Understanding the Relationship
between your IT Function and Your
Business
What’s Driving Your IT ROI?
FEI National Breakfast Series
Vancouver Edmonton Calgary Toronto Montreal Halifax
March 5 – 20, 2008
BROUGHT TO YOU BY:
1
Understanding the Relationship
between Your IT Function and
Your Business:
What’s Driving Your IT ROI?
Jim McKeen, PhD
Queen’s School of Business
jmckeen@business.queensu.ca
A Brief History of the Relationship
between IT and the CFO
In the beginning, the CFO owned IT
and now they don’t
A New Model of Engagement
IT ROI needs to be a “3-legged stool” where
1. The
IT function takes ownership of the
technology
2. The
business takes ownership of the
organizational transformation
3. the
CFO takes stewardship of the benefits
Agenda
Understanding IT ROI
What about your IT ROI?
Two case studies – success vs. failure –
hindsight is 20:20 vision
IT ROI starts with project selection
Ten steps to an improved IT ROI –
reengaging the CFO in IT investment
Assessing Your IT ROI
Everyone uses the same set of tools to
select IT projects (payback, NPV, BSC,
alignment with corporate goals)
Everyone uses common industry indicators
(IT as % of revenue)
Existing measures aren’t perfect but they
are good enough
There is no “silver bullet” here
What about your IT ROI?
Do you know your IT ROI?
(Yes/No)
Are you satisfied with it?
(Yes/No)
Most CFOs don’t know their ROI
I know my IT ROI
14%
86%
64%
74%
4%
22%
26%
Yes
No
No
10%
Yes
My IT ROI is satisfactory
but they know it needs improving!
It seems no one questions the
importance of IT but …
… most senior executives
harbour a lingering doubt
about whether IT is
delivering what is needed
by the business at a
reasonable cost
IT project selection is the key to
ROI. Unfortunately ...
in many organizations, project selection is
like taking the whole family grocery
shopping …
... everyone puts things in the
cart that they “need” but, when
you get home, you can’t put a
“balanced” meal on the table
Case #1: The Missing Partnership
The company launched a
$3.5M IT project to replace its
collection of underwriting
systems
Underwriters begrudged the
time spent “explaining the
insurance business” to IT
Mid-way through, the business made the
decision to cut functionality in order to meet
their market target
The Outcome?
IT celebrated their “on time”
and “on budget” delivery –
bonuses for all!
Since going live, an additional
$2M has been poured into the
system to add functionality
The company has yet to “unplug”
the old systems which the
underwriters use to “check” the
new system
IT ROI?
Disaster!
Case #2: Foundational Systems
The company rolled
out a new “plant
production and
control” system to all
its plants across
Ontario and Quebec
Sponsored by the CFO and CEO, the
system was aggressively resisted by the
majority of plant managers.
The Outcome?
The system was “way
late” and “way over
budget”
Seven years later, the system
was delivering benefits “far in
excess of expectations”
according to the CFO
IT ROI?
Huge!
So what makes IT ROI difficult?
Long term … lag effects ...
complementarities
Consumer surplus
Difficult to trace infrastructure projects to
the bottom line
Few standalone projects today although
we try to justify them on this basis
Project benefits don’t aggregate
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Ten Steps towards
Improving your IT ROI
Improving Your IT ROI
1. Create a technology renewal program
•
Makes maintenance transparent (eliminates
IT’s “dirty little secret”)
•
CFO formalizes the process
•
Funded centrally (tax on development)
•
Administered by CFO and senior executive
•
IT Director builds the case for technology
renewal initiatives
Improving Your IT ROI
2. Ensure that major IT projects compete
with other capital projects
•
Every dollar spent on IT is a dollar denied to
other uses ... and vice versa
•
Pre-allocating IT dollars doesn’t guarantee
value creation
•
CFO certifies all business cases
Improving Your IT ROI
3. Make “internal” IT projects compete with
other IT projects
•
IT Director has “needs” for IT too
•
The IT Director should bring these internal
projects before the project selection committee
so that they compete with all other IT needs
•
CFO certifies the business case
•
Eliminates the “coffee can”
Improving Your IT ROI
4. Articulate role expectations with your IT
Director
•
Four archetypical roles (www.cio.com) are:
•
•
•
•
Business Leader
Innovation Agent
Operational Expert
Turnaround Artist
•
Role discrepancies are highly frustrating and
counter-productive
•
Have you articulated and aligned role
expectations with your IT Director?
Improving Your IT ROI
5. Create a “dynamic auction” for IT projects
•
All IT projects that have passed detailed
specification but have not yet been
implemented are considered “in the auction”
•
Projects in the auction can be expedited,
frozen or supplanted by other projects
•
Even after resources have been allocated to a
project, the organization does not commit to
delivering the project ... See point above
Improving Your IT ROI
6. Allow managers to “change their mind”
and withdraw an IT project from the
auction
•
Balance the benefits of project “sponsorship
and commitment” against the costs of
“ownership and ego”
•
Don’t let the forces of organizational inertia
drive you towards delivering questionable
projects
Improving Your IT ROI
7. Harvest the benefits for new projects
•
“Stage gate” your benefits (revise/revisit
