In an Oxford Economics study conducted recently under enterprise  executives across Europe it is once again reaffirmed that enterprises are spending a disproportionate amount of capital and resources on ‘keeping the lights on’. The study, released on December 17th, shows that on average 70% of the IT spend is aimed at operating and maintaining existing environments. This leaves only 30% to be spent on innovation value creation.

In addition, over 50% of the respondents indicated they don’t feel they’re getting a decent ROI on the investments they make and that the weak processes,

planning and budgeting lie at the heart of that. The study further shows the consensus that enterprises need to aggressively drive down TCO and improve

efficiency to redirect cash and capacity to generating innovative value for the business and to turn IT into a business growth engine.

Set the Right Course

A CIO’s strategy is at the very least a direct derivative of the business strategy. The CIO and CEO and in fact the entire C-suite have a vested interested in both efficient and innovative IT strategies. As professor Donald A. Marchand, a professor of strategy execution and information management at IMD, states in his blog, “All members of the Csuite need to recognize and embrace their fundamental roles” in the realization of the IT strategy.

A simple rule-of-thumb is if you cannot link any business KPI to an initiative or activity, you shouldn’t be doing it. So how does the general and consistent trend of spending 70 percent of your IT cash and capacity on maintaining an existing environment relate to that? That’s right, it doesn’t. Of course you want to be able to do what you’re doing now while looking at new innovative business offerings and accompanying technologies, but with 70 percent of your spend and people focused on ‘keeping the lights on’, that leaves only 30 percent of your money and resources adding value. It’s no wonder that the DSAG CIO Survey on ITEconomics revealed that to “Increase operational efficiency as well as increase business value are top CIO priorities”.

How does IT Project and Portfolio Management help?

IT Departments typically have several projects running in parallel – some under software m intenance, some under hardware maintenance. Some questions that most IT departments cannot answer immediately without having to look up disparate sources for information to pull together are:

How much did the last change you moved to production cost you? Was that change maintenance effort or new functionality? Which project did the change belong to? Which portfolio bucket does that change roll up to? Did you have a forecast on resourcing when the change was being planned? Which project task and under which phase was the change executed? At this point, IT managers are looking up project plans, file shares, excel sheets, rate cards etc to pull this information together for a CIO who wants a finger on the pulse – how are my development and maintenance projects running. “What is therefore required is strong governance of IT. Be clear about the decisions concerning IT that need to be made, who gets to make them, how they are made, and the supporting management processes, structures, information, and tools needed to ensure that they are effectively implemented, complied with, and are achieving the desired levels of performance. Clear is that IT needs to have strong governance, processes and policies in place to manage the increasingly complex portfolio of programs and projects. Ideally this is supported by integrated automation tools such as SAP IT PPM and SAP Solution Manager, that provide the necessary data, analysis and insight to make informed decisions about e.g. which initiatives are delivering the most value, which initiatives are running off track and need to be corrected and which should be cancelled altogether.

IT  Project and Portfolio Management offers this missing governance by enabling a CIO to bucketize (by LoB, region etc) all business requirements that are put on his table, perform risk and ROI analyses on these ideas, convert into real life projects those that are most promising, and then go on to track resourcing, financials and execution using ChaRM  (Change Request Management) on solution manager as the execution tool.

Some Key KPIs that weaves together portfolio management, resource management and Project management are:

1. IT Spend as a percentage of revenue.
2. Ratio of Development and Maintenance spend.
3. Split of resources between support and development.

Lifecycle Management for IT Operational Efficiency – A Framework to achieve
lower TCO

Looking at all of the challenges IT organizations are facing, there is a huge potential  for us – as SAP – to help CIOs. We can avail ourselves of 40+ years of knowledge and experience in managing IT in general and SAP in particular, a broad library of frameworks, methodologies, best practices and accelerators and an extensive catalog of Engineered Services and Rapid Deployment Solutions.

How can SAP help?

The service Lifecycle Management for IT Operational Efficiency brings this all together in a holistic engagement model with a dedicated resource, the Efficiency Advisor, partnering with the CIO to turn those challenges into opportunities. In three steps we can:

1. Identify the gap between where they are and where they should be by assessing their current and to-be state along the four dimensions.
2. Provide actionable recommendations in a roadmap to efficiency with a quantified business case and KPIs that describes what they need to do to become more efficient and release some of that 70% cash and capacity to work on innovation value creation instead.
3. Create an assemble-to-order engagement that combines our powerful RDS’, engineered services and potential custom T&M activities to xecute on those recommendations.

We can also offer customers a preview by conducting a two ay on site assessment of the four dimensions and providing an initial view of hat can be done to help them achieve their goals and objectives.