digital trans

The Hackett Group

IT EXCELLENCE:

Moving toward Borderless Business Services

2© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Agenda

Setting the Stage – World-

Class IT Organizations Moving

from IT Effectiveness to

Business Effectiveness

“What are they Doing?” –

Transitioning IT Service

Delivery Model to Delivering

Innovative Business Outcomes

“How are they Doing it?” –

Leveraging the “Post ERP”

agenda as a Transformational

Lever

Q/A

Setting the Stage –

World-Class IT

Organizations Moving

from IT Effectiveness to

Business Effectiveness


56%

36%

Peer Group World Class

Effe

ctiv

enes

sE

ffici

ency

HR Cost (per employee)

Source: 2015 Hackett G&A Benchmark Database

53%

100%



Extent senior HR executives tie

business strategy to people

strategy

$1.6K$2.3K


Procurement Cost (% of spend)


.59%.73%

Cost savings around annual

procuring of products & services% of FN analysts' time spent

collecting vs. analyzing

Finance Cost (% of revenue)

1.03%

0.59%


43%

32%

60%


% Projects Meeting ROI


IT Cost (per end user Equivalent)

$6.1 K$7.6K

World-Class IT organizations aggressively focus on

driving business outcomes outside of IT

Finance IT HR Procurement

36%

19% 31% 18%

116%88%

90%

4.4x

9.4x


And they do so by maximizing the total contribution of the

three basic components of business value

IT E

ffec

tive

nes

s

IT Efficiency

Improving the “Old”

Innovating the “New”

Running the “Railroad”

1

2

3


Simply put, IT has three basic capabilities to generate direct business value outside of IT

Data

Business Process

Enablement

Decision Support

Functional

Cost Savings

Customer

Engagement

IT Business Value

Drivers

IT Value-add Capabilities

Applications

Infrastructure


But even internal IT support processes can directly impact

business value

30%

49%

0%

10%

20%

30%

40%

50%

60%

None/ Low Medium/High

Pro

ject

Del

iver

y P

erfo

rman

ce In

dex

Utilisation of Centralised Request Management

Centralized Request Management Impact onDelivery Performance

63%

32%

52%

0%

10%

20%

30%

40%

50%

60%


Bu

sin

ess

Ou

tco

mes

P

erfo

rman

ce In

dex

Utilisation of Business Cases with CBA

Business Case Study and CBA Impact Business Outcome Performance

38%

58%


Adherence to Methodology Standards

Methodology Standards Impact onDelivery Performance

12%

50%

0%

10%

20%

30%

40%

50%

60%


Bu

sin

ess

Ou

tco

mes

Per

form

ance

Ind

ex

Utilisation of Centralised Request Management

Centralized Request Management Impact onBusiness Outcome Performance

4x

40%

62%

0%

10%

20%

30%

40%

50%

60%

70%


Bu

sin

ess

Ou

tco

mes

Per

form

ance

Ind

ex

Utilisation of Project Reviews

Centralized Request Management Impact onDelivery Performance

63%

18%

57%


Adherence to Architecture Standards

Architecture Standards Impact on Business Outcomes Performance

55%

Those with a centralized process for

managing IT demand enjoy 63% greater

delivery performance and over 4x

greater business outcomes

performance than those that do not.

Selecting projects based on business

cases that include a cost-benefit analysis

attain 63% greater business outcome

performance. Reviewing projects

against those business cases can give a

55% performance edge.

A narrow footprint of methodologies

positively impacts delivery performance.

Architecture standards positively impact

business outcomes performance

Centralized Demand Management

Business Case Evaluation

Process & Architecture Standards


And finally, a new breed of “IT Business Value Optimization” must be

leveraged to address the convergence of Business & IT objectives and

strategies

Quality of service

Operational efficiency

Cost Takeout

“ROI”

Strategic alignment

Shareholder value

Revenue growth

IT Value Creation

Components

IT Business Value Optimization Processes

IT Value Measurement Framework

Portfolio

Management

Business Relationship Management

Governance

Performance Management

Technology

Strategy &

Roadmap

Run the business

Improve the business

Innovate the business

Technology

Value Drivers

(Capabilities)

Business

Value DriversShareholder

Value Drivers


Organizations are leveraging IT business value management

(BVM) frameworks as a tool to align IT & the businessOne example of the model that translates the concept into execution


It’s critical that the framework focus on Targeting, Improving,

Measuring, and Tracking Business Outcomes as well as TCOThe IT BVM Framework

1. IT Financial Management

2. Business Benefits Accounting

3. Business Value Contribution as KPI

4. Move up the Maturity Curve

5. Account for Delivery and

Consumption of IT

Do Wells


World-Class IT Moving from IT Effectiveness to Business EffectivenessKey Takeaways

1. World-Class IT organizations are moving from driving IT Effectiveness to Business

Effectiveness

2. IT Service Delivery Models are transitioning to measuring and delivering targeted business

outcomes

3. World-Class IT organizations maximize the total contribution of the three components of IT

business value: Run the Railroad, Improve Business Ops, Disruptive Digital Innovation

4. Achieving World-class performance requires the design and execution of an optimized

Service Delivery Model

5. There is currently an IT Skills Gap in most companies in areas critical to driving partnership

and collaboration with the Business including, collaboration, relationship management,

process improvement, analytics.

