Transcript No Slide Title

Applying IT Research
Friday 31 May 2002
Neil McCaffrey
research
consulting
measurement
community
news
Agenda
 What is (IT) consulting?
 Why use research?
 Examples
Sydney University | Applying IT Research| 31 May 2002 | Entire contents © 2002 Gartner, Inc. All rights reserved.
Page 2
What is (IT) Consulting?
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What is consulting?
Consulting Advice Should Be:
Based on fact
Universally understood
Relevant to the issue at hand
Perceptive
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The Consulting Process — It’s just problem solving!
 Develop situation, complication and
?
 Propose hypothesis
 Prove/disprove hypothesis
 Present findings
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Engagements usually address one or more of four questions
… then ...
Key questions ...
 What
 How
should we do?
 How?
should we do it?
 Why?
 Should
 Why
we do it?
 How
do you know?
did it happen?
… by
 How?
— Steps
 Why?
— Reasons
 How
do you know? — Proofs
Source: Barbara Minto; The Minto Pyramid Principle
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IT context — the IS Management Process
IS Management
Set Direction
process
Implement
Plan
Manage demand
Manage
Services
Review
Manage
supply
Key issue
How can we be more
effective?
Responsibility
Delivery
Corporate
How do we
do things
efficiently?
BU’s
IT&T
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IT&T
ESP
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Why use Research?
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Research can provide answers to the “How? Why? How do
you know?”
How? — Steps
Well other organisations have
done it like this...
… th e n ...
K e y q u e s tio n s ...
 W hat
 H ow
sh o u ld w e d o ?
 H ow ?
sh o u ld w e d o it?
 W h y?
 S h o u ld
 W hy
w e d o it?
 H ow
Why? — Reasons
d o yo u kn o w ?
d id it h a p p e n ?
… by
 H ow ?
— S te p s
 W h y?
— R e a so n s
 H ow
Source: B arbara M into ; T he M into P yram id P rinciple
Product xyz provides the
required functionality
How do you know? — Proofs
d o yo u kn o w ? — P ro o fs
All of the 375 clients that have
implemented this solution
have finished in under three
months
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Page 9
The type of research will vary upon the stage in the process
IS Management
Set Direction
process
Implement
Plan
Manage
Services
Review
Trends
Forecasts
Frameworks
Approaches
Estimating tools
Processes
Methodologies
Metrics
Standards
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Examples
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Total IT Spending as a Percent of Revenue will continue to increase
highlighting a need to understand and apply investments strategically
10.0% Key Technology
WebDiscontinuities Internet
PCClient/
5.0%
Server
S/360
Mainframe
0
North America
Western Europe
Asia/Pacific
(Dev.Economies)
Accelerating Business
Unit Spending
1960 1970 1980 1990 2000 2010
IT Spending % Central IS Budget
Revenue
Per Employee
Telecom
Insurance
Fin./Banking
Services
Retail/Wholesale
Hospitals
Utilities
Transportation
Manufacturing
12.70
9.42
8.66
6.47
4.54
4.53
3.86
3.30
2.99
$10.4K
17.4K
19.1K
7.1K
3.1K
1.7K
5.6K
1.4K
4.1K
IT Baseline/
Infrastructure
as % IS Budget
72
67
76
78
73
72
77
77
76
Source: US Department of Commerce/Gartner
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Supply Chain Management in Transition
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Page 13
Office 2010 — The Wall Comes Down as inter-organisation
and inter-site collaboration becomes the norm
Reliance on Paper
and Location
Office = Location
Office = Connection
Bandwidth rules
Visual interfaces
Physical environment
Ubiquitous access
Standardised interface
Service-based
Independent
Work
Need for
Supervision
Office = Community
Office = Attention
Virtual communities
Workflow
Monitoring and access
Wearable or mobile devices
Wireless connectivity
Instant-on
Mobile/Fully Digital
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Page 14
Technologies to Keep on the ‘Radar Screen’
1) Automatic platform
4) Transactional data
adjustment as
increases 20 to 30 times.
generally adopted
Action: “Rearchitect”
standards. Action:
B/O for scalability.