benefits as well as costs through project
development)
•
CFO organization monitors benefits for all
new IT development projects (“stewardship
role”
•
Benefit transparency – tracked for 3 years by
CFO
•
Harvesting benefits builds accuracy and
confidence in IT ROI assessment
Improving Your IT ROI
8. Encourage “enterprise” systems
•
Go where the greatest value exists
•
Eliminate barriers that work against enterprise
systems
•
•
Chargeback mechanisms (“first on the bus ... buys the bus”
Decentralizing IT decisions to business units
•
Develop “Robin Hood” funding models
•
“100 percent plus” buy-back plan for first
movers
Improving Your IT ROI
9. Fund “programs” instead of “projects”
•
Bucket funding offers better alignment with
many new business initiatives
•
For example, if you wish to open a new web
channel, put all the required projects in a
“bucket” and fund (or don’t fund) the whole
bucket.
•
Also, then harvest the benefits on the basis of
the new channel launch
Improving Your IT ROI
10. Eliminate the “us-them” through
“responsibility partnering” :
•
•
•
Articulate the responsibilities of all partners
Gain acceptance of these responsibilities
•
Commit necessary resources to fulfill responsibilities
Agree on what “success” looks like
Commit to achieving success – together
•
Recognize and celebrate joint successes
•
Harvest the benefits
•
This morning we spoke about
Understanding the Relationship
between Your IT Function and Your
Business: What’s Driving Your IT
ROI?
This afternoon you can
Change your Relationship with
Your IT Function and Drive Your IT
ROI up!
© 2006 Microsoft Corporation and Capgemini U.S. LLC
27
THANK YOU!
Jim McKeen, PhD
Queen’s School of Business
jmckeen@business.queensu.ca
© 2006 Microsoft Corporation and Capgemini U.S. LLC
28
Understanding the Relationship
between your IT Function and Your
Business
What’s Driving Your IT ROI?
FEI National Breakfast Series
Vancouver Edmonton Calgary Toronto Montreal Halifax
March 5 – 20, 2008
BROUGHT TO YOU BY:
29
Finance at Microsoft
An Inside Look
Joel Freedman
Chief Financial Officer
Microsoft Canada
Marilee Byers
Director of Compliance
Microsoft US
Agenda
Finance/IT Partnership
Leveraging Technology – 2 Case
Studies
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Vision: Elevate the role of the finance organization to be leaders in
shareholder value creation for Microsoft
BUSINESS INSIGHT
P
E
R
S
O
N
A
L
L
E
A
D
E
R
S
H
I
P
Attract
the best
talent
on the
planet
Build
your skills
and those
of your
team
Contribute
personally
to the success
of your team
and Microsoft
Think
strategically
to maximize
SV
Plan
current
year
business
needs
Develop
strategic
plans to turn
ideas into
actions
Execute
key
financial
processes
Influence
key decisions to
deliver business
results
Improve
business
productivity and
operations
BUSINESS EXCELLENCE
Finance/IT Partnership
Clear definition of roles and responsibilities
Finance
(Business Ownership)
Solutions Delivery
(Stewardship)
• Sustainable
Compliance
• Effective reporting
• Strong internal controls
• Improved processes
• Productivity gains
• External leadership
• People development
• IT advocate
• Investment steward
• Connect and balance
stakeholders
• Balance current and
long term
• Disciplined
management
• Continuous
improvement
• Simplification
• Reduce number of
applications
Connection to Keynote
Rule #7 - CFO organization
monitors benefits for all
new IT development
projects (“stewardship role”
Rule #10 - Articulate the
responsibilities of all
partners
IT Center of Excellence
(Technology
Ownership)
• Leading Role
• Technical Strategy
• Design
• Build
• Test
• Support
• Supporting Role
• Envision
• Deploy
• Measure Results
Connection to Keynote
Rule #2 - Ensure that major IT
projects compete with other
capital projects
Rule #6 - Create a “dynamic
auction” for IT projects
Executive Sponsors / IT Partners
ROI
10%
Business Insight
Weighting of Drivers via
Pair-wise Comparison
(preliminary MBC example)
Data Quality/Data
Relevance
40%
Strategic
Driver
Productivity
15%
65%
10%
Plan
Risk
30%
5%
Personal
Leadership
25%
Strategic Imperatives
Defining Strategic Driver &
Impact Statements
Weighting of Drivers
Project level weighting /
development of POR
Case Studies
35
Case Study #1
Collaborating to close faster
and better
Close and Reporting Management:
Old World
37
Financial Reporting and SEC Filing
Connection to Keynote
Rule #8 – Encourage
“enterprise” systems
Leveraged existing technology infrastructure provide by IT
Technologies used: Microsoft Office SharePoint™ Server 2007 Web site, Office 2007, InfoPath 2007, SQL
Server 2005, XBRL
38
Responsibility
Status
Review
SOX Controls
Support
Benefits achieved
Reduced close by 5 days
10Q filed with Earnings Release
Clear tasks and accountabilities
Supporting docs readily available
Auditor access to documents
Reduction in email pileup
Case Study #2
Managing complex compliance
processes
Phase 1
Connection to Keynote
Rule #8 – Encourage
“enterprise” systems
Rule #9 - Fund “programs”
instead of “projects”
Initial compliance application – Agile
development with quick solution
Second compliance application – Full build
of asp.net application customized for SOX
compliance
Leverage existing tools - Issue Manager,
Consensus, LiveMeeting
Next iteration - a solution to support
multiple compliance requirements, likely on
SharePoint with some custom build
Purpose