6. Business Value optimization requires alignment of business and IT goals, objectives and

KPIs – Business & IT Value Drivers are converging

7. IT value measurement framework must be complemented with discrete competencies to

optimize value

“What are they Doing?” –

Transitioning IT Service

Delivery Model to

Delivering Innovative

Business Outcomes


Enterprise innovation agenda and business services

80%

75%

13%

15%

7%

10%

Strongly Agree/Agree Neutral Disagree/Strongly Disagree

Percent of IT organizations

planning to great expand their

role in supporting enterprise

innovation in the next 5 year;

100%

Business services (incl IT) are

integral to supporting our

company’s innovative capability

Business services (incl IT) need

structural transformation to

adequately support

enterprise innovation

Source: Hackett 2014 Innovation Study

Innovative Service Delivery Enable Enterprise Delivery

Service

Delivery

Components

Information

Service

Placement

Process

Sourcing

Process

Design

Enabling

Technology

Skills

&

Talent

Governance

&

Organization


Priority of IT's 2015 objectivesIT is focusing on improving alignment and agility, without sacrificing efficiency and

customer service levels

37%

32%

16%

16%

37%

16%

32%

16%

Improve IT support ofexecution of strategic and

operational plans of thebusiness

Improve IT's ability torespond swiftly to changesin business demands (i.e.

agility)

Drive down cost of the ITfunction through efficiency

and productivityimprovement

Improve IT customerexperience / service levels

Priority #1 Priority #2

Source: Key Issues Study, The Hackett Group, 2015

Priority of IT objectives, 2015 Hackett IT Value Pyramid

Drive

Business

outcomes

Enhance business

agility

Deliver new business

capabilities

Run the business

Innovate

Op

era

tio

na

lS

tra

teg

ic


Innovation – Finding a new or better way of doing something

EFFICIENCY

(reduce costs)

SUSTAINING

(improved replacement)

DISRUPTIVE

(change the way we live, work, play)


Five key technologies driving business innovation

Platform 1.0:

Computing

Platform

centric

Platform 2.0:

Interconnected

computing

platforms

Value driver: Efficiency improvement

Silo’ed technology support for business

Value driver: business process improvement

Pervasive technology adoption in business

Platform 3.0:

Interconnected

virtual

services

Time

Val

ue

OS 390

Value driver: Business model innovation and disruption

Convergence of technology and business

Commoditization

Commoditization

Innovation

Innovation

Innovation

Client/

Server

Middle-

ware

Internet

Analytics

(big data)

Cloud

Internet of

Everything

Social

Media

Mobile

Commoditization

We are here

Source: The Hackett Group


“Digital transformation” is an enterprise-wide value opportunity – An

opportunity to “rebrand” IT around a proactive focus on Digital Business

Transformation leveraging ERP at the CORE

Digital Business Transformation

“The pervasive use of digital technology in

products, services and value chains,

fundamentally transforming traditional

business outcomes

Technology

Innovation

Business

Innovation


Digital Business Transformation

“The pervasive use of digital technology in

products, services and value chains,

fundamentally transforming traditional

business outcomes

Technology

Innovation

Business

Innovation

“Digital transformation” can be leveraged as a way to

develop both culture and buy in across the business


Enabling business innovation through six “Do Wells”

1. Re-allocate resources towards

innovation supporting activities by

bridging the efficiency gap

2. Redefine IT’s Role and Value

Proposition

3. Cultivate and mobilize organization-

wide technology talent

4. Adapt solution development

methodology to demands of digital

business and platform 3.0

5. Develop the competencies needed to

support next generation BI &

Analytics

6. Develop or adopt new thinking &

processes to innovate


Category 1 Category 2 Category 2 Category 3

Category 1 Category 2 Category 2 Category 3

#1: Re-allocate resources towards innovation supporting activities by bridging the efficiency gap

