The challenges of IT-business alignment A presentation for

The challenges of IT-business alignment A presentation for Microsoft’s Tech. Net IT Director’s Strategy Day Neil Macehiter, Partner advising on IT-business alignment

Agenda § § § A brief introduction to MWD Aligning IT and business Understanding business processes Understanding managed IT services Summary © Macehiter Ward-Dutton 2005 www. mwdadvisors. com 2

A brief introduction to MWD § Strategic advice and consulting § Focus on issues concerning IT-business alignment – Driving more business value out of enterprise IT – Not about the “nuts and bolts” of individual technologies § Core: two highly experienced industry analysts / practitioners – Sun, Oracle, Sybase, Ovum, Deloitte Consulting, etc § Based in UK, Europe-wide capability © Macehiter Ward-Dutton 2005 www. mwdadvisors. com 3

Aligning IT and business © Macehiter Ward-Dutton 2005 www. mwdadvisors. com 4 advising on IT-business alignment

IT-business alignment: multiple angles It’s not just about “building stuff that the business will use” Business Change implications Investment in capability Delivery of value Change capabilities, limitations IT © Macehiter Ward-Dutton 2005 www. mwdadvisors. com 5

Why now? § Globalisation – Customers, partners, suppliers – and competition – Connectedness driving sophisticated value chains § Transparency – Industry regulations, consumer pressure and competition driving openness § Service focus – Differentiation and shareholder value increasingly derived from service experience © Macehiter Ward-Dutton 2005 www. mwdadvisors. com 6

From a UK perspective § A healthy economy – albeit growing at a low rate – Spurred by public sector investment – With a knock-on effect on the IT market § Globalisation – >4000 (+400/year) UK-Sino joint ventures – Vonage launches UK Vo. IP service (01/05) – Tesco enters mortgage market with First Active (11/04) § Transparency – Corporate Responsibility (CORE) coalition – Government initiatives e. g. Extractive Industries Transparency Initiative – International Financial Reporting Standards (IFRS) § Service Focus – BT launches mobile music service with UBC Media and Virgin Mobile (06/05) – Amazon Services Europe to underpin M&S e-commerce systems (04/05) © Macehiter Ward-Dutton 2005 www. mwdadvisors. com 7

The real world From Towards Build, or buy vs. build Application implementation Buy AND build AND integrate Back office Business area investment focus Front office and beyond “Personal productivity” desktop IT access environment Data processing Technology innovation focus Outsourcing vs. in -house delivery Capability supply Productivity desktop + global access to resources Communication, collaboration, integration “Multi-sourcing” Older approaches fail to capture reality re: integration, communication, collaboration, supply complexity © Macehiter Ward-Dutton 2005 www. mwdadvisors. com 8

A common language is the essential starting point Business ? IT © Macehiter Ward-Dutton 2005 “Investment prioritised in terms of business need” “Systems that deliver value to the business” “Clear direction from the business about focus, strategy” “Collaborative approach to implementing business change” www. mwdadvisors. com A common, agreed representation of business activity, goals + A common, agreed view of how current and future IT provides structured support to the business in this context 9

Reflecting the environment in IT-business alignment IT defines and delivers “business level” services which support the right processes, the right way IT Managed IT service sp ro ce ss Bu sin es sp ro ce ss sp es Bu sin es Bu s in es sp ro ce ss Business processes form the foundation of a common language STRATEGY sp ro ce ss BUSINESS Bu sin es Business Managed IT service APPLICATIONS & INFORMATION INFRASTRUCTURE © Macehiter Ward-Dutton 2005 www. mwdadvisors. com 10

Understanding business processes © Macehiter Ward-Dutton 2005 www. mwdadvisors. com 11 advising on IT-business alignment

The challenge Business process Applications The business Activities, processes Data The real world doesn’t “decompose” nicely – and IT isn’t just about things you build in-house © Macehiter Ward-Dutton 2005 www. mwdadvisors. com 12

Providing structured support for business processes means understanding scope & scale of interactions Towards Business process From Data design tightly coupled to application design, and application design to “user requirements” – very restricted view of process needs © Macehiter Ward-Dutton 2005 Loosely-coupled resources provide services which are designed to support the interactions that take place within a business process www. mwdadvisors. com 13

