Infosys – Leveraging IT Effectiveness Framework

Code: CE-09-05

��

1

Improving Effectiveness ofthe IT Function

Executive SummaryDon't believe whatyour eyes are tellingyou, all they show is

limitation. Believewith your

understanding, findout what you alreadyknow, and you'll see

the way to fly.

- Richard Bach, author ofJonathan Livingston Seagull

In today's business environment differentiation through IT is gettingmore difficult even as it remains aspiration. It appears that permanentcompetitive advantage leveraging IT is coming from a series of continualtemporary advantages. This context makes it imperative for the ITfunction to improve its effectiveness by balancing technology, processesand skills. Improving effectiveness of IT does not appear to be simplein times when IT budgets are expected to grow only by six to sevenpercent during 2003-2008 compared to the nine to fifteen percent growthduring1995-20001. In a survey of Fortune 1000 companies in October2004, of those indicating at least a modest number of IT projects onhold, 60 percent cited budget constraints as being the reason2.

Senior executives leading the IT function need to balance twinobjectives of optimizing expenditures and showcase value of ITinfrastructure and services. As a starter, they need to understand ITinvestments and operating costs using a business case approach. Thiswill serve as a baseline on decisions on appropriate categorization ofIT investments and operational costs and subsequent investment andcost rationalization. This apart, right sizing and right skilling of theIT organization is required after implementing a large software package.This is an important facet that is often overlooked. The analysis of ITinvestments and costs require a structured and systematic assessmentof the different aspects of the IT function. How is the IT function assessed?And how can assessments identify initiatives for cost reduction?

Alter

Transform

Organization

dardization, Reduced spending

times, increase quality

ments

ills, flexiblity, transparency

Supporting business

RAVI MANI, VISHWANATH SHENOY & N DAYASINDHU

SEPTEMBER 2005

��

2

IT Function Under Challenge

We are currently witnessing a phase where ITorganizations are in consolidation mode and the focusis on getting more out of existing IT systems ratherthan invest in new ones. The accent in on improvingthe IT systems that helps in running the business moreefficiently rather than IT systems that look at changinghow business is done. This is not surprising consideringthe current business focus of big MNCs is improvingthe bottom-line. According to a Gartner report in April20053, “Because many IT budgets are only nowrecovering, little funding is available for investment innew projects and technology. This trend has forced ITorganizations to focus on more-effectively leveragingtheir infrastructures and to emphasize processreengineering. We expect this emphasis on process toincrease operational efficiency and help IT strategiesalign with the needs of the business.”

The intent of IT organizations to improve operationalefficiency is for real. This is evident from a CIO survey4

in December 2004 in which aligning business and ITgoals and controlling IT costs are among the top fivepriorities for CIOs in large and medium enterprises.The same survey also states that inadequate budgets asa top three hurdle for large and medium enterprisesthat impede effectiveness of IT organizations.

In this context, it becomes extremely useful to have aframework to assess and identify pain points thatimpede effectiveness of IT organizations. Thisassessment can be used as the basis for identifyinginterventions to improve effectiveness that get rolledout as initiatives of IT organizations.

Building Blocks of IT Effectiveness

Effective IT is not just about having technology, processes& skills in place to ensure consistent high results. It is aboutachieving the right balance of technology, processes andskills to ensure consistent better answers to problems inexecuting IT plans:

• Ineffective IT organizations, processes andcontrol mechanisms disconnect the IT valuechain between IT-Demand (business' ITplanning) and IT-Supply (execution)

• IT assets - applications, infrastructure anddelivery capabilities - are inadequate and notbalanced

• Resource constraints in capital, IT expertise,management focus and capacity for changeimpede execution

IT Effectiveness is a measure of how well an ITorganization develops the right technologycomponents of business solutions in the enterprise..Infosys experience has demonstrated that it isnecessary to review different aspects of the ITorganization to improve IT effectiveness byunderstanding current inhibitors.

• A health analysis of the organization'sapplication portfolio and projects - to ensurethat IT effort in terms of creation of applicationshas the right impact on business.

• A review of the process maturity of theorganization - since a mature set of processesresult in timely delivery, lower costs, goodquality, and improved predictability.

• A review of organization - to check forinefficiencies that impact cycle time and lead toincreased costs.

• A review of the technical architecture andinfrastructure - to ensure maximization ofinvestments in technology.

Once such an assessment is completed, and keyinhibitors identified, the Infosys IT Effectivenessframework (shown in Figure 1) achieves the rightbalance of technology, processes and skills in the ITorganization.

Case Study: Assessing AutoCo's ITFunction

AutoCo is a large automotive company engaged inretail and wholesale business of vehicles acrosseleven geographies in the Asia Pacific region. The ITorganization works in the regional/local supportmodel with the regional headquarters in Singapore.The local country CIOs were reporting to the regionalCIO and a dotted line relationship to the CFOs in thecountry. To ensure standardization of IT systemsacross geographies for large applications, a center ofcompetence was established. The role of the centerof competence is to ensure that a template wasfollowed during roll-out of large IT systems andprovide second and third level support to thegeographies. The objective of AutoCo was to reducethe IT G&A budget by ten percent year on year forthree years. Infosys was engaged by AutoCo toidentify the cost cutting initiatives.

