Technology Business Management

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It's time to shift the discussion from IT spending to IT value.

KPMG’s Technology Business Management (TBM) service can help achieve this change.

Read Moving Information Technology from a Cost to an Investment for more insights:

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TBM means putting value first — to match and enable business strategy

TBM helps IT organizations manage the business of IT through an integrated view of technology, cost, performance, supply and demand. It can help you maximize your understanding of IT’s contributions to the organization’s top and bottom lines.

The TBM Framework

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Drive Performance-based Culture

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Drive Performance-based Culture Linking actions with outcomes is critical for businesses seeking superior results and increased customer satisfaction.

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Change Behavior with Transparency

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Change Behavior with Transparency Armed with fact-based insights, executives can consider cost, service, and quality tradeoffs.

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Run-the-Business

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Run-the-Business To deliver on today’s commitments.

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Change-the-Business

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Change-the-Business To realize tomorrow’s aspirations.

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Optimize Your Cost for Performance

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Optimize Your Cost for Performance Optimizing cost means providing the right quality, service, and managed risk for the best possible price.

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Rationalize to Sustain Value Creation

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Rationalize to Sustain Value Creation The portfolio’s complexity and diversity — applications, technology, etc. — drive up costs and hinder agility. They must be regularly simplified, modernized or consolidated.

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Innovate to Grow and Compete

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Innovate to Grow and Compete Staying ahead of the pack requires continual innovation.

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Transform by Enabling Agility

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Transform by Enabling Agility Businesses must continually adapt to changing markets and competitive landscapes. Building in agility allows rapid response at lower costs.

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Plan with Greater Confidence

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Plan with Greater Confidence An understanding of how decisions will affect cost, service and quality allows executives to turn their focus to the growth agenda.

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Understand and Benchmark Your True Cost and Performance

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Understand and Benchmark Your True Cost and Performance Fact-based decisions are essential to optimize cost for performance, rationalize portfolios, innovate to grow and compete and transform by enabling agility.

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Position to Manage Your Supply and Demand

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Position to Manage Your Supply and Demand Fine-tuning supply and demand is imperative: No one wants waste from idle capacity nor the inability to satisfy critical demand.

Source: Technology Business Management Council 2013

Transforming the organization takes discipline

Getting from cost transparency to value optimization is a journey that requires organizational and behavioral change management to help the company win in the marketplace. There are four stages to the journey and, over time, it can increase the value of IT to the business.

Stage 1:

TBM Strategy & Roadmap

A roadmap provides the plan to move the organization from its current state to the desired state described in the strategy.

Stage 2:

Transparency

Transparency is about sharing information with stakeholders about IT costs, purpose, service levels, risks and consumption of IT resources in business terms.

Stage 3:

Optimization

The information gained from transparency must be optimized — leveraged to increase effectiveness and efficiency of both technology demand and supply chains.

Stage 4:

Sustained Value

Sustaining value focuses on embedding optimization within processes on an ongoing basis.

A major task like TBM is achievable. As the philosopher Lao-Tzu said, “A journey of a thousand miles begins with a single step.”

Stage 1: TBM Strategy & Roadmap

Start out right by setting strategy and mapping a route

Can you answer these key questions?

Can the organization change?

Data, processes, people, communications, organizations and metrics must be ready for the journey.

Does the effort have the right sponsorship?

Short-term tactical wins can be attained through finance or IT-sponsored initiatives, but getting to true value requires buy-in from the top.

Have you made the right business case?

Documenting the lifecycle cost and quantifying benefits are key to delivering short- and long-term value.

Is the whole business engaged in the effort?

Changing the ways in which business and IT are held accountable for IT demand and consumption can be significant cultural hurdles.

Can the organization change?

Data, processes, people, communications, organizations and metrics must be ready for the journey.

Does the effort have the right sponsorship?

Short-term tactical wins can be attained through finance or IT-sponsored initiatives, but getting to true value requires buy-in from the top.

Have you made the right business case?

Documenting the lifecycle cost and quantifying benefits are key to delivering short- and long-term value.

Is the whole business engaged in the effort?