Drive cross-LOB data
synergies.
2000
2002
2004
6) Digital signatures are a top 10 cost saver
in > 50% of enterprises.
Action: Focus on policies as much
as technologies, use internally sooner
rather than later.
2006
2008
2010
3) Privacy and security
7) Bandwidth increases
issues begin a period
100 fold over 2000 levels,
of intense political
but demand increases more.
2) 80% of corporate
debate.
Action: Reinforce functionality
customer interaction is Action: Drive an
over “featurality.”
electronic.
industry consensus and
8) More than 75%
Action: Invest in staff lobby.
of customer feedback
5)
Decision
support
staffing
triples
training and prepare a
analysis is automated.
over
2000
levels.
labor redeployment
Action: Guard the
Action:
Rethink
hiring
strategy
strategy.
“crown jewels.”
and skills inventory.
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Page 15
Transaction volumes/ values are also predicted to grow aggressively —
has the customer base been profiled against early adopter industry
verticals and product types?
Hong Kong & Singapore
e-Business Survey(1)
%
Top 10 transaction value by product type (%)(2)
% of companies that have
used marketplaces
100
Consumer electronics
90
Chemicals
80
Construction materials
70
60
To purchase
To sell
50
Textiles and clothing
rinting and publishing
40
Paper
30
20
Industrial machinery and equipment
10
All enterprises
Business
Services
Financial
Services
Manufacturing
Distribution
& Retail
Logistics/SCM/Warehouse Services
0
Desk/Office supplies
Textile mills
0
• Few companies transact regularly (4 txns is
an anecdotal hurdle rate)
• Enterprises that purchase more than 1% of
inputs electronically are almost nil
• Substantial portion of activity is “sourcing”
with few actual transactions
Source
5
10
15
• The most popular commodities to date that have been traded in e-marketplaces are consumer
electronics, chemicals and construction materials
• The number one position of consumer electronics correlates with a general early adoption of
new technologies by this industry (this is a target industry for Ariba)
• Has the correlation between heavy users of trade finance such as retailers and the food
industry and their rate of technology adoption been tested?
(1) Hong Kong and Singapore medium/large enterprise e-marketplace usage survey Q4 00 (203 enterprises)
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(2) Asia Pacific e-Marketplaces survey
Page 16
Each IT function has a different level of complexity and business
value to the Service Provider and Service Receiver
B U S IN E S S V A L U E
IT
C o n s u ltin g
B u s in e s s
S tra te g y
C o n s u ltin g
A p p lic a tio n
M anagem ent
N e tw o rk
S y s te m s
O p e ra tio n s
D e s k to p
In te g ra tio n
A p p lic a tio n s
O p e ra tio n s
D e v e lo p m e n t A s s e t
M anagem ent
H e lp
D esk
D a ta
B u s in e s s
C e n te r
C o n tin u a tio n
O p e ra tio n s
R E L A T IO N S H IP C O M P L E X IT Y
Some IT functions have now become a standardised commodity and are of lower of business value (e.g. Data Centre
Operations) than other functions (e.g. Systems Integration). These lower value functions can be easily outsourced to one
of the many providers which exist in the market without compromising business value. As the complexity of the IT function
increases, so to does the value to the business and the relationship complexity which is established to manage the
delivery of the function. Each organisation will have a different positioning of its IT functions.
Sydney University | Applying IT Research| 31 May 2002 | Entire contents © 2002 Gartner, Inc. All rights reserved.
Page 17
Gartner Research: ERP II Magic Quadrant — Service
Intensive
Medium scale solutions
Large scale solutions
Leaders
Challengers
Leaders
Challengers
J.D.