Support scenario: a mesh of interactions Business process IT approaches must consider business process support more broadly Transactional services Information services Communication & collaboration services We have to model more than just transactional applications © Macehiter Ward-Dutton 2005 www. mwdadvisors. com 14

A universe of business processes [1] A hierarchy of business processes S M E E © Macehiter Ward-Dutton 2005 M “Strategy” processes – instances oversee instances of management processes M E www. mwdadvisors. com E “Management” processes – instances oversee instances of execution processes E “Execution” processes – instances handle particular units of work within business activities 15

A universe of business processes [2] Contribution to competitive differentiation S S M M E E E Non-differentiating Differentiating (focus should be on efficiency) (focus should be on flexibility) © Macehiter Ward-Dutton 2005 www. mwdadvisors. com 16

Observations on the nature of business processes S S M M s r ea c e o dc ll r abo at , ad io n as cre E e M M E In tr ds ho e t ur a cn u , ure ct d pre ic lit abi t y E E In E E Non-differentiating Differentiating (focus should be on efficiency) (focus should be on flexibility) © Macehiter Ward-Dutton 2005 www. mwdadvisors. com 17

A resulting (wider) view of technical architecture Collaboration tools High “Management” business processes Business intelligence tools Simple portal Low “Traditional” app. Development tools & frameworks Level of process abstraction “Strategy” business processes Workflow “Pure” BPMS Composite service-based application development & integration Non-differentiating © Macehiter Ward-Dutton 2005 “Execution” business processes www. mwdadvisors. com Business functions Differentiating 18

Understanding managed IT services © Macehiter Ward-Dutton 2005 www. mwdadvisors. com 19 advising on IT-business alignment

So what is an IT service? “Provide automated support for my sales force” “Update customer details” “CRM database” Line of business perspective Developer perspective IT operations perspective © Macehiter Ward-Dutton 2005 www. mwdadvisors. com 20

Managed IT services – aligned with business processes Users’ experiences of “managed IT service” Lifecycle services Managing the lifecycles of business functions and infrastructure Business function services Automating business functions Infrastructure services Providing the platform © Macehiter Ward-Dutton 2005 www. mwdadvisors. com 21

Contracts bring obligations for suppliers and consumers Message Format Message Sequence Functions Security Response Time Throughput Qo. S Terms Functional Terms Usage Cost Liability Clauses Trust © Macehiter Ward-Dutton 2005 www. mwdadvisors. com Commercial Terms 22

An organising model for service-oriented IT in the context of IT-business alignment Functional contract aspects Quality-of-Service contract aspects Business function services How can we align flexibility / reusability requirements for business software functions, to business needs? How can we trade-off flexibility / reusability of business function services with efficiency / openness requirements? How can we ensure that the right consumers get the right kind of experience from these services, and do so costeffectively? Infrastructure services How should infrastructure elements provide their services to different business functions? How should infrastructure be optimally managed? How can Qo. S responsibility be delegated to infrastructure in a way that is easily flexed in response to changing requirements? How can we minimise the cost and risk of overall process support while creating an business support environment with more moving parts? How should we differentiate lifecycle service levels for different kinds of business function, infrastructure? How should we define and enforce development, fault-fix and change-request priorities? How can we demonstrate the overall value of the services that the IT organisation and its resources provide to the business? Lifecycle services © Macehiter Ward-Dutton 2005 www. mwdadvisors. com Commercial contract aspects 23

An example – business function service design Level of process abstraction “Strategy” business processes High d ibility x ss, fle ase cre ds in n ema ne Open Reusability importance increases ncy d fficie E Low “Management” business processes “Execution” business processes a incre nd ema Activity functions Technical functions Non-differentiating Differentiating (focus should be on efficiency) (focus should be on flexibility) © Macehiter Ward-Dutton 2005 Business activity role www. mwdadvisors. com 24

Summary © Macehiter Ward-Dutton 2005 www. mwdadvisors. com 25 advising on IT-business alignment

Summary § Today’s business environment brings IT-business alignment to the fore – In terms of investment, delivery and change § Business processes provide a common language – But the organisational context of real-world business processes is complex § Managed IT services must align with business process priorities – It’s about more than business function services § Services and their contracts provide an organising model for service-oriented IT © Macehiter Ward-Dutton 2005 www. mwdadvisors. com 26