Changing the ways in which business and IT are held accountable for IT demand and consumption can be significant cultural hurdles.

Having the correct answers to these questions is critical as you start the journey.

Stage 2: Transparency

Transparency is a baseline

The IT organization’s budget frequently accounts for between 2 and 12 percent of its company’s revenues and more than half of total capital expenses. Yet, it often has no visibility — despite sharing service catalogs and cost models with stakeholders — and an unusually high absence of financial accountability.

But offering greater transparency into its operations is not enough to keep its budget away from the chopping block. It is also expected to articulate the value it brings to the table — and present a convincing argument for its role in the growth of the company.

Transparency is critical but it also has its perils

Transparency is not easy to accomplish, and if not done correctly it can lead to such potential pitfalls as:

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    IT cost data can be expensive and distracting.

  • Locating, aggregating and normalizing all of the IT cost data can be time consuming and expensive, requiring a level of effort that diverts valuable and already overstressed IT resources.
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    Poor data or sloppy work impacts credibility.

  • Organizations may be tempted to take shortcuts that use bad or incomplete data, leading to a loss of credibility. When moving to cost transparency, it is important to get it right the first time since there is rarely a second chance.
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    Business leaders may not understand the costs.

  • IT must change its engagement model and implement a strong account management function to work with the business to help them understand the costs, drivers, and linkages, otherwise they may make uninformed decisions.
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    IT costs may not be competitive.

  • Once IT builds its service cost models it may find that due to operational inefficiencies or lack of scale, some or all of its costs are more expensive than comparable services from external providers. This may result in even more pressure to cut costs or open the door to outsourcing.
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    Cost transparency may lead to wrong behaviors.

  • Since there are no standards for IT services, comparing them and their pricing can be complex and confusing. A company’s requirements for security and/or regulatory compliance or management overhead may not be reflected in a similar outsourced service. It is important to help stakeholders understand differences and ensure that they are comparing “apples to apples”.
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    IT cost data can be expensive and distracting.

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    Poor data or sloppy work impacts credibility.

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    Business leaders may not understand the costs.

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    IT costs may not be competitive.

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    Cost transparency may lead to wrong behaviors.

Locating, aggregating and normalizing all of the IT cost data can be time consuming and expensive, requiring a level of effort that diverts valuable and already overstressed IT resources.
Organizations may be tempted to take shortcuts that use bad or incomplete data, leading to a loss of credibility. When moving to cost transparency, it is important to get it right the first time since there is rarely a second chance.
IT must change its engagement model and implement a strong account management function to work with the business to help them understand the costs, drivers, and linkages, otherwise they may make uninformed decisions.
Once IT builds its service cost models it may find that due to operational inefficiencies or lack of scale, some or all of its costs are more expensive than comparable services from external providers. This may result in even more pressure to cut costs or open the door to outsourcing.
Since there are no standards for IT services, comparing them and their pricing can be complex and confusing. A company’s requirements for security and/or regulatory compliance or management overhead may not be reflected in a similar outsourced service. It is important to help stakeholders understand differences and ensure that they are comparing “apples to apples”.

Nevertheless, transparency is crucial before value can be optimized.

Stage 3: Optimization

IT value must be optimized across three key domains

Better technology management means implementing optimization initiatives in three critical areas:

Financial Resources

Technology Portfolios

Business Demand

FINANCIAL RESOURCES

Why does business see IT as cost, not value?

  • Historically, IT spend has been treated as a burden — which the business feels powerless to control and often caps it as a percentage of revenue. In turn, IT feels frustrated and put upon.
  • IT budgets must be driven by accurate forecasts based on actual data, historical trends and business strategy — not guesswork.

TECHNOLOGY PORTFOLIOS

Why is IT portfolio management an underdeveloped competency?

  • Over time, many IT portfolios have grown organically from business demands — investments for ERP, CRM and supply chain automation and the absorption of systems through M&A. The result is portfolios bloated with redundancy, excess capacity and underutilized and/or unused assets.
  • The total cost of ownership (TCO) of each application and asset must be calculated so their contributions to increasing revenue, reducing time to market and enhancing customer satisfaction can be properly measured.