Centralized repository

Integrated risks and control objectives

Visibility to ownership, workflow assignments

Flexible security model
Technologies :

Office 2007 templates

SQL Server 2005

SQL Reporting Services

ASP.NET web services
SOX Dashboard
Connection to Keynote
Rule #9 - Fund “programs”
instead of “projects”
Leverage compliance information; SOX404, SOX302, ERM, FCPA, PCI,
HIPAA
Automate assessments and mapping
Common tool
Lower TCO
Case Study #3
Performance management
Silo environment vs. a unified view of financial
performance
Inconsistent data definitions and sources
Customized, sometimes offline reporting
Analysis vs. data-gathering
Objectives, Guiding Principles &
Tenets
Objectives
Integrated…
standard reporting
across the
organization
Reliable…
single master data
source &
taxonomy
Guiding Principles
Right information, right
hands, right time
Discipline at the core,
flexibility at the edge
(Enabling agility with
discipline)
One Source of
Management Information
Powerful…
world-class tools
& simple
workflow
Role based productivity and
satisfaction
Leverage Microsoft BI
technologies
Connection to Keynote
Rule #10 - Agree on what
“success” looks like
Tenets
•
Consistent performance drivers and accountability
•
Stable metrics and reporting
•
Information is align to strategy and driving decisions
•
Right time processing and availability of reporting
•
Take advantage of global time zones and geography
•
Guaranteed data quality and integrity of Financial Reporting
•
Define & Implement common control standards
•
Centralize governance and change management
•
Enterprise consensus around definitions & methodologies
•
Single Finance vision aligned to the business
•
Single version of the truth for finance reporting
•
Common definitions, data accuracy and quality
•
A balanced approach to reporting creating and analysis
•
Simplify and automate report generation
•
Ability to manage and respond to change efficiently
•
Deploy integrated solutions
•
Align system investments with strategy
Connection to Keynote
Rule #8 – Encourage
“enterprise” systems
DELIVERY
SharePoint Server
Excel
Analytic Scorecards
Reports DashboardsWorkbooks
Views
Plans
END USER TOOLS & PERFORMANCE MANAGEMENT APPS
PerformancePoint Server
Excel
BI PLATFORM
SQL Server
Reporting Services
SQL Server
Analysis Services
SQL Server DBMS
SQL Server Integration Services
Personalized
dashboard based on
role
Central repository for
reports
Integrated collaboration
Pre-Defined reporting
categories
Unified dashboards
Pre-Defined reports
Flexibility to define
different parameters
and pivots
Integration with existing
applications and tools
Finance/IT Key Success Factors
Collaboration in defining requirements
Solutions delivery role
Good balance between user and IT
“development”
Clear budget , cost and benefit information
to make trade-offs
Clarity and appreciation of expertise and
roles
Communication
Thank you!
© 2004 Microsoft Corporation. All rights reserved.
This presentation is for informational purposes only. MICROSOFT MAKES NO WARRANTIES, EXPRESS OR IMPLIED, IN THIS SUMMARY.
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