ISM101 Discussion, 10.21.04 Notes from the Field

ISM101 Discussion, ISM101 Discussion, 10.21.0410.21.04

Notes from the FieldNotes from the Field

Adam SeligmanAdam SeligmanPlatform Strategy AdvisorPlatform Strategy AdvisorMicrosoft CorporationMicrosoft Corporation

AgendaAgenda

The Business – Technology GapThe Business – Technology Gap

The Web Services RevolutionThe Web Services Revolution

Thoughts on selling technologyThoughts on selling technology

Thoughts on MicrosoftThoughts on Microsoft

A bit about meA bit about me

AgendaAgenda





Business Value & Business Value & TechnologyTechnology

or, why executives don’t care or, why executives don’t care about developer productivityabout developer productivity

Adam Seligman, .NET AgitatorAdam Seligman, .NET Agitator

2 Minute MBA2 Minute MBA

$1 tomorrow is not the same as $1 $1 tomorrow is not the same as $1 todaytoday

Difference is called “discount rate”Difference is called “discount rate”

10% annual discount rate means:10% annual discount rate means:

““$1.10 in a year == $1 today”$1.10 in a year == $1 today”

Discounted Cash FlowDiscounted Cash FlowWrite down your cash inputs and Write down your cash inputs and outputsoutputs

Discount each oneDiscount each one

Sum themSum them

year 1 2 3 4

cash flows $ (100) $1,000 $1,000 $1,000

discount factor 1.00 0.85 0.72 0.61

discounted dollars $ (100) $ 850 $ 723 $ 614

NPV @ 15% $2,087

Advanced ManagementAdvanced Management

Business Case DevelopmentBusiness Case Development

Guesstimate cash flows for Guesstimate cash flows for projectsprojects

Portfolio analysis and managementPortfolio analysis and management

Pick projects with positive NPVPick projects with positive NPV

Don’t drop the ballDon’t drop the ball

Don’t drop the ballDon’t drop the ball

ISM101 Fall 2004

MBA

Graduation!Graduation!

How do Business Execs How do Business Execs think about projects?think about projects?

Invest some cash up frontInvest some cash up front

Get a big inflow of cash laterGet a big inflow of cash later

Positive NPVPositive NPV

year 1 2 3 4

cash flows $ (100) $1,000 $1,000 $1,000



NPV @ 15% $2,087

Cut Development Cost by Cut Development Cost by 50%50%

year 1 2 3 4

cash flows $ (50) $1,000 $1,000 $1,000



NPV @ 15% $2,137

Add Some Project DelayAdd Some Project Delay

year 1 2 3 4 5

cash flows $ (50) $ - $1,000 $1,000 $1,000

discount factor 1.00 0.85 0.72 0.61 0.52

discounted dollars $ (50) $ - $ 723 $ 614 $ 522

NPV @ 15% $1,809

Three ScenariosThree Scenarios

Old technology NPV = $2,087

New technology50% dev cost savings

NPV= $2,137(+$50)

New technology with delay

NPV = $1,809(-$278)

ObservationsObservations

Fat tail end of projects determine Fat tail end of projects determine returnsreturns

Developer productivity is low priorityDeveloper productivity is low priority

Project risk = Delay of returnProject risk = Delay of return

New technology has a lot more New technology has a lot more downside than uspidedownside than uspide

What do technical people What do technical people think of business people?think of business people?

What do business people What do business people think of technical people?think of technical people?

How we hear, think How we hear, think differently, examples of differently, examples of problems this causesproblems this causes

Market ChallengesMarket Challenges

Earnings Earnings pressurepressure

Lowering costsLowering costs

Rising Consumerism Rising Consumerism

CompetitionCompetition

Security issuesSecurity issues

New technologiesNew technologies

Regulatory PressureRegulatory Pressure

Growth is DifficultGrowth is Difficult• Research 130 businessesResearch 130 businesses• H&R Block, Lowe’s, Johnson Controls, H&R Block, Lowe’s, Johnson Controls,

Medtronic, Mohawk Industries, Wal-Mart, Medtronic, Mohawk Industries, Wal-Mart, Harley-Davidson, Dell, etc., Harley-Davidson, Dell, etc.,

• FindingsFindings• 1997-2002 the thirty companies that make up 1997-2002 the thirty companies that make up

the Dow Jones Industrial Average grew at a the Dow Jones Industrial Average grew at a collective rate of 4.9% in revenue, 4% in gross collective rate of 4.9% in revenue, 4% in gross profit and 0.5% in after-tax profitprofit and 0.5% in after-tax profit

• If you take out the top five performers the If you take out the top five performers the remaining 25 companies grew revenues at remaining 25 companies grew revenues at 2.3% - about the rate of inflation2.3% - about the rate of inflation

• Root causes – management systems, Root causes – management systems, management tools and techniques have not management tools and techniques have not kept pacekept pace

Source: Michael Treacy’s Source: Michael Treacy’s Double-Digit Growth, 2003Double-Digit Growth, 2003

Advances in Management Advances in Management ToolsTools

““The major differentiator between The major differentiator between companies now is their agility – their companies now is their agility – their ability to create value quicker than ability to create value quicker than their competitors. This may be the their competitors. This may be the only differentiator in the future, as only differentiator in the future, as every other innovation can be every other innovation can be copied.”copied.”

--Rolf JesterRolf Jester

Chief Analyst – IT Services Market Asia/PacificChief Analyst – IT Services Market Asia/Pacific

GartnerGartner

The Debate About ITThe Debate About IT

Fundamental Fundamental BusinessBusiness QuestionsQuestions

What is the “basis of competition” in What is the “basis of competition” in the market(s) where my company the market(s) where my company competes?competes?