Business ImprovementInnovation

Run the business

Value Multiplier < 1

Value Multiplier = 1 - 5

Value Multiplier = 5 - 10

Resource Allocation

0%

100%

Value Creation

ROI = 0% - 50% ROI = 50% - 100% ROI > 100%

Cost

Benefit

(Value)


Efficiency

Gap

Effectiveness

Gap

Business PartnerUtility


#2: Redefine IT’s role and value proposition

Cohesive bundles of products, services and

delivery mechanisms

Business

strategy

partner

Business

results driver

Business

effectiveness

enhancer

Business

capability

provider

Business

utility provider

Create new business ecosystems,

revenue streams and lines of

business

Identify opportunities for

boosting business revenue and

margin, shape the benefits that

get realized

Proactively enable business partners

to respond quickly to changing

conditions

Va

lue

Provide the right business

capabilities at the right time

Bulletproof business

operations

Just-in-time time business insight,

scenario modeling, product mix and

profitability assessment

Intelligent process automation, self-

service, effective enterprise

architecture

Low IT complexity, effective

demand and program

management

Efficient and effective

provisioning of IT

capabilities

Drive

Business

outcomes

Enhance business agility

Deliver new business capabilities

Run the business

Innovate


Value proposition of IT Key IT competencies Role of IT


Skills &

talent

management

#3: Cultivate and mobilize organization-wide

technology talent


Pressure

for profits Increased volatility/

uncertainty

Decreased emphasis

on administrative/

transactional work

Need to deliver

high value

Globalization of

talent pools

Greater demand

for business skills

Demographic

shiftsService providers

drawing top talent

More

outsourcing

Global growth

imperative

Education/training

not keeping pace

Business

drivers

Technology

drivers

Talent

drivers

IT–enabled

toolsTask

automation/

digitization

Large amounts of data

Greater

dependence

on IT

Technology innovation;

I-SMAC

Function

drivers


#4: Adapt solution development methodology to demands

of digital business and platform 3.0

Requirements

Analysis

Design

Coding

Testing

Acceptance

Development cycle time: months or years Development cycle-time: days or week

Platform 1.0 – 2.0: Waterfall Platform 2.0 – 3.0: Agile

STORY 2

Develop,

integrate & test

STORY n

Develop,

integrate & test

RELEASE

Feedback,

review &

accept

STORY 1

Develop,

integrate &

test

CONTINUE

Iteration ADJUST

Priorities

RECORD

Changes

DEPLOY

INITIATE

Define,

requirements

& priorities


#5: Develop the competencies needed to support next

generation BI & Analytics

Need for a new BI “paradigm” - Sensemaking The next generation BI capability – Sensemaking – will

drive sustainable competitive advantage

An illustrative Sense-making thinking model


#6: Develop or adopt new thinking & processes to

innovate

1. A Well-Defined Goal

2. Design-Thinking Based or Similar

Innovation Process

3. Need to Link Innovation Process To

Operational Implementation

4. The Right People & Competencies

5. The Right Tools For Collaboration &

Knowledge Sharing


Current trend - IT service delivery transition to delivering innovative business outcomesKey Takeaways

1. The importance of innovation is increasing – universally. 98% of companies believe

innovation is a strategic differentiator

2. Only 1/3 of companies believe they have the KPIs, practices, incentives in place to foster

innovation

3. Priority of IT's 2015 objectives - IT is focusing on improving business alignment and

agility, without sacrificing efficiency and customer service levels

4. “Digital transformation” is an enterprise-wide value opportunity – An opportunity to

“rebrand” IT around a proactive focus on Digital Business Transformation leveraging ERP

at the CORE. “Digital transformation” can be leveraged as a way to develop both culture

and buy-in across the business

5. Enabling Business innovation requires Six “Do Wells” addressing resource allocation, IT

role redefinition, talent cultivation, new solution development methods, developing

analytics competencies & capabilities, as well as a wholly new way thinking and process

around innovation.

“How are they Doing it?”

- Leveraging the “Post

ERP” agenda as a

Transformational Lever


#1 Best Practice Pillars for Post Implementation ERP Support –Transition from a Technology Implementation organization to a Process Excellence

organization

Break fix Configuration Software Updates Performance Tuning

1. Keeper of the “golden template”

2. Actively pursue process improvements

3. Actively pursue BI & Analytics Improvements

4. Drive performance through process and business value metrics

5. Prioritize demand and execute

Business Value FocusedTechnology Focused

Production Support

Process Excellence

Architecture & Integration

BI & Analytics Excellence Technology footprint

Data Integration App Services UIX and Mobility

ODS DW Reporting &

Analysis Advanced

Analytics

Contract to Cash

Forecast to Fulfill

Source to Settle

Account to Report

Regulatory/ Compliance

Role


Roadmap to Future-

State SDM

Recommended approach to building the “Post-ERP”

service delivery model (SDM)

The Service Delivery Model (SDM) playbook is a standard methodology containing a logical

sequence of steps and a collection of supporting templates that can be applied to improve the

delivery of a broad range of services (business or IT).