The ITE framework was the used by Infosys and theengagement was divided into an assessment phasethat was followed by an align phase. The assess phaseinvolved a structured and detailed assessment of the

��

3

organization, delivery and application portfolio ofAutoCo in the Asia Pacific region and recommendinginitiatives for which business case could be developedin the align phase. The assessment used a hypothesisbased approach and was completed in 4 weeks. Theseinitiatives were presented and prioritized in aworkshop conducted with the local and regionalCIOs. The assessment was used to rate the ITorganization and delivery on an excellenceframework that depicted the level of maturity ofAutoCo's Asia Pacific IT organization on the differentIT Effectiveness aspects.

In the organization assessment the organizationstructure, skills, degree of centralization (vslocalization) was studied through interviews withthe local CIOS, regional CIO and managers of thecenter of competence. The initiatives identified froman organization perspective were centralization ofprocurement across regions, relocation of center ofcompetence to a low cost location, implementingshared services in the IT organization and defining anew organization blue-print for the region.Reorganization included recommendations onconsolidating the CIO organization in the smallergeographies and defining the right-head count andskill levels in each of the geographies.

The delivery assessment analyzed the processesand the delivery capabilities in the Asia Pacificregion through interviews and workshops.Specifically the initiatives that were identifiedwere exploring the possibilities of other low costcountries in the region as a supplier of IT services,prioritizing all current projects based on ROI andcriticality, developing a ROI process to ensure thatall local projects are approved at the regional level,exploring different funding models and means tosupport standardization and preventcustomization of template solutions and exploringhow IT systems provided to AutoCo's dealers canbe cross-charged.

The application assessment analyzed the variousappl icat ions in the region to f ind outconsolidation or sun-setting opportunities. Theinitiatives that were identified for cost reductionwere CRM system consolidation, HRM systemconsolidation, ticketing system consolidation,Lotus Notes deployment consolidation andinternal benchmarking for ticketing reduction.

Thus a holistic set of cost cutting initiativeswere ident i f ied based on IT Ef fec t ivenessframework.

Assess

Identify and sizeopportunities

Align

Design integratedsolutions, deliver

quick wins

Alter

TransformOrganization

Objectives

Work Streams

Outcomes - Improvementopportunities

- Business Cases- Roadmap

- Solution Designs- Validated

Business Cases- Quick wins

- Effective ITOrganization

Application Effectiveness Retirement, Standardization, Reduced spending

Delivery Effectiveness Reduced cycle times, increase quality

Change Management Sustained improvements

Organization Effectiveness Right sourcing, skills, flexiblity, transparency

Infrastructure Effectiveness Cost effective, Scalable, Supporting business

Business Case Journey Scorecard, Realization Controlling

Figure 1: IT Effectiveness is a staged approach to transform all aspects of the IT organization Source: Infosys Research

CuttingEdge is a monthly thought leadership note published by Software Engineering andTechnology Labs (SETLabs) of Infosys.

Editor: Dayasindhu N. ([email protected])

© 2005 Infosys Technologies Ltd. All rights reserved.For more information about Infosys and its capabilities, visit the World Wide Web at http://www.infosys.comThis document is for informational purposes only. Infosys makes no warranties, express or implied, in this summary.The names of actual companies and products mentioned herein may be the trademarks of their respective owners.

4

��

Leveraging IT Effectiveness

Our experience in using the IT Effectiveness framework with clients reveals bothtangible and intangible benefits. The structured approach based ensures that thereare no “blind spots” for the client. Very often CIOs have strong intuitions (that aremostly correct!) on how can IT effectiveness be improved. What the IT Effectivenessframework does is to put in place guidelines that formalize the thought process ofCIOs. The IT Effectiveness framework not only helps formalizing hypotheses thataddress the root causes for poor performance but also provides a base for identifyinginitiatives that eliminates the root causes. The initiatives identified are balancedacross organization, application, delivery and infrastructure aspects, the buildingblocks of an effective IT function.

As explained in the case study IT effectiveness framework can not only identifyareas for application consolidation (concomitant with “sun downing”) but alsoput together a rigorous business case framework that helps prioritize current andfuture IT projects. Last but not the least, organization skills and rightsizingopportunities are identified and justified using the IT effectiveness approach. ThusIT Effectiveness helps to wrap experience with the formalism that helps CIOsbetter understand the IT function.

Key Words: IT Effectiveness

References:1. Blueprint for the Next Decade, IDC Directions 06, Presentation by Pradeep Gupta, IDC, 20052. CSFB CIO Poll Series October 2004, CSFB, November 20043. Gartner Poll Suggests IT Management Processes Aren't Maturing, Debra Curtis, Cameron

Haight, Gartner, April 20054. State of the CIO: Challenges Differ in SMBs, large Organizations, CIO Research Report,

December 2004, http://www2.cio.com/research/surveyreport.cfm?id=81

About the Authors

Ravi Mani is a Program Manager withthe Automotive and Aerospace (ANA)practice in Infosys. He anchors the ITEffectiveness solution for ANA. He canbe contacted at [email protected].

Vishwanath Shenoy is a SeniorConsultant with the SoftwareEngineering and Technology Labs,Infosys. He anchors the IT EffectivenessSolution Development across Infosys.His experiences are in the areas ofconsulting and framework developmentin the areas of business process and ITeffectiveness. He can be reached [email protected]

N Dayasindhu, PhD is a SeniorResearch Associate at the SoftwareEngineering Technology Labs, Infosys.His research on IT organizations helpsthem align better with businessfunctions. He has published in peerreviewed journals and conferences andhas consulted for Fortune 500organizations. He can be contacted [email protected].