How will we know when the this basis How will we know when the this basis of competition shifts ? of competition shifts ?

How do the velocity of information How do the velocity of information and the agility of my organization and the agility of my organization impact my company’s ability to impact my company’s ability to compete ?compete ?

How does the Microsoft platform help How does the Microsoft platform help me realize strategic competitive me realize strategic competitive advantage ?advantage ?

AgendaAgenda





What’s all this WS stuff What’s all this WS stuff about?about?

Business IT todayBusiness IT today

If You Invest …Then If You Invest …Then TomorrowTomorrow

10 Years Later10 Years LaterWhat Actually HappenedWhat Actually Happened

Internet Internet BankingBanking

WirelessWireless

AggregatiAggregationon

Branch BankingBranch Banking

CRMCRM

Core Core BankingBanking

Wealth Wealth ManagementManagement

Treasury / Treasury / ForexForex

Trading / Back Trading / Back office office

Payment Systems and Card Payment Systems and Card MgmtMgmt 3D Secure3D Secure

Business Business IntelligenceIntelligence

EAIEAI

Straight through Straight through ProcessingProcessing

ATM / POSATM / POS

No Application Is An IslandNo Application Is An Island

No Company Is An IslandNo Company Is An Island

CustomerCustomerss

SuppliersSuppliers EmployeeEmployeess

PartnersPartners

SuppliersSuppliers

SuppliersSuppliers

EmployeeEmployeess

CustomerCustomerss

PartnersPartners PartnersPartners

What are XML Web What are XML Web Services?Services?

Industry standards for applications to Industry standards for applications to talk to each othertalk to each other

Extend basic web concepts… (HTTP, Extend basic web concepts… (HTTP, HTML)HTML)

To applications (SOAP, XML, WSDL, To applications (SOAP, XML, WSDL, UDDI)UDDI)

Designed to work across platforms & Designed to work across platforms & languageslanguages

Coexist well with firewalls and Coexist well with firewalls and networksnetworks

Standards body defining the specs:Standards body defining the specs:Participation by all the major playersParticipation by all the major players

What is .NET?What is .NET?

.NET is our brand for our XML and WS .NET is our brand for our XML and WS stacksstacks

Microsoft is delivering XML and Web Microsoft is delivering XML and Web Services capability across our product Services capability across our product lineline

Windows OS, BizTalk, SharePoint, etc.Windows OS, BizTalk, SharePoint, etc.

New applications use the .NET New applications use the .NET framework, which includes WS and framework, which includes WS and XML toolsXML tools

Use Visual Studio to develop Use Visual Studio to develop applications on the .NET framework applications on the .NET framework from a variety of languagesfrom a variety of languages

C#, C++, J#, VB.NET, (and many others)C#, C++, J#, VB.NET, (and many others)

Service-Oriented Service-Oriented ArchitectureArchitecture

An approach to take existing IT An approach to take existing IT assetsassets

Think of these assets as technical Think of these assets as technical capabilities: “services”capabilities: “services”

Use these services, along with new Use these services, along with new services, to support business services, to support business processesprocesses

Reconfigure these services flexibly to Reconfigure these services flexibly to support changes in business processsupport changes in business process

AgendaAgenda





What does a customer What does a customer think of a vendor?think of a vendor?

What does a vendor think What does a vendor think of a customer?of a customer?

1. Writing a Business Case1. Writing a Business Case

Start with your core business objectivesStart with your core business objectivesTop line: growth, new customers, expand Top line: growth, new customers, expand marketmarket

Cost savings: simplify, consolidate, shutdown Cost savings: simplify, consolidate, shutdown old systemsold systems

Build a business case with champions from Build a business case with champions from both IT and businessboth IT and business

4 sections:4 sections:1 background & strategic need1 background & strategic need

2 what you want to do2 what you want to do

3 benefits to your firm3 benefits to your firm

4 economics (cost & benefit)4 economics (cost & benefit)

2. Pitching Technology to 2. Pitching Technology to MgmtMgmt

Get a clear “GO” or “NO-GO” from Get a clear “GO” or “NO-GO” from managementmanagement

Force the pointForce the point

Make a pitchMake a pitch

Make a clear “ask” for funding and Make a clear “ask” for funding and sponsorshipsponsorship

Use a core team of both business and Use a core team of both business and IT staff to map out the projectIT staff to map out the project

Build a real project plan – don’t just pitch Build a real project plan – don’t just pitch for $for $

Program manage project aggressivelyProgram manage project aggressively

Enforce phase-gates/milestones and Enforce phase-gates/milestones and reviewsreviews

Getting “unstuck”Getting “unstuck”

Strategies for “NO-GO” or on the Strategies for “NO-GO” or on the fence…fence…

Wrap an existing system as a service Wrap an existing system as a service and deliver value to a business process and deliver value to a business process where there’s a clear painwhere there’s a clear pain

Use case studies from Use case studies from http://www.microsoft.comhttp://www.microsoft.com to to demonstrate value of .NET Architecture demonstrate value of .NET Architecture in your industryin your industry

Take a “challenge” – a hard problem that Take a “challenge” – a hard problem that nobody else has a good solution to, and nobody else has a good solution to, and deliver past expectationsdeliver past expectations

http://www.microsoft.com/

Still stuck?Still stuck?

Is this a company that is using Is this a company that is using technology to its strategic technology to its strategic

advantage?advantage?

AgendaAgenda





Microsoft cheerleadingMicrosoft cheerleading

R&D spend, financialsR&D spend, financials

What we’re good at, what we’re bad What we’re good at, what we’re bad atat

Roles & OrgRoles & Org

A day in my lifeA day in my life

Documents

ISM101 Discussion, 10.21.04 Notes from the Field