Edwards
SAP
PeopleSoft
Ability to
Execute
Oracle
SAP
Lawson
QSP
J.D. Edwards
CODA
Walker
Great Plains
Navison
Agresso
Epicor
Sage
Sys Union
As of 5/01
Niche Players
Visionaries
PeopleSoft
Oracle
Lawson
As of 5/01
Niche Players
Visionaries
Completeness of Vision
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Page 18
A review of reference sites showed five key drivers in a
bespoke/ERP decision
Global
Systems
ERP
(SAP R/3)
Product line variety
• Multiple platforms
• Few platforms/model variants
• Multiple model variants
Manufacturing complexity
• Large domestic
assembly (CBU)
• CKD, 60% local content
• Full SUP import
Global synergies
• High
content/process
overlap
• Low
content/process
overlap
Site age
• Mature (brown
field)
• New (green field)
Corporate ownership
• Wholly owned
subsidiary
• Joint venture
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• Associate company
Page 19
Example — Sourcing Strategy
A sourcing strategy identifies how internal and external resources will be identified and applied to support the IT strategy.
The sourcing decision is based on a range of criteria but primarily it comes down to ability to execute the required IT
strategy and the efficiency of existing operations. The ITOA undertaken in Step 2.1 will determine how efficient existing IT
operations are.
Low
Medium
High
Sourcing Decision Matrix
IT S e rv ic e
Strategic
Outsource
or Re-skill/
Re-tool
R is k
E x te rn a l
S o u rc in g
D ata C enter
D esktop
Strategi
c Value
Non
Strategic
Retain
S tra te g ic E ffic ie n t E ffe c tiv e
V a lu e
Outsource
Outsource
or Spin Off
Business
N etw orks
V oice
Core
Non-core
Core vs Non Core
Competencies**
For any functions being outsourced, Gartner has
identified 3 types of deals an organisation can enter
into. In addition, there are 7 governance models and
7 pricing models that can be selected to suit an
organisation’s business objectives. In combination
these form an outsourcing strategy. This
assessment will be performed for Tata Steel’s IT
functions.
Once it has been determined what to outsource vs
retain an organisational impact assessment will be
undertaken using Gartner’s IS-Lite framework.
A pplications
S ervice D esk
Deal Type
Utility
(Cost Focus)
Enhancement
(Productivity Focus)
Frontier
Governance Model
Single
Provider
Best
of
Bree
d
Prime
General
Insource
Joint
Ventur
e
Brande
d
Service
s
Pricing Model
Time and
Materials Cost Plus
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Fee for Fixed Price Gain Share
Shared
Service
Risk/Reward
Business
Benefit-Based
Page 20
Financial Elements of Value Chain
Originate
Negotiat
e
Function
Protect
Track/
React
Offerings
Fulfill
Settle
Examples
Authentication,
qualification
Credit verification
Certificate validation
Identrus,
Open Ratings
Credit provision
Loans
Leases
eCredit, Oinke,
eLease
Payment,
credit guaranty
Escrow
Letter of credit
Tradenable,
Bolero, TradeCard
Disbursement
and collection
Cheque, ACH, wire,
lockbox, FEDI
Clareon,
VeriSign
Receivables
management
Factoring,
“securitization”
Orbian,
eTime Capital
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Page 21
Example — Enterprise I/T Architecture leverages
current investments and is extended by
components identified by Gartner as leading or
emerging practices I/T Architecture Framework
Layer 2 – Business
Services
•
•
•
•
Windows/Pc
Green Screen
IVR
Web TV
•
•
•
•
Business Objects
Workflow Services
Document Management Services
Content Management Services
•
•
•
•
Business Intelligence Services
Email Services
OLAP
Payment Services
Integration Solutions
Static Library Services
Dynamic Library Services
Systems Management
Data Management*
•
•
•
•
•
Network Management
Directory Services
Security
Firewall
Application Server
Layer 3 –Technology •
Services
•
•
•
•
Layer 4 - Data
•
•
Layer 5 - Platform
Layer 6 - Network
•
•
•
•
•
RDBMS
•
Unstructured Data •
•
•
•
•
Intel-PC
Mainframes
PDA/Pocket PC
Mobile Phones
•
•
•
•
TCP/IP
SNA
Frame Relay
ATM
Layer 7 – Systems
Development
Environment
Pager
Browser
Portable Handheld Devices
Sequential Files
OODBMS
•
•
•
•
•
•
•
Windows 9x, 2x, NT
OS/390
Windows CE
ISDN
Ethernet
DSL
Wireless
•
•
•
•
Increasingly logical definition
Increasingly physical definition
Layer 1 - Presentation
•
•
•
Use Cases
Object Service
Based Design
Object Oriented
Development
Change
Management
3GL
Testing
Implementation
Guidelines
Layer 8 –
Layer 9 – Architecture
Management
Governance
Services
•
•
•
•
•
•
•
•
Security
Backup &
Recovery
Availability &
Performance
Change Mgmt
Event
Monitoring &
Mgmt
Transaction
Monitoring
and Integrity
Help Desk
SLAs
•
•
•
•
Architecture
Office
Vitality
Compliance
Communicati
on
SDLC
Microwave
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Page 22
Within the IS-Lite Framework there will be an IT
organisation structure appropriate for delivering IT
services
Gartner will recommend the appropriate IT organisational structure to deliver services, in an efficient and effective manner.
