in business value. It s the beginning of journey from the traditional managed services model of IT to a technology organization co-managed for technology and business results. W W W. O U T S O U R C I N G - C E N T E R. C O M OutsourcingCenter All Rights Reserved. 6

8 The Evolution from Traditional Managed Services to Co-Managed IT Business-Aligned Transformation at Dr. Pepper Snapple Group W W W. O U T S O U R C I N G - C E N T E R. C O M OutsourcingCenter All Rights Reserved. 7

9 Virginia Guthrie served as CIO and senior vice president of information technology from 2006 to 2011, a critical time in the history of Dr. Pepper Snapple Group (DPS), a $ 5.5 billion bottler and distributor of soft drinks based In Plano, Texas. Before retiring, she oversaw the technology and legal separation from Cadbury Schweppes after the company was spun off in 2008, and she put in place a consolidated set of IT systems and processes to drive DPS operations and contribute to its strategic goals of growth, cost cutting and customer delight. Guthrie s mantra was simple: align IT with those business goals in order to both help the business uncover how it could achieve those enterprise goals and illuminate IT s role in delivering those business outcomes. Guthrie s goal was to create a single corporate IT organization, consolidate the disparate IT systems that had emerged over the years, and help the business achieve its strategic goals by providing a single version of the truth across all the businesses and functions within DPS. A veteran CIO, Guthrie understood that she needed to be seen as a business leader rather than just the head of IT in order to accomplish the IT transformation necessary for DPS to succeed. IT s value would not lie in simply running help desks or operating data centers but in partnering with the business. Guthrie decided to partner with IT service provider HCL to achieve that. It is important that I have a very strong business role in the organization, says Guthrie. Outsourcing much of IT development work affords me the time to focus on business issues. Although it was clear that outsourcing the day-to-day operations of IT could free up IT and its leadership to focus on business alignment, service quality and delivery was still priority number one. Guthrie implemented key metrics, systematic processes and tracking and reporting tools to compel increased accountability from vendors. W W W. O U T S O U R C I N G - C E N T E R. C O M OutsourcingCenter All Rights Reserved. 8

10 DPS developed a plan to consolidate its infrastructure and modernize and rationalize its enterprise applications using HCL s PRIZM portfolio management tool. They developed an innovative three-layer approach to system rationalization: 1. Foundation Layer: The SAP ERP system and delivery to handheld devices to support optimized business processes. 2. Information Layer: A compendium of a new data warehouse, master data management tools, and business intelligence systems to turn critical business data into meaningful information for decision-making. 3. Growth and Efficiency Layer: Consolidating and optimizing enterprise applications to enable organizational growth Long term, DPS will use the portfolio management tool to map business disruptions to application attributes in order to make decisions about future system replacement or consolidation. Guthrie and her management team were able to work hand-in-hand with the business to uncover how both the business and IT could achieve key priorities of growing sales, cutting costs and improving customer satisfaction. One of DPS strategic business goals was the perfect order: increasing the number of orders completed both on time and in full. W W W. O U T S O U R C I N G - C E N T E R. C O M OutsourcingCenter All Rights Reserved. 9

11 Achieving the Perfect Order at Dr Pepper Snapple Group By investing in a business-aligned IT framework, the IT organization was able to identify the KPIs across several business functions that were most likely to better perfect order performance, including inventory accuracy, picking accuracy, available-to-promise optimization and delivery time optimization. That IT-enabled foundation for business process improvements and perfect order delivery are just the beginning of what the business-aligned IT framework can provide to DPS. Clearly, this is a journey, but we re getting closer, says Guthrie. We will achieve our goal of a single source of the truth across our entire business. It makes coming into work pretty exciting for an IT team. W W W. O U T S O U R C I N G - C E N T E R. C O M OutsourcingCenter All Rights Reserved. 10