BUSINESS DEMAND

Why does IT demand always seem overwhelming?

  • IT is frequently operated as a supplier handling requests on a first in/first out basis. When increased demands and cost cutting measures coincide, the result is a "perfect storm" — with backlogs, longer delivery times, business frustrations, and the neglect of IT’s value proposition.
  • IT services must be balanced with available supply and optimized for business value.

The objective of improvements in these domains is to drive better business outcomes, such as ensuring alignment between the portfolio and business strategy, linking IT costs to value, and reducing risk.

Some initiatives may require a collaborative effort between IT and the relevant stakeholder to realize enhanced value. Once established, value can be sustained by embedding value optimization within processes on an ongoing basis.

Stage 4: Sustained Value

Sustaining IT value calls for continuous improvement

Sustainability focuses on embedding value optimization within processes on an ongoing basis. A process must be in place so that the organization doesn’t backslide and miss significant opportunities for increasing value, for example, preventing redundant applications from occurring in the future.

Without this focus, organizations may miss significant opportunities for realizing more business value. Over time, the hard work and benefits from optimization initiatives might very possibly become undone.

Ways to Sustain Value

  • Use pricing strategies to influence behaviors
  • Incorporate rolling budgets and forecasts
  • Benchmark
  • Influence demand to match planned supply
  • Enforce architecture and investment governance
  • Continuously monitor and adjust

Read Moving Information Technology from a Cost to an Investment for more insights:

+ DOWNLOAD THE WHITEPAPER

Measuring IT value: The future is now

IT value will increasingly be measured by its contribution to business outcomes such as revenue acquisition, reduction in time to market, and enhanced customer satisfaction. We work with clients to help them create dialogue about a managed IT approach that matches and enables business strategy to bring IT the recognition it deserves.

To learn more about how we can assist with your specific needs, call:

Marc E. Snyder KPMG LLP,
CIO Advisory
Managing Director
978-807-0522 msnyder@kpmg.com
Steve Bates KPMG LLP,
CIO Advisory
Principal
720-518-8626 sjbates@kpmg.com
Denis Berry KPMG LLP,
CIO Advisory
Principal
312-665-2866 dberry@kpmg.com
Dave Yip KPMG in the UK, part of KPMG Europe LLP
CIO Advisory
Partner
+44 20 73113699 dave.yip@kpmg.co.uk
Chris McLaren KPMG Australia
CIO Advisory
Partner
+61 2 9335 8507 chrismclaren@kpmg.com.au

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Podcasts

IT Transparency: An Accelerant to Transformation
Steve Bates, Principal in KPMG Advisory Services, discusses transforming the relationship between IT and business from a supply-based model to a business-demand consumption model.

Listen to podcast on Android or desktop

IT Transparency: New Capabilities Driven by the Boardroom
Boards and executive leaders are demanding a significant step-change in capabilities out of IT that are altering the very fabric of how organizations invest in and interact with both customers and suppliers.

Listen to podcast on Android or desktop

Webcasts

The Business of IT: Need for Change
CIOs are not only navigating change due to new disruptive technologies, but the pace of change is increasing and the status quo of managing their organizations is no longer sufficient. The time has come to better realize the philosophy of running IT as a business.

Replay webcast

IT Transparency: New Capabilities Driven from the Boardroom
Boards and executive leaders are demanding a significant step-change in capabilities out of IT that are altering the very fabric of how organizations invest in and interact with both customers and suppliers.

Replay webcast

Whitepapers

Enabling the Business of IT
To maximize value, the IT function must evolve from a service provider to a strategic business leader, with the CIO acting as a CEO for the IT organization.

Download now

Technology Enabling Business Change
Many companies are still having trouble using technology to solve their business challenges or achieve their business objectives even after years of implementations and upgrades.

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IT Value Management -- No More Crash and Burn
Ever notice that many so-called “IT value” efforts crash on takeoff? We see this scenario all too often. What starts out with good intentions and significant technology talent quickly collapses as the approach is often oversimplified, undertaken with a high degree of internal focus, and lacking the integration and business acuity required to truly make a difference. Read More

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