The final structure will depend on what IT functions are retained by Tata Steel versus outsourced. Different skills are
required to manage external service providers versus managing internal staff.
An example structure is shown below. The structure will depend on how “big” the final IT organisation is and what
functions it performs
Embedd
ed in the
business
Office of Enterprise IT
BU
Management
CIO
BU
Management
Quality
Assurance
Outsourced to external
service providers
Process
Requirements
Assessment
Development
measured
for
effectiveness
Specification
Design
Relationship
Manager
Product
Office
Relationship
Manager
Project
Manager
Project
Office
Project
Manager
BU
Applications
Development
Team
Development
Services
Functional
Applications
Development
Team
Office of
Architecture
and
Standards
Tier 3 Support
Competency Centres
Build
Test
Production
measured
for
efficiency
Change Management
Infrastructure and Production Support
Maintain
Support
Support
Advanced Technology Group
Network Apps.
Tier 2 Support
Data Systems Training Admin.
Consolidated Service Desk
Tier 1 Support
End User
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Page 23
1.73
Application Support
1.61
3,500
25,000
3,000
1.45
Midrange UNIX
1.28
IT Help Desk
0.74
0.4
0.6
0.8
1,500
10,000
1,000
5,000
500
Occupancy
External
Personnel
LAN / Shared Services
Software
Hardware
Cost per User
1.15
0.2
2,000
15,000
0
Midrange NT
Distributed Computing
2,500
20,000
0.89
Wide Area Network
0.0
30,000
1.0
1.2
1.4
1.6
1.8
2.0
XYZ
Peer
781
0
8,003
4,019
2,200
4,690
592
2,373
8,750
4,900
2,651
7,187
Cost per User ($)
Applications Development
Expenditure ($'000)
Benchmark — Information Technology Overview
Analysis
0
XYZ
Peer
2,462
3,307
Normalised Key Metric Value
Peer Normalised to 1
Characteristic
Peer Group
40%
D istributed
C om puting
XYZ
FTEs by Cost
FTEs by Users
Desktop Cost per User
7.84
7,567
$2,462
$1,461
$1,000
$0
$86,885
79.86
92.11
92.11
$775
Average
7.86
5,691
$3,307
$1,886
$1,156
$265
$72,690
67.73
$233
120.38
113.10
$1,233
Maximum
9.29
8,116
$6,828
$4,301
$1,961
$566
$97,685
80.73
30%
E x p e n d itu re P e rc e n ta g e
Complexity
Number of Users
Cost per user
Infrastructure Costs per User
Personnel Costs per User
External Costs per User
Cost per FTE
User per FTE
Minimum
7.19
4,523
$1,117
$411
$562
$127
$57,068
40.53
A pplications
D evelopm ent
A pplications
S upport
20%
M idrange U N IX
10%
M idrange N T
W ide A rea
N etw ork
IT H elp D esk
0%
0 .0
0 .2
$2,392
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0 .4
0 .6
0 .8
1 .0
1 .2
1 .4
1 .6
1 .8
2 .0
N o rm a lise d K e y M e tric V a lu e
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