Current-State

Service

Delivery Model

Requirements

for Future-

State Services

Strategic Alignment

Organizational

Capabilities

Performance

Goals

Design &

Operating Principles

Service Delivery

Transformation

Organizational

Acceptance

Execution

Capabilities

Implementation

Roadmap

Service Delivery Model

Service

Delivery

Information

Service

Placement

Process

Sourcing

Process DesignEnabling

Technology

Skills & Talent

Governance &

Organization

Strategic Drivers

+

Activities to Establish

Future-State SDM

Future-State Service

Delivery Model for Targeted

Services

Service Delivery

Model Playbook

Ongoing Transformation Initiatives


Example IT Operating Model – “Aligned to the Business”, and to drive

“Technology Enablement” – The new Post ERP organization must be

rationalized and aligned with the rest of IT

BU 1

BU 2

BU 4

A

B

C

B

u

s

i

n

e

s

s

BP

O

CIO

EPMO

Relationship

Management

Business

Planning

Business Enablement

Governance Structure

Service

Management

Business

Relationship Mgmt

Business

Solutions

Solution Design

/Build/ Delivery

Strategy &

Emerging

Technology(this group will be

responsible for driving

2-5 strategic year

plan)

ITaaS

Service Vendor

Capacity

SecurityQuality

Assurance

Integrated

Service Desk

Information Mgmt.

BU 3

Emerging

Technologies

Strategy &

Consulting

New

Business

Solutions

Technology

Architect &

Strategy

Technology Enablement

Digital Transformation

Process Excellence

Business Analytics


Ad hoc Mature

Silo’ed IntegratedOperational

Strategic

Val

ue

BRM Engagement model

None

Extensive

Dem

and

Man

agem

ent

Capability

Best practice post ERP support requires a multi-

dimensional focus on partnering with the business


Run the business

Deliver new business

capabilities

Enhance business

agility

DriveBusinessoutcomes

Innovate

Prioritization

Relationships Accountability

Communication Standardization

InnovationDecision Making

Business

Relationship

Manager

1. Lagging

2. Achieving

3. Exceeding

4. Leading

Increasing

focus on value

delivered

Pushing the outer

boundaries of

effectiveness

RegisteredDemand Filtered

Demand AssessedDemand

PrioritizedDemand Scheduled

Demand ExecutedDemand

BasicInformation

aboutRequest

ProspectiveProjects

Triaged forNext Step

Project hasSponsorship

“Project ona Page”

Benefits orBusiness

Case

Scoring

Allocation,Forecast &Schedule

ProjectDelivery

$


IT business value management (BVM) is a way to measure and drive ongoing IT business value

ERP Post Implementation Support – Need to transition from transactional implementation

to innovate the business

Cohesive bundles of products, services and

delivery mechanisms

Business

strategy partner

Business

results driver

Business

effectiveness

enhancer

Business

capability

provider

Business utility

provider

Create new business ecosystems,

revenue streams and lines of business

Identify opportunities for boosting

business revenue and margin,

shape the benefits that get realized

Proactively enable business partners to

respond quickly to changing conditions

Valu

e

Provide the right business

capabilities at the right time

Bulletproof business

operations

Just-in-time time business insight, scenario

modeling, product mix and profitability

assessment

Intelligent process automation, self-

service, effective enterprise architecture

Low IT complexity, effective

demand and program

management

Efficient and effective

provisioning of IT capabilities

Drive

Business

outcomes

Enhance business agility

Deliver new business capabilities

Run the business

Innovate

Value proposition of IT Key IT competencies Role of IT


Design approach - Leveraging the “Post ERP” agenda as a

transformational leverKey Takeaways

1. Best Practice Pillars for Post Implementation ERP Support – Transition from a technology

implementation organization to a Process Excellence organization

2. Pre to Post ERP Implementation Support should be viewed as a Transformation Journey in

itself.

3. Leverage a holistic Service Delivery Model (SDM) as the key approach to building an ERP

Post-Implementation Support Model including: governance/organization, information needs,

service placement, process sourcing, process design, enabling technology, skills & Talent

4. Best Practice Post ERP Support requires a multi-dimensional focus on partnering with the

business including: Demand Management, Business Relationship Management, Business

Value Partnership, Process Maturity.

5. IT Business Value Management (BVM) Framework – A way to measure and drive ongoing

IT Business Value

Documents

digital trans