IT Performance: ottenere risultati
con i dati e non con l'intuizione
Intel’s Business Value Index
Harry Chapman
CMC, Principal
Bay Area Consulting Group LLC
Hchapman@baconsulting.net
(415) 971-5746
12
© Bay Area Consulting Group LLC
A Common Problem Facing IT
 70% of companies consider IT a cost center
(source - the Gartner Group)
 IT Departments are continually asked to “cut
costs” - especially in uncertain economic times
 IT Departments are still expected to deliver
long-term competitive advantage
© Bay Area Consulting Group LLC
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What the CFO Tells the CIO
“You always want more money”
“It is technology for technology’s sake”
“I need flawless execution and operation”
“You need to be a key source of business
innovation”
“Why do you use your own language?”
“IT is too slow!”
© Bay Area Consulting Group LLC
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Can You Relate to This?
The “IT Paradox”
Help Enable Growth
Help Improve Margins
Help Reduce Costs
Positive Growth
Flat Growth
Negative Growth
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Some History
Intel’s IT Staff was challenged in 2001 to measure the
bottom-line impact – the business value – of their IT solutions
As a result, the IT department developed the “IT Business
Value Program” (ITBV) to include:
 “Business Dials” – a standard set of financial measurements
 A Standard Measurement Methodology
 A Common Valuation Process – Finance acts as an
independent auditor
 A Business-Value portfolio – Value determined by customergenerated critical success factors
 A Set of Ground Rules – Defines the programs operation and
accountability
Source: “Measuring the Business Value of Information Technology” by David Sword from the Intel
Press
© Bay Area Consulting Group LLC
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What is “Business Value”?
“Business Value” is the benefit for business
units represented in dollar terms that result
from IT solutions;
 Direct contribution to the corporation’s market
position or revenue
 Deliverables and results that support solving
customer business needs and challenges
 Customer cost savings or financial benefits
 Examples of technology investment that advance
the industry
© Bay Area Consulting Group LLC
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Results from ITBV Program
Year
Program Goal
Program Results
2002
$100M
$423M
2003
$250M
$923M
2004
$400M
$1.2B
2005
$1.7B
2006
$1.3B
2007
$1.2B
2008
$1.5B
© Bay Area Consulting Group LLC
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So How Does ITBV Work?
It is based on:
Feedback Mechanism for
Maximizing Value
Managing IT “Like a Business”
Managing the
IT Budget
Managing the
IT Capability
The Budget Drives
IT Capability
Managing IT for
Business Value
IT Capability Enables
IT Business Value
And can be expressed in “IT Capability Maturity
Frameworks”
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IT Capability Maturity Framework
Managing the
IT Budget
Maturity
Sustainable
Economic
Model
Managing the
IT Capability
Managing IT for
Business Value
Corporate Core
Level 5 Optimized Value
Competency
Expanded
Funding
Strategic
Business
Partner
Level 4
Systematic Cost
Reduction
Technology
Expert
Level 3
Predictable
Performance
Technology
Supplier
Level 2
Ad Hoc
Ad Hoc
Level 1
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Managing IT
“Like a Business”
Value Center
Options and
Portfolio
Management
Customer
Service Focus
ROI and
Business Case
Customer
Service
Orientation
TCO
Technology/
Product Focus
Ad Hoc
Ad Hoc
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Defining Value
What is of Value to the End Users?
 Bottom Line Impact?
 Top Line Growth?
 Using IT to Open New Markets?
The Starting Point is a Common Definition
Intel’s are:
 “Business Dials” – a standard set of financial measurements
 A Standard Measurement Methodology
 A Common Valuation Process – Finance acts as an independent auditor
 A Business-Value portfolio – Value determined by customer-generated critical
success factors
 A Set of Ground Rules – Defines the programs operation and accountability
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Consider the Approach
Based on User Needs (not Technology)
Uses Common Terms
Is an Overall, Repeatable Process
Have Finance act as an auditor to give
credence to the financial results
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What is “Business Value”?
Business Value is “the contribution IT makes to
helping a firm or other organization achieve it’s
objectives”
Revenue (Growth)
Costs/Efficiency
Assets (Productivity)
Risks (Continuity)
Increased Shareholder Value =
F(Growth, Efficiency, Productivity, Continuity)
© Bay Area Consulting Group LLC
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Business Value “Dials”
….are Intel’s Standardized Indicators of
Business Value
The Goal is to have the Change Positively
Influence the Business Value Dials
Dial
Financial Value Dials
Non-Financial Value Dials
•Days of inventory
•Headcount productivity
•Hardware and software cost avoidance
•Capital equipment cost avoidance
•Time to market
•Direct revenue
•Other cost avoidance
•Customer satisfaction
•Intellectual property risk reduction
•Product development agility
•Regulatory compliance
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Need to Also Consider the Intangibles
Enhanced customer loyalty
New business opportunities
Intellectual property protection
Product development agility
Regulatory compliance
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To Summarize
The Value of BVI….
 Process based on what is important to IT’s
customers
 Common language between IT and its customers
 Assess projects on consistent bases
 Reports $$$ value delivered by IT
 Changes the dynamic & perception that IT is a cost
center
© Bay Area Consulting Group LLC
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Business Value – Corporate-wide
Business Value (corporate-wide impact to Company's business)
Criteria
Explanation
Weig
ht
Impact to Company Revenue
Directly related to protecting or enhancing the revenue generation
environment, not the magnitude of the impact (including: direct
revenue, time to market, opening new markets, optimizing existing
markets, cross-selling)
5
IT Customer Pull/Need (i.e. Company Biz
group, or external company)
Extent to which customers are asking for this deliverable and
strength/influence of request/demand
4
Impact to Company's Business Risk
Impact to Company's business continuity/security/stability/disaster
recovery. (Total Risk = Severity of occurrence X Frequency of
occurrence).
4
Requirement to comply with Legal or
Regulatory obligation
Mandatory investments that are required to comply with an external
regulatory obligation. These regulations are government, legal, tax
and regulatory practices.
5
Describe how the project's objectives align
with Company's SOs (Stated Objectives)
and the customer's organizations SOs
Describe how the project's objectives align with Company's SOs
(Stated Objectives) and the customer's organizations SOs
3
IT Customers' Performance Improvement
Customer user productivity, process efficiency, such as HC
productivity (including HC reduction and reduction in turnover),
factory optimization and yield improvement
3
Innovation or Enhanced Capability that
solves a biz problem or creates competitive
advantage
Completely new, innovative solution to solve a business problem
that creates competitive advantage or an enhancement/
incremental improvement (including: reduction in days of inventory,
reduction in days of receivables, factory uptime)
3
© Bay Area Consulting Group LLC
Score
(0 - 3)
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Business Value – Corporate-wide
Business Value (corporate-wide impact to Company's business)
Criteria
Explanation
Weig
ht
IT Customer Product Unit Cost
Reduction
Impact to the cost of products that IT Customers are achieving
due to the use of IT solutions, not IT products/services costs
(higher profit margin for Company products; including system
EOL, materials discounts, hardware/software cost avoidance,
scrap reduction, yield improvement, waste reduction, other
cost avoidance)
3
How this solution will influence the IT
PE (Partnership Excellence) program
scores addressing top customer
issues
How this solution will influence the IT PE scores from endusers and senior managers, including addressing top
customer issues
2
Confidence of Successful Execution
Confidence that the solution will be executed with high quality,
flawlessly from a planning and implementation standpoint
2
Confidence in timeliness of solution
delivery
Confidence in ability to deliver solution in a timeframe that's
most beneficial to the customer
2
Confidence that the solution will
address the business need
Confidence from a biz standpoint that the benefit would be
delivered and the solution will meet the customer's business
objective
2
Use of Company Products
Extent of which project showcases use of Company products,
vs just using them to deliver a solution internally
1
Intangible Benefits (benefits not
captured above and not included in
Business Value Dials)
Please list the benefits
1
© Bay Area Consulting Group LLC
Business Value Index:
Score
(0 - 3)
Page
160
40
IT Efficiency
IT efficiency (optimal utilization of IT's infrastructure and resource capabilities)
Criteria
Explanation
Weight
Pull/need from within IT
Extent to which internal to IT customers are asking for
this deliverable (volume and strength/influence of
request/demand)
4
Describe how the project's
objectives align with IT SOs and EB
Goals
Describe how the project's objectives align with IT
SOs and EB Goals
4
Time to Market
Increse the speed of IT products and services get
deployed to customers (Company-wide) without
impacting quality
3
Impact to IT Employee Performance
Improvement
Measure of impact to IT employee productivity, I.e.
efficiency, faster throughput, higher quality
2
Level of Innovation and Learning
for IT
New technology approach/tool for IT internal usage
2
Unit Cost Reduction of IT
products/services
Impact to the Unit Cost of Products - please list the
products and the type of costs affected
2
Impact on future investments
Investments that provide a foundation or are
necessary for future technologies, capabilities or have
a direct impact on strategic roadmaps
3
© Bay Area Consulting Group LLC
Score
(0 - 3)
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IT Efficiency
IT efficiency (optimal utilization of IT's infrastructure and resource capabilities)
Criteria
Explanation
Weight
Maintain Quality and Reliability of
IT products and services delivery
Investments in maintaining required levels of quality
of IT infrastructure, service delivery, operational
efficiency, capacity, response rates, problem
resolution
3
Opportunity of reusing existing
components or creating of
reusable components
Opportunities to reuse existing standard applicable
capabilities and assets or/and opportunities to
create new ones for future reuse.
2
Fit with existing architecture and
roadmaps
Level of fit with existing architecture and integration
required in order to introduce into the environment.
Thus, solutions requiring new architecture, will not
score high on this criteria, while they may be
innovative in nature and the right thing to do. The
level of innovation is evaluated in a separate
critieron above.
2
IT Employee Satisfaction Impact
Level of improvement on IT employee well-being,
development, growth.
1
IT Efficiency Value Index
© Bay Area Consulting Group LLC
Score
(0 - 3)
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Finance
Finance Index
Criteria
Explanation
Weight
NPV (Net Present Value)
Calculate under most likely assumptions. Typically,
NPV is calculated over a 3 year period. More
optimistic scenarios can be captured under "Option
Value."
2
Payback Period
Period between initial investment and recovery of the
total investment
2
Option Value
Potential future value not reflected in NPV. Option
value should include any cost associated with
bringing the product to market.
1
Internal Rate of Return
Internal Rate of Return is the discount rate that makes
the PV of costs over time equal to PV of benefits over
time, i.e. NPV = 0.
3
Level of Initial Investment
Initial spending (in most cases, quarterly) required as
a percentage of department's quarterly budget
2
Finance Index:
10
© Bay Area Consulting Group LLC
Score
(0 - 3)
0
Page 19
Let’s Try Four Projects
Project
Cost
Business
Value
IT
Efficiency
Finance
A-Finance
$500
1
2
3
B- Mid All
$750
2
2
2
C- BV
$1,000
3
2
1
D – Hi All
$1,250
3
3
3
E – Lo All
$1,500
1
1
1
F- Mixed All
$1,750
0-3
0-3
0-3
© Bay Area Consulting Group LLC
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Results
Business Value Chart
Business Value Matrix
This chart shows how the BVI values of the scored projects
map to the Business Value Matrix
IT Efficiency
+
0
?
?
0
Business Value
© Bay Area Consulting Group LLC
+
Project A - Finance
Project B - Middle for All
Project C - Business Value
Project D - Hi for All
Project E - Low All
Project F - Mixed All
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Financial Index is represented by bubble